A Case Study of New England Groundfish Fishing Capacity Reduction Eric Thunberg Andrew Kitts John Walden Northeast Fisheries Science Center Woods Hole, MA

Outline Overview – Landings, Fleet, Gears, Management Vessel Buyback – Objectives, Design, Results Permit Buyback – Objectives, Design, Results Impacts and Lessons Learned Epilogue

Groundfish Fleet Size ME, MA, RI

Groundfish Management quotas, gear, some closures gear, fish size, some closures 1994 – Amendment 5, Limited Access, Days-at-Sea (DAS) and reduction schedule, gear, fish size, closures 1996 – Amendment 7, Accelerated DAS reductions, eliminated most exemptions from DAS program 2004 – Amendment 13

Vessel Buyback Objectives Financial Assistance – Buyout – Fishing Family Assistance Centers – Fishing Industry Grants Conservation – Immediate Boost to Amendment 7 – Capacity Reduction?

Vessel Buyback Design $2 Million Pilot ( ) – Extensive public hearing Reverse auction Select limited access permit categories Surrender all federal permits Vessel in fishable condition Vessel must be scrapped Eligible if 65% revenue derived from groundfish in 3 of 4 years ( ) Rank by bid divided by average groundfish revenue

Vessel Buyback Design $23 Million Expanded Buyout ( ) – Another round of public hearings – Positive review of pilot (Inspector General report notwithstanding) – Same design as pilot except Included all limited access permits Allowed vessel transfer to non-fishing use

Vessel Buyback Results 98 Bidders of 251 eligible for Pilot 140 Bidders of 360 eligible for expanded 79 Vessels removed (11 Pilot, 68 expanded) Total of 463 federal permits removed Average bid of $376 thousand Accounted for 20% of groundfish landings Accounted for 17% of DAS used

Vessel Buyback Success or Failure? General Accounting Office Review – Used buyout funds to purchase new vessel Financial assistance success Conservation failure – Entry of latent effort Conservation problem but management or buyback failure?

Permit Buyout Objectives Capacity reduction Prevent activation of effort Secure future gains for active vessels

Permit Buyout Design $9.6 Million Buyout ( ) – Consultative Process NMFS and Industry Advisors – Public Hearings Reverse auction All limited access permits eligible Rank by bid divided by capacity – Vessel characteristics – Data Envelopment Analysis Irrevocable Bid

Permit Buyout Results 502 Bidders from 1,732 eligible 245 Permits removed Removed 13.4% of groundfish capacity output Average award of $39 thousand Most removed permits had little or no groundfish activity Average vessel characteristics smaller than vessel buyout

Impacts Removed 324 groundfish permits Removed nearly 20% of groundfish fishery capacity output 1,413 Remaining permits; about 1,000 permits are used in any given year Impacts not readily separable from management changes

Lessons Learned Buyout programs should be designed based on capacity removal – GAO Recommendation – Vessel buyback would have removed 1.6% more capacity than what was actually removed May need to reconsider capacity estimates for latent effort buyouts – Dealing with zero outputs

Epilogue December, 2001 Groundfish FMP not in compliance with applicable law May, 2002 Settlement Agreement – Established new baseline for DAS allocations based on history Baseline modified to be implemented in Amendment 13 (May, 2004)

Amendment 13 DAS Elements Total DAS allocations about 67 thousand – Prior DAS allocations 140 thousand – Documented days absent 60 to 70 thousand About 400 vessels would get no DAS – Brings number of vessels close to recent and somewhat below longer term annual average number of active vessels Capacity output reduced 55% WITHOUT A BUYOUT

Role of Buyout Available funds simply not sufficient to rationalize capacity output Buyouts did make it possible to reduce needed DAS reductions in Amendment 13 A catalyst to get to the Settlement Agreement and beyond? Perhaps best used as a component of transitional strategy to alternative regime