Proceedings of the Standing Senate Committee on
Fisheries and Oceans
Issue 8 - Evidence, April 26, 2007
OTTAWA, Thursday, April 26, 2007
The Standing Senate Committee on Fisheries and Oceans met this day at 10:47 a.m. to examine and report on issues relating to the federal government's new and evolving policy framework for managing Canada's fisheries and oceans.
Senator Bill Rompkey (Chairman) in the chair.
[English]
The Chairman: Ladies and gentlemen, I would like to call our meeting to order. Before I welcome our guests, I want to report to you that I appeared before the Subcommittee on Budgets and Administration with regard to our budget, and they were supportive. They did not make a decision because they did not have a quorum, but the meeting was very positive. We already have the Lake Winnipeg money, but we need the money for the trip to Nunavik and I expect we will get that.
We are polling senators with respect to the Lake Winnipeg trip. We would like to have replies back by tomorrow, Friday, because we have to do some planning. You have to burn the midnight oil and get the replies into the clerk.
This morning we have invited the officials to come talk about the announcements that the minister made recently, which will have implications for all of us on all the coasts. We are very pleased to have them.
I will ask the Deputy Minister, Admiral Murray, if he would introduce the people with him. They really need no introduction — David Bevan needs no introduction to this committee and neither does Wayne Follett — but introduce them anyway.
Larry Murray, Deputy Minister, Fisheries and Oceans Canada: Thank you very much for the opportunity and for your interest in the new initiatives and approaches announced on April 12.
As you mentioned, I have with me David Bevan, the Assistant Deputy Minister for Fisheries and Aquaculture Management, Fisheries and Oceans Canada, and Wayne Follett, our Regional Director General for Newfoundland and Labrador Region.
They will both be doing short presentations off decks, which I think have been provided, on both the national and Newfoundland announcements of April 12, as you requested. Following this, we will be happy to answer your questions and hear your comments and views on the announcements that were made on fisheries renewal generally and on the way forward.
We believe that the announcements made by Minister Hearn are an important signal for a new way of doing things in the fishery. As a follow-up and in response to a year of extensive engagement with fisherman, with provinces and with others at summits and in various other consultative processes across Atlantic Canada, the announcements were both the end of a process and, in many ways, the beginning of a way forward.
[Translation]
The announcements included a number of initiatives that both David and Wayne will outline for you. At the core of these initiatives is a new way of looking at the management of fisheries — an Ocean to Plate approach that looks at all aspects of the fisheries industry from the harvester to the processor to the buyer to the distributor to the grocery store and restaurant to the consumer. For our department, this means a different way of doing things.
We do not have, nor are we seeking, the mandate on all of these elements. The mandate and the governance of fisheries is quite diffuse, and our department's role is changing from one of pure regulation of the resource to one where we work with provinces — who have the mandate for processing — with other federal government departments — who have the mandate for economic development, international marketing, training, et cetera — and with all the industry players along the seafood value chain to manage the resource in a more comprehensive way that seeks to maximize long-term value from the resource.
In some ways, this involves a change in culture for our department, for the industry and for others — a change that we believe is necessary to better position Canada's fishery in a competitive, complex, global marketplace.
[English]
At the end of the day, we see a smaller, more nimble and more competitive fishery in Canada that can better respond to market demands and that creates more wealth for fishermen, for others in the industry and for Canadians in general.
At the same time, we are mindful of the public character of fisheries management and of the unique role of the independent inshore fishermen who are central to the culture and identity of Atlantic Canada. We have taken steps so that as we move to a more competitive fishery, we are supporting and strengthening the independence of the inshore fleet.
There are three points of context I would like to make briefly. First, from our discussions with fishermen over the last year, it is evident that one size does not fit all. Different solutions and approaches will be required in different fisheries and the fishermen themselves have to be part of that solution.
Some of the initiatives announced on April 12 are national in scope, but some are focused on Atlantic Canada and some on Newfoundland and Labrador fisheries in particular. Discussions are ongoing on all three coasts, and we can expect other regionally focused initiatives to be developed over the coming months.
Second, all of these policy and process initiatives can only go so far without legislative change. At the end of the day, we believe we can be more effective with the new legislative framework and the legal tools that a new Fisheries Act would provide.
Third, these new initiatives are not a signal that we are moving away from our core conservation mandate. It remains our priority, and our prime responsibility continues to be to manage the fishery so that the resource is available for future generations. We believe, however, that industry viability and conservation are inextricably linked and that the initiatives in the April 12 announcements will result in better conservation outcomes, as well as improved industry viability.
I now turn the floor over to Mr. Bevan to talk about the national overview.
The Chairman: Before I ask Mr. Bevan to make his presentation, I forgot to mention to the committee that I have to leave at 11:45. I have asked Senator Hubley to take the chair at that time. If I leave, it is not because I do not like you or for any other reason; it is simply that I have obligations.
David Bevan, Assistant Deputy Minister, Fisheries and Aquaculture Management, Fisheries and Oceans Canada: I will be speaking about the Ocean to Plate approach for the Canadian fishing industry. Briefly, I will give an overview of Canadian fisheries, the challenges we are facing, the Ocean to Plate processes and approach, the April 12 announcements and the next steps.
On slide 3, you can see that the Canadian fishing industry has changed over the last number of years. It used to be focused on high volumes of groundfish; now it is being focused on shellfish, with finfish taking a much smaller percentage and aquaculture growing dramatically over the last number of years.
The industry is worth $4.3 billion for exports, another almost $1 billion in the domestic market and has aquaculture revenues of $753 million. It supports 80,000 people and is a very important player in coastal communities in Atlantic Canada; it is a significant contributor to the GDP of Atlantic Canada.
The industry is governed by many players. The Canadian Food Inspection Agency looks after the processing plants; we look after harvesting; Foreign Affairs and International Trade Canada looks after foreign markets; Agriculture and Agri-Food Canada looks after marketing; and provinces look after processing, et cetera.
In the last number of years, we have had a tendency to focus on our own piece of that puzzle, not looking at the whole. What we have learned through the course of this year is that we do need to look at the whole because we can grow value in the fishery if we do that.
The Chairman: Could you break down finfish for us?
Mr. Bevan: It would be all the groundfish — salmon on the West Coast. On the East Coast, groundfish would include everything from bluefin tuna, mackerel and herring right through to cod and haddock.
As you can see, it is a small piece of the pie. When you look at all of that together, it does not add up to as much as aquaculture or lobster. It is about the same size as crab, which is a significant shift in the last 15 years.
The Chairman: I asked that because it is a significant shift.
Mr. Bevan: On slide 4, we see that we have a number of external pressures, with a significant increase in the dollar and fuel prices and increased competition from China. In 2006, we had a significant price-cost squeeze, with fish prices lower and some fishermen unable to cover costs in a reasonable way. The prices have bounced back somewhat but we are still subject to significant challenges from competition from China. We also face challenges with respect to access to markets due to tariffs.
Aquaculture is not achieving its full potential due primarily to a problem with the complex regulatory framework. In Newfoundland, I was informed that to get a site approved you have to seek approvals from 18 different agencies or government organizations. That kind of complexity has meant that the growth in aquaculture in Canada has dropped off, where it is continuing in Chile, Norway and other areas. It has stabilized and now our aquaculture industry is taking orders two years out. They cannot supply the demand. The price is good and the demand is there but they cannot ramp up production due to the problem of how we are organized to support the industry.
