Evaluation of the Commercial Groundfish Integration Pilot Program, November 2009

Introduction

The Pacific groundfish fishery is one of the most operationally and spatially complex fisheries in the world with over 60 species of marine fish harvested concurrently using three gear types (hook and line, trap, mid-water and bottom trawl) in seven fisheries. There are over 2000 limited entry licences which fall into separate licence categories, each incidentally capturing other groundfish species:

illustration of the license overlap

Figure 1: Illustration of the overlap (many-to-many relationship) between some of the species that are captured (directed and non-directed) in the Pacific groundfish fishery and the licence categories that capture them.

The groundfish fishery is one of the most valuable commercial fishing sectors in British Columbia with a total landed value of $134 million in 2007. However, there are ongoing conservation and sustainability concerns for several species of groundfish, particularly inshore rockfish. Although each limited entry licence targets a single species or group of species (directed species), incidental catch (by-catch) of non-target species (non-directed species) is unavoidable. The absence of comprehensive at-sea monitoring resulted in uncertainty about total catch and mortality as a result of discarding at sea for many species of rockfish and groundfish. In response to these concerns, the Fisheries and Oceans Canada (DFO) implemented the Inshore Rockfish Conservation Strategy in 2002 which identified the need for measures designed to achieve improved catch monitoring and increased catch accountability in all groundfish fisheries.

In 2003, the Department initiated discussions with the commercial groundfish sector and others to address these conservation and management issues. Discussions were premised on a clear understanding that, given significant conservation concerns for rockfish, the existing groundfish management regime was no longer acceptable. The Department established five guiding principles to inform the development of a new management plan:

  • All groundfish must be accounted for1.
  • Groundfish catches will be managed according to established rockfish management areas;
  • Fisher harvesters will be individually accountable for their catch;
  • New monitoring standards (dockside and at-sea) will be established and implemented to meet the above three objectives; and
  • Species and stocks of concern will be closely examined and management actions such as reduction of Total Allowable Catch (TAC) and other catch limits will be considered and implemented to be consistent with the precautionary approach.

The outcome of these discussions was the Commercial Groundfish Integration Pilot Program (CGIPP), initiated in April 2006 as a three-year pilot. Key elements of the program include:

  • An inter-fleet trading system which would allow different licence categories to trade species allocations on a temporary basis to reduce the need to release non-directed species;
  • A comprehensive and consistent catch monitoring system for all fleets including implementation of 100% at-sea monitoring in addition to existing dockside monitoring to account for all catch both landed and released at sea;
  • Extending individual vessel quota (IVQ) management (already in place for halibut, sablefish and groundfish trawl fisheries) to the dogfish, lingcod and rockfish fisheries to facilitate inter-fleet trading of species allocations;
  • Consolidation of individual groundfish fisheries management plans into one integrated fisheries management plan;
  • Implementation of consistent groundfish management areas, and
  • Individual vessel accountability for all catch whether retained or released, directed or non-directed.

Although February 2009 marked the end of the three-year pilot, the program was extended for an additional year to allow for a comprehensive evaluation of the program. The purpose of this evaluation is to determine whether the CGIPP has achieved the Department's conservation objectives, including an assessment of socio-economic impacts.

Consultation

During the review, input was received from a range of stakeholders, via various combinations of formal consultation sessions facilitated by DFO, personal meetings and telephone conversations, and written correspondence (ranging from emails to position papers). Groundfish integration community dialogue sessions were held in Prince Rupert, Port Hardy, Nanaimo and Vancouver in May, 2009 to solicit comments and thoughts on the program. The following parties contributed feedback which was incorporated into this review:

  • Harvesters in all of the groundfish fisheries
  • The Commercial Industry Caucus (CIC)
  • DFO
  • Province of BC
  • Coastal Community Network (CCN)
  • Sportfishing Advisory Board (SFAB)
  • Nuu-chah-nulth Tribal Council (NTC)
  • Processors
  • United Fishermen and Allied Workers Union/Canadian Auto Workers (UFAWU/CAW)
  • Environmental organizations

Three key themes emerged from the consultations.

Monitoring Costs

The discussions at each of the dialogues revealed a number of benefits associated with the CGIPP, including greater certainty and flexibility when fishing. However, concerns were raised with respect to the overall cost of the program. Harvesters felt the costs for individual vessel operators to be substantial. Some have stated that the small vessel owners are being impacted the most because of the high monitoring costs. There were concerns raised that the Department is benefiting from the additional data collected by harvesters through the monitoring program and therefore the Department should contribute more than the current $700,000 contribution to the electronic monitoring (EM). Stakeholders have urged the Department to continue its contribution to the monitoring program to be consistent with funding arrangements in other groundfish fisheries across Canada.

Accountability in Other Sectors

Multiple comments indicated concern that the recreational sector has not been held to the same standards as the commercial sector with respect to catch monitoring. Harvesters agreed that all groundfish mortality must be accounted for irrespective of the fishing sector. Commercial harvesters expressed concern that the catch from other sectors is not adequately monitored. Inequitable treatment of catch for the same species is inappropriate. Many participants stated that DFO has to play a leading role to ensure parity amongst all user groups.

Leasing and Access to Quota

Leasing of quota among the various commercial fleets plays a significant role in an integrated fishing plan. Many raised the concern that active harvesters have difficulty accessing sufficient quota to cover their catch and that the lease prices are volatile. Some stated that the concentration of quota on a few licenses limits access to quota and thereby allows individuals to lease their quota at a higher price. Furthermore, the allocations of quota are widely distributed among licensees making acquisition challenging. The high cost of leasing paired with the inability to access sufficient quota is an increasing problem.

The views of the sectors and First Nations are summarized below.

Commercial Sector

Although opinions about the economic and social performance of the CGIPP varied widely, there was near-unanimous support for the program from a conservation perspective and acknowledgement that a sustainable fishery is the foundation for the business.

Recreational Sector

A meeting was held with Sport Fishing Advisory Board representatives who indicated that there were no negative effects on the recreational sector as a result of the CGIPP. There were some concerns about the impact of increased TACs for rockfish on recreational access to rockfish and implementation of IVQs in the rockfish, lingcod and dogfish fisheries.

