for April-May-June 1999)
by Dan Holland and Todd Lee
The Federally-managed groundfish fishery off Alaska is one of the Nation’s most important in terms of quantity of fish caught and value of products produced. The fishery is managed under two fishery management areas, the Bering Sea-Aleutian Islands (BSAI) area and the Gulf of Alaska (GOA) area. In 1997, the total groundfish catch for both areas exceeded 4.5 billion lb, which produced over 1.3 billion lb of wholesale fishery products that sold for roughly $1.2 billion. The total catch was harvested by 1,280 catcher-vessels and 116 catcher processors. Walleye pollock, from which surimi, fillets, roe, and fish meal are produced, is the most abundant species in the fishery; in 1997, pollock comprised 60.2 percent of the total Alaskan groundfish catch and 56.9 percent of the wholesale product value (Figures 1 and 2 below). Pacific cod, flatfish, rockfish, Atka mackerel, and sablefish make up the rest of the fishery’s total catch.
A primary task of the Socioeconomic Assessment Program of the Alaska Fisheries Science Center’s (AFSC) Resource Ecology and Fisheries Management Division is to collect data and develop models that can be used to monitor the economic performance of the Alaska groundfish fishery and to assess the economic impacts of Federal measures to manage the fishery. Economic analyses are important because the benefits derived from fisheries are impacted by far more than the abundance level of a fish stock and the total allowable catch (TAC). Managers need to know the relative economic impacts of alternative management actions and how they interact with market forces. Regulations and market forces affect the costs of harvesting and processing a given level of catch and the value of the products produced from it. Regulations and market forces both directly and indirectly distribute benefits and costs among fishery stakeholders. The benefits include the incomes of thousands of people employed in the fishery and in support industries.
The American Fisheries Act, Steller Sea Lions, and Economic Problems in Asia
Major changes in the BSAI pollock fishery during the first quarter of 1999 demonstrate the profound effect regulations and market forces have on the economic value of a fishery. The combined effect of regulatory and market changes in the BSAI pollock fishery has been a substantial change in not only who is catching and processing pollock, but also how and where they are doing so, and what fishery products are produced. The economic impact of these recent developments is probably greater than that due to the 12 percent drop in the TAC for BSAI pollock in 1999.
The American Fisheries
Act (AFA) enacted by Congress in late 1998 identifies
which catcher vessels, factory trawlers, motherships
and in-shore processors are eligible to participate in
the BSAI pollock fishery. The Act shifted nearly 10
percent of the BSAI pollock TAC from factory trawlers
to in-shore processors, which include processing
plants on land and floating processors anchored near
shore (Figure 3a and 3b above). The Act also
permanently removed nine factory trawlers from the
offshore fleet along with the implicit catch rights
attached to them. A profound change
brought by the AFA was the creation of a pollock
factory trawlers cooperative. The formation of the
cooperative allows the factory trawlers, and catcher
vessels that deliver to them, to divide up the
group’s pollock quota during each of the next 6
years. Each factory trawler and catcher vessel
is allocated a certain amount of the group’s overall
quota, thereby allowing them to fish at a slower pace
since they no longer compete against one another for
their share of the total catch. The result is
lower operating costs and greater product quality and
The results of this new management approach are in sharp contrast to those of the recent past when each company attempted to put as much catching and processing capacity on the fishing grounds as it could muster. During the 1999 pollock A season from late January to late March, 4 of 20 eligible pollock factory trawlers were voluntarily left at their moorings in Seattle. The average haul size for pollock factory trawlers dropped by roughly 20 percent from the 1998 A season, and the average catch per day for individual vessels dropped almost 30 percent. In light of declining surimi prices due to economic problems in Japan and Korea, the slower pace of fishing has allowed factory trawlers to shift production from surimi to fillets, which are higher valued but also take longer to produce (Figure 4 below). Until recently because of production times, the factory trawlers’ ability to produce more fillets and less surimi was limited as vessels raced against each other to catch and process as much fish as possible before the overall quota was caught and the season closed.
