oversight

Commercial Fisheries: Information on Federally Funded Buyback Programs

Published by the Government Accountability Office on 1999-10-20.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States General Accounting            Office                                                   Resources, Community,      and
Washington,  DC 20548                                                                           Economic Development     Division
           B-293711

           October 20, 1999

          The Honorable Don Young
          Chairman
          The Honorable George Miller
          Ranking Minority Member
          Committee on Resources
          House of Representatives

           Subject: Commercial Fisheries: Information                    on Federallv Funded Buvback Programs

          Federally funded fishery’ buyback programs are one tool available for managers of
          commercial fLshing resources to reduce excess f=hing capacity by purchasing from
          fishermen their fishing permits and, in some cases, their fishing vessels and related gear.
          Excess capacity can result from several factors, including legal decisions that may reduce the
          number of&h that can be caught, ecological factors such as changes in habitat that may also
          reduce the number of fish, or economic considerations such as the demand for fLsh. Excess
          capacity can lead to economic hardship for fishermen and to increased pressure on managers
          to allow catch limits above what the fLsheries can support.

          As agreed with your offlces, we are providing you with information on (1) the number,
          objectives, and key features of federally funded buyback programs since 1976; (2) the costs,
          sources of funds, and results of these programs; and (3) the key features and estimated costs
          of proposed federally funded buyback programs. On September 23,1999, we briefed your
          staffs on the results of our review and agreed to provide you with this report summarizing
          our fmdings. A copy of our September 23, 1999, briefing is included as enclosure I.

          The management of commercial fishing waters in the United States is divided among coastal
          states and the federal government. Coastal states manage fishing resources within 3 nautical
          miles of their borders. The federal government manages fishing resources extending from
          the state limit to 200 nautical miles from the U.S. coast. In 1996, there were 80,394
          commercial fishing vessels and boats in U.S. marine waters. These boats landed 9.6 billion
          pounds of commercial fish at domestic ports, with an estimated value of $3.5 billion.
          Commercial fish include cod, flounder, and other groundfish; shrimp, crab, and other
          shellfish; and swordfish, tuna, and other highly migratory fish. In 1998, the federal
          government reported that for the 300 species for which it has data, 100 of the species were
          either overfished or approaching an over&shed condition.

          Number,       Objectives,       and Key Features            of Past     or Current       Buyback        Programs

          Since 1976, the federal government has authorized 10 buyback programs under a variety of
          laws, including the Interjurisdictional Fisheries Act of 1986, the Sustainable Fisheries Act of
          1996, and the American Fisheries Act of 1998. The programs have generally focused on
          buying back federal or state fishing permits, and a few have included buying vessels or

          ‘A fLshexyis one or more stock (defined as one species or several species in a geographical area) of fish managed as a group.


                                                               GAWKED-00-8R           Commercial      Fisheries   Buyback     Programs
B-293711

placing restrictions on their use. The programs also have attempted to provide economic
assistance to fishermen leaving the industry, to increase the profitability of fishermen
remaining in the fishery, or to provide for the conservation of the fish stocks.

The focus and basic features of the buyback programs are as follows:

l   Pacific Northwest salmon. There have been five separate programs for salmon since
    1976, although none of the programs is currently active. All five of the programs
    purchased state fishing permits. One of these programs also purchased vessels, while
    another also paid a portion of a vessel’s value to the owner in exchange for the owner’s
    agreement not to return to commercial salmon fishing for 10 years. The state of
    Washington administered all five programs. Most of the vessels purchased were resold
    with restrictions. Others sunk in storage before they could be sold.

l   New En&md groundfish. There have been two separate programs since 1995 for these
    groundfish, neither of which is currently active. Both programs purchased federal fishing
    permits and vessels. The National Marine Fisheries Service (Fisheries Service) in the
    Department of Commerce’s National Oceanic and Atmospheric Administration, which
    administered both programs, required that the purchased vessels be scrapped, sunk, or
    transferred to activities other than fishing.

l   Texas shrimp.  The program started in 1996 and is currently active. The program is
    purchasing state shrimp fuhing permits and is administered by the state of Texas.

l   BerinP Sea groundfish. The program, administered by the Fisheries Service, began in
    1998 and is currently active. The program has purchased nine large vessels, together with
    the federal fishing permits for Bering Sea groundfish associated with the vessels, The
    vessels were used primarily for catching pollock. Eight of the vessels are being scrapped.
    The remaining vessel will be prohibited from fishing in U.S. commercial fmhing waters.

l   Glacier Bav (Alaska) Dungeness crab. The program began in 1999, is currently active,
    and is part of a larger effort to eliminate commercial fishing in some parts of Glacier Bay
    National Park and Preserve. The program will purchase state fishing permits and may
    also purchase one fishing vessel and related gear from participating fishermen.
    Purchased vessels and gear may be sold by the General Services Administration.
    However, the National Park Service, which is administering the program, has not yet
    determined how it will dispose of these items. Program officials expected to begin
    making payments to qualifying fishermen in September 1999.