First Nations

The Nuu-chah-nulth Tribal Council (NTC) was the only First Nation to submit a review of the CGIPP. The submission identified a number of issues related to loss of access, increased cost and impacts. The NTC provided recommendations regarding interim bycatch allocations and NTC representation on the Catch Monitoring (CM) Subcommittee and the CIC.

A more detailed summary of all of the feedback from the consultations is provided in Appendix 1.

Evaluation of Conservation Objectives

Although the CGIPP expanded DFO's original guiding principles to include accountability for all catch, this evaluation focuses on the original rockfish conservation objectives because rockfish was the impetus for the pilot program. The rockfish conservation objectives are:

  • Reduction of rockfish fishing mortality in directed and non-directed fisheries in Pacific waters.
  • Full accountability for all significant inshore rockfish catch (retained and released).

1. Is the rockfish catch information sufficiently accurate and complete to meet the conservation objectives?

The monitoring program has been operational since April 2006 and appears successful. For the first time, there are credible by-catch estimates available for yelloweye rockfish for all fleets by Region. Stanley et al. (2009)2 examined the accuracy of collected yelloweye rockfish catch information to determine whether the monitoring program is providing sufficiently accurate estimates of total catch.

Under the CGIPP, the fishery is managed using the assumption that the dockside monitoring program (DMP) provides an accurate record of retained catches by weight for yelloweye rockfish. The fisher log is audited against both the DMP and the Video Footage (VF) records to verify the accuracy of yelloweye rockfish catch retained and discarded. Should the audit show that the fisher log does not accurately reflect at-sea releases, a complete review of the VF can occur to provide a corrected catch record for yelloweye rockfish.

Following a transition period in the first year of the CGIPP, most harvesters now pass their audit check. The total fisher log and DMP piece counts for yelloweye rockfish generally match, as do the total counts from the fisher logs and reviewed events of the VF. The total catch is less than the set TAC, indicating that the conservation risk is minimized.

Given that only 10% of the VF is audited, it might still be possible to cheat the monitoring system, however such concerns can be abated by measures within the monitoring program. It is perceived that harvesters would be unlikely to bias their logbooks or DMP records for fear of increasing the likelihood of failing the audit checks, which would incur the cost of 100% VF review and/or observer.

Moreover, the random process of selecting trips for VF review can provide data that can be used to derive a virtually independent and unbiased estimate of total catch in pieces. Such estimates illustrate consistency between VF-estimates, the fisher log and DMP-estimates indicate that there is negligible unreported discarding or dumping.

In summary, the CGIPP catch monitoring program is providing accurate total catch estimates of yelloweye rockfish by the commercial groundfish fleets. It could be assumed that this would hold true for total catches of other rockfish since all rockfish are retained for dockside sorting, which can be confirmed by the program's audit checks.

Non-rockfish species are not estimated with the same accuracy. Fisher logs will provide defensible total piece counts (but not total weight) of quota species that are tested in the audit (i.e. halibut, sablefish). For species not checked in the audit (i.e. skates, birds), it cannot be assumed that fisher logs provide unbiased estimates of total piece count. As the catch monitoring program progresses, there will be opportunity to include additional species tested within the audit process. However, as with yelloweye rockfish, unbiased estimates of total catch in piece count can be derived from the VF data.

2. Have annual rockfish catches in each of the commercial groundfish fisheries remained within area-specific TAC's, either coast-wide or area?

Since implementation of the CGIPP in 2006, all reported rockfish catches have remained within the prescribed TAC limits. Year-end summary reports detailing the total catch by all species and areas for each fishery are available at: http://www.pac.dfo-mpo.gc.ca/fm-gp/commercial/ground-fond/index-eng.html.

Prior to the implementation of the CGIPP, yelloweye rockfish TACs were overharvested based on landings data alone. Not only have rockfish TACs not been exceeded since 2006 (this includes all catch by all fleets), but many have been under-harvested, again using yelloweye rockfish as an example.

Catches of other groundfish species managed using IVQs have also remained within their catch limits, as compared to pre-CGIPP when the TACs for these species were often exceeded.

3. What additional benefits have accrued through the CGIPP that help in achieving conservation or other objectives?

In addition to improved catch data for quota management, other spinoff benefits of the CGIPP include added economic gains from the sale of non-directed catch, improved information for research, assessment and management and improved monitoring of rockfish conservation areas (RCA's).

Economic gains from the sale of non-directed catch and less wastage

The CGIPP allows for the retention of all species, directed and non-directed, by each groundfish fishery. Prior to the CGIPP, conditions of licence did not permit the retention and sale of these non-directed species and much of this catch was released at sea. For some species, such as rockfish, the mortality rate was close to 100%.

Discard rates from observer data collected from 1999 to 2002 indicated that during targeted halibut fishing, 0.2-1.1 t of yelloweye rockfish were discarded for every 10 t of retained halibut, depending on which area of coast was being fished. This discard rate prorated to a coastwide halibut quota of 5,000 t per year, for example, translates to at least 200 t per year of discarded yelloweye rockfish, using the lowest regional estimate. Harvesters have reported that they changed their fishing behaviour to reduce catch rates of yelloweye rockfish when observers were onboard.

Improved information for research, assessment, and management

The CGIPP monitoring program includes a GPS system that provides verified high resolution spatial information on the location of fishing to accompany catch. These data can be used for identifying areas in need of enhanced protection (e.g. Rockfish Conservation Areas), and designing stock assessment surveys, as well as providing the opportunity to monitor trends in catch rate in small regions to search for evidence of serial depletion or changes in distribution. For example, verified hook-and-line fishing log data provided from the CGIPP provided the first documented evidence that bocaccio are found in many inlets and in the Strait of Georgia and not just the traditional trawl grounds on the outer coast3.

Conservation and protection of remote Rockfish Conservation Areas(RCAs)

The GPS monitoring system provides accurate, verified monitoring of fishing activity and is used to ensure that commercial groundfish fishermen do not fish in closed areas such as RCAs. It is reasonable to argue that DFO would be unable to provide sufficient cost-effective surveillance of the most remote RCAs without this capability. Furthermore, the "surveillance" capability of the CGIPP monitoring system will allow managers considerable latitude to expand the use of closed areas/times for commercial fishing to address future conservation issues.