While the AFA is
designed to bring more flexibility to participants in
the pollock fishery, recent regulations designed
to protect the endangered Steller sea lions have
restricted the pollock fleet’s ability to fish
near the shoreside processing plants in the Aleutain
Islands region and closed the pollock fishery there.
In addition, the BSAI pollock A season was split
into two seasons, with a mandatory 5-day stand down
in between. Similar regulations designed
to reduce the amount of pollock taken from the sea
lions’ critical habitat will be in place for future
pollock seasons. Some industry members have argued
that such regulations will increase their operating
costs as boats will have to travel farther and fish in
less productive areas and that a longer distance to
the fishing grounds will also lower product quality
since the delivered fish will not be as fresh.
Current events in the pollock fishery illustrate a variety of ways that regulations impact a fishery’s value. With insufficient data, the National Marine Fisheries Service (NMFS) had a very limited ability to predict the economic impact of alternative options for achieving conservation goals for sea lions. Had NMFS been able to provide an accurate assessment of the relative economic impacts of different proposed options, the costs to participants in the pollock fishery and to the Nation of protecting the sea lions might have been substantially reduced.
Towards Optimal Management
What responsibilities and what capabilities does NMFS and the AFSC have to assess the impact of regulations on the level and distribution of economic benefits derived from fishery resources? The Magnuson-Stevens Fisheries Conservation and Management Act (MSFCMA) includes a number of national standards for fishery conservation and management that are at least partially concerned with the economic benefits derived from U.S. fisheries. National Standard One instructs fishery managers to implement management plans that will achieve the “optimum yield from each fishery for the U.S. fishing industry.” Optimum yield is defined as that which “(A) will provide the greatest overall benefit to the Nation, particularly with respect to food production and recreational opportunities, and taking into account the protection of marine ecosystems; (B) is prescribed as such on the basis of the maximum sustainable yield from the fishery, as reduced by any relevant economic, social, or ecological factor; and (C) in the case of an overfished fishery, provides for rebuilding to a level consistent with producing the maximum sustainable yield in such fishery.” Though its language is somewhat ambiguous, the MSFCMA also has some instructions for fisheries managers regarding the objectives of economic efficiency and allocative fairness. National Standard Five instructs managers that “conservation and management measures shall, where practicable, consider efficiency in the utilization of fishery resources; except that no such measure shall have economic allocation as its sole purpose.” National Standard Seven states that “conservation and management measures shall, where practicable, minimize costs and avoid unnecessary duplication.” Lastly, National Standard Eight states that “conservation and management measures shall, consistent with the conservation requirements of this Act (including the prevention of overfishing and rebuilding of overfished stocks), take into account the importance of fishery resources to fishing communities in order to (A) provide for the sustained participation of such communities, and (B) to the extent practicable, minimize adverse economic impacts on such communities.”
As the legal guardians of public resources, NMFS and the fishery management councils have a statutory obligation to implement management systems that will promote economic efficiency while ensuring the conservation of fishery resources. Thus, the responsibilities of fishery managers extend beyond setting the optimal TAC and ensuring the conservation of fishery resources and habitat. Fishery managers are required to consider the economic impacts that regulations have on the individuals and communities which benefit from the use of fishery resources. For example, how, when, by whom, and under what conditions the TAC is taken.
Currently management lacks the type of economic data, including fishery revenue, cost, and employment data, that is necessary to perform basic analyses. Management has some revenue and production data, but it is incomplete. NMFS collects data on the quantity of fish caught, production of fishery products, and the state of Alaska collects information on revenues for on-shore and near-shore seafood processors. However, prices for products produced at-sea are collected only from the processors that supply them voluntarily, and none of the product prices are available by product grade. There is even less cost and employment data. In fact, no data on the costs of production and very little on employment are routinely collected. Without information about costs it is not possible to determine whether the industry is making a profit or a loss, much less the magnitude of the profit or how it has been or might be impacted by regulatory changes. The absence of employment data means that it is not possible to state the number of individuals employed in the fishery, their earnings, and how they are impacted by management decisions.