We are facing changing environmental and oceanographic conditions. In the Atlantic, we have some stations off Newfoundland and Labrador that have increased by 4.5 degrees Celsius since the cold temperatures in the 1990s and they are above long-term averages. In the Pacific, salmon are migrating through oceanographic conditions that are so different we cannot use time series data to accurately predict what is happening.
The result of this, coupled with internal weaknesses including overcapacity in the harvesting, complex regulatory framework, lack of integration, harvesting aquaculture and processing where we have a fragmented industry, federal and provincial policies that were focused on maximizing the participation and not on having a competitive industry, aging work force, low wages, and out migration in coastal communities, has led to short seasons, a race to harvest, a race to process, a lack of focus on quality, an inability to market effectively, missed opportunities in aquaculture and low productivity in the wild fisheries. All this has resulted in coastal communities being vulnerable and subject to out- migration.
We have responded by having, in concert with provinces, a number of summits and round tables that have reinforced the fact that the status quo is not acceptable. We do have to change. If we do not, change will be forced upon us. If we cannot manage the change, it will be managing us.
Significant consultation with industry throughout the last year led to the vision, which you see on slide 6: a sustainable, economically viable, internationally competitive industry. That industry should be able to adapt to the changing resource and market conditions. We have seen those changes and have to live with them every day. Crab abundance goes up and down, crab prices go up, and down and the industry needs to be able to respond to that. The same is true for other species as well.
That industry must be able to extract optimum value from world markets. We are not doing that now. Our prices are not as high as they are from other sources.
That industry must be able to provide an economic driver for communities in coastal regions and provide attractive incomes for industry participants. We are not attracting skilled workers now and once the current age class of workers goes through we will be faced with a significant labour shortage.
This vision can be achieved if we look at a more integrated approach: oceans to plate and in some cases from plate back to oceans. We have to be informed by the market as to what we need to do at the harvesting sites, at processing and at the markets.
The goal is to coordinate policies and programs relevant to fish harvesting, aquaculture, processing, distribution and marketing in order to maximize the economic value and help lead to economically viable industry that can go through the supply and market shocks and uncertainty.
That requires us to go through significant changes. We have to enhance the seafood sector global competitiveness, increase awareness of relevant policies and programs of federal and provincial governments, increase industry resilience, strengthen collaboration with industry, and create more value from fish and seafood landings.
We have been trying to stabilize the access and allocation, in order to have people stop focusing on solving their problems by getting access to somebody else's fish and start looking at what to do to maximize the value of their own fish.
Program and policy initiatives to support the Ocean to Plate approach were announced on April 12, which you can see on slide 8. I would point out that this will be a significant cultural shift for the government, where we have to work collaboratively with all those other institutions I mentioned earlier, as well as trying to seek a more collaborative approach instead of a combative approach between fishermen, processors, the market and brokers.
We have seen the capital gains tax exemption increase, which will help with the intergenerational transfer of licences, and where the maximum taxes are being paid the current exemption will allow up to $180,000 to remain in the hands of the fishermen involved.
Science renewal funding has been provided and that will help provide the information needed to have information not just on the stocks but also on the ecosystems on which they rely.
We have new Coast Guard vessels being planned for and funded.
We have a license fee review launched to modernize licence fee processing and update a process that was based on 1993 data.
We have sustainable fisheries check lists, because we in the new marketplace will have to prove to the market that the fish they are receiving are coming from sustainable fisheries. It is no longer adequate just to have the fish available. You have to be able to prove that they come from a source that will be there for the future and that their markets are not contributing to the demise of fish stocks.
We moved ahead with preserving the independence of the inshore fleet in Atlantic Canada, removing the opportunity to enter into trust agreements that control the licence and providing seven years for those trust agreements that do exist to be modified.
Mr. Follett will go through the Newfoundland initiatives where we have enterprise combining, vessel replacement rules, and permanent licences for the inshore shrimp fisheries. We are moving to self-rationalization. We also have moved to create regional shares so that the fleets in Quebec and in the rest of the gulf can start to look at maximizing the value of the amount of the fish they have. Racing to the fish has not provided an opportunity to fish to a market and increase the value of your fish.
We will look at Quebec temporary allocations being resolved by 2010. We have agreements that extend through 2008 and we need some time to move from these temporary arrangements to something more stable, and we have set a target for 2010 for that.
We are looking at the northern shrimp economic viability study. We have studied the inshore and found that it is under a great deal of economic stress. We need to do the same for the offshore.
We are looking at reviewing fisheries in Nunavut.
The next step will be to continue with regional processes in Quebec, New Brunswick and Northumberland Strait in Nova Scotia. We will be making further steps to follow up on the April 12 announcement and we are making the changes that come from that. Fishermen will be receiving letters to explain preserving the independence of the inshore fleet. We are looking at changing how we manage licence transfers in response to that new initiative, and we will work with fleets on a fishery-by-fishery basis to explore self-rationalization regimes. This was designed to leave the fishermen in control of their future; allowing self-rationalization will have fishermen working with other fishermen to rationalize, and at the end of the day we should have a more economically efficient and viable inshore fleet in the hands of inshore fishermen and where the fisherman on the boat controls the enterprise.
Wayne Follett, Regional Director General, Newfoundland and Labrador Region, Fisheries and Oceans Canada: You should have a deck with the title ``Canada-Newfoundland and Labrador Fishing Industry Renewal.'' I believe the title has certain significance in that it is a Canada-Newfoundland initiative. I will speak primarily this morning to those elements of the renewal strategy that relate to the federal side, but I will briefly enumerate for you those elements that will be delivered by the Province of Newfoundland and Labrador.
The deck is lengthy but my intention is to go through the first eight slides. The appendix is provided so that if you have an interest you can look at the back and see some of the details. I will take you through an introduction. Like Mr. Bevan, I will talk about industry challenges and drill down deeper in Newfoundland specifics. I will talk about the objectives of the renewal strategy announced April 12 and speak to the elements of that strategy and the next steps.
On page 2, our process in Newfoundland and Labrador commenced in May 2006. Three of us along with our minister attended the premier's summit in St. John's, Newfoundland where the premier and our minister brought together all the key industry and community leaders in our province to talk about the fishery.
In May 2006, dark clouds were on the horizon, particularly in terms of the economics of the fishery and the cost- price squeeze Mr. Bevan mentioned. There was a level of consensus at the summit on the need for change. The status quo was not an option.
Out of the summit, the premier and our minister launched a Canada-Newfoundland industry renewal initiative. It started in the summer months with government-industry working groups looking at different aspects of the fishery and with a steering committee, which I co-chaired with the Deputy Minister of Fisheries and Aquaculture of the Province of Newfoundland and Labrador. The working groups identified a number of options, which allowed us to bring a progress report to the minister and premier in late August 2006.
In the fall of the year, we released a federal-provincial discussion document on the challenges in the industry in Newfoundland Labrador and what we saw then as some of the policy questions that needed to be addressed moving forward. We launched an extensive consultation exercise. As a renewal team, we had 40 meetings in mostly rural settings. We met with fish harvesters, plant workers, industry associations, mayors, municipalities, boards — a broad cross-section of the people in Newfoundland and Labrador with a stake in the fishery. More specifically, we went directly to the stakeholders — the fisherman and the plant worker — to get their input into the renewal strategy. Our team members also participated in 40 other community sessions that were held by the fishermen's union in Newfoundland and Labrador. All in all we had 80 sessions. It was quite an extensive exercise.
