Wednesday, November 16, 2011

Voluntary Lowering of Lease Fees Offered By Some Crab Quota Share Holders

By Margaret Bauman

A report of the crew work group meeting at Dutch Harbor during the October meeting of the North Pacific Fishery Management Council notes that some current crab quota shareholders have agreed to voluntarily lower lease rates.

The report, prepared by Edward Poulsen, distributed on Oct. 4 to members of the working group who participated in the Sept. 29 meeting, notes several issues covered by those in attendance and via teleconference, including a Kodiak connection.

It does not mention electronic data reporting, a subject on which the council will take final action at its December 5-13 meeting in Anchorage. Poulsen, former executive director and now an advisor to the Bering Sea Crabbers, said he was preparing an updated report on the meeting to deliver at the December meeting.

A number of people who crew on crab boats have expressed concern since the crab rationalization legislation went into effect several years ago about loss of jobs and income, mainly because of fleet consolidation and leasing of quota shares. Some crew members also feel they should have been allocated crew quota shares because of their long-term participation in this dangerous fishery, an opinion challenged by some vessel owners who said they have invested substantial capital in the fishery, as opposed to physical effort alone.

Several people representing crewmembers also want data reports made available that show specifically how much income crew members earned annually before the federal crab rationalization program was approved.

“What we would like to see on public record is the pay from pre-rationalization,” said Steve Branson, a veteran Kodiak fisherman. “It would be nice to be able to compare what was going on before and after privatization.”

Branson said after seven years of traveling from Kodiak to attend various meetings of the federal council he is not overly optimistic about change any more, even though ”the council now is more fair-minded. I don’t think it (crab rationalization) would have passed if it had been scrutinized more closely.”

Vessel owners held the Dutch Harbor meeting to discuss progress in development of measures to address crew issues, as a precursor to the industry’s report to the council in December.

First up on their agenda was a proposal of vessel owners to provide a right of first offer to active participants on 10 percent of the quota share being transferred in any transaction. The right is intended to increase the portion of the quota share pool held by persons actively fishing. The remaining 90 percent could be subject to a similar right of first offer for either people active in the fleet or owning a fishing vessel.

Proponents of the measure are still developing the specific agreement and suggested that a written description could be provided at the next meeting.

Vessel owners also reported that a substantial portion of current quota holders have agreed to voluntarily limit their lease rates to 65 percent in the Bristol Bay red king crab fishery and 50 percent in the Bering Sea opilio fishery, Poulsen said. The lower limit is intended to reduce the pressure on vessel owners that could arise under arrangements that only guarantee crew minimum shares of a vessel’s gross revenues, Poulsen said. In the absence of limits on lease rates, a reduction on the lease rates that may be charged to crew may disadvantage vessel owners that lease a substantial share of the quota that they harvest, he said.

Supporters of the limit on lease rates suggested that in the future cooperative agreements could be modified to include a limit on the lease rate percentage that may be charged to crew, Poulsen noted in his meeting report. However, it was also noted that affiliated coops would also need to implement similar changes that could be more difficult as they are not FCMA cooperatives, he said. In addition, provisions could be included in that agreement to prevent vessel owners from modifying crew contracts to pass on additional costs to crew that might offset the reduced charges on lease costs.

Before crab rationalization went into effect, crew made more money for their efforts because only a percentage of the vessel’s fuel, bait, food and pot loss were deducted before their percentage of the profit was calculated. Once crab rationalization went into effect, some vessels began fishing a great deal of leased quota shares, for which they were paying a lease fee of sometimes up to 80 percent of the harvest, and that lease fee was added to the list of vessel expenses deducted from crew pay.

Branson, who was not among those attending the Dutch Harbor meeting, said he would have made substantially more money the last time he crewed on a crab boat, had lease fees not been deducted.

Some crewmembers at the meeting expressed support for efforts of vessel owners to improve crew compensation through reduced lease fees. These representatives suggested that they would support allowing vessel owners to continue with the effort to use reduced lease rates to address the crew compensation issue.

Poulsen said meeting participants also discussed the means of evaluating the effects of the reduced lease rates on crew compensation.