The CGIPP monitoring program provides accurate data to ensure conservation objectives are met and that harvests are within the TACs. Considerable collateral benefits have also been achieved, including the opportunity for economic gains, improved data collection, and an enhanced ability to protect remote closed areas.

Evaluation of Socio-Economic Impacts

While no explicit economic or social objectives accompanied the CGIPP, an evaluation of social and economic perspectives was undertaken. The analysis focused primarily on the non-trawl fisheries, the rockfish, lingcod and dogfish fisheries in particular, as these fisheries faced the greatest degree of change under the CGIPP.

Key concerns associated with implementation of the CGIPP were:

  1. The viability of the more lucrative or "money" fisheries (halibut and sablefish) could be compromised because access to rockfish would be insufficient to fully prosecute the directed fisheries; fish could be left in the water, compromising viability and economic benefits.
  2. The smaller scale fisheries (rockfish, lingcod, dogfish) would be consumed and/or dominated by the "money" fisheries, meaning a limited place in the groundfish fishery for small-scale operations.

The inside and outside rockfish, lingcod, and dogfish fisheries are small-scale fisheries, featuring relatively few vessels harvesting modest volumes of groundfish. Landed values are small relative to halibut and sablefish. The economics of these fisheries are generally considered to be marginal, with financial performance significantly affected by relatively small changes in revenue and cost. The following charts show the relative scales of the groundfish fisheries, first in terms of landings (lbs), and next in terms of estimated landed values (Source: DMP 2008 database and fish price research).

graph, hook and line by sector
graph, share of landed value

Halibut and Sablefish Harvest of Target Species

The harvest of target species in the halibut fishery remained virtually unchanged during the three years pre-CGIPP and during the CGIPP implementation period. Of note is the reduced halibut TAC in 2007 and 2008. The picture is similar for the sablefish fishery. The reduction in halibut and sablefish TACs is unrelated to the CGIPP, but has several implications for socio-economic developments under the CGIPP (for example, inflationary effects on lease prices). In addition, the Pacific Integrated Commercial Fisheries Initiative (PICFI) and recreational fleet acquired halibut quota.

 
Period Halibut Target Species TAC % Target Species Caught
Pre 2003 11,873,531 98.7%
2004 12,690,221 95.2%
2005 12,540,229 97.7%
Pilot 2006 11,707,824 100.1%
2007 9,637,845 97.0%
2008 7,744,715 93.7%
Pre 2003-2005 Average 12,367,994 97.2%
Pilot 2006-2008 Average 9,696,795 96.9%
 
 
Period Sablefish Target Species TAC % Target Species Caught
Pre 2003/04 5,885,131 96.9%
2004/05 8,993,695 94.4%
2005/06 9,269,965 90.7%
Pilot 2006/07 7,600,754 93.6%
2007-2009 9,361,459 97.8%
Pre 03/04-04/05 Average 8,049,597 94.0%
Pilot 06/07-07/09 Average 8,481,107 95.7%
 

Rockfish, Lingcod, Dogfish Fisheries: Landings, Vessels, Trips

It is more difficult to evaluate the concern that smaller-scale fisheries would be undermined by CGIPP. The following table compares landings (directed and non-directed catch) for these fisheries in the pre vs. pilot period4 . ZNI and ZNO refer to the inside and outside rockfish fishery, respectively.

 
graph, Pounds of Fish Landed by Year
 

The rockfish, lingcod, and dogfish fisheries each saw a marked decline in landings in the first year of integration. However, with the exception of dogfish, all have seen consistent growth in landings since this initial decline, with inside rockfish exceeding pre-integration levels by 2008. The dogfish landings pattern has been highly volatile (2009 landings to September 25 were 5.2 million lbs).

The reduction in landings for the rockfish and lingcod fisheries in 2006 can be attributed to the CGIPP. Halibut and sablefish harvesters to an extent accumulated quota in 2006 out of fear that they would need this to prosecute their targeted fisheries. The "shock" of the new system caused some rockfish and lingcod harvesters to stay on the sidelines for all or a portion of the first season. These factors applied to the dogfish fishery as well, though market and fishery conditions also contributed to the drop in landings.

The outside rockfish fishery saw the largest percentage decline in landings (93% reduction). When the CGIPP was launched, it was envisioned that the targeted outside hook and line rockfish fishery would cease because that rockfish quota would be required to conduct the other fisheries. The majority of outside rockfish licences were held by entities also holding halibut and/or sablefish licences. The ensuing seasons eased concerns about a rockfish shortage, and the outside rockfish fishery in particular (with the assistance of some rule changes to increase flexibility), has rallied since then, along with the other small-scale hook and line fisheries to an extent. Changes in fishing behaviour under CGIPP, most notably the ability to avoid rockfish, have been pronounced. Increased catches are evidence that the "rockfish aversion" that accompanied CGIPP implementation has abated, and harvesters are more actively seeking to utilize their rockfish IVQs.

With landings indicative of the amount of fishing activity, and given the implementation of IVQs in these fisheries, it is intuitive that the number of participating vessels has declined during the CGIPP implementation period.

The following table shows the number of active boats pre vs. Pilot5 in the smallscale fisheries:

 
Vessel Count Pre Pilot Average
Pre
Average
Pilot
2003-04 2004-05 2005-06 2006 2007 2008
Rockfish (inside) 27 24 23 18 16 15 25 16
Rockfish (outside) 74 71 74 35 48 46 73 43
Lingcod 73 72 66 38 28 37 70 34
Dogfish 49 29 29 17 17 16 36 17
 

The reduction in participation reflects the dynamics cited above, and is also a result of IVQ implementation in these fisheries. Fleet rationalization in the 50% range (more for halibut and trawl, less for sablefish) has been experienced in the groundfish fisheries under their IVQ programs. In the case of dogfish and lingcod, the pre-integration vessel counts are actually higher than the number of vessels that made directed trips in these fleets; if a vessel engaged in another fishery but landed lingcod or dogfish under applicable trip limits, then that vessel was counted as participating in the lingcod or dogfish fishery. Thus the decline in Pilot period participation may be exaggerated for these fisheries.

