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Pacific Trollers,
Some Thoughts on Individual Transferable Quotas


EXECUTIVE SUMMARY

The paper proposes an Individual Transferable Vessel Quota (ITQ) system for the troll fleet. From a fishers perspective desirable results of the system are:
- Stability of access to fish and/or income
- Stability of markets and prices
- Creation of asset value to fishermen
- Rationalization of Investment
- Stable business environment and opportunity

It is argued that some important issues which affect the fishery and must be negotiated between fishery managers and fishermen are independent of ITQ considerations and should be ignored when considering the desirability of the ITQ system. These issues are:
- Total Allowable Catch (TAC)
At the onset of any fishery occurring a preset number is announced
- Variable stock strength
- Treaty commitments
- Catch distribution between fleets

The issues which must be resolved are:
- Formulae for sharing amongst quota holders
- Accountability
- Management cost
- Transferability
- Stock management impacts

Two methods of allocating quota are discussed. These are an equal division of the TAC between boats with no consideration of size or history and a 70-30 split with 70% of the TAC allocated equally to each boat and 30% of the TAC allocated on the basis of boat length. Examples are calculated using typical TAC’s for Area F. These examples result in quota allocations of approximately 36,000 lbs/boat under the equal split formula and a range of 33,000 lbs to 41,000 lbs for boats 30’ to 60’ under the 70-30 formula.

It is proposed that quota be allocated as pounds rather than pieces to reduce high-grading and individual quota allocations be made for each salmon species in each management area. Quota would be issued on the basis of round weight and delivery weights adjusted to account for processing method and glaze using standard ratios.

Catch monitoring will be required and it is proposed that a system similar to that used in the halibut fishery be adopted. Vessels would be required to hail out, hail in and have landings weighed, recorded and reported to DFO by independent observers. In addition daily catches would be reported electronically from the vessel at sea.

The use of on-board observers is discouraged as impractical for small vessels. It is proposed that a committee of fishers and managers be established to design an on-board monitoring system that meets with DFO approval.

Quota transferability is seen as critical to the success of an ITQ program. It is proposed that quota be transferable in units of a few hundred pounds between vessels licensed to fish in the same area. Transferability between areas is unlikely to be acceptable to managers. Transferability between gear types should not be allowed. Limits of 1% of TAC are proposed as the maximum quota that could be held by any one individual or company but as long as no transfers between gear types occur there should be little need of this limit since no troller could catch the amount of fish allowed.

The establishment of a quota fishery creates an asset for fishers. The cost of using this asset must, therefore, be borne by the one who gains, the fisher. It is proposed that an existing company such as an accountant or management consultant be engaged to manage the ITQ program. This firm would manage all quota transfers, delivery monitoring and other activities required by the program. All fees for service would be paid to the company.

An estimate of the cost of an ITQ program suggests that the services required to manage delivery verification, quota transfers, data reporting and DFO services would be in the order of $.10 - $.11/ lb of quota.



SOME THOUGHTS ON TROLL INDIVIDUAL TRANSFERRABLE QUOTAS (ITQ’S)

Prior to the development of any organizational concept it is necessary to have a clear idea of the results to be achieved. This discussion will begin with an outline of desired results and progress to proposals designed to achieve the results. It should be reviewed in the same order ie: Are the desired results correctly stated and complete and if so will the suggested mechanisms achieve these results?

DESIRED RESULTS

There has been extensive debate over the value of ITQ’s to the salmon fleet over the past few years. The essence of this debate has been the conflict between two fundamentally opposed views of the fishing life. Historically fishing has been an activity in which skill, hard work and efficient equipment has allowed some fishers to catch more fish and earn greater incomes than those less skilled or willing to work and take risk. Each year and each trip was a gamble with the potential for a wide range of rewards. This system has great appeal to many who choose the fishing life.

An ITQ system of management alters the traditional fishery fundamentally. Under this system the fisher knows how many fish can be caught before fishing begins. The gamble, which is a significant factor in the appeal of the life style, is to a large extent removed. Variations in income levels between those who wish to work harder or smarter are achieved by more usual business methods rather than the traditional means.

While the difference between lifestyles may be important to fishers the fact that an ITQ management system gives managers more comfort may be more important. Recent years have shown that worried managers can reduce fishers catches to a far greater extent than any other factor. If managers take comfort from an ITQ system they are more likely to allow fisheries to proceed. If they cannot estimate catch rates in a derby fishery they are more likely to close the fishery.

