Permit Banks: A Strategy for Viable and Sustainable Fisheries. ove rvi ew an d r ecom m e n dation s 2011

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1 Permit Banks: A Strategy for Viable and Sustainable Fisheries ove rvi ew an d r ecom m e n dation s 2011

2 The New England groundfish fishery is at a crossroad. After nearly two decades of efforts to curb overfishing and rebuild depleted groundfish stocks through a system centered on limits on days at sea, gear restrictions and trip limits, the New England Fishery Management Council charted a new course. In June 2009 the Council voted overwhelmingly in support of a catch share management system for the New England groundfish fishery. Under this new management approach: Self-selecting groups of fishermen called sectors are allowed to create harvesting cooperatives. These sectors are allocated a portion of the Total Allowable Catch of groundfish (or catch share) for the year, based on their members historical participation in the fishery (catch history). Sector members are given relief from days at sea restrictions and trip limits that previously governed the fishery, but are required to stop fishing for the year once their allocated catches have been reached. 1 Adoption of this approach marked a significant change in the way New England groundfish are managed by introducing enforceable limits on the total amount of fish that can be caught each year and requiring a comprehensive catch monitoring program. While there is great optimism that the new system will end overfishing and rebuild depleted groundfish stocks in New England, there are also legitimate concerns about the ability of traditional fishing communities to survive the transition. In other fisheries, quota-based management systems have had adverse socio-economic impacts including fleet consolidation, reductions of shore-side infrastructure and loss of access. 2 Smaller, more remote fishing communities are often hit hardest during the transition. Against this backdrop, a number of New England stakeholders are exploring permit banks and community fishing associations to mitigate these impacts. In simplest terms, a permit bank is a collection of fishing permits held by an organization or individual for the purpose of leasing the associated fishing privileges to qualifying fishermen. Permit banks enable fishing communities and others to acquire permits and make the associated quota available to local fishermen at reasonable rates, helping them survive and even thrive during the transition to catch share management. 22 lorem Permit ipsum Banks: A dolor Strategy for Viable and Sustainable Fisheries

3 This paper reviews the current situation in the groundfish fishery, describes existing permit banking initiatives in New England, discusses potential policy and regulatory hurdles to the long-term success of permit banks and presents potential solutions on how to address these obstacles. Regulatory Setting The New England Fisheries Management Council first adopted the Northeast Multispecies Fishery Management Plan (Groundfish FMP) in However, by the mid- 1990s many of New England s once-prolific groundfish populations were at or near record low levels, and concern over potential population collapses led to wholesale changes in how the fishery was managed. A major turning point came in 1994 when a moratorium on new entrants in the fishery was imposed and a complex effort control system called Days at Sea management was first introduced. Since that time, the Council, National Marine Fisheries Service (NMFS) and interested stakeholders have wrestled with the challenge of designing appropriate limits on days at sea, trip limits and closed areas, in a way that balances the conservation needs of the fish and economic needs of the fishing communities that depend on them (see Groundfish Management Timeline, next page). Still, several groundfish populations remain depleted in spite of these efforts (see chart, next page), and fishing communities up and down the coast have struggled to survive under increasing regulatory constraints. To address these ongoing ecological and economic challenges, and in light of amendments to the Magnuson-Stevens Fishery Conservation and Management Act, the Council began exploring new management approaches in After nearly four years of work and hundreds of meetings, the Council voted overwhelmingly in favor of adopting a new catch share management approach in This approach centered on the approval of 19 groundfish sectors. When properly designed, sectors and other catch share management systems can help to end overfishing, minimize bycatch and discards, eliminate the race to fish and improve the profitability of fishing businesses. However, it is also widely recognized that catch share management systems can result in a number of adverse socio-economic impacts, including: 1) consolidation of fishing effort, 2) creating barriers to entry for new participants, 3) decreasing access for smallscale fishermen and 4) reducing community involvement in local fisheries. Permit banks have the potential to mitigate these adverse impacts and help ensure the new management system works well for the fish and the fishing communities that depend on them. 1 For more information on the sector management approach visit 2 For more information on potential socio-economic impacts of quota-based fisheries visit and 2009/pdf/E pdf The Nature Conservancy 3