An important corollary of landings and vessel counts is the amount of fish harvested per fishing trip. The table below provides a comparison of per-trip landings pre and Pilot:

 
Lbs ber Trip Landed Pre Pilot Average
Pre
Average
Pilot
2003-04 2004-05 2005-06 2006 2007 2008
Rockfish (inside) 754 799 760 796 1,099 1,148 771 1,014
Rockfish (outside) 4,100 4,402 4,263 1,171 2,891 5,368 4,255 3,143
Lingcod 3,787 3,351 3,651 4,323 4,979 5,448 3,697 4,915
Dogfish 18,852 22,841 24,428 19,670 31,938 23,520 22,040 25,043
Total 8,861 9,490 8,856 7,900 12,911 9,594 9,068 10,352
 

While fleet landings have decreased on average, in part because of fewer vessels participating, the poundage per trip for remaining vessels has generally increased. This is evidence that vessels are organizing trips under CGIPP to improve viability.

Location of Landings

With respect to location of landings in BC coastal communities, the only apparent trend is in the sablefish fishery, where there has been a steady increase in Lower Mainland landings. The sablefish average percentage for the combined years 1996-2003 is 54%, which is below the 2008 post-integration level. Overall, the data show stability with modest changes from year to year.

 
% Offloads in BC Communities
outside lower mainland
Pre-Integration Integration
2003/04 2006 2008
Rockfish (inside) 98% 100% 100%
Rockfish (outside) 99% 100% 100%
Lingcod 100% 100% 100%
Dogfish 77% 84% 72%
Halibut 91% 94% 94%
Sablefish 76% 71% 57%
Total 85% 86% 81%
 

The CGIPP appears to have had little effect on the location of landings in the groundfish fishery.

Consolidation of Commercial Groundfish Licences

An indicator of consolidation is the number of licences held on commercial groundfish vessels. If fewer vessels are holding more licences, consolidation could be concluded.

 
Rockfish Fleet 2003 2007
Halibut 141 139
Sablefish 20 19
Trawl 12 15
Total 173 173
Halibut Fleet 2003 2007
Rockfish 147 150
Sablefish 33 35
Trawl 23 22
Total 203 207
Sablefish Fleet 2003 2007
Rockfish 20 19
Halibut 33 35
Trawl 14 9
Total 67 63

There is no trend that groundfish licences are being consolidated on fewer vessels under the CGIPP, in part, because multi-licence holdings on groundfish vessels were already substantial several years prior to integration.

Cost of Commercial Groundfish Licences and Quota

Another concern accompanying IVQ implementation is an escalation in the cost to purchase licences/quota to the extent that a barrier to entry is created, and/or that lease costs become inflated to the extent that young operators (who don't own much of their own quota) are rendered non-viable.

Values for the groundfish fishery are shown in the three tables below, comparing the March 31 2004-2006 values (pre-integration) to 2007 and 2008 (the Pilot period)6. Values are not adjusted for inflation, and are not shown for 2009 because the report is not yet available. The report does not capture any inseason fluctuations in value, nor does it reflect the highs and lows in transaction rates.

Capital Cost (Licence/IVQ Values)

The first table shows licence valuation trends. All values are per-foot.

 
Licence Values per foot 2004 2005 2006 2007 2008
Rockfish (inside) $1,000 $1,300 $1,000 $1,300 $1,300
Rockfish (outside) $3,000 $3,500 $6,000 $4,000 $3,000
C (Schedule II) $500 $500 $500 $300 $250
Halibut $1,100 $1,300 $1,300 $1,400 $1,250
Sablefish $3,846 $3,077 $3,077 $3,846 $3,846
Trawl $1,300 $1,500 $1,500 $1,300 $1,300
 

The greatest evidence of change is found in the rockfish and C (Schedule II) licence categories. Inside rockfish licence value decreased in early 2006, the period immediately preceding CGIPP implementation, likely as a result of expectations that the program would significantly impact the fleet. It has since recovered to former levels.

The rockfish licence category saw a surge in values in the season prior to the CGIPP due to speculation that access to rockfish for bycatch purposes would be limited. This proved not to be the case and licence values subsequently returned to prior levels.

C licences, one avenue for access to the lingcod and dogfish fisheries and already inexpensive in relative terms, have softened further in value. This could be because IVQs for dogfish and lingcod, even though the program is temporary, are deemed to comprise a separable asset with value, thus lessening licence values; in addition, relaxation of licence length restrictions in other fisheries has reduced the demand for C licences. Less than 15% of lingcod and dogfish qutoa are held on C licenses.

Licence values have remained more or less stable in the halibut, sablefish, and trawl fisheries, where the licence is simply the mechanism for access while the quota commands the majority of value.

The following table shows quota values for the fisheries where quota can be traded permanently:

 
Quota Values (per lb) 2004 2005 2006 2007 2008
Halibut $33 $35 $29 $33 $35
Sablefish $40 $35 $29 $32 $25
Trawl (uncut) $2.90 $3.10 $2.95 $1.85 $1.40
 

The value of quota is linked to buyers' and sellers' expectations about the longterm profitability of a fishery. Under the CGIPP there has been no clear trend with respect to IVQ values (sablefish quota values in the fall of 2009 are ~$35, substantially higher than the $25 shown for 2008). Any changes in values are attributable more to developments with TACs, currency exchange rates, market conditions, fuel prices, and resource access issues, than to impacts of the CCGIP. The Pilot period has coincided with some very challenging business conditions in the groundfish fisheries. Long-term expectations for profitability, and therefore quota values, do not appear to have been strongly influenced by the CGIPP, possibly because it is a pilot, not a long term, program.

The available data does not support that notion that the capital cost to enter a groundfish fishery has risen due to CGIPP implementation.

Operating Cost (Lease Rates)

Assessment of the impact of the CGIPP on lease rates is more challenging, as available data is general and not very recent.