There was close federal-provincial cooperation and it was seen and led as a federal-provincial approach as part of the Ocean to Plate agenda. Throughout the process there was a high level of consensus on the need for change but there was not a high level of consensus on the measures for change. That made it difficult for us. Our recommendations to the minister and premier tried to strike a balance, but it was not a balance that suited every individual perspective. The Ocean to Plate strategy was announced April 12 in St. John's, Newfoundland.
The industry challenges are similar to the global challenges. We characterize our challenges in our sessions as both external and domestic. The external ones are those beyond our control to influence, and Mr. Bevan talked about some of them. The Canadian dollar is up 41 per cent over four years, and we market most of our seafood in U.S. dollars. That has had a phenomenal impact on the bottom line. Fuel costs are up 55 per cent, giving rise to the cost-price squeeze. The industry has slipped in terms of its international competitiveness with other countries like Iceland and Norway and in particular with low-cost producers, among which China and Vietnam are at the forefront. China has had a phenomenal impact.
We are prone to cyclical market price variations. We are driven by two shellfish species, crab and shrimp. The inshore shrimp sector commenced in Newfoundland and Labrador in 1997 as a wet fish industry. Shrimp is caught and landed for processing on shore. Since 1997, the landed price of shrimp has gone from approximately 65 cents a pound down to 42 cents a pound and most harvesters would say that that is below their break-even point . This year we are seeing a slight price increase for the first time since 1997.
Crab is prone to quite an oscillation in pricing over two- to three-year periods. In 2004, crab prices were at $2.40 a pound and last year they went as low as 96 cents a pound, which was a phenomenal drop. This year we have seeing a rebound to the range of $1.75.
The key point is that we need an industry that is resilient and that can adjust to those types of swings in economics. Hence, I will outline some of those strategies later.
Mr. Bevan spoke about tariffs and market access. In particular, our cold water shrimp is predominantly sold in the European Union subject to a 20 per cent tariff. That really puts us at a disadvantage.
There is an increasing world supply of aquaculture. When we started in the shrimp business in the inshore in 1997, the total supply of shrimp to the world market was 3.5 million tonnes and it rose to over 6 million tonnes last year. The aquaculture contribution tripled from 800,000 metric tonnes to 2.4 million metric tonnes. It is difficult to sustain any supply and demand curve, any kind of price for shrimp, with that kind of growth in worldwide supply.
We set out as part of a renewal team to meet the domestic industry challenge.
The Chairman: Just to clarify, there are two points here, the increase in the world demand and supply but also a difficulty. People have to jump through hoops to get aquaculture facilities. Is that right?
Mr. Follett: I think Mr. Bevan spoke to the regulatory challenges that we have here in Canada between the federal government and the provinces.
The Chairman: I wanted to highlight that because we need to focus on it in the future. I do not want to take time right now but I wanted to finger it because if we could find out a little more about that and what we can do about it that would be helpful.
Senator Meighen: There is a split jurisdiction between the federal government and the provinces in the area of aquaculture.
Mr. Follett: In terms of the domestic challenges, in our renewal exercise we included the things we thought were within our control. The first one relates to resource fluctuations and declines, albeit those are subject to the vagaries of nature. We have to manage our stocks on a sustainable basis, and throughout the strategy we make a link between industry viability and sustainability, because when you are managing a sector that is always in economic distress, it is difficult to make the tough choices on the resource side.
We have seen the declines. Obviously, nationally we see the finfish as a small percentage. In Newfoundland and Labrador moratoria remain on many groundfish stocks, and we made the transition to a shellfish sector, as we have talked about.
With respect to industry structure and capacity, there are a number of issues relating to how harvesters relate to processors and the intense port market competition. In the inshore sector in Newfoundland and Labrador, processors process and harvesters harvest but they do not come together; there is no vertical integration in the industry. That gives rise to a challenge in terms of setting a price at the port market and having fisheries start on time.
There are other issues related to the seasonality of the industry. There is low utilization of vessels and processing plants because of that seasonality. One of the statistics we used was days at sea. A longliner is usually 35 feet to 65 feet in length and fishes for crab and shrimp offshore. That fleet, on average in 2006, was utilized for 37 days of the year. That is a phenomenally low utilization rate for a capital asset that can range anywhere from $1 million up to $2.5 million. The fleet with the highest use was the fleet that fished crab and shrimp at the highest volumes. They were getting their utilization up to 64 days in the year. There is a very low utilization of assets and high level of over capacity.
With respect to workforce recruitment and retention, we had a look at demographics of fish harvesters and plant workers. I will give you another interesting statistic. In the fishery, enterprise owners are characterized as core fish harvesters. In Newfoundland and Labrador, half the core fish harvesters are currently over 50 years of age. The other telling statistic is that 5 per cent of the core harvesters are less than 35 years of age. The plant worker demographics are not dissimilar in nature. The conclusion, reinforced through our consultation, is that the fishery is no longer an occupation for the young. We are having phenomenal difficulty attracting young people into an industry with such a highly seasonal and unpredictable situation and low incomes.
The average plant worker in Newfoundland and Labrador earned an income of $8,000 a year. If you put the transfer payments and EI payments on top of that, you are getting into the range of a little over $16,000 for an average plant worker. This is not an industry that is attracting young people, and certainly not the young and brightest. It is an alarming statistic in terms of the future as we, like others, compete in what is a competitive labour market for young talent.
The nature of the fishing industry in Newfoundland and Labrador has changed dramatically since the moratoria on groundfish stocks and cod and with the transition to the shellfish industry. It is more highly seasonal now than ever in our history.
I have already spoken about the issue of increasing and stabilizing incomes.
Vessel design repeatedly came at us as a significant issue, predominantly driven by the vessel replacement rules that have been in place within the Department of Fisheries and Oceans for a couple of decades now. Poor vessel design, in terms of the constraints on the growth of vessels and on the inshore fleet to fish offshore, has given rise to the high level of seasonality. It has not been conducive to the landing of a quality product. It does not allow harvesters to fish on the shoulders of the season when the demand may be higher or on the shoulders of seasons where the biological characteristics of fish are more conducive to a quality product.
Many of the vessels have been oddly shaped. We have heard issues around safety and comfort, but more particularly around fuel efficiency. We did research through Memorial University looking at the typical design of inshore vessels and the fleet compared to what a more efficient design might look like. The simulation models produced fuel savings as high as 40 per cent to 50 per cent if a vessel was properly designed.
With respect to marketing, I have already talked about the challenges with port market competition. It is difficult to get the processors and the harvesters together in a collaborative arrangement in markets when there are such fierce competitors on the wharf. We certainly saw the lack of a collaborative approach to marketing as being a challenge for extracting maximum value from the fishery.
The strategy we announced on April 12 will implement the Ocean to Plate approach. It will assist transformation to a sustainable, economically viable and internationally competitive industry. That is the focus of the renewal. It will preserve the independence of inshore fleets and support a regional approach for fish processing. I will talk more about that when I get to the provincial matter. It will respond to the needs of displaced workers and increase health and safety in the industry. Health and safety is not an issue we brought to the people but one the people brought to us.