4 Groundfish Ecology The suite of groundfish species managed by the NEFMC includes cod, haddock, pollock, hake, halibut and a variety of flounders. Groundfish are characterized by their close association with the sea floor for spawning, juvenile nursery areas and feeding. Historically, groundfish were plentiful and widely distributed throughout the Gulf of Maine and Georges Bank, and they were key ecological drivers that influenced the relative abundance and diversity of other species in the Gulf s marine food web. In recent decades, however, depletion of several key groundfish species has resulted in wholesale changes in the marine ecosystem in the Gulf of Maine and Georges Bank. Ending overfishing and rebuilding depleted groundfish populations to healthy, sustainable levels is a fundamental goal shared by many in the region, including fishery managers, fishermen, conservation groups and others G r o u n d f i s h Sto c k Statu s The majority of New England species have been identified as overfished and subject to overfishing. Overfishing: fishery catch rate exceeds sustainable rates adopted in Fisheries Management Plan. Overfished: population size less than one-half rebuilding target adopted in the Fisheries Management Plan. o v e r f i s h i n g n ot o v e r f i s h e d n o o v e r f i s h i n g n ot o v e r f i s h e d Gulf of Maine Cod Southern Windowpane Flounder Redfish Georges Bank Haddock Gulf of Maine Haddock American Plaice o v e r f i s h i n g o v e r f i s h e d Georges Bank Cod Cape Cod Yellowtail Flounder Gulf of Maine Yellowtail Flounder Mid-Atlantic Yellowtail Flounder Southern New England Yellowtail Flounder Pollock Gulf of Maine Winter Flounder Mid-Atlantic Winter Flounder Southern New England Winter Flounder Witch Flounder Northern Windowpane Flounder n o o v e r f i s h i n g o v e r f i s h e d Georges Bank Flounder Halibut Ocean Pout Groundfish Management Timeline 1994» Amendment 5 to the Groundfish Fmp introduces a moratorium on new groundfish permits (limited entry) and effort control (days at sea) management approach. 1999» Framework 27 to the Groundfish Fmp implements seasonal closures in the Gulf of Maine and a 30-pound trip limit for Gulf of Maine cod » Magnuson-Stevens Act passes, authorizing the 200-mile U.S. Exclusive Economic Zone and creating the Regional Fishery Management Council (Fmc) system. 1996» Sustainable Fisheries Act (SFA) Amendments to Magnuson-Stevens Act are adopted, revising the national standards for Fmp review and strengthening conservation provisions.

5 Groundfish Economy Groundfish have played a critical economic and cultural role in New England for centuries. Fisheries for cod, haddock, halibut and hake are believed to be largely responsible for early European settlement in North America. Since then, groundfish have helped support communities up and down the coast, providing a source of food, economic livelihood and community identity. Today, despite significant declines in many commercially-exploited populations, groundfish are a vital part of economies across the region. Annual Fishing Revenues Projected groundfish revenues when Projected populations Groundfish rebuild Revenues as Populations Recover Groundfish Projected Groundfish revenues Revenues 2001 as Groundfish Populations Revenues Recover 2001 Annual Fishing Revenues Groundfish Groundfish revenues Revenues Average Groundfish Revenues $57,676,000 $85,460,000 $98,637,000 $85,460, Average Groundfish Revenues Groundfish Revenues 2009 Dollars in Millions Groundfish Revenues 2009 Groundfish Landings New (in England. pounds) Groundfish Landings (in pounds) 103,418,000 63,477, ,418,000 63,477, $98,637,000 $98,637,000 $85,460,000 $57,676, Dollars in Millions 2. G r o u n d f i s h L a n d20 i n g s 40(i n p60 o u n d80 s) 100 Dollars in Millions Active Groundfish Boats in Maine Active Groundfish Boats in Maine a n n ua l f i s h i n g r e v e n u e s Though struggling, the groundfish fishery is a vital part of New England s economy. A sustainably-managed fishery promises even greater revenue potential $57,676,000 Unfortunately, groundfish landings have been on the decline 3. acti v e g r o u n d f i s h b oats i n m a i n e The number of boats in the fleet has been declining as well $300,000,000 $300,000, th e 20tr a n40 s iti o60 n to s80 ecto300 r s The most The recent Transition regulatory to response Sectors to these declines has been the transition to sectors, which is now underway. 2,515 2,515 The Transition to Sectors Total groundfish permits, fishing year 2009 Total New England Total groundfish groundfish permits, permits, fishing year 2009 fishing year , % $300,000,000 Number of community sectors approved for Number fishing year of 2011 community Number of community sectors sectors approved for fishing approved for fishing year year Permits enrolled in Permits enrolled groundfish in groundfish sectors for sectors for fishing year 2011 Permits enrolled fishing in groundfish year 2011 sectors for fishing year Total allowable catch Thousands of metric tons of Thousands groundfish of allocated allocated metric tons for to of catch sectors groundfish by sectors allocated for for fishing fishing for year2011 year 2011 catch by sectors for fishing year » Amendment 13 is implemented to address overfishing and rebuilding requirements. 2005» Days at sea (das) leasing and transfer restrictions are relaxed in Framework 40(b). 2006» Magnuson-Stevens Act amended to require Annual Catch Limits and Accountability measures in Fishery Management Plans. 2010» Sector management system is implemented through Amendment » Conservation groups successfully challenge the New England Groundfish Fmp for failing to meet SFA requirements. 2006» Biennial adjustments to Amendment 13 measures are implemented in Framework 42, including reduced das allocations and differential DAS counting in Gulf of Maine and Southern New England. 2007» Scoping for Amendment 16 ends and workshops are held to identify new management approaches.

