ITQs:  Initial allocation of quota shares

 

A willingness to talk about individual transferable quotas is based on the realization — or assumption — that the current congressional moratorium on ITQs will expire or be deliberately lifted.  Furthermore, more and more fishermen themselves, while extremely leery of ITQs, at least see the possibility that they may be preferable to the morass of impossible regulations in which we find ourselves now. 

At the same time, it is likely that Congress will require that certain principles and policies be in place before any ITQ programs are implemented.

Some of those principles were explored in our Guest Column in the June CFN, in which we, as individuals who have had opposite views on ITQs, stated it is time to open dialogue on the subject.  A number of questions were posed at the same time. 

The issues are known and include:  fairness, community stability, conservation, and opportunity for today’s fishermen and for the next generation. 

The problems, such as discards, enforcement, and concentration of quota into a few hands, have been debated at length.  But those debates have generally taken place in a framework of either trying to promote ITQs uncritically, or preventing their implementation or even consideration. 

In the interest of promoting dialogue instead of bombast, this second installment looks at one of the most contentious aspects of ITQs:  initial allocation of quota shares.

 

Starting quota

Like the present debate over Amendment 13 in the groundfish plan, it is inevitable that there will not be enough quota to go around, just as there are not enough days-at-sea to satisfy everybody.  Some people are determined to prevent cutbacks to their ongoing operations, while others want to preserve an opportunity they see as rightfully theirs, and still others seek to maintain an asset value in the fishing rights they have acquired. 

Too often, each group only sees its own salvation in the sacrifice of others.  Just like the current furor over freezing days-at-sea, an identical contest will take place in the establishment of any ITQ system, and it will be the most difficult and time-consuming part of the entire process.

Unless... there is a recognition that everyone gives up something, simply because there isn’t enough fish for all  who want to claim them.  And a recognition that an all-or-nothing battle is an unacceptably high-risk venture decided by raw politics. 

On the contrary, the resulting system should leave everybody involved with a sense that, at least, they weren’t treated any more unfairly than everybody else. 

Creating a system in which there are clear winners and obvious losers can only guarantee that the unavoidable scars that accompany fishery allocation battles will be deep and ugly.  The approach that is taken to the initial allocation of fishing rights will have a huge impact on whether the very things we fear about ITQs are certain to become reality.

 

Fishing rights

The public debate over ITQs, like the debate over the groundfish plan’s Amendment 13, has made it clear that a variety of factors must be taken into account, because they represent real values that people will not easily give up.  These values have varying importance and intensity to each individual and community, depending on the circumstances involved. 

For example, a boat or a port which is only involved in one type of fishery may feel (believe, assert, claim) a special dependence on that fishery and thereby demand a share large enough to maintain current operations and avoid cutbacks.  The Magnuson Act itself, in the section on limited entry, requires that regulations take into account “present participation” and “historical dependence” on a fishery.

Someone else, with less immediate involvement or dependence on a particular fishery, may feel just as strongly that rights in that fishery are a vital and valuable option for the future, and that preserving the right to participate in that fishery is crucial. 

Others, whose dependence on any given fishery may be minimal or nonexistent, are nevertheless aware that, having qualified for certain fishing rights, they have an asset that may be substantial — and it will not be easily surrendered.

The fact that each of these participants puts a value on those fishing rights, and will not give them up without a fight, means that each has a voice that must be heard.  The alternative is paralysis, and a winner-take-all battle that is certain to destroy those things we all cherish most about the fisheries. 

Political posturing that attempts to dismiss the legitimacy of these values, or to disparage those who hold them, is more likely to discredit, rather than elevate, those who claim the moral high ground. 

Self-interest is, and always will be, transparent throughout this debate.  Let’s cut the crap, as they say.  Nobody went dogfishing for the altruistic purpose of saving groundfish. 

 

No use-it-or-lose-it

How might all these factors be blended into an acceptable allocation formula? 

Some years ago, many ITQ advocates in the scallop fishery attempted to avoid the controversy associated with the question of initial allocation by putting forward a simple formula:  every permit holder would get an equal allocation.  While straightforward, this approach is unlikely to find much agreement today. 