The last thing I would say regarding the overall objective of the strategy is that it will afford or offer to fish harvesters in particular a greater choice in the conduct of their fishing enterprises and businesses. As Mr. Bevan said, it will involve a cultural change for Fisheries and Oceans Canada. I think it will mean a less paternalistic approach by the department. We are giving greater choice to fish harvesters in particular, and we will see where it will go.
The last thing I will stress is that most everything we have announced is voluntary. It is in the hands of fish harvesters if they want to pick up on some of the new policy changes and grow their enterprises.
Turning to the key elements announced on the federal side from Fisheries and Oceans Canada and the federal jurisdiction perspective, the first one Mr. Bevan mentioned was the strengthening of the owner-operator and fleet separation policies. Certainly it was a prerequisite on behalf of fish harvesters to participate in any change agenda. Here we have announced policies to roll back the growth of numbers of trust agreements between processors and fishermen. We have also built in provisions for licences to be used as collateral with banks, which is important to fish harvesters.
In the province, we have also moved new policies recently as they relate to rent extraction. More particularly, increasing numbers of folks have left the industry but more or less leased back their entitlements in the fishery.
We have introduced a combining policy to allow harvesting self-rationalization. In simple terms, it is a significant shift in fisheries policy in that we are now allowing a fish harvester to acquire the enterprise of another fish harvester. In the past, you could not do that. This combining would occur within fleets. At the moment, we have put a cap on the level of combining. In effect, a harvester can acquire two for one in terms of combining. Upon combining, one enterprise will disappear from the fishery, one vessel registration, and in most cases a number of species licences will return to the department. We will see two enterprises collapse into one.
We have made significant changes to vessel replacement policies, which I spoke to earlier. We have simplified the rules, and we have created basically three fleets. There is a fleet less than 40 feet in length, a fleet 40 feet up to 65 feet in length, and we have also announced a provision for the current inshore fleet less than 65 feet to acquire a vessel up to 89 or 90 feet in length, which is probably a better vessel for those who fish for shrimp and crab on the Northeast Coast in waters up to 230 miles offshore.
We have done away with the volumetric rules that were in the old policy, which we refer to as cubic numbers. A fisherman can now design the boat of his choice.
We also announced the conversion of temporary shrimp permits to licences. I mentioned earlier that the inshore shrimp fishery started in 1997 with the introduction of the inshore fleet to the shrimp fishery. At that time, they were given temporary permits. On April 12, the minister announced that he had converted those permits into regular licences, basically to enable those people to participate in the combining.
As Mr. Bevan said, we have made some recent investments to increased fishery science in stock assessment. The minister announced a new $75-million vessel for Newfoundland and Labrador for research.
The licence fee review that Mr. Bevan mentioned will be helpful, as will the capital gains exemption. In our combining policies, we have pro forma estimates of the level of commodity we might expect over five years in the enterprises and what this might offer in benefits to Newfoundland fish harvesters. The estimate is about $50 million to $60 million in tax relief over the next five years. That relief will be shared on a 60/40 basis between the federal and provincial treasuries.
The Province of Newfoundland and Labrador, as part of this strategy, also announced a number of elements. I will touch briefly on them. I am sure the province would be prepared to talk to the committee about their specific elements.
Processing renewal is a renewal of plant licensing policy, which will allow for some consolidation to occur. It sets more defined rules for when the province will or will not activate a dormant licence when a plant closes, and it defines resource thresholds for the management of plant licensing policy on a reasonable basis.
I have spoken to challenges in marketing. The province has agreed to fund the establishment of the seafood marketing council, to bring fish harvesters and processors to the table to conduct market research and analysis and to do promotional campaigns on Newfoundland seafood. Lastly, as a policy group, they will inform both federal and provincial policies as those relate to the Ocean to Plate challenges in industry.
One of the solutions that came to us in terms of the port market competition challenges was the establishment of an auction at the ports to provide a vehicle through which harvesters could sell to processors. There is a draft proposal in play now to test an auction on the south coast of the province in 3Ps cod this year. It will be voluntary and will involve, for those that want to participate, the port auction of 3Ps cod. We will not have an auction for northern shrimp it this year, but maybe next year we will pursue it.
The province announced in concert with the combining policy the enhanced loan guarantee program. They have an existing loan guarantee program for fishermen through the banks, but they have increased the levels of loans they are prepared to offer. They are changing their criteria to allow for the refinancing of the trust agreements.
Lastly, they will change their criteria to allow for the financing of enterprises under the combining policy. This will provide a government-guaranteed source of capital financing to fish harvesters who want to participate in the combining policy.
The province is also intending to establish a Newfoundland fishing industry sector safety council to begin to address the safety issues. They also announced a number of enhancements to their workforce adjustment measures as they relate to plant closures and other displacements in the industry.
In terms of our next steps, we have quite a work load ahead of us in the Newfoundland region, working with industry on the program details and implementation. There is a phenomenal amount of detail to be worked out with fish harvesters and with processors to implement the strategy. The changes are complex, and they represent the first step towards industry renewal. We are hoping to begin consultations with those we can reach in the spring, those in the North who are still iced in, and continue with consultations in the fall with full implementation of the policies by the end of this calendar year.
Senator Baker: Thank you very much for your presentations. I would like to welcome the witnesses to the committee. In Admiral Murray and President Bevan — I say ``president'' because he is the president of the Northwest Atlantic Fisheries Organization — we have two outstanding and remarkable men who have contributed a great deal to our ocean resources. They stand out, and it should be a part of the record that we so recognize these two gentlemen.
Of course, we also have Chairman Follett, and I say ``chairman'' because we have an admiral and a president, so we should have a chairman. Chairman Follett runs the best run region of Fisheries and Oceans Canada. It stands out as a model for fisheries management in the world. Most people recognize that.
I had intended to ask questions concerning the vessel monitoring system, or VMS. I will get to the recent announcements in a moment, but perhaps I can read the three questions I wanted to have answered concerning the vessel monitoring system. You could either provide an answer here before the committee or provide one to me in writing within the next 24 hours or 48 hours.
My questions are quite simple. I know it is a fact, but why is it that Canadian vessels are required, if their vessel monitoring system is not operative, to return to port or face prosecution in order to get it fixed, whereas the foreign vessels in the Northwest Atlantic Fisheries Organization, NAFO, zone around our coast are not required to return to a port to get their VMS system fixed if it is not operative?
Second, what is the exact law in Canada? Where is it? I cannot find it. It must be in a licence requirement, I presume. I would like somebody to tell me exactly what it is, to read it out in one sentence, because I am sure it is only a sentence.
Third, if you are paying a monthly charge for this service, which fishermen are, is that a guarantee that it is working? Is that enough evidence to say that the fisherman looks at his VMS and it is operative because he pays the monthly fee?
Those were the three main questions I had concerning that. Somebody could answer that perhaps in one take.
I also want to put on the record the other question. A remarkable change has taken place that I have just noticed here today in fisheries policy. Over the past 10 years, an enterprise has grown, just like the real estate business, called the fishing licences brokers business, and it has been operating quite successfully in Eastern Canada. A fisherman can put up a licence, a broker takes it, advertises on the Internet, sells the licence, arrives at an agreement for sale and then he goes to Fisheries and Oceans Canada, which then accommodates the sale by identifying whether the person qualifies for the transfer of the licence, and it becomes a complete sale.