The desirable changes the ITQ system brings to fishers are as follows:

Stability of access to fish and/or income – With the establishment of quota each fisher knows at the start of each year precisely how much fish may be caught. If this is inadequate to meet the perceived needs additional quota can be purchased. Purchase of quota increases input costs but this is often offset by overall increase in fish prices. It can also be offset by the fishers ability to time fishing activity to high price periods of the market year or to meet the needs of a niche market paying higher than average prices.

Stability of markets and Prices – The advent of a quota fishery allows the development of fishing patterns that make supply more nearly meet the needs of the market. Under these conditions markets grow to count on a reliable supply and thus are in a position to pay higher prices. Constant and reliable supply also stimulates demand and again allows higher prices. The even flow of this supply reduces the role of the processor and thus tends to reduce the power of the processor to control or manipulate prices.

Creation of asset value to fishermen – The creation of ITQ’s is the creation of an asset with value to its owner. The ITQ represents a body of fish in the sea privileged to and harvested by the fisher. This privilege may be bought, sold or leased. As the ITQ program develops the value of the asset will increase with rising value of fish.

Rationalization of investment – Under the quota system a fisher may gear the operation to a scale sufficient to efficiently catch and process the precise quantity of fish allowed under the quota. There is no need to over invest in anticipation of the high catch rates needed to prosper in a derby fishery. Capital is thus more efficiently applied and overall profits from the operation increased.

Stable business environment and opportunity – The quota system reduces the number of variables within the individual fishing business. The quota is subject to change as a result of stock health and abundance and fish prices will vary with market demand but these are the major variables. Weather and breakdown are no longer an influence nor is competitive fishing pressure. Ultraconservative management may also be reduced in that managers have a less hectic environment in which to make their decisions.

Valuation of fish allocated to given sectors – One of the more controversial issues in the salmon fishery is the ongoing reallocation of usage priorities. In recent years the percentage of the TAC given to the commercial fishery has been significantly reduced by reallocation to Native and Sport fisheries. An ITQ management system establishes a value for the privilege to harvest each pound of fish landed. In the event of a change in government priorities the ITQ systems makes clear the actual cost of these transfers and allows fishers to argue their case in a more objective manner.

The foregoing are the results which the introduction of an ITQ system to the troll fishery must achieve for fishers. The desired results for managers are as follows:

Achievement of Total Allowable Catch (TAC) targets – The traditional derby style fishery relies on the limitation of fishing effort to control catch levels. In most fisheries this has been crude and largely ineffective in achieving the needed level of catch control. TAC’s have routinely been exceeded. In the salmon fishery in recent years managers have erred on the side of conservation and fishers have been unable to reach the TAC in the time available to them. The introduction of ITQ management in fisheries other than salmon has resulted in a much higher level of catch control and in these fisheries TAC’s are routinely met. Their introduction to the salmon fishery should give managers confidence that they can control catches to the desired levels.

Accountability – The introduction of ITQ management provides fishers with a vested interest in the health and abundance of fish stocks. Experience in other fisheries has shown that fishers respond to this with an increased awareness of their responsibility to provide information to managers. There is also an increased willingness to work with managers in the co-management of the fishery. The net result is a significant reduction in the pressure on managers from the fleet and an improved management climate.

Organizational Structure – In order to function effectively an ITQ management system will require fishers to organize a single organization to control catch monitoring, quota transfers and other issues related to the program. This will require all, or at least the vast majority, of trollers to become members of the single organization and thus provide managers with a single voice which can speak for the fleet. Managers will be freed from the need to deal with multiple organizations and more importantly from having to deal on an ongoing basis with individual fishers.


ISSUES THAT DO NOT AFFECT THE ITQ PROGRAM

There are a number of fundamental issues which must be resolved before an ITQ program may be introduced. Some of these issues are the sole concern of fishers, some the sole concern of managers and some the concern of both. Those which concern only managers or are not related to the ITQ program will not be discussed in detail but must establish the general framework within which the system operates. The principal issues of concern to managers are as follows:

Total Allowable Catch (TAC) – The TAC for each species and stock will be established by managers using processes that are not related to the ITQ program although they may be achieved using input from fishers. A conservative TAC becomes an established fact at the start of the fishing period and determines the amount of fish available to each ITQ holder. As the season progresses the TAC may be altered to reflect new estimates of run size. In calculating the TAC managers may take into account issues such as by-catch, mortality rates, illegal fishing and high-grading that will occur during the fishery. In a derby fishery managers may also factor in the inevitable over-run that will occur. In an ITQ fishery catch over-runs are minimized and this may allow managers to actually increase the TAC.