Vessel owners offered to advance a list of quota holders and/or vessel owners who agreed to the arrangement, but opposed any effort to collect additional information on crew compensation.

These vessel owners expressed their opinion that the adequate information would be provided by the list of quota holders. Vessel owners said that, when available, electronic data reporting data would demonstrate specific effects on compensation.

Some crew representatives voiced concern that electronic data reporting data may not be available until more than a year after some seasons, which would limit the ability to address compensation, if the lease rate reduction measure fails to achieve its intended result. For this reason, they believe that some other means of demonstrating the effectiveness of the measure should be pursued, Poulsen said.

Vessel owners also offered to bring a written description of the agreement to limit lease rates to the next meeting for review by all participants. That description could help participants evaluate the measure, including the potential for reports to establish its effectiveness, Poulsen said.

It was suggested by staff that the group meet prior to the December meeting of the federal council, perhaps on Nov. 21, to ensure that all participants have the same understanding of the progress of discussions.

Poulsen said in an interview later that a loan program up and running since this summer allows crew to get low interest loans to purchase crab quota shares through the National Marine Fisheries service, with amortizations over a 20 year period. “The issue is the NMFS loan program is so low that there is not a lot of incentive for more programs, he said.

The federal crab rationalization program was the first and only program that gave 3 percent of the individual fishing quota shares to skippers. The quota share holders would not be supportive of reallocating quota shares, because it would be disruptive to their businesses now ongoing, he said.

Another Kodiak commercial fisheries veteran, Kodiak city council member Terry Haines, noted that efforts to get banks to offer reasonable interest rates to crew members seeking to buy into quota share did not work out well. “And you can’t blame them,” Haines said. ‘The whole concept makes the banks nervous, that crew might have rights to quota shares they have already given out loans on.”

Haines noted that the Magnuson-Stevens Fishery Conservation and Management Act identifies quota shares in the crab fishery as a privilege that can be taken back at any time, if there is enough reason. “It makes the banks very nervous,” he said.

Caps on leased quota share, Haines said, are on the other hand something that is quite doable.

Another issue the council has not discussed is caps on the amount of quota share that may be harvested on the same vessel, he said. When huge amounts of leased quota are harvested on the same vessel, it takes away from a crew’s ability to leverage pay. The bottom line is, what is their percentage of net profits now? Before rationalization is was 6-8 percent for the crew and the skipper got 15 percent (after expenses). Now with 80 percent lease fees off the top that leaves you 20 percent,” he said.

Haines and others are also eager to get the crab electronic data reporting up and running to provide data that provides more information.

Public comment submitted at the Dutch Harbor meeting by Stephen Taufen for the Groundswell Fisheries Movement urged that data collection should include reconciled fish settlement accountings, and inclusion of each crab vessel’s by-species/fisheries lay share contracts.

The reconciled fish settlement accountings should detail whose quota is consolidated on which vessel, the rents or leases charged to the vessel and portion passed along to crews by lease, as well as shared trip settlement expenses by categories, such as fuel, bait, and gear, the percentage for each crewmember by name, showing individual trip settlement costs as well as total personal deductions, Taufen said.

The electronic data collection should also include lay share contracts for all captain and crewmembers, as part of the collection of data that confirms both quantitative analysis and qualitative assessment of whether or not the Bering Sea –Aleutian Islands crab rationalization program meets the requirement that in order to hold quota rights, all applicable federal laws must be obeyed by each IFQ holder, Taufen said.

Haines said that from a community perspective, he looks at the reduced revenue going out of communities as a result of consolidation of the fleet after rationalization and lease fees. From a community perspective, vessel caps and a limit on lease fees would address capital flight form communities, he said.

Haines is a member of the Crewmen’s Association, which has been advocating for crew rights for several years, but said he is more focused at this time on Fish Heads, an advocacy group for the preservation of the vitality of Alaska’s fishing communities.

A number of people who work as crew members have been reluctant to speak out about their support of the Crewmen’s Association, led by Shawn Dochtermann, and other advocates for crew rights because if they were to put their names on a list of those groups they could lose their jobs, he said.

Margaret Bauman can be reached at

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