The problem is that the banks and businesses got involved in this so that a huge number of licences today are held by business interests. Banks hold fishermen as collateral. Business interests own the licences, but the licences are put in the name of a fisherman under the rules and regulations. This has been operating for 10 years in Canada.
Now, all of a sudden, we have a rule, and I want to congratulate the minister. This is a wonderful decision, in my opinion, although the business community and the banks will not like it, to end the ownership or the transfer of licences to partnerships of which the fisherman is a member.
This is a huge change. The substantive nature of it is presently before the Supreme Court of Canada under the Bankruptcy and Insolvency Act. The Nova Scotia case is Royal Bank of Canada v. Saulnier; I do not know if you are aware of it. In that case, the fisherman declared bankruptcy and his fishing licences were seized to be sold on the open market.
No longer can a licence be transferred to a business partnership; it can now be transferred only to a fisherman. When will the new system, which I presume you would call the independent fishermen's status for ownership of licences, be operative? The minister makes this excellent announcement, but I suppose it will take a period of time for the bureaucracy to catch up to the actual announcement. When will this initiative be put into place? What papers will they have to sign to guarantee that they are not part of a partnership upon transfer?
Those are my two questions, one on the VMS, the other concerning the setting up of this new category of independent fisherman.
Mr. Bevan: With respect to VMS, Canada is actually catching up with the rest of the world in utilizing VMS. It is a licence condition under the Fisheries Act. We use the licence condition to require VMS so that we can manage not just how much fish is caught but also use, time and area closures, et cetera.
We have a fairly complex system within the Canadian zone, and we have gone to one-hour reporting. In NAFO zones, we do not have the same degree of time and area closures. They are fairly large and closures are not as significant an issue in the NAFO zone. It is an international agreement that we have two-hour reporting.
In NAFO, it is a distant water fleet. If they have a problem the first time in port, they have to fix it within a month. In the Canadian zone, there is a decision taken by a fishery officer as to whether or not that vessel must return. In the Newfoundland context, 28 vessels have been called back to fix their VMS. That is out of a population of over 900 vessels.
In the NAFO context, there is a very low level of failure and those are repaired next visit to port. The low level of failure would be less than 1 per cent of the sea days. In the event of a failure, they have manual reporting obligations and, of course, we have air surveillance and other means to determine where the vessels are.
With respect to changes for preserving the independence of the inshore fleet, we are trying to allow access to capital by having banks do loans to independent fishermen. What will not be allowed are the under-the-table arrangements where a trust agreement is used, capital is supplied by a business or by a fish plant and used to obtain a licence in the name of the fisherman when in actuality the licence is controlled by that business. Those things will be terminated with this new policy.
We are sending letters out to core fishermen now, and those letters should be received either imminently or certainly early next week. Those letters will ask the fishermen to make a declaration as to whether or not they are subject to a controlling agreement. The fishermen will have to make that declaration in writing to a designated licensing officer and there will be a legal obligation on the part of the fishermen to provide accurate information.
In the event that the Fisheries and Oceans Canada receives information that there is a controlling agreement even if someone has declared there is not, the department will take steps to deal with that, and those steps are outlined in the letter. Certainly false declarations would expose the person making them either to charges under the Fisheries Act or to having their licence situation resolved by not having it issued or by having it corrected in some other way. That will be starting immediately.
We are providing six months for the declarations to be made and then from the time of the acknowledgment of a controlling agreement there will be a seven-year period for the controlling agreement to be resolved such that the person holding the licence is an independent core fisherman.
Senator Baker: No transfer can be given. As of right now, since the minister's announcement, no transfer can be made unless it is made to an independent fisherman, a fisherman independent of a partnership. Is that correct?
Mr. Bevan: That is right.
Senator Baker: What about my other specific question, Mr. Follett, the one sentence? What is the law regarding VMS?
Mr. Follett: The VMS requirement is discharged to two fishermen through a condition of licence under the Fisheries Act. The law is the Fisheries Act through conditional licence.
You did ask if we could read out the specific wording. I could do that, if you like.
Senator Baker: It should only be one line, though. There must be something on the fishing licence, according to you, that says this very clearly. I presume it would be a line.
Mr. Follett: There are a number of lines and paragraphs there; I do not have all of that with me.
Senator Baker: No. You are misunderstanding what I am saying.
When someone is charged with an offence under the Fisheries Act, they are charged with the offence as it relates to a violation of the regulations. The offence document then lists a sentence that they violated this particular sentence. I am asking you this question — and I will be honest with you — because I have watched this evolve over the years. Nova Scotia or New Brunswick is where most of the case law exists in recent years. The charge was that you were not allowed to have your VMS turned off or inactive from the time you left to go fishing until you returned from fishing. Somewhere along the way, that was changed so that in one sentence it states somewhere — and I do not know where it is, Mr. Follett; it must be on the licence — that the VMS must be active from the moment the fishing season starts until the moment the fishing season ends and not whether you are fishing.
I am asking the question because fishermen are upset. When they put a boat up on dry dock, their wife or spouse turns off the set because it saves them money. But they then must pay an exorbitant monthly fee for air time. They shut it off and then they are charged by DFO because the signal was not being received while the boat was on dry dock. It is what is known as a strict liability offence. In other words, you commit it; that is it. Just like speeding, there is no defence to it.
I would like to know the sentence, just for my own edification. Somewhere along the line the law was changed that allows for that kind of extraordinary charge to be made.
Mr. Bevan: This has been subject to court challenges. The charge would be that you are failing to meet the conditions of licence.
Senator Baker: Yes, that is the charge. I am now looking for the sentence that tells someone what they did.
Mr. Bevan: The charge itself would be failing to meet licence conditions. The licence conditions would be read out to the fisherman at the time he receives the licence, so the licence conditions are explained to the fisherman. If you fail to meet them, you are subject to enforcement action.
It has been subject to challenges and has been successfully defended by the department. That was done in a court in New Brunswick, I believe.
The other thing you should be aware of is that when we meet with fishermen and consult on fishing plans and what conditions should be in the integrated fish management plan, the fishermen have an influence on what should and should not be there. You are dealing with fisheries where, for example in tuna, you can have a high degree of return on illegal fishing activities if you get out of port and catch a fish without reporting it. That led to desires in some fleets to have more controls. Those are reflected in the conditions of licence.
Senator Baker: Is the law in Canada today, then, that the VMS system must be turned on and operating from the time the fishing season starts until it concludes?
Mr. Bevan: The conditions of licence are designed so that you can have specific requirements for specific fisheries. In some fisheries, that is the requirement, because of past experience of non-compliance in those fisheries. Other fisheries will be different. It is dependent upon the nature of the fishery and the consultations we have with fishermen, and those lead to the development of licence conditions that reflect those requirements for that specific fishery.
Senator Baker: There is general compliance to the crab and shrimp fishery. Is it true that the law is that you must have the VMS signal in the crab fishery offshore? Mr. Follett was talking about it. You must have the VMS operative from the start of the fishing season until the conclusion of the fishing season. I am looking for a yes or no.
Mr. Murray: As Mr. Bevan said, it varies from fishery to fishery. We would be pleased to provide to the committee the specific licence conditions as they existed in either 2006 or this year around VMS operation, because we would be guessing to some extent around particular fisheries. We would be happy to provide that information.