Variable Stock Strength – Multiple individual runs of migrating salmonbecome intermixed. Managers may be concerned that a weak stock mixed with a strong stock may be subject to over fishing and endangered. Many ways have been tried to prevent this over fishing but most have resulted in very much reduced catch levels for fishers and underutilization of strong stocks. Strategies for dealing with this issue are not related to the ITQ program but the program may have a positive impact on these strategies in that fishing pressure would be reduced under the ITQ program and reduce the danger of damage to weak stocks.

International Treaty Commitments – Canada is committed to certain catch levels as a result of International treaties and these levels must be maintained and seen to be maintained. These commitments will impact the TAC and may impact timing of allowable fisheries. They are not related to the ITQ program.

Catch Distribution Between Fleets – The fishery advisory process has as one of its principal duties the sharing out of fish resources between competing fishing fleets and methods. This process is of serious importance to each of the fleets and determines how each species of salmon will be allocated and thus how it will be captured. This will be a part of the process which determines the TAC. It will determine how much fish is available to be distributed through the ITQ program but it has no other relation to the program.

ISSUES WHICH DO AFFECT THE ITQ PROGRAM

As noted above there are issues which solely concern fishers and issues that concern both managers and fishers. The most significant of these are as follows:

Sharing amongst quota holders – There are an infinite number of possible formulae which could determine an individual share of the TAC within any group. A decision as to which formula is adopted is almost solely the prerogative of the participants. In general its attributes must include fairness, the perception of fairness amongst quota holders and workability. Although managers should have no interest in this process other than its workability they will be affected by its acceptance by the fleet and thus have concerns regarding fairness. The program must thus be able to demonstrate both fairness and general acceptance by the fleet.

Accountability – An ITQ program depends, for its success, on the fact that it ensures that catches can be controlled and the resource sustained. Each individual has an agreed amount of fish that may be landed and there must be confidence amongst managers and other fishers that this amount is not exceeded. The program must regulate the locations at which fish may be landed and provide methods of monitoring all landings to ensure quotas are not exceeded. Methods must also be in place to monitor and control unacceptable by-catch, high grading and similar at sea issues. In planning the ITQ program care must be taken to identify those at sea issues which are unique to the ITQ program and those which must be addressed under any management system. Most abuses will be common to all systems but there is a danger that High-Grading could be encouraged under a badly designed IT Q plan.

Management Cost – Historically all citizens had a right to participate in a fishery. As population pressures mounted this right was restricted to certain license holders only. Government assumed the responsibility of controlling the licensing process and developed and enforced regulations designed to restrict over harvesting of stocks. The introduction of ITQ’s effectively confers a privileged share on fishers and the responsibility for protecting that share shifts from the Government to the owner of the resource, the ITQ holder. Methods must, therefore, be developed to efficiently fund the cost of protecting each fisher’s share; the fish in the sea. These methods must be carefully designed to ensure that control of management costs remains in the hands of fishers and their organizations not in the hands of government.

Transferability – Transferability or the possibility of sale or lease of quota has been the subject of extensive debate in many fisheries. The advantages of transferability are that it allows each fisher to tailor the fishing operation to suit. Those with large boats or greater skill than average are able to lease or purchase additional quota to build maximum efficiency into their operations. Those who are unable to fish in a given year or wish to retire are able to sell or lease quota. The risk with transferability is concentration of ownership in a few hands, particularly those of large companies. Methods must be developed which allow fishers maximum freedom to design their own operations without a transfer of ownership of the whole fishery to a few over time.

Stock Management – Each quota holder effectively has privilege to a small percentage of the total run and it is therefore important to the individual that the total run size is as large as possible. Responsibility for the size and health of the total run lies with fishery managers. Thus both fishers and managers have a similar interest in ensuring that management is effective and results in maximum run size. It is therefore in both their interest to develop within the ITQ system the best possible processes for providing data and information as to fish abundance, movements and health.

Commercial Catch Protection – In recent years there has been considerable change in the attitude of government to the commercial fisheries. This has led to a significant transfer of catch quota from the commercial salmon fishery to the sports and native sectors. These pressures are unlikely to change and may increase. The introduction of an ITQ management system gives fishers a defined share of a TAC. Provided negotiators insist that the total TAC for all sectors is used as a basis any future redistribution between sectors would have an immediate financial effect on each individual fisherman. The precise value of this effect is easily calculated and would allow fishers to claim damages that are clearly defined.

