Alaska/Pacific Coast

AK Groundfish and Crab Values Holding Steady
Fishermen’s News – June 1, 2016
A new report funded by the National Marine Fisheries Service shows that Alaska groundfish and crab values have held their own in value over the past five years.
http://fnonlinenews.blogspot.com/2016/06/ak-groundfish-and-crab-values-holding.html

BSAI Crab Rationalization Review on NPFMC Agenda
Fishermen’s News – June 1, 2016
Among the major issues before the North Pacific Fishery Management Council during its meeting at Kodiak June 6-14 is the 10-year review of Bering Sea/Aleutian Islands crab rationalization.
http://fnonlinenews.blogspot.com/2016/06/bsai-crab-rationalization-review-on.html

West Coast non-Whiting Trawl Fleet Crippled by Spiraling Costs of 2003 Buy Back Program
SEAFOODNEWS.COM by Peggy Parker – June 2, 2016
A disastrously implemented buyback program plus other NMFS rulings have meant that the West Coast groundfishing fleet is paying 20% of its gross revenue in fees, prior to covering their first expense for crew or fuel.

In addition, since the implementation of catch shares, the share of TAC that has actually been landed has remained at historically low levels.  This combination has meant disaster for West Coast groundfish:  low volume and lack of catch due to the way regulations are implemented, along with crippling costs from a buyback program and mismanagement on the part of NMFS.

This is the context as the Pacific Fisheries Management Council initiates a five-year review of the Pacific groundfish quota program, a management scheme that has achieved significant conservation benefits but at a cost of 70% foregone harvests of target species and lost markets.

Council members and stakeholders are already deep into discussions about potential fixes. Industry, federal managers, and stakeholders met in mid-February to go over what works, what doesn’t, and how to fix management tools with unintended consequences.

None of them, however, deal with the out of control costs of a federal buy-back loan program designed to reduce the non-whiting trawl fleet 13 years ago. That’s because the buy-back program was not part of Amendment 20, the catch share regulation that started the current groundfish IFQ program off Washington, Oregon, and California.

The buy-back plan preceded Amendment 20 by eight years. That’s when the Pacific Council reduced catch quotas and the groundfish trawl fleet found itself with too many boats and not enough fish.

The Council “was unable to come to agreement on a workable solution to reduce capacity so an industry-funded federal permit buyback program was proposed and passed into law by Congress in 2003,” according to a white paper written by Peter Leipzig & Brad Pettinger in 2014.

Both Leipzig and Pettinger were trawlers with many years in the industry. Leipzig, who now heads the Fishermans Marketing Association, actively lobbied Congress to get the buy-back program approved. He worked closely with NOAA Fisheries staff during the set up.

The buy-back program reduced the fleet by 91 trawlers and associated federal groundfish and state shrimp and crab permits.

But in the first of many questionable decisions, the National Marine Fisheries Service failed to develop and publish rules for the collection of the buyback loan fees until 18 months after the law was passed and the loan issued.

“This delay in promulgating regulations added an additional $5.5 million dollars in accrued interest to the loan balance before one payment could be made,” Pettinger said.

The reduced capacity and better efficiency kept spirits up throughout the fleet in their first post buy-back year. But it was short-lived.

New stock assessments showed too much pressure on bycatch species, and trawlers were restricted from target catch when there was a chance of catching the protected fish.

Under industry pressure, the Council began looking into an Individual Fishing Quota (IFQ) system, also known as a “catch share” program. With catch shares, individual fishermen would be held accountable for their own catch. In order to assure his actual catch was recorded correctly, this new program would require 100% observer coverage.

Leipzig and Pettinger explain what happened next. “The new program took about eight years to develop and implement. Throughout the development of the program, it was understood that the Magnuson-Stevens Act gave NMFS the authority to collect an additional 3% of participants gross revenues to help cover the cost of the program.

“However, as the date of implementation approached, NFMS informed the industry that they were not planning on providing observers for the program, therefore the cost of observers would not be included in the 3% cost recovery cap,” they said.

“The NMFS approach was that the requirement to take an observer would simply be part of the regulations with which fishermen would need to comply. The cost of the observer would then be an expense in addition to the 3% cost recovery fee. The observer fee would grow to more than $500/day.

With cost recovery capped at 3%, state landing fees, $500 per day for observers, the 5% buy-back fee, along with other industry dues and fees, the new off-the-top expenses were approaching 20% of their gross, before even fuel, food, or crew payments were made.

The interest rate on the original amount of the $28.5 million loan is 6.95%. Payments have been made each delivery of every season since 2005. As of February 19, 2016, the balance on the loan, including interest, is $25.5 million.

“Since the rules of finance dictate that current and accrued interest must be paid before any payments can be applied to the principal,” Leipzig and Pettinger wrote in 2014, “the groundfish industry finds itself 8.5 years into paying almost $21 million in interest on this loan.”