Senator Adams: You are talking about some of the changes. We do not have the new fisheries bill yet in the committee. Are the changes in the new bill?
Mr. Murray: I will ask Mr. Bevan to elaborate on the connection between the new Fisheries Act and what has been announced here, but, effectively, what was announced on April 12 are policy changes entirely within the minister's authority and within the authority of the various provinces that have participated with us.
However, they are all aimed at trying to move the fishery forward in terms of modernizing the compliance framework, enhancing conservation, enhancing shared stewardship, and providing greater stability and transparency around access and allocation. We believe these policy changes would be better in the context of a new Fisheries Act, however Bill C-45 emerges, that reinforces those things, which is what we are trying to do with this policy. Mr. Bevan may want to connect some specifics.
Mr. Bevan: The policies as noted were designed to provide fishermen with more involvement in their own futures, more ability to take decisions on their own. They are designed to ensure conservation, stability of access and allocation, and better value for the fish volumes that we have.
Those changes can be dealt with through policy, but the current act, the 1868 act, provides the minister with absolute discretion with no legal guidance on how to use that discretion. The word ``conservation'' is not there. There is nothing about a precautionary approach or about considering an ecosystem. The stability of access and allocation that we currently have is through policy only, because in law the minister can change them all overnight. In the new act there would be a process for the use of the minister's discretion. There would be transparency and there would be rules around the use of that discretion, as well as principles to guide it. Those are all absent now; they are reflected only in the policies that we have, but any subsequent minister could change those policies. Any minister could change the allocations without a lot of process, and so on. That undermines where we would like to go with the fishery, whereas a new act would complement it and make things more stable from a legal perspective.
As well, we cannot enter into binding agreements with fishing fleets. We cannot have fishing fleets talk to us about the level of sanctions that they would see a particular offence requiring. We cannot co-manage with them, because we have lost that under the Fisheries Act. We do not have the ability to sanction or enter into significant joint management arrangements. We do not have any of that capacity. That means that, while we want to be less paternalistic, we still end up with a minister making all the decisions and the department supporting that process. We are unable to work with organizations that are closer to the fishery and that would want to have a bigger say in the rules that apply to them. We are not able to get there under the existing act. We would under the new act.
Senator Adams: On slide 8, you have maybe a good thing here with Nunavut. You have ``Nunavut Fisheries Review'' in green. Does that mean we do not know what is happening up there now? Will you be reviewing it in the future? If you pass those new policies, will Nunavut be affected?
Mr. Bevan: The policies would apply throughout Atlantic Canada, including in the North. What we meant there is that we need to review the situation in Nunavut with respect to quotas, their shares, how the fisheries are managed. However, more important is the issue of Nunavut's desire to have increased access. We have a commitment to look at all of the fisheries relevant to that and to determine if there is a way to respond to Nunavut's aspirations for more access.
Issues such as preserving the independence of the inshore fleet in Atlantic Canada are not huge at this moment in Nunavut because there is no infrastructure for inshore fleets and the bulk of the quotas are held by the Baffin Fisheries Coalition. That was the where the Nunavut Wildlife Management Board wanted those to go. That means, therefore, that we do not have the same structure of fishery up there that has existed or developed in the South.
Senator Adams: I have three more questions, which you have a copy of. Sometimes my English is not all that good, but you have a copy. The first question is that the Prime Minister promised when campaigning that in the future there would be three icebreakers in the Arctic. Nothing happened this year. It is not in the budget.
The second question, with some review, last year, after a trip up to the Gris Fjord, especially with regard to navigation fees, I went to the House of Commons committee on October 19, 2006, on the question about eliminating the marine navigation services fee in Nunavut.
The minister did not answer to the committee that he will eliminate the fee. Now we find out that somehow in the background the fee in the North, above 60 degrees, was eliminated in 1997. Yet, somehow the Coast Guard was still collecting the fee up to 2002, and we do not know where the money went. My question is about the navigation fee. Every time you charge the shipper, you charge the cost of the navigation fee. You see the map. If you are charging a navigation fee up to Iqaluit and Frobisher Bay, it is only about a dollar of navigation fee through the percentage. In Gris Fjord, the fee is 20 per cent higher. The House of Commons eliminated it in 1997, and now we are told that up till 2002 the Treasury Board was still collecting it.
We went up to Gris Fjord again last year and learned that an average household spends $28,000 on groceries per year. The shippers have to pay a navigation fee to the Coast Guard and therefore have to double the cost of shipping. If it no longer exists, why is the government still charging that fee?
Mr. Murray: In response to the first question, the announcement of April 12 that deals with fisheries renewal does not deal with the icebreaker commitment made during the last election. However, in Budget 2006 the government announced the first phase of Coast Guard fleet replacement, which was effectively the addition of four midshore patrol vessels, two fisheries science research vessels and four additional midshore patrol vessels to work with the RCMP on the Great Lakes and St. Lawrence Seaway system, for a total of ten vessels. In Budget 2007, which was the second phase of the Coast Guard fleet replacement, the first announcement was $276 million plus, in round figures, $80 million to $90 million for the security vessels. In Budget 2007, there was a $324-million Coast Guard fleet renewal, which will produce four additional midshore patrol vessels as well as one additional fisheries research vessel and one major oceanographic research vessel.
From a Coast Guard perspective, certainly Coast Guard fleet renewal is moving forward. In round figures, that is approximately $750 million in two budgets, with priority being assigned to those vessels that have the highest priority. In future announcements, Coast Guard icebreakers would be part of that, but at the moment there has not been an announcement in relation to them.
On the specifics of the question about April 12, the minister made a second announcement on April 12 related to the new ships I have just outlined and where they would be stationed. He indicated that our two heavy icebreakers would move from Halifax to be placed in St. John's for the Terry Fox, commencing in 2008, and in Argentia for the Louis S. St-Laurent in 2009, moving them closer to their area of operations and to save us $10 million in infrastructure costs so that we can use those resources for operational purposes and so that we can get on with the renovations at the Bedford Institute of Oceanography, BIO, in Halifax for the rest of the fleet, including the new ships I have mentioned.
There was nothing in the announcement specifically about the polar icebreaker commitment but there was a lot about Coast Guard fleet renewal and some about moving icebreakers.
With respect to the question about marine service fees, the minister announced a review of those fees. He has directed the Commissioner of the Canadian Coast Guard to get together with the industry and look carefully at this. He has also directed that there be Northern representation in that process.
I would be happy, Madam Chair, to get more detail on that and provide it to the committee in written form so that Senator Adams has a more complete answer. The process is underway, it was announced, and there is no other representation involved in that review.
Senator Meighen: You characterize aquaculture as being a status quo that is not sustainable.
Mr. Bevan does not look as though he agrees with that. If I have it wrong, please correct me.
In the document I have before me, aquaculture is characterized as not achieving its potential. Also, it is faced with a complex, to say the least, regulatory framework, split jurisdiction between Fisheries and Oceans Canada and the provinces, and a focusing of policies on the maximization of employment rather than on the efficiency or competitiveness of the industry.
Later on you talk about summits, forums, round tables and consultations. I think those have been going on for a number of years and I am looking for some reassurance that progress is being made in terms of bringing clarity and certainty to the industry.