Lease rates for licences (rockfish) and quota (halibut, sablefish, and trawl), as found in the valuation reports referred to earlier, are shown below:

 
Lease Rates 2004 2005 2006 2007 2008
Rockfish inside (per licence) $2,000 $2,250 $2,500 $2,500 $2,500
Rockfish outside (per licence) $6,000 $6,000 $9,500 $8,000 $7,000
Halibut (per lb) $2.90 $2.25 $2.15 $3.00 $3.25
Sablefish (per lb) $3.40 $2.50 $2.40 $2.20 $2.40
 

The data shows that inside rockfish licences have had very stable lease rates, while the outside rockfish fishery experienced the same pattern as seen in the licence market, i.e. a spike upon CGIPP implementation based on concern about overall rockfish accessibility, then a softening of rates as concerns eased.

Halibut lease rates have shown a clear rising trend, while the sablefish lease rates are stable for the last four periods shown.

Consultations with harvesters during the course of this review provide some insights on the current state of leasing in the groundfish fisheries:

  • Integration has added another level of demand for IVQ leases. For example, whereas sablefish was formerly only leased amongst sablefish licence holders, now harvesters in all groundfish fleets may access it. Enhanced demand can clearly be inflationary.
  • The majority of leasing still occurs within a fishery fleet and near the beginning of the season, as harvesters assemble the blocks of quota they require to conduct their annual fishing plan. Lease rates for upfront blocks within a fishery tend to be at levels where both lessor and lessee believe they can earn a fair return.
  • Leasing among fleets comprises a minority of lease arrangements. Lease rates for non-directed catch strongly influence the profitability generated by retention of a non-directed species.
  • Each season under CGIPP has featured "hot button" species, where supply-demand dynamics in the fishery make for high lease rates for IVQ of that species. At times, the price of the lease approaches the ex-vessel value of the fish. For example sablefish lease rates in excess of $5.00 per lb have been reported in the fall of 2009. The "hot-button" species change from season to season as fishing patterns, TACs, and market conditions fluctuate.
  • There are many species for which lease rates allow satisfactory margins for the harvesting vessel. Lingcod and dogfish are species where lease rates are generally considered to be reasonable and stable. Typically, aberrant leasing arrangements attract attention, while lease activity conducted at more reasonable levels is non-contentious.
  • Leasing is the only avenue for transferring rockfish, lingcod and dogfish IVQ, since permanent transfers are not allowed because the program is a pilot.

The diversity and complexity of leasing arrangements under CGIPP makes it challenging to provide a snapshot analysis. Virtually all harvesters in the groundfish fishery transfer IVQ on and off their vessels, and some portion of these transfers are via lease arrangements. Some leases are between active vessels, while others are from an inactive to an active one. Many of the lease arrangements are satisfactory to the lessee, while some leave little margin on non-directed catch. Some parties believe that market forces will result in satisfactory leasing conditions in the long term, while others favour interventions by the Commercial Industry Caucus (CIC), DFO or some other body to govern these arrangements. The industry has developed a set of rules for the various fleets to govern how they will operate, such as holding caps (maximum amount of quota for any one species that can be held), trip limits, and access of quota to other fleets.

Catch Distribution within Fleets

A key element of the structure of groundfish fleets is the high level of segmentation of landings seen within each fleet. Relying on fleet averages is misleading, since most vessels deviate significantly from the average. The following table divides each hook and line fleet into production tiers (top 1/3, middle 1/3, and bottom 1/37) using 2008 DMP data.

 
Catch Distribution Top 1/3 Middle 1/3 Bottom 1/3
# Vessels % Catch # Vessels % Catch # Vessels % Catch
Rockfish (inside) 5 55% 5 35% 5 10%
Rockfish (outside) 15 65% 15 26% 16 8%
Lingcod 12 76% 12 23% 13 2%
Dogfish 5 64% 5 30% 6 6%
Halibut 55 60% 55 31% 55 9%
Sablefish 11 73% 11 20% 11 6%
 

In every fleet, the top 1/3 of the fleet catches a disproportionately high percentage of the catch; the middle tier seldom harvests up to its pro rata (33% share), while the bottom tier's catch is negligible. Lingcod and sablefish have the most skewed landings distributions, while outside rockfish has the most even split (though still highly skewed).

Viewing the fleet in these terms makes it evident that the number of active vessels in a fleet is misleading, since typically 1/3 of vessels catch the majority of the fish, and another 1/3 has only token participation.

Summary of Fleet Profiles and Financials

Each fleet is characterized by widely varying harvest levels and financial performance (Appendix 2: Summary of Fleet Financial Profiles). The top 1/3 of vessels in each fleet garner a disproportionately high share of the catch, while the bottom tier's participation can often be characterized as part-time. Profitability also varies widely by fleet and within a fleet.

Inside Rockfish

The inside rockfish fishery has a low catch volume and is constrained by a small TAC, but it is enabled because of high prices for live quillback. Under the CGIPP, about two-thirds of the vessels are earning very modest cash flows. Given the nature of the fishery (e.g. inside, selling live catch), this fishery has not broadened its catch mix under the CGIPP.

Since this fishery sources little of its fish from other fleets, harvesters are not overly vulnerable to leasing "outside" fish. Lease rates for inside rockfish licences have remained stable from the pre-to-pilot periods, at rates (average $2,500 per licence) that allow reasonable margins.

Given the constraints on the size of the fishery, significant expansion of the fleet under any fishery management scenario is unlikely. A return to pre-integration fleet size of 25-27 vessels is unrealistic if financial performance is a consideration in participation in the inside rockfish fishery.

Outside Rockfish

A number of opportunities for this fishery emerged as experience was acquired during the Pilot period. The outside rockfish fleet is comprised mainly of individuals that participate in the halibut and sablefish fisheries, but there is also a core of participants that focus on the rockfish fishery. The majority of fishing is conducted by about 15 vessels with the balance of the 46 vessel fleet (2008) engaged more peripherally.