6 Permit Banks as a Potential Solution Many in the region believe the sector management approach holds great promise for ending overfishing, rebuilding depleted stocks and providing opportunities for sector members to work together to optimize allowable catch. 5 But given concerns about potential socio-economic impacts during the transition period, a number of stakeholder groups have looked to permit banks and community fishery trusts. Permit banks provide a mechanism for fishermen, community leaders and others to purchase permits from willing sellers and anchor the associated access in fishing communities for the long term. Once acquired, the access associated with the permits can then be distributed to participating fishermen to supplement existing access, provide incentives for more sustainable fishing techniques and ease the transition to the new management system. Permit banking initiatives have been launched in several communities throughout New England. 2 Stonington 1 Port Clyde ME Jeffreys Bank Jordan Basin NH Jeffreys Ledge 6 Cashes Ledge 3 7 MA CT Gloucester Stellwagen Bank RI 8 4 Chatham Great South Channel Georges Bank

7 (1) The Nature CONservaNCy and Island InsTITute The Nature Conservancy and Island Institute created a small-scale permit bank in Maine to help local fishermen through the transition to catch share management. The two groups jointly purchased a permit and are deploying the associated access to support collaborative research with Maine fishermen and provide tangible economic incentives for use of more sustainable fishing practices. The effort s long-term goal is to restore the Gulf of Maine s ecological health and the economic viability of its coastal communities. (2) PeNObsCOT East Resource CeNTer As part of its mission to secure a future for fishing communities in eastern Maine, Penobscot East Resource Center created a permit bank program to help preserve the remaining access to fishing rights and rebuild access that has been lost from these communities. Penobscot East makes these fishing rights available to fishermen who agree to use ecologically sustainable practices, thereby fostering greater stewardship of eastern Maine s marine resources. (3) Gloucester FishING CommuNITy PreservaTION Fund The Gloucester Fishing Community Preservation Fund works to protect and promote awareness of Gloucester s fisheries, its heritage and the fabric of the community. The Fund was created to aid Gloucester fishermen and protect and enhance port infrastructure. It serves as a central repository and exchange for the distribution of limited access groundfish privileges and permits for fishing vessels based in Gloucester. (4) Cape Cod Fisheries Trust The Cape Cod Fisheries Trust works to protect the future of Cape Cod s historic fishing industry by purchasing commercial permits to secure additional fishing opportunities for the struggling local fleet. Self-employed Cape Cod fishermen then lease these opportunities from the Trust and agree to harvest the catch with small boats and traditional gear. new england states Several New England states received awards from the National Marine Fisheries Service to establish permit banks. These programs aim to supplement and restore fishing and employment opportunities for small boat fishermen by: 1) securing continued access to the fishery for small-scale fishermen, 2) protecting sustainable local fisheries, 3) supplementing existing access privileges and 4) mitigating the effects of consolidation on small-scale fishermen and rural fishing communities. Without the Fisheries Trust, Cape Cod could wind up losing its fishing fleets just like what s happened in other ports up and down the coast. Joh n Tuttle, chatham, ma My forefathers have fished in downeast Maine for eight generations. Without the opportunity presented by the sector and permit bank, I was doomed to be the first generation in 200 years to have no access to fishing rights. jason joyce, swans island, M e Guys like me rely on permit banks to help keep us afloat until we get these stocks rebuilt. When they buy permits and make the fish available, it allows us to try new gear and find cleaner ways to fish. It s helping keep the little guy in the game. g a ry li B BY, p o rt c lyd e, M e Depending on the structure of the permit bank, and the criteria used for participation, permit banks could be very effective at protecting the fishing interests of small communities and small fishing operations by mitigating some of the consolidation of fishing rights that often follows implementation of catch share programs noaa Federal Register Oct. 1, 2009 (5) the State of Maine received a $3 million award (6) the State of New Hampshire received a $1 million award (7) the State of Massachusetts received a $1 million award (8) the State of rhode Island received a $1 million award The Nature Conservancy 7