The loan was to be used to reduce the crab and shrimp fleets as well. While groundfish catches dropped following the implementation of the quota share fishery, crab and shrimp did not. They had no problem paying the money back earlier than predicted.

“Within a couple of years, the value of groundfish fishery went down,” said Heather Mann, heads up the Midwater Trawlers Cooperative, and supported buy-back from the beginning.

“Ninety one vessels and permits were retired from the buyback, but the loan was unmanageable. We started looking at ways to refinance,” she said.

Mann and Brad Pettinger, who heads up the Oregon Trawl Commission, sought better terms on the loan: lower the interest rate, lower the payment cap, and increase the term from 30-45 years.

“Even after the agency ran the clock on us for 18 months charging interest on the loan without allowing us to make one payment, adding $5.5 million to the total bill, we were not asking forgiveness on any of this debt,” Mann said. “We just wanted NMFS to refinance the loan.”

Mann, Pettinger, Leipzig and others began asking for support from the West Coast Congressional delegations.

The result was a bipartisan bill with 20 sponsors, spearheaded by California Representative Jared Huffman, Oregon Congressmen Peter DeFazio and Kent Schrader, and Washington’s Representative Jaime Herrera Beutler.

A Congressional staffer close to the effort described the support and passage into law as “unheard of. They had bi-cameral and bi-partisan support across a wide region of the nation. This just never happens.”

With the law in place, Mann and Pettinger prepared to discuss how to proceed with Paul Doremus, Deputy Assistant Administrator for Operations at NOAA Fisheries.

“When you refinance, you need to pay a fee loan origination fee (10% of the principle) which in our case would be about $300,000,” said Mann.

“But, because of the additional $5.5 million from having interest start before we could start paying NMFS, our strategy was to get NMFS to come up with the $300,000,” she said.

On January 29, 2015, Mann and Pettinger had a conference call with Doremus, who apologized for the delay getting back to them but explained he’s been “working this issue very agressively with OMB” and talking with “some folks on the Hill yesterday” to understand a recent problem with implementing the refi.

Mann said Dorimus explained, “The problem is that in OMB’s reading they — the way they have pieced this all together, they have determined that basically a new appropriation is required to pay of the old loan and start the new one.”

“He told us ‘That’s the bad news. The good news is that we will be able to find out, in a couple of days, how the administration plans to respond to that. The President’s budget is being released next week and you will be able to go forward with that information relatively quickly.’

“We learned later that the appropriation we’d need to ask for would be $10.3 million,” Mann said. “This is based on a law many decades old that addresses procedure for refinancing current loans.”

Six days later a second conference call occured, this one with Doremus confirming the status of the re-fi to Brent Paine of United Catcher Boats, Mann and Pettinger.

Mann said, “Doremus told us that OMB has briefed the Congressional delegations and can confirm that NOAA needs an appropriation to exercise their discretion and execute this loan.

“I asked him what happened. NMFS reviewed the legislation language more than once—a technical review — and said ‘You’re saying that you guys had no idea this would be an issue?’ she said.

“He told us they were unaware of this until they tried to implement the refinance,” Mann said.

Despite an organized campaign to refute OMB’s decision, including letters to the President from lawmakers, that is where the situation stands today.

Mann continues to push for a reasonable refinancing, and is in Washington, D.C. today for Oceans Week.
http://www.seafoodnews.com/Story/1021026/West-Coast-non-Whiting-Trawl-Fleet-Crippled-by-Spiraling-Costs-of-2003-Buy-Back-Program

FYI’s

RSW class planned this weekend in Dillingham
KDLG by Molly Dischner –  May 31, 2016
Refrigerated seawater system operator class planned in Dillingham
Fishermen looking to upgrade to a refrigerated seawater system can learn more about them in a class offered in Dillingham June 3-5.
http://kdlg.org/post/rsw-class-planned-weekend-dillingham

PFMC to Meet in Tacoma
Fishermen’s News – June 1, 2016
The Pacific Fishery Management Council and its advisory bodies will be at the Hotel Murano in downtown Tacoma, Washington from June 21 through June 28 to address a number of fisheries issues related to salmon, groundfish, highly migratory species, Pacific halibut and habitat.
http://fnonlinenews.blogspot.com/2016/06/pfmc-to-meet-in-tacoma.html

Juneau kids explore Aureo, the yellow submarine
Juneau Empire by KEVIN GULLUFSEN – May 27, 2016
Before lowering himself into Aureo, an erstwhile research vessel brought to Juneau to teach kids about ocean sciences, local Faith Community Christian School fourth-grader Lucas Thompson — who aims to be a pro football player — wasn’t too keen on the sea.
http://juneauempire.com/outdoors/2016-05-27/juneau-kids-explore-aureo-yellow-submarine

Ann Owens
Pacific Seafood Processors Association
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E-mail: pspafish@gmail.com; Website: www.pspafish.net
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June 2, 2016