It seems to me, as an illustration of the challenge, that aquaculture operators in Canada, as opposed to the United States, are not yet required to report escapes from their cages, if that occurs. My understanding is that there is no legal requirement to report escapes, and obviously the escape of a large number of fish from their pens into the wild has the potential to cause serious problems in terms of disease and otherwise.
Can you send me away from here feeling a little better about progress being made in the area of aquaculture generally?
Mr. Murray: That is an area of significant importance to the country, and we would welcome the committee's delving into it, as you see fit.
From our perspective, the industry is not achieving its maximum potential. There have been significant discussions with the provinces in the last year or so leading up to a draft aquaculture framework agreement which would be negotiated between the federal government, provinces and industry, and which would, if and when we get there, provide confidence around a regulatory framework as well as coherence in the regulatory framework and the elimination of duplication and overlap, while maintaining a necessarily solid framework to reassure Canadians that the industry is being regulated in a safe and scientific manner.
Our view is that that is the current case but it is overly complex and overly difficult for industry and quite challenging. I am not sure that the average Canadian, certainly in some areas of the country, B.C. in particular, would be reassured by what I just said. Therefore, there is a need to bring science to this as well, and part of the aquaculture framework agreement would deal with the regulatory framework. Second, it would also deal with investment by federal government, provinces, industry, and research and development in appropriate infrastructure and looking at appropriate infrastructure. Third, it would provide the industry with some sense of protection, like the agriculture industry has, and with some investment, obviously, from industry on business risk insurance, so that with a high-risk investment there is at least some of the protection that agriculture has.
This aquaculture framework agreement has unfolded separately from the initiative we are talking about here. All that to say that significant energy is going into the aquaculture scenario.
As one example, we are all aware of the challenges in employment on the south coast of Newfoundland. As a result of a coordinated effort between a couple of departments of the federal government, the Province of Newfoundland and Cook Aquaculture, last year there was an investment of $155 million in a major aquaculture development there, which is tremendous news to that area. It gets people working in the fishery. We are very comfortable with the regulatory framework around that and have worked closely with Newfoundland.
In terms of the comment about summits and so on, certainly dialogue consultation is part of the business. However, what I would want to emphasize is that in most of the summits we are talking about in relation to the April 12 announcement, the focus was really on the wild fishery.
With respect to the comment about not achieving, that was focused on the wild fishery. From our perspective we would see that the first summit that started this in Newfoundland in May and the three or four others that followed were different. We had 65 people around the table representing all levels of government, including communities, and all elements of the industry. That was followed in Newfoundland by probably the most extensive consultation in our memory. The focus was on the wild fishery in that context. That is not to say that we do not also need to move forward with an aquaculture framework agreement and with more science and more work on the regulatory side.
Senator Meighen: Page 4 of the Ocean to Plate document states ``Aquaculture not achieving potential.'' Are you saying that that refers to the wild fish?
Mr. Murray: No, I am saying that in the context of aquaculture that is a true statement from our perspective. In our view, given the natural potential of Canada, when one looks at the south coast of Newfoundland or B.C., for example, we are not achieving our potential.
In terms of Mr. Bevan's point, it is interesting that in the context of other nations, aquaculture is more important. In Norway, for example, aquaculture is now the number two industry in the country, I believe, and in Chile it is certainly a key industry, although I am not sure where it stacks up in terms of numbers. In both of those countries, the slope continues to go up. In the case of Canada, it went up dramatically, and it still is very significant, but it has levelled off. We feel we need to fix some of the regulatory stuff and we need to reassure Canadians with more science. We need to move this thing forward and we have to work with everyone else involved to do that.
Senator Meighen: Is this aquaculture framework agreement presently under active negotiation?
Mr. Murray: It is not currently under what we would call capital end negotiation, but is the result of the work of the Canadian Council of Fisheries and Aquaculture Ministers, which is a federal-provincial ministers' council co-chaired by the federal minister and one of the provincial ministers on a rotational basis. The council has various working groups, one of which has hammered out the framework for an aquaculture framework agreement.
Every province with an interest in aquaculture has a mandate from their particular cabinet to sit down and negotiate. We have the framework agreement but we do not yet have a federal government green light to actually negotiate the agreement, although we do have the construct of the agreement and the minister obviously sees this as a top priority.
Senator Meighen: Is that a policy decision?
Mr. Murray: That is a policy decision the Government of Canada has to make. In the meantime, we are carrying on with discussions around regulatory framework and that kind of thing.
Mr. Bevan: From our point of view, government has the responsibility to regulate and manage the aquaculture industry in a sustainable way. We believe we are achieving that. We have the challenge of having to respond to accusations about escapes or accusations of sea lice damaging wild stocks and those are negatives. We have to prove a negative in order to move off that. We have to do that using science and it is time consuming.
We think the footprint of aquaculture is substantially less that many other types of protein-producing agricultural activities. Our problem is that the regulatory regime is complex. An example would be that a person wanting a new site would have to go to Transport Canada to work out the requirements under the Navigable Waters Protection Act. That would trigger a need for an environmental assessment so he goes to the agency to get a CIA. He comes to us for the habitat provisions, has to go to the province to get the sites approved, and there are other steps involved. Once in operation, he works with the Canadian Food Inspection Agency on the quality of the fish. He has to work with Agriculture and Agri-Food Canada on feeds and marketing. You can see you have to keep going to different doors and every time you do that you get a sequence such that in Canada we can see people spending up to two years and $200,000 to see if a site is approved and then find out it is not. That is a significant obligation to place on an industry. They need a more predictable, more streamlined process to achieve the same regulatory outcome, which is sustainable aquaculture where we know the footprint is being managed so that you are not looking at something that will irrevocably damage the ecosystem or change a particular part of the ecosystem forever. That is what we are trying to achieve through the aquaculture framework agreement.
Senator Meighen: Who would decide how many fish and what types of fish could go into the cages?
Mr. Bevan: That is a site selection process; the site has to be able to carry that number of fish. I would point out that there are codes of conduct in New Brunswick. There are codes of conduct about escapees, et cetera. They are moving to a different management regime where in a particular location all the fish are one-year class and they move through that and hold it fallow after that year class is out of the area and then restart the process to avoid disease going intergenerationally.
There are many steps being taken and if you look at the aquaculture industry on both coasts of Canada you will see that it is rigorously managed from a sustainability point of view and very competitive internationally. We have some of the toughest rules in application throughout the world. When we get people making claims and you have to prove a negative, it is very difficult to do.
Mr. Murray: Within British Columbia, it is probably more controversial than elsewhere in the country, and the premier established a parliamentary committee to review aquaculture, chaired by the opposition. They have had hearings and we have had officials provide information, but my understanding is that their report is meant to be tabled in the June. That might be of interest to this committee if indeed they meet their timeline and you are interested in looking further into aquaculture.
[Translation]
Senator Robichaud: You mention an enhanced loan guarantee program, and the announcement of last April 12 states that you are looking at better access to traditional lenders like banks by allowing the licence to be used as security.
What hold could the banks have on the licence when it is used as security?
Mr. Bevan: We would like to give fishers the opportunity to obtain money from another source. At the moment, it is usually lenders from within the fisheries who give money to fishers to buy their licences.
Senator: Robichaud: Lend, not give.
