Please find below a letter from ALFA director Linda Behnken stating ALFA's view on the recently proposed Municipal Quota Entity, which would allow the city of Sitka to buy and lease halibut quota.
Dear Sitka Assembly Members,
I understand that a proposal will be introduced on January 24th for consideration by the City Assembly that would allow Sitka to petition for authorization to purchase quota share and lease that quota to longline or “rod and reel” fishermen. As I believe you have been told, January 24th coincides with the annual meeting of the International Pacific Halibut Commission (IPHC) in Victoria, BC, hence many ALFA members will be out of town, myself included. I regret that I will not be able to address the Assembly on this proposal in person, but wanted to provide some background and comment with this letter.
At this point, the goals and details of this proposal are not clear to me. I am not sure if the proposer’s goal is to reallocate halibut quota from the commercial to the charter sector or to allow the City of Sitka to invest in halibut quota for use by commercial fishermen. It is also not clear to me whether or not the Assembly understands that Sitka currently does not qualify to purchase halibut quota, hence would have to request a regulation change in order to purchase and hold halibut quota. Whatever the details, the Alaska Longline Fishermen’s Association (ALFA) opposes the proposal as we currently understand it. By way of explaining that opposition, I provide the following background.
Halibut Management 101
As many of you know, fisheries management is complicated with multiple agencies and overlapping jurisdictions. No fishery is more complicated than the halibut fishery. Halibut is managed under an international treaty with Canada, with the International Pacific Halibut Commission (IPHC) charged under the Halibut Act with conserving halibut stocks and optimizing yield from the directed fisheries. The North Pacific Fishery Management Council (“Council”) is responsible for allocating halibut between user groups and with managing the groundfish fisheries that take halibut as bycatch. Unlike other fisheries, the longline halibut fishery is managed in both state and federal waters by the IPHC and the NPFMC; the State of Alaska does not have jurisdiction over halibut but does assist with monitoring the sport and charter halibut fisheries.
As some of you remember, during the 1980s effort in the halibut fishery created short, intense and dangerous halibut “derbies.” To end the derbies, the Council implemented Individual Fishing Quotas in 1995. The Council’s goals were to improve safety, reduce gear loss and waste, lengthen the halibut season and improve product quality, but to do this while controlling fleet consolidation and preserving the small boat, independent operator nature of the halibut fishery. As designed and implemented, the IFQ program limits how much quota an individual may fish and how much quota may be fished from any one boat; the program also established vessel size classes, which prevent quota initially issued to small boats from ever being harvested on large boats. Most importantly, the quota program requires second generation quota share (QS) holders to be “real” people—not corporations, non-profits or municipalities— and to have a history of participating in commercial fisheries in a harvesting capacity. The Council took these steps to prevent corporations from dominating the QS market, because Council members recognized the importance of supporting Alaska’s independent communitybased fishermen and that these community-based fishermen would need an affordable entry level to these fisheries now and in the future. The Council did not award quota to deckhands, but did provide this path to ownership for those who work on deck in these fisheries.
Community/Municipal QS Ownership
The Council made three exceptions to the “real” people rule: 1) because fishermen in western Alaska communities had not yet established themselves in the halibut fisheries, the Council issued community development quota (CDQs) to non-profit community-based organizations in the Bering Sea; 2) some years after implementation of the IFQ program, the Council authorized Gulf of Alaska communities with less than 1500 residents that were off the road system to form community-based non-profit entities (Community Quota Entities, or CQEs) and purchase quota share because the Council observed that QS was being sold out of these communities; and, 3) the Council allocated approximately 10% of the initial quota to existing corporations based on their historic operations as corporations, and allowed this quota (designated as “A” shares) to be purchased by corporations and entities in the future. CDQ groups have leveraged initial allocations of halibut, sablefish, Pollock, crab and flatfish to purchase more quota; CQEs have made little progress toward quota share ownership because the high cost of quota has proven to be a significant obstacle; “A” shares are seldom on the market and sell for a premium price when they do become available.
Since the halibut/sablefish QS program was implemented, the number of QS holders has declined substantially and the number of boats participating in the fisheries has been reduced by half. The price of quota has risen from $5 per pound of halibut individual fishing quota to over $60 per pound. Over 65% of the people who now hold quota have purchased some or all of the quota they currently hold. Commercial fishermen have borrowed and invested heavily to participate in the halibut fisheries. Sitka fishermen are no exception. In fact, more quota share is held by Sitka residents now than when the QS program was implemented in 1995. The same is true of Petersburg and a few other larger Alaska communities. The smaller communities, those that are struggling to form CQEs, have experienced a significant net loss of halibut quota.