Lingcod

Like the rockfish fisheries, the lingcod fishery is a fishery where a few boats at the top of the hierarchy are making a modest living while the balance of the fleet is competing to generate a positive contribution from the fishery. As such, any increases in cost may have major implications for future participation by "marginal" vessels.

Dogfish

The CGIPP has brought both challenges and opportunities for the dogfish fleet. By its nature, dogfish is not a fishery for everyone, and a number of factors, including the complexity and cost of the CCGIP and resource and market conditions, have contributed to a reduction in participation and landings under the program.

A low-value, high-volume fishery, dogfish is susceptible to increases in operating costs. Enhanced ability to retain non-dogfish species, particularly halibut, has been a boon to the fishery, resulting in higher margins and profitability for those that have adapted to the system.

Halibut

The halibut fishery is widely viewed as being a profitable one, a perception that was confirmed by this analysis. However, halibut performance is highly segmented, as is the case with other groundfish fisheries. Bottom tier financial performance is similar to that seen in other hook and line fisheries.

Sablefish

The top tier of sablefish vessels operate on a scale unlike other segments in the hook and line fisheries, with larger vessels and sizeable catches of high-valued sablefish. The bottom tier (11 vessels) however, fairs much like other hook and line fleets. A lower TAC in 2008 will likely lead to reduced profitability due to lower landings per vessel and higher lease rates.

The analysis largely confirms the suppositions going in to the review that:

  • The halibut and sablefish fleets feature stronger profitability levels.
  • The rockfish, lingcod, and dogfish fleets have somewhat marginal financial results, and are vulnerable to relatively small increases in cost.

Catch Monitoring Risk Assessment

Of significant concern to industry participants are the costs associated with the catch monitoring program. In the first year of the pilot (2006), industry paid for all of the electronic monitoring (EM) costs. Early in 2007, industry sought funding assistance for one-third of the administrative portion of the EM costs (approximately $700K per year) consistent with the portion of funding that DFO contributes to At Sea Observer programs in some other fisheries both on the East and West Coast. The Minister agreed to pay this funding for two years (2007 and 2008), and the contribution was continued in 2009 when the pilot was extended for one year to permit a comprehensive evaluation of the program. No commitment has been made to continue this financial contribution.

A monitoring committee consisting of members of each groundfish fleet and DFO has been established to review the monitoring program in effort to reduce costs. The committee concluded that cost savings would be difficult as efficiencies have already been achieved, and meaningful cost relief by eliminating components of the program would impact the objectives of the CGIPP. They also concluded that the program is new and still evolving and cost-saving opportunities are likely to emerge over time, however, they are likely to be minimal. There may be costsharing synergies through restructuring of the groundfish trawl at-sea observer program, to which DFO contributes $1 million annually. The trawl fleet is vehemently opposed to sharing their DFO contribution for at-sea observers with the hook and line fleet.

A detailed analysis of the tradeoffs and risks associated with a lower level of catch monitoring for the CGIPP is under way. The assessment will examine the implications of a lower level of monitoring including the associated impacts, costs, benefits and risks (e.g. changes to harvest strategy). It will also examine the impact of any changes to the monitoring program on achieving the conservation objectives as well as eco-certification, and potential impacts on rockfish species slated for designation by the Committee on the Status of Endangered Wildlife in Canada (COSEWIC). Preliminary results indicate that the cost savings associated with a lower level of monitoring would be minimal compared to the potential reduction in revenue or opportunity that would result from a more risk adverse harvest strategy (e.g. reduced directed and nondirected catch, area or time closures, etc). Industry does not support a reduced level of monitoring as it would influence behaviour at sea (i.e. cheating) and result in more risk adverse harvest strategies.

The Department's contribution to the catch monitoring program is significant relative to the profitability of vessels in the smaller-scale fisheries (inside rockfish, lingcod and dogfish), and particularly vessels in the lower production tiers (Appendix 2: Summary of Fleet Financial Profiles). These vessels face marginal returns even with the DFO contribution. If the contribution were removed the ratio of costs versus profitability would increase, thereby providing a disincentive to remain in the fishery. The vessels within these bottom tiers are considered "part-time" participants and would likely leave the fishery as there would be little financial incentive to remain. If the program becomes permanent these boats would be able to exit the fishery by permanently transferring their quota to another harvester, or submit applications to the Pacific Integrated Commercial Fisheries Initiative (PICFI). Currently, leasing is the only option for the rockfish, lingcod and dogfish fleets as permanent transfers or buy-back under PICFI are not allowed because the program is a pilot.

Alternative Management

The pilot proposal was industry's response to DFO's conservation mandate and subsequent guiding principles. Had industry failed to develop an acceptable proposal, the status quo would not have prevailed, but rather, an alternative management regime would have been implemented.

The alternative management plan could have involved closure of the hook and line fisheries pending development of a plan to address the five rockfish conservation principles (as was the case for the trawl fishery in 1995). The elements of an alternative management plan, as identified at the time, were follows:

  • A focus on rockfish conservation and adherence to TACs
  • Rockfish TACs established by management area
  • A comprehensive catch monitoring (CM) program similar to that in place under the CGIPP, targeted on primarily on rockfish. Audits would focus on rockfish and DMP piece counts would be on rockfish only.
  • Full retention of rockfish by all licence types
  • Areas would be closed to all groundfish fishing once any rockfish TAC had been reached in that area

The alternative management plan would have brought most of the costs associated with the CGIPP, without the Pilot program's countervailing remedies and revenue-enhancing mechanisms. A comparison of the two approaches, while subjective in nature, yields the conclusion that the CGIPP generates superior economic benefits.

Conclusion

Results of this evaluation show that the CGIPP is achieving the Department's conservation objectives and satisfies social concerns and economic performance. Halibut and sablefish fleets have continued to fully harvest their directed total allowable catch and feature stronger profitability levels. There are fewer vessels in the smaller-scale fleets (rockfish, lingcod, dogfish), which is expected with implementation of IVQ fisheries, however, the landings per trip for the remaining vessels has increased. While there are continued concerns about high monitoring and quota leasing costs, availability of quota, and rationalization of the small boat fleet, permanent implementation of the CGIPP will alleviate some of these concerns. While implementation of the CGIPP Plan has changed the way the fishery was managed, a substantial degree of stability has been observed over the four year pilot period.