STRUCTURE OF AN ITQ PROGRAM

The specific structure of an ITQ program must be based upon the issues which directly impact the program ie those listed above. It must be assumed that a TAC can be and has been established and the role of the ITQ program is to distribute the TAC amongst fishers. It must also ensure that the quotas given are not exceeded, that management costs are fairly distributed amongst quota holders and government, that quotas can be transferred in a suitable manner, that fishing practices are honest and appropriate and that stock management information is communicated between fishers and managers. The structures required are as follows:

Quota Shares or Distribution of TAC - Experience in other fisheries indicates that some combination of equal shares per license plus an allowance for either past performance or investment in the industry is considered fair by a majority of fishers. The disruption of traditional troll fishing patterns during the 1990’s has made past performance a poor measure. As a result a formula giving equal shares to each license holder has a significant degree of support in the fleet. Probably the best way of deciding on the acceptance of any proposal is by referendum on a single idea. Two possible approaches are as follows:

Equal Split – Under this proposal, shares would be calculated by dividing the number of license holders into the TAC for each species. An example using assumed numbers for Area F is shown in Table 1 .

Table 1 – Example ITQ for Equal Shares

    
In the example shown, a TAC is provided for each species in a single management area (Area F) and the total number of licenses for that area is used as the No. of Boats. The ITQ for each license is calculated by dividing the TAC by the number of boats.

Many boats now carry licenses for more than one area. Such boats would carry the 36069 lbs of quota for Area F and another amount for the quota assigned to each additional license. It is clear that few trollers would be capable of catching the quota for two licenses and almost none could catch a three license quota. This fact is significant when considering the impact and risks associated with quota concentration.

An example calculation for similar TAC’s distributed using the 70-30 split formula is given in Appendix A.

Quota Units – The quotas illustrated above are stated in pounds rather than pieces as used at present. To continue the practice of using piece counts would force fishers to indulge in high grading their catches and have a seriously negative effect on the fishery. This becomes evident when one considers the difference in value of a 12 lb vs a 36 lb fish which under a piece count regime would be a factor of 3. Under a poundage regime the difference in value received for a pound of quota would be zero. The difference in value between grades could provide an incentive to high grade but this is not usually enough to cause a fisher to discard a medium in hopes that there may be a large to replace it. It is much more likely that fishers will adjust their gear and location to target high value fish.
(There may be exceptions for piece count in other species ie sox, ,but this illustration is on Chinook.)

Adjustment of ITQ’s – The example ITQ’s shown above assume round weight of fish landed. Adjustments to actual landed weight will be required to account for processing and handling methods. DFO maintains records which relate various processing options to round weight. These ratios would be applied to the landed weight at time of delivery and recorded against the quota. The items which would be considered would be:
- Dressed Head On
- Dressed Head Off
- Glaze Allowance
- Round
At the time of landing fish will be graded and weighed in the usual manner. Total weight by species will be identified and processing option recorded. The recorded weight will be increased by the necessary percentage to convert processed weight to round weight and reduced by a fixed percentage to allow for glaze weight. The resulting total will be deducted from the remaining quota and entered in a quota log.

Catch Monitoring – Under a quota fishery it is necessary that some process be in place to record all landings and relate them to the available quota. This process has been developed over the past 15 years or so and is well established in other fisheries. It is therefore unlikely that any fundamental changes to existing models will be required. There may, however, be a need to ‘tweak’ the procedures to account for situations that are unique to the Troll fishery. Some of these unique features are the following:
- Large number of small boats
- Wide distribution of boats
- Present practice of private dock sales
- Present practice of holding fish for private sale
All of the foregoing features contribute to an increased opportunity for abuse of the system. They are, however, similar to those existing in the halibut fishery and some of the other quota fisheries and it appears reasonable to begin the ITQ program using the existing system and allow experience to suggest any ‘tweaking’ that may be required.

The elements of the monitoring system would be as follows:
- Hail out at start of trip
- Daily catch reporting while at sea
- Hail in prior to landing
- Landings recorded by independent observer
- Landing report submitted to DFO

Accountability: Fishers - The creation of an individual license share creates a corresponding duty for the fishers who receive the privilege. This is the duty of accountability to the resource and to the other resource owners. In practical terms this means a duty to protect salmon and other species stocks from over fishing and unnecessary mortality. Quota holders and fishery managers require assurance that this duty is being carried out.