The Council recently conducted a 15-year review of the halibut/sablefish program. The review considered the success of the program in meeting initial program goals. The review concluded that the program had met conservation, safety and marketing goals, but more work was needed to support independent fishermen and entry level opportunities. We agree completely with these findings. As I described to the Assembly last summer, ALFA helped launch the Alaska Sustainable Fisheries Trust (ASFT) some years ago to assist deckhands and entry level fishermen with accessing the halibut fishery. We are in the process of capitalizing the ASFT to take to scale our investment model, but in brief: ASFT will provide bridge financing to qualified young fishermen; the bridge financing will allow local fishermen and others who care about sustainable community-based fisheries to share the risk and entry level costs of QS purchase and provide new entrants with an affordable path to QS ownership. In sum, we share the Assembly’s goal of investing in sustained fishery access for Sitka fishermen; what we do not share and cannot support is an initiative that advocates for changes to existing halibut regulations that allow more “entities” to purchase and hold halibut quota.
Our reasons for opposing changes to the owner-operator regulations are two-fold: 1) entities generally have better access to capital and their entry into the QS market will further inflate already high halibut QS prices, making it that much more difficult for Alaska’s community-based fishermen to afford access; and 2) in our experience, independent community-based fishermen are community and industry leaders; they are also strong advocates for ocean health and sustainable fisheries. Independence is one of the most important values shared by our members and small boat fishermen across the state and country. ALFA looks to support, not undermine our coastal residents with gaining access. With the CDQ and CQE programs already in place, the missing piece is support for individual fishermen, and that is the piece ASFT, with ALFA’s help, is designed to address. We welcome the City of Sitka’s support for this work; we DO NOT support the City of Sitka lobbying for additional entry into the QS market of new “entities,” municipal or otherwise.
ALFA’s reasons for opposing the reallocation of commercial halibut quota to the charter sector may be obvious to the Assembly—when quota is reallocated away from the strongly Alaska commercial halibut fleet, commercial deckhands, processors, supports sectors, and the millions of Americans who access halibut through restaurants and grocery stores suffer-- but perhaps more background would be helpful here as well.
Until 2009, harvest by the growing halibut charter sector was deducted from the total allowable catch of halibut in each halibut management area before the catch limit for the directed commercial fishery was set. As a result, increased charter harvest led to pound for pound decreases in commercial fishermen’s individual fishing quota. Given the substantial investment commercial fishermen were—and are—making to purchase halibut quota, this reallocation imposed unacceptable costs and inequities. After 20 years of controversy, the Council finally addressed the inequity, first by assigning a Guided Harvest Level to the charter sector and later with a halibut Catch Sharing Plan (CSP). The CSP ties both sectors to the same index of abundance and allows individual charter operators to lease a small amount of quota from commercial fishermen to provide increased harvesting opportunity to charter clients. This leasing provision is called the Guided Angler Fish (GAF) program. Because some charter operators were dissatisfied with the cost of leasing GAF, they proposed yet another reallocation scheme called the Recreational Quota Entity (RQE). The RQE, which was approved by the Council in December 2016, allows the charter sector to form a non-profit entity authorized to purchase commercial halibut quota for use by the charter sector, creating yet another exception to the owner-operator principles of the halibut QS program. RQE proponents hope to charge either all sport halibut fishermen or halibut charter clients a fee to cover the cost of purchasing halibut quota, creating a revenue stream to fund yet another reallocation and upward pressure on the halibut QS market.
Hopefully this background allows you to understand the strong and negative response you have received from Sitka halibut fishermen who have heard about the municipal quota entity proposal. Sitka’s commercial halibut fishermen worked hard to secure a QS program that protects independent community-based fishermen. We worked even harder to protect the Southeast resource from the habitat destruction wrought by trawlers. We fought to protect the halibut resource from bycatch and we worked hard to protect our investments in halibut quota share from reallocation to an insatiable charter sector. We have watched CDQs, CQEs and now RQEs authorized in contradiction to the owner-operator characteristic of the halibut fishery, and each authorization has driven halibut quota prices relentlessly higher. At this point, scant space remains for independent community-based fishermen, and we are doing all we can to hold that space by taking to scale our Fisheries Trust. We would welcome the City’s support of the Trust.
As you may know, ALFA was recognized last fall by President Obama’s administration for our work promoting sustainable fisheries in general and the next generation of small boat fishermen in particular. We are on your side in promoting Sitka’s future in fisheries. We cannot support creation of yet another entity that will compete with local fishermen for halibut quota, and we will strongly oppose a municipal entity that purchases commercial halibut quota for reallocation to largely non-resident charter clients.
I hope this background helps you to understand the position of our organization on the municipal quota entity proposal. Again, I will be out of town when the Assembly addresses this proposal in January, but I would be happy to talk to or meet with any Assembly members before that date to discuss this issue. Please feel free to contact me through our office in the Sitka Sound Science Center or by calling my cell (907-738-3615). Thank you for your time and your service to Sitka on the Assembly.
Linda Behnken, Executive Director, ALFA