Even so, it demonstrates a recognition that a “fair” allocation is defined by nothing more than people’s agreement    to it.  There is no objective standard of “fairness.”  This “equal-for-everybody” approach acknowledges that the very fact of owning a permit creates an interest and a value that has to be accommodated. 

For this reason, the possession of a permit, by itself, is a factor that has to be put into any formula for the allocation of fishing rights.  This is all the more true in light of the New England Fishery Management Council’s long commitment that the failure to exercise fishing rights does not jeopardize them — there will not be a use-it-or-lose-it penalty.

 

Dependence/longer history

With that in mind, what are the other factors that must be considered, the voices that must be heard, and the values that must be respected?  Some are obvious, like present dependence on the fishery at issue — call it “recent history.”  Claimants for this perspective point to today’s economic reality in the fishery, and their case is strong. 

But an aspect of the “dependence” argument that  must be examined is the extent to which today’s reality is one of long standing.  Is today’s dependence one of many generations, or is it the result of displacement from other fisheries, new entrants, or other factors?  “Current participation” is only one element of “history,” and may not reflect an adequate basis for allocation by itself.

In some fisheries, for example, the regulations have, deliberately or inadvertently, reallocated most of the resource from one sector to another.  To completely ignore the interests of those who were dislocated in that fashion risks exactly the battle we must avoid.  It is another voice that must be heard. 

Some longer-term definition of “vessel history” must be created.  If possible, that longer-term definition would go back to encompass a period before the time when regulations had such a substantial effect on vessel productivity.

 

Vessel size

Another element that must find a place at the bargaining table is the size of the vessel involved.  While bigger boats, in some fisheries, have “bigger”
histories — more landings — than small boats, that is not always the case.  This has become even more true in these days of restrictive trip limits, federal closures, and bycatch tolerances. 

Consideration of vessel size is, in effect, another measure of “dependence.”  Presumably, vessel size is a surrogate for investment, expenses, and the number of jobs involved, and making it part of the formula might re-introduce a proportionality that has been lost as a result of the current regulatory environment.

 

Sticking points

This list of factors is not meant to be either exhaustive or proscriptive.  But they have been the key sticking points during the early-stage development of other ITQ programs.  These four factors are:

l  The vessel’s permit itself — the basic right to participate in the fishery;

2  Current dependence and recent history in the fishery;

3  Long-term history in the fishery; and

4  Vessel size.

It is very clear that any attempt to completely ignore, or disenfranchise, any of these interests will lead only to a destructive political (and social) battle in which any potential benefits of ITQs will be lost before they might have been realized. 

And any fishery for which ITQs are being considered will doubtless weight those factors differently.  For example, in one fishery, a vessel permit alone may represent a large percentage of the allocation formula, while a permit in another fishery might be given minimal weight in the allocation process. 

Each of these four factors may find very different definitions in differing fisheries — what is “long-term history?”  What is a “big” boat? 

Any approach should consider blending these factors into a single, ultimate formula for the fishery in question.  No one factor, such as last year’s catch, or simple possession of a permit, should dominate the allocation process to the extent that it disenfranchises other legitimate stakeholders. 

Only a formula that acknowledges the legitimacy of all of these interests will ultimately work.  No one must leave the process believing that they have nothing to lose by destroying it because it totally failed to recognize their interests.

This is the time for innovative thinking, they say.  It may even be that some mix of transferable and nontransferable quota to each vessel would address multiple concerns.  Such a device would provide the opportunity to participate in a fishery while preventing the creation of an attractive windfall asset which may cause problems later, if transferred.  Perhaps transferable days or traps are more appropriate than quota in some fisheries. 

While the variations may be unlimited, any approach must continually be vigilant about all the concerns associated with transferable fishing rights — initial allocation, conservation, community stability, opportunity, enforcement, discards, and consolidation and corporatization. 

What about separability and divisibility?  Should we allow fishing rights to be nothing more than pieces of paper in an investor’s desk?  Future installments will continue to explore these issues.

 

Jim O’Malley is the executive director of the East Coast Fisheries Federation and a member of the New England Fishery Management Council.  Dick Allen is a lobster fisherman from Wakefield, RI.