Return to the fishery seen in the pre-integration period is not an option. The CGIPP likely provides the best program to achieve the conservation objectives and satisfy socio-economic performance.

Appendices

Appendix 1: Consultation Feedback

The following tables document the feedback as provided by the commercial and recreational sectors and First Nations during the consultation process. The comments provided do not necessarily represent the views of the Department.

Commercial

Economics: Generation of Benefits
Issue
Revenue
  • Little question that the CGIPP provides opportunities to enhance revenues.
  • Opportunities to improve revenues are not uniform across fleets. Rockfish (inside) and lingcod sectors are limited by the nature of their fisheries and have been less successful in expanding their catch mix.
  • Have moved away from favored fishing areas to avoid non-target species.
  • While failure to fully utilize rockfish TACs limits currentyear benefits, rockfish utilization is improving.
Expense Catch Monitoring
  • Ways to reduce monitoring costs are being explored by CIC sub-committee.
  • Tradeoffs between cost and benefit are being explored.
  • DFO should entrench its financial contribution to the EM program.
  • No going back to a partially-monitored fishery. Current monitoring program is the standard for BC commercial groundfish fisheries and a reality for the foreseeable future.
Leasing
  • Quota leasing is the most contentious issue. At times lease rates for some species rise to levels that allow little profit margin while for other species lease rates are more stable and reasonable.
Efficiency
  • It's taken a couple of years to figure out how to access quota, but quota accessibility has improved.
  • Some harvesters would like to "get on with integration" by removing barriers to efficiency while others more cautious about changing licencing rules that provide the ground rules for fishery access.
Social Perspective
Issue
Distribution of Benefits Armchair Quota Holding
  • Important to ensure that benefits from the fishery accrue to active harvesters. How to do so is unresolved.
Small Boats
  • There is a widespread desire to maintain a place for small boats under an integrated program.
  • No clear definition of "small boat".
  • Small boats face distinct challenges under CGIPP but can gain a place in the fishery with appropriate application of effort and resources.
Fleet Parameters Rationalization and Consolidation
  • Views on this topic reflect an unresolved debate in the fishery: the extent to which rationalization and consolidation are a negative outcome vs. a necessary step towards a viable fleet configuration.
Equity
  • Little dispute over that charge that the CGIPP has brought increased complexity. Opinion varied on the extent to which this has limited participation.
Communication, governance, appeals
  • There is recognition of the importance of communication among and within the groundfish sectors, with improvements being implemented over time.
Equitable treatment
  • The groundfish industry feels strongly that other sectors should also be subject to the same high standards vis à vis the comprehensive catch monitoring (includin funding).
  • The fact that other sectors benefit from the science and management improvements to the commercial groundfish fishery is seen as a rationale for DFO cofunding the CM program.

Recreational

SFAB Issues Point
Affects of Pilot on
Recreational Sector
  • There have been no negative effects.
  • There are concerns about potential problems arising in the future, particularly if the commercial sector is gifted perpetual ownership of the resource, thus requiring compensation for another sector to access.
Access
  • Certain rockfish TACs went up with integration. Want to be sure that the recreational sector doesn't have to pay to get some/all of it back. (DFO pointed out that rockfish TACs rose for four species: rougheye, yelloweye, quillback and shortraker. The rationale was that all mortality would be accounted for under the CGIPP and previously much of the mortality was unknown hence the TACs were likely exceeded far more than what was known. In light of all rockfish mortality now being known, a 20% increase in the TACs was granted to ensure there was sufficient by-catch for all the commercial groundfish fisheries. These species comprise a small percentage of total rockfish TACs, and these have never been reached.)
  • Prefer the system used in BC salmon (chinook and coho). The needs of the recreational and FSC fisheries are accommodated, and the commercial sector gets the balance.
  • The recreational fishery is the only truly public fishery. How can you restrain the public's access to its own resource?
ITQs
  • Opposed to ITQs. Must take into account the present and future needs of other sectors
  • Part of position on ITQs: it's a unique chance for change. Think seriously about it before entrenching ITQs in the rockfish, lingcod and dogfish fisheries. ITQs are bad public policy.
  • The problem is not ITQs per se, but having to pay for access and not being provided a mechanism to fund the transfer.
CIC Principles
  • Some of the CIC's principles violate the principles in the Recreational Sector's Vision document.
  • How can DFO support one set of principles at the expense of another sector?
  • A clear statement of what DFO supports would be helpful. (DFO pointed out that the principles DFO accepted are those found in the IFMP, which were the original principles put forward by the Department. The CIC's principles guide discussions among themselves).

First Nations – Comments provided by the Nuu-chah-nulth Tribal Council (NTC)

NTC Issues Point
Loss of Access
  • Regarding expansion of ITQs to rockfish, lingcod, and dogfish: process used to allocate bycatch within the fisheries - not adequate bycatch to cover encounters for all fisheries. Acquiring bycatch a hardship.
  • Access that was open to all participating fishers is now restricted to quota holders; many quota holders are not active harvesters.
  • Trying to increase quota is a financial barrier.
Increased cost
  • New monitoring standards are costly.
Impacts
  • Troll salmon got poor allocations because qualifying period saw limited salmon fishing.
  • AFS/ATP groundfish licences tended to have low landings history.
  • Fear of local depletions as harvesters focus on areas that are populated by target species with little nondirected.
Recommendations
  1. Develop interim bycatch allocations for all groundfish and salmon troll licences. Most of problems could be remedied by fair and equitable bycatch allocations for all fishers.
  2. Review individual trip limits for bycatch with a view to eliminating. It shouldn’t matter when you catch it. It’s a costly redundancy that doesn’t enhance integrated fishing.
  3. Include NTC on EM sub-committee. Monitoring costs are too high for small boat fleet.
  4. NTC troll fleet represented on CIC. Not enough attention paid to those that access groundfish with salmon troll gear. NTC not represented in lingcod Initial Allocation. Had detrimental affect on NTC troll fleet