The AFSC Cost, Earnings, and Employment Data Collection Project
In an attempt to remedy the deficit of economic information, the Socioeconomic Assessment Program, in cooperation with the Pacific States Marine Fisheries Commission and the North Pacific Fishery Management Council, has initiated a data collection effort that will attempt to collect detailed economic data from companies involved in harvesting and processing groundfish in the Federally managed fisheries off Alaska. The information will be collected through voluntary surveys that will be administered to different sectors of the groundfish fishery. Catcher vessels, factory trawlers, motherships and in-shore processors involved in the pollock fishery will be surveyed in 1999. Factory trawlers that participate primarily in the bottom trawl fisheries, as well as participants involved in fixed-gear groundfish fisheries, will be surveyed early in 2000. Groups to be surveyed in 2001 and beyond will be identified later this year. It is envisioned that the collection of economic data will become routine and will be divorced from particular policy issues such as inshore-offshore quota allocations. Each industry sector will be resurveyed periodically and, if possible, annually.
The surveys are designed to provide data necessary to evaluate the economic performance of the groundfish fisheries, including the net profits derived from them. Processors and harvesters will be asked to provide detailed information about their costs, earnings and employment. The surveys will include questions about operating costs and the value and costs of capital. Respondents will be asked to provide information about revenues for the different products they produce as well as objective information about product quality. Information about the numbers of employees and their compensation will also be collected. Over time, the accumulated data will allow managers to assess the impacts of regulations and to differentiate regulatory impacts from impacts resulting from changes in seafood markets, technology, and the environment. The eventual goal of the data collection project is to provide the information necessary to evaluate the relative economic impacts of alternative management measures and to aid in planning management systems that maximize the sustainable benefits provided by the fisheries.
Currently, neither NMFS nor the North Pacific Fishery Management Council (NPFMC) has statutory authority to require firms to report economic information. In fact, the MSFCMA specifically precludes the NPFMC from requiring harvesters or processors to supply “information that would disclose proprietary or confidential commercial or financial information regarding fishing operations or fish processing operations.” Thus, participation in the data collection effort is voluntary. Without the authority to require firms to provide economic data, NMFS must convince industry members that it is in their best interest to provide this data and must address industry members’ concerns about how the data will be maintained and used.
To this end, AFSC economists have met with representatives of most of the companies involved in processing pollock, several owners of catcher vessels, and industry association representatives. This interaction was motivated by a desire to develop more effective and efficient survey instruments as well as to convince industry of the importance of the project. It also provided an informal forum to address industry members’ concerns about the data collection effort. It is instructive to point out some of these concerns. Perhaps the foremost concern is the security and confidentiality of the data being provided. NMFS already collects and maintains a variety of confidential data on catch and production, but data on production costs and revenues is considered even more sensitive by industry members. Some industry members are leery that the information collected will be used to justify regulations that essentially redistribute benefits from one group to another. Nevertheless, industry members are keenly aware of the economic impacts of regulations, and many of them have expressed a willingness to provide the data that will be necessary to assess these impacts.
Economic Models and Analysis
The economic data collected through the data collection project will be used to calculate a number of measures of economic performance. These include standard financial performance measures that can be used to assess the profitability and financial health of firms engaged in the fisheries. These measures will be tracked over time to assess the impacts of regulatory and other changes in the fisheries, and will strengthen managers’ ability to predict outcomes of future changes. The Socioeconomic Assessment Program will also be preparing physical and economic measures of capacity and capital utilization to support national and international efforts to develop fishing capacity management plans. Economic data will eventually be used to develop models to predict how revenues, costs, and employment will change with changes in regulations, markets, and environmental conditions.
Successful implementation of the cost, earnings, and employment data collection project is designed to provide the economic information necessary to the AFSC in its mission as steward of the Federally-managed marine resources off Alaska. The data collection project should help the region’s managers quantify the benefits derived from the Alaska groundfish fishery and how regulations have impacted those benefits. It is hoped that the project will also enable managers to predict the impacts of regulations before they are implemented and to identify management systems that will maxmimize the sustainable benefits of the Alaska groundfish complex.