Fishery managers have been faced with the problem of reducing by-catch and shaker mortality for many years. The favoured solution by managers is the introduction of on board observers. This solution may be acceptable in fisheries where boat size and the dollar volume of the trip make it possible but it is impractical in the Troll fishery. Many trollers have no accommodation for an extra body on board and few can afford the cost of a full time, non producing passenger. An alternative method must be designed.

It is proposed that on the introduction of an ITQ program no on board observers be required. As a part of the program introduction a committee made up of DFO experts and quota holders will be struck to examine the question of on board monitoring. This committee will work to design a process which is acceptable to both parties. If, after the first season, no such system has been designed an observer program may be implemented. In addition it may be possible for DFO to require that either the agreed system be installed on a boat or a DFO observer be employed. This would allow fishers to opt for the solution which best suits their individual need while providing DFO with the level of monitoring required.

Accountabilit: Managers – In order for an ITQ fishery to function fishers must have a reasonable expectation that they can catch their quota. The present system of management with its short openings and area closures will make it unlikely that quotas can be caught. If managers are serious in their desire to implement an ITQ program they must ensure that the techniques they adopt recognize the need to allow the quotas to be caught.

The obvious way to achieve assured quota catches is long or longer openings and this is the case in all other fisheries. The salmon fishery is, however, unique in that runs move quickly through the fishery and there is a large number of individual stocks, some of which are at risk. No fishery is allowed on stocks at risk and where these are present fisheries are halted. Under the present management regime DFO managers do not get sufficient or timely information as to which stocks are present in any given fishery and are forced to err on the side of caution. Methods must be found which give DFO managers the information they need and the ability to restrict fisheries on species at risk but at the same time allow fishers to catch their quotas.

Individual runs of fish can be identified by DNA testing. This is presently carried out but of little value to fishers in that results are not timely and in most cases the fish have passed through by the time DFO has the information available to allow fishing. If it is a fact that timely and sufficient DNA data would provide managers with the confidence to control the fishery with a lighter hand it is proposed that the provision of this information be designed in concert with DFO but implementation be the responsibility of the ITQ management organization established by fishers. Arrangements could be made with the landing monitoring firm to have testing done immediately fish are landed. Data would then be relayed to DFO along with other material delivered by the firm. This additional information will include daily vessel location and other information related to the trip and it should be possible to design a process which relieves DFO managers of much of the work load while providing significantly more information than a few test vessels can provide.

Transferability – The concept of quota transferability is one of the most contentious features of an ITQ program. For those who believe the purpose of the program is to provide a set share in the fishery transferability is essential. Others believe it is needed to allow fishers to tailor their fishing operations for maximum efficiency. Those who oppose ITQ’s are concerned that fleet size will be reduced and jobs lost as quotas are leased out or concentrated or that large companies will purchase and control quota. Both these attitudes are valid and have been addressed in varying ways in other ITQ fisheries.

A review of the literature suggests that a reduction in the number of vessels engaged in the fishery will occur. It also suggests that incomes for those participating will rise significantly as will the value of the quota privileges. The relationship between fishers and processors also changes dramatically with the introduction of ITQ fisheries. The traditional power of the processors to control prices and market conditions can be reduced provided companies are restricted in their ability to own and control quota. In short there is, today, sufficient information to predict that most of the benefits attributed to an ITQ program will be seen and many of the negative results will also occur. The decision to implement the program must accept this fact. It must also accept the fact that transferability is an inherent part of the program and without transferability an ITQ program cannot function.

In the case of the troll fishery it can be argued that some of the negative effects may be reduced by the nature of the fishery. Trolling is not an efficient method of catching fish and there is an upper limit to the amount of fish that one vessel can catch. This limit sets a peak to the amount of quota that can be usefully carried on one vessel and thus the minimum fleet size required to catch a given TAC is fairly large. The fleet reduction brought about by transferability of quota will as a result be smaller in the troll fleet than it might be in more efficient fisheries. Similarly the troll fleet is relatively free of processor control and ownership. A limitation on ownership of troll quota by processors would have little impact on the present situation and could reduce the risk of corporate concentration.