8 Potential Regulatory Challenges and Recommendations Despite the broad support for permit banks and community fisheries associations in the region, they face a number of logistical challenges. These stem from the fact that permit banks are not formally recognized in the regulatory process, and therefore must operate within the new sector management rules. Specifically, permit banks and fisheries trusts in New England have to either enroll the acquired permits into a NMFS-approved groundfish sector, or form their own sector. These requirements present a number of potential administrative and regulatory challenges that warrant the attention of the Council and NMFS in the next groundfish FMP Amendment. Lack of Formal Regulatory Recognition To date, permit banks and community fisheries associations are not explicitly recognized in groundfish regulations. As such, there can be confusion regarding how rules designed for sectors comprised of active fishermen apply to entities whose main purpose is to make fish available to participating fishermen. Formally recognizing permit banks and community fishing associations and clearly articulating the rules under which they operate would greatly enhance predictability as community interests contemplate investing in permits. Sector Liability Issues Under original sector rules, sector members were considered jointly and severally liable for the actions of other sector members. This provision is of significant concern to fishermen, and many will not join sectors because of it. The Council and NMFS limited the scope of this liability for sector members in Amendment 16 by specifying that it apply only to: 1) catch overages, 2) discarding of legal size fish and 3) misreporting of catch. Narrowing the scope of liability contributed to adoption of the sector management system and has helped permit banks operate within that system. This should remain a priority moving forward. The Rule of Three Current rules stipulate that a sector must include permits owned by three non-related business entities. This rule forces both private and state-run permit banks to identify two additional entities to join them in order to create an approvable sector. To address this the Council should recognize permit banks as lease-only sectors and eliminate the requirement or provide other forms of regulatory flexibility to permit banking entities. Implications of Accumulation Limits Accumulation limits are often implemented in catch share fisheries to limit the amount of quota any one entity can control and prevent excessive consolidation. But depending on where the cap is set, it could prevent permit banks and community fisheries trusts from acquiring sufficient quota to achieve broader community goals. The Council will be developing an amendment to address these issues in the coming years and should recognize the distinction between limits for individuals and those for collaborative, community-based entities. Fate of Catch History and Potential Permit Value While quota leasing is the primary mechanism permit banks use to make the associated catch available to fishermen, there is uncertainty regarding who will get credit for the catch during a trip on leased quota the lessor or the lessee. This uncertainty can create a disincentive for permit holders to lease quota. The Council included a catch history freeze in Amendment 16 to alleviate this concern and encourage quota trading among sector members as necessary. It will be critical for the Council and NMFS to honor this catch history freeze going forward to recognize the investments made by permit banks and other fishing businesses. This publication was produced by The Nature Conservancy with funding from the Gordon and Betty Moore Foundation.

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