Mr. Bevan: Yes. We wanted the policy to allow a fisherman to go to a bank to obtain the money necessary to buy the fishing licence. In doing so, we would like to put a process in place whereby the bank and the fisherman must both sign in a transfer to another fisherman. We hope that the bank will then be able to lend the money to the fisherman because it will be impossible for him to get the money and subsequently sell the licence to another fisherman without the bank's approval. My hope is that this will open up different sources of money for transfers of licences.
Senator Robichaud: But would fishermen then not be giving the bank the power to wield influence? Say the fisherman who did the negotiating runs into difficulty, could the bank not say to him that the licence has to be transferred to someone else — especially with the two-into-one combining program — because the someone else is a better customer?
Mr. Bevan: No, the goal is to set up a process whereby the fisherman must get the bank's approval before he can sell the licence to another fisherman. It is not possible for the bank to own a fishing licence.
Senator Robichaud: I understand, and that is not what I am saying. I am saying that the bank can pressure a fisherman in trouble to sell to another fisherman who is in good standing with the bank. The fisherman is no longer free, in that case.
Mr. Bevan: Yes, but the bank can put pressure on someone to sell their house to get the money needed if there is a problem. The same situation applies to fishermen. The bank can put pressure on a fisherman to sell the licence if he is not able to make the payments, it is true.
Senator Robichaud: Yes, they can encourage him to sell, but can they not also encourage him to sell to one person rather than another?
Mr. Bevan: Perhaps, but the bank's interest is to get its money. It is possible that it may require the fisher to sell the fishing licence, but it has no great interest in the purchaser. I think that this is only to get the money. They cannot get more than the fisherman borrowed.
Senator Robichaud: I understand, but I am trying to understand how this situation differs from the previous one. Beforehand, the buyers lent money to the fishermen, now it is the banks. But the buyers deal with the banks. In small fishing communities, everyone knows everyone else, and everyone else's business.
I am just wondering how it is different. But if the fishermen chose this, it is their decision. I just have a hard time seeing how it is going to change anything.
Mr. Bevan: According to the banks, the most valuable part of the enterprise is the licence to fish. They want to be able to make sure that the licence stays with the enterprise and cannot be sold without their approval. Without the licence, it is impossible to have the same kind of arrangement with the fishermen.
Senator Robichaud: I understand that. You have a two-into-one combination policy for just one province, Newfoundland and Labrador. What does that mean?
Mr. Bevan: For the moment, yes. But it is possible for other fleets to hold consultations and discussions with the Department of Fisheries and Oceans. Fishermen with individual quotas can benefit from the combination policy. But it is true that, at the moment, only fishermen in Newfoundland and Labrador can enter into detailed discussions about how to take advantage of the policy.
Mr. Murray: But the department is open to similar proposals that could come from other fleets in New Brunswick or Nova Scotia.
Senator Robichaud: Does that mean that you need two licences to fish from one boat?
Mr. Bevan: No. Under the combination policy, one of the two licences is cancelled. You need individual quotas for each licence and the two licences can then be combined. The harvester can also use the boat of his choice to fish.
Senator Robichaud: But even so, the effort put into fishing is not reduced, is it? You keep the same quota, right?
Mr. Bevan: The same quota, yes.
Senator Robichaud: They are combined.
Mr. Bevan: There will be fewer boats, but the harvester can use the one of his choice. In Newfoundland and Labrador, you can use a boat almost 90 feet long.
[English]
Mr. Follett: Maybe I could offer some clarification. It is not strictly a licence combining system. It is an enterprise combining system.
Two fishermen cannot select the licence from an enterprise and combine the licence. You have to buy the entire enterprise. What gives rise to the combination of licences and individual quotas is actually the combination of the enterprise.
Each fish harvester with an enterprise has a core licensing status that allows him to acquire and own an enterprise. As well, a vessel registration goes with that enterprise and allows him to fish with that vessel, and then you have a bunch of licences which allow access to different fisheries and in some cases individual quotas or non-competitive situations.
The program we are putting in place in the Newfoundland region provides for the combination of the entire enterprise. The enterprise must be combined. When that occurs, it allows the licences to be combined. You cannot just combine two licences. You have to take the enterprise and, in effect, create the rationalization of the fishery by removing an enterprise and the enterprise entitlements from the fishery. In so doing, the licences in that enterprise then become combinable, if I can use that term.
In the context of the Newfoundland proposal, it does not have to be one fisherman to one fisher. The three of us could buy your enterprise, and in combining it —
Senator Robichaud: No, you cannot because you are not a fisherman.
Mr. Follett: That is true. In a hypothetical situation as fish harvesters, I always look for the hand test. Our hands I do not think would meet the test.
It is not a licence combining. That is an important clarification. That is more attuned to the individual transferable quota or ITQ systems that we know about in other jurisdictions.
Senator Robichaud: In the lobster fishery in my area, two fishermen can come together. In the case of lobster, when the two fishermen get together and combine one boat, they can take only 250 traps where they can fish for usually ten weeks. The second person can fish only 125 extra traps rather than the full 250. Where did that decision come from? Did it come from the department or the fishermen in the area?
Mr. Bevan: I am not quite sure where that came from. We do not usually take decisions like that without consulting with the fishermen first. I do not know if they proposed that or agreed with it or where that came from, but we would have to get that information to you if it is available.
Senator Robichaud: I have not heard any complaints about it, but I have heard it is happening. Why would they not have access to the 250 traps? The season is limited, and then you are taking one boat out.
Mr. Bevan: I am not sure that that is the way it is. There will be further discussions. In particular, given what is going on in Northumberland Strait, we need take a hard look at those policies.
Mr. Murray: We would be grateful for more information because certainly in the gulf region our people are looking at this combining as applying to other fisheries like the lobster fishery. Like Mr. Bevan, I am interested in getting something underway here. We certainly think this approach, coupled with up to a $750,000 capital gains tax benefit, which could translate into up to $180,000 cash in pocket to a fisherman, is a lot to offer in terms of encouraging self- rationalization.
Certainly in the lobster fishery, our people in the gulf region saw some merit because of our challenges in the Northumberland Strait or other fisheries. We have a Fisheries Resource Conservation Council report on lobster coming in the summer. The control system is not necessarily working 100 per cent. We will see what FRCC says about that.
We would like to use some version of this in other fisheries.
Senator Robichaud: Is the department planning on transferring lobster licences or any other kind of licence to Aboriginal fishermen? This is a very important question where I come from, because there have been a lot of transfers. During the time that the transfers occurred, the price of a lobster licence went from about $60,000 to about $200,000 or $250,000. Now that there are no further transfers the price has come back down.
There is speculation that there could be more buyouts and that there may not be. Do you have any information on that, or would you rather not say?
Mr. Bevan: It is clear from the budget that we are not in the same kind of situation as we were at the start of what is called the Marshall Response Initiative. Then we were into a much larger program of transfer of access to First Nations.
We do have ongoing programs under the Aboriginal Fisheries Strategy. We have programs also coming out of the budget. Some of that may be related to it, but the scale will be completely different. There will be no large-scale transfer comparable to what was done just after the Marshall decision in 1999. There will not be the same kind of circumstances. I do not think there is enough capital in the process that would actually have a distortion effect on the market.
The Acting Chairman: That concludes our meeting this morning. I would like to express our thanks to the department for coming to share their information with us.
There will be no committee meeting next week.
The committee adjourned.