On the basis of the foregoing it is proposed that troll quota be designed for maximum transferability. Quota units will be issued as a percentage of the TAC but transferable in units of a few hundred pounds. In the examples cited above a fisher in Area F might lease out or sell 80 to 100 lbs of sockeye and 4000 lbs of Chum and lease a few thousand pounds of Chinook or Coho. An individual wishing to concentrate on sockeye and chum in Area F could build a quota volume that made such a fishery economic.

Concentration of quota ownership - Concentration is a concern to many in the fishery and is demonstrably undesirable. Maximum ownership levels have been set in many fisheries. This method would be difficult to enforce in the case of a determined attempt to bypass it but there is little evidence that the issue has arisen in other fisheries. It is proposed that a limit of 1% of total quota of any species be set as the maximum ownership level which may be held by an individual or company.

Control of Leasing Prices – The leasing and sale of quota in other fisheries has demonstrated that the demand for quota is high and that transfer prices reflect the demand. Many argue that this produces ‘windfall profits’ to quota holders and forces those who choose to fish leased quota to fish for very low returns. On the surface this may appear to be a reasonable argument but in most cases it does not withstand close scrutiny. In the Halibut and Sablefish fisheries landed values have risen dramatically since the introduction of quota. At the same time lease prices have risen to the extent that almost all the price rise experienced has accrued to the quota holder. Fishers are receiving net returns that are equivalent to the price they received prior to the introduction of quota. For this reason they are still willing to fish.

The argument as to whether or not the benefits of a quota fishery should accrue to the quota owners or to others is akin to the much broader arguments over social organization. In a free society it can be argued that the benefits of ownership accrue to the owner. Unions would argue that this is not so and that benefits should go to the workers. Socialists might argue they should go to government. This debate has not been resolved in BC and will not be resolved in the salmon fishery. What may be resolved is to make the transfer of salmon quota take place in a free market. This market will determine whether or not benefits accrue to the quota owner or to those leasing quota.

The organization and structure of the troll fishery will impact the effect of quota on lease prices. In most fisheries it is possible for very few boats to catch the full TAC. This creates the very high demand for leased quota. In the troll fishery there is an upper limit to the amount of fish that one boat can catch. As a result the demand for extra quota will be limited. As a result of this limited demand it is likely that a much greater share of the price rise resulting from the ITQ program will be available to fishers.

Payment of Fees and Program Costs – With the shift to an ITQ program quota holders will be responsible for the costs of managing the fishery. These costs must be recovered from each individual quota holder whose quota is used in the fishery. The method of collecting these fees varies from fishery to fishery but certain principles are common and the troll program must ensure that it develops methods to ensure that all payable fees are collected in an efficient manner.

The principles which must be adhered to are as follows:
- The right to fish a quota must be linked to the payment of required fees.
- Fees must be based upon the amount of quota being used.
- The cost of transferring quota from one boat to another must be borne by those involved in the transfer.


ORGANIZATION AND MANAGEMENT OF AN ITQ PROGRAM

The introduction of an ITQ fishery represents a fundamental shift in the underlying philosophy of fishery management. By creating a partnership to those participating in the fishery the responsibility for funding the management of the fishery becomes a shared responsibility. Sharing in the cost of this management should be paid by all those who have gained by the change in method. Unfortunately government is not able to relinquish its management responsibilities when it passes the cost of this management to fishers. It is therefore imperative that an organization be established by fishers to control and administer the funds provided and ensure that government spending on the fishery is in fact providing value for the monies spent.

The activities which will be managed and overseen under the new system include administration of a landing verification program, quota transfer activities, enforcement activities, and monitoring of research and data gathering. The budgets for these activities will be measured in the hundreds of thousands of dollars and management of these amounts cannot be done on an ad hoc basis. An organization which can undertake the full range of required management must be created since none presently exist in the fishery.

Creating a new organization and a new management system at the same time is both a daunting and risky task. The new system must be able to function from the first day and it will take a new organization some time to gather staff and become operational. Other fisheries have dealt with this issue by engaging an established company or consultant to undertake the management role until a dedicated organization can be formed. This approach is recommended for the troll fishery. An established firm with office staff and structure should be chosen rather than a single individual consultant. Organizations such as Accountants, Management firms or similar would be appropriate. Ideally the firm will have some knowledge of the fishery but no direct involvement or identification with existing fishing organizations.