Appendix 2: Summary of Fleet Profiles and Financials
(Financials are without the DFO contribution to the monitoring program unless specified)

 
Inside Rockfish Top 1/3 Middle 1/3 Bottom 1/3
Landings (lbs, all species) 9,808 6,307 1,790
Gross Revenue $63,417 $39,999 $11,535
Catch Monitoring expenses
(including EM, DMP, Admin Fee, Equipment rental)
12,508 8,396 4,672
Captain/Crew share 9,072 6,356 1,940
Earnings (EBITDA)8 13,018 6,680 -3,625
Captain/Crew + EBITDA 22,090 13,036 -1,685
Catch monitoring % of Gross
without DFO contribution
20% 21% 41%
Catch monitoring % of Gross
with DFO contribution
14% 14% 21%
Catch monitoring % of EBITDA
without DFO contribution
96% 126% -129%
Catch monitoring % of EBITDA
with DFO contribution
56% 61% -164%
 
 
Outside Rockfish Top 1/3 Middle 1/3 Bottom 1/3
Landings (lbs, all species) 48,381 19,535 5,779
Gross Revenue $77,803 $25,508 $8,616
Catch Monitoring expenses
(including EM, DMP, Admin Fee, Equipment rental)
11,804 6,135 4,723
Captain/Crew share 11,883 3,762 824
Earnings (EBITDA)8 18,327 -621 -7,477
Captain/Crew + EBITDA 32,210 3,141 -6,653
Catch monitoring % of Gross
without DFO contribution
15% 24% 55%
Catch monitoring % of Gross
with DFO contribution
11% 14% 29%
Catch monitoring % of EBITDA
without DFO contribution
64% -987% -63%
Catch monitoring % of EBITDA
with DFO contribution
39% 221% -47%
 
 
Lingcod Top 1/3 Middle 1/3 Bottom 1/3
Landings (lbs, all species) 65,800 19,573 1,231
Gross Revenue $99,727 $29,424 $1,987
Catch Monitoring expenses
(including EM, DMP, Admin Fee, Equipment rental)
13,925 6,8261 4,821
Captain/Crew share 16,754 5,162 -844
Earnings (EBITDA)8 30,444 3,395 -10,620
Captain/Crew + EBITDA 47,198 8,558 -11,464
Catch monitoring % of Gross
without DFO contribution
14% 21% 243%
Catch monitoring % of Gross
with DFO contribution
10% 13% 131%
Catch monitoring % of EBITDA
without DFO contribution
46% 184% -45%
Catch monitoring % of EBITDA
with DFO contribution
31% 68% -31%
 
 
Dogfish Top 1/3 Middle 1/3 Bottom 1/3
Landings (lbs, all species) 500,970 239,452 37,628
Gross Revenue $359,740 $108,571 $20,674
Catch Monitoring expenses
(including EM, DMP, Admin Fee, Equipment rental)
23,015 12,402 3,957
Captain/Crew share 72,966 19,002 90
Earnings (EBITDA)8 57,566 3,602 -13,385
Captain/Crew + EBITDA 130,532 22,605 -13,296
Catch monitoring % of Gross
without DFO contribution
6% 11% 19%
Catch monitoring % of Gross
with DFO contribution
5% 9% 19%
Catch monitoring % of EBITDA
without DFO contribution
40% 344% -30%
Catch monitoring % of EBITDA
with DFO contribution
31% 156% -30%
 
 
Halibut Top 1/3 Middle 1/3 Bottom 1/3
Landings (lbs, all species) 111,595 61,997 18,599
Gross Revenue $476,677 $264,820 $79,446
Catch Monitoring expenses
(including EM, DMP, Admin Fee, Equipment rental)
14,237 8,765 5,097
Captain/Crew share 137,578 75,690 20,740
Earnings (EBITDA)8 187,168 94,335 11,910
Captain/Crew + EBITDA 324,746 170,026 32,650
Catch monitoring % of Gross
without DFO contribution
3% 3% 6%
Catch monitoring % of Gross
with DFO contribution
2% 2% 3%
Catch monitoring % of EBITDA
without DFO contribution
11% 13% 49%
Catch monitoring % of EBITDA
with DFO contribution
7% 8% 22%
 
 
Sablefish Top 1/3 Middle 1/3 Bottom 1/3
Landings (lbs, all species) 515,856 119,602 34,441
Gross Revenue $2,140,177 $496,204 $142,890
Catch Monitoring expenses
(including EM, DMP, Admin Fee, Equipment rental)
29,364 11,389 6,286
Captain/Crew share 545,857 122,809 29,948
Earnings (EBITDA)8 666,786 148,013 25,722
Captain/Crew + EBITDA 1,212,643 270,822 55,670
Catch monitoring % of Gross
without DFO contribution
1% 2% 4%
Catch monitoring % of Gross
with DFO contribution
1% 2% 2%
Catch monitoring % of EBITDA
without DFO contribution
6% 10% 29%
Catch monitoring % of EBITDA
with DFO contribution
4% 7% 15%
 

Notes

1 The original principles focused on rockfish only, but industry later requested the principles be broadened to include all groundfish.

2 Stanley, R.D. N. Olsen, and A. Fedoruk. 2009. The accuracy of yelloweye rockfish catch estimates from the British Columbia Groundfish Integration Project. Marine and Coastal Fisheries: Dynamics, Management, and Ecosystem Science 1:354-362.

3 Stanley, R.D., M. McAllister, P. Starr, and N. Olsen. (in press). Stock assessment for bocaccio (Sebastes paucispinis) in British Columbia. Can. Sci. Adv. Sec. Res. Doc. 2009/xxxx

4 The pilot period figures include catch of all species by vessels hailing out under each fleet category (for example, dogfish catch includes dogfish plus all other groundfish species.

5 The number of vessels is not summed, since some vessels participate in multiple fisheriess.

6 Source: Analysis of Commercial Fishing Licence, Quota, and Vessel Values, as at March 31, 2008, West Coast Fishing Fleet.

7 There are other ways to segment the fleets, but the methodology used in the report Fleet Financial Profiles for 2007 is used for this Review

8 Earnings before interest, taxes depreciation and amortization