The specific tasks which should be delegated to the new office would be as follows:

Management Fee Collection – Experience in other ITQ fisheries indicates that collecting management fees after fish have been caught and sold is impractical and unfair. Many fishers avoid paying their share and collection costs and lost fees increase costs to other participants(example BCSMC). Fees must, therefore, be paid prior to the start of fishing. In some fisheries this is not a significant issue but in the troll fishery it may be. Many trollers do not have the funds at the start of a season to pay fees up front.

A number of methods of dealing with payment are possible but one stands out as most desirable for the troll fleet. This is the leasing of quota held by the fishery association. Under this method a defined portion of each ITQ would be allocated to the industry organization which manages the fishery. This quota would be available for lease to any member of the organization. Funds gained by the leasing would be available to cover the cost of the program.

The proposed method has the advantages that it requires no cash outlay from fishers, it distributes the cost of the program equally to each pound of quota held, and it establishes a pool of available quota for those who require it. It has the disadvantage of not directly charging for quota transfers however this cost could be recovered as a separate fee for each transfer. A more significant disadvantage is the lack of incentive for fishers to minimize the cost of delivery verification. In order to provide this incentive it may be necessary to allow a certain number of landings for a given amount of quota and additional landings would be charged directly for the cost of verification. This charge would be payable at the time of unloading.

Quota Transfers – The tracking and control of quota transfers is the responsibility of the DFO but the management and implementation of actual transfers is better done by an outside agency. It is proposed that the management firm hired to manage the program be responsible for all documentation of transfers and the submission of necessary documents to DFO. In this way DFO has only one entity to deal with and fishers are assured of prompt and complete attention to their need to transfer quota. A fee for this work based on the time involved would be developed and charged directly to the transferred quota.

Delivery Verification – Working with the new industry organization and DFO the management firm would design a verification program to verify all quota landings, tender the program and engage an independent verification company. Landings would take place at designated ports only. These ports will ideally be the designated ports used by the halibut fishery.

Enforcement – In the initial phases of the ITQ program it is likely that enforcement will be the sole concern of DFO. Experience in other fisheries shows that DFO enforcement may not be adequate to satisfy quota holders and pressure will build to have additional effort. This additional effort can take the form of fisher funded DFO employees or privately hired investigators. Usually the latter will be a cheaper alternative with better results.

Research – Some ITQ fisheries have been required to fund portions of the research carried out for the benefit of their fishery. This is unlikely to occur in the early years of the program but may be expected. The organization must retain the right to approve research projects to ensure that the work being funded is useful to fishers and is seen as relevant.

COST OF AN ITQ PROGRAM

The costs which will be transferred from government to fishers must be negotiated and carefully controlled. Fishers must take care to avoid taking responsibility for any costs over which they have no control or programs which are managed by government employees. Budgets and activities funded must be established by fishers independent of government priorities. An initial program should attempt to negotiate fisher funding for landing verification only.

Verification Cost – The cost of present verification programs has remained little changed since the inception of IVQ management in the 1980’s. Archipeligo reports costs in the range of $.03 to $.06/lb as their charge for the verification work they do. Should additional work such as overseeing DNA testing be initiated this cost will rise.

Management Cost – For initial estimating purposes it can be assumed that the management firm engaged would require three full time staff during the peak fishing months and one full time equivalent in the winter months. At rates varying from $40 to $80/hr this would amount to fees in the order of $180,000/annum.

In all likelihood DFO will require payment of the cost of some of its officials engaged in the management of the fishery. Negotiators should attempt to limit this to one person per license area or three full time positions. This could amount to $300,000/annum.

Total IVQ Cost in early years – Based on the above and assuming a 12 million pound troll TAC for all species the cost of the program could be held to $1.1M or approximately $.11/lb of landed round weight.

APPENDIX A



70-30 Split - A combination which distributes the TAC at 70% allocated to the license and 30% allocated in accordance with boat length has been proposed. Such an allocation would be calculated as follows:

Species Allocation – Each IVQ holder would be allocated a quota for each of the five species of salmon. For each species TAC in an area each boat would be allocated an equal share of 70% of the TAC. The total length of all boats in the fleet would be calculated and an amount equal to 30% of the TAC would be allocated on the basis of a calculated number of pounds of fish per foot of boat. See Tables 2 and 3.

Table 2 Example – Input Data Required

Table 3 Example -Quota for Varying Boat Lengths

The IVQ’s shown in Table 3 are calculated by the formula

IVQ=((TAC x 0.7)/(No. of boats))+

((TAC x 0.3 x Boat Length)/(Total length of boats))