Costs,   Sources   of Funds,   and Results     of Past or Current     Buyback      Programs

When completed, the 10 buyback programs will have cost a total of about $160 million.
About $140 million (87 percent) of the costs will have been incurred since 1995, an indication
of the increasing use of buyback programs. About $20 million of the costs were incurred in
the late 1970s through the mid-1980s for programs to assist fishermen in the Northwest
salmon industry.

Of the total costs, about $80 million is funded through federal grants for economic assistance
and relief to fishermen adversely affected by closures of fishing areas or natural disasters
that reduced fish stocks. Most of the remaining costs are funded by a $75 million federal loan
provided to Bering Sea groundfish fishermen to buy large fishing vessels specified by the
American Fisheries Act. The loan is repayable over 30 years based on a fee tied to the

2                                            GAOfRCED-OO-08R   Commercial   Fisheries   Buyback   Programs
B-29371 1

pollock caught by those left in the fishery. The remaining $5 million of the cost is funded by a
combination of state and private funding.

Taken together, the buyback programs have purchased over 3,000 fishing permits and have
purchased or restricted the use of about 600 vessels.’ Individually, the size and cost of the
programs have varied widely. For example, the Texas shrimp program spent about
$1.6 m.iIlion to purchase several hundred fishing permits, while the Bering Sea groundfish
program spent $90.2 million (a $75 mUion federal loan and $15.2 million in federal grants) to
purchase nine vessels and fshing permits.

Key Features         and Costs       of Proposed        Buyback      Programs

Six additional buyback programs have been proposed by industry groups or the state of
Washington. Preliminary cost estimates prepared by the sponsors of these proposals exist
for five of the six programs. If implemented, these five programs could cost from about
$150 million to $220 million. One of the programs, for Bering Sea/Aleutian Islands crab
(estimated to cost from $45 million to $60 miXon), would be financed by a federal loan to
purclhase federal fishing permits and would be administered by the Fisheries Service. A
second program would involve a federal grant for about $32 miIlion to purchase salmon
fishing licenses associated with June 1999 changes to an existing treaty with Canada. The
state of Washington plans to administer the program. Three proposals, involving Atlantic
swordfish, scallop, and shark, could cost in total from $70 million to $130 million. The
financing, administration, and other features of these programs are still being determined. A
Pacific groundfish proposal was submitted to the Fisheries Service but is now being
reconsidered by an industry group. No cost estimate is available for the proposed program.

Agency      Comments

We provided the Department of Commerce with a draft of this report for review and
comment. The Department’s National Oceanic and Atmospheric Administration provided
technical comments that clarified the number of species that are overfished, the status of
selected proposed buyback programs, and the steps that the National Oceanic and
Atmospheric Administration is taking to manage buyback programs (see enc. II). We
incorporated the comments on overfished species and proposed buyback programs, but we
did not include information on the management activities because our report does not
evaluate the management of buyback programs.



To develop the information for this report, we reviewed studies and data on buyback
programs prepared by the Congressional Research Service, the Fisheries Service, and
selected state agencies and university researchers. In addition, we interviewed officials from
the Congressional Research Service, the Fisheries Service, the states of Washington and
Texas, fishery management councils, and industry representatives. The interviews took place
in the Washington, D.C., area; Gloucester and Woods Hole, Massachusetts; Seattle and
Olympia, Washington; and Juneau and Gustavus, Alaska.

We performed our review from July 1999 through September 1999 in accordance with
generally accepted government auditing standards.

‘A total of 3,365 fishing permits have been purchased. The total includes an additional 458 permits purchased under the New
 England groundfish programs for other fisheries, including summer flounder, squid, mackerel, and scallop. These additional
 permits were purchased because the programs obtained all of the fishing permits associated with the vessels purchased.


3                                                   GAOIRCED-00-OSR         Commercial      Fisheries   Buyback    Programs
B-29371 1


Copies of this report are being sent to the Honorable William M. Daley, the Secretary of
Commerce; Dr. James Bake, Director, the National Oceanic and Atmospheric Administration;
and Penny Dalton, Assistant Administrator of the Fisheries Service. We will also make copies
available to others on request.

If you or your staff have any questions or need additional information, please call me at
(206) 287-4800. Key contributors to this report include Kathleen Gilhooly, Robert Lilly,
Timothy Minelli, and William Swick.




James K. Meissner
Associate Director, Energy,
 Resources, and Science Issues

Enclosures - 2




4                                      GAO/RCED-OO-08R    Commercial   Fisheries   Buybaclc Programs
 Enclosure I




GAO            Resources, Community,                          and
               Economic   Development                         Division



           Federally      Funded Buyback
           Programs       for Commercial
           Fisheries


           Briefing for the House           Committee                  on
           Resources
           September    23, 1999




                           GAWRCED-OO-08R    Commercial   Fisheries   Buyback Programs
 Enclosure   I




GAO              Background


             Overcapacity    (excess fishing vessels,
             permits,   and related gear) can result
             from legal, ecological,  or economic
             factors.

             Programs      that buy back fishing vessels
             and fishing permits attempt to reduce
             overcapacity.

             Buyback        programs        have been
             authorized        or proposed        under a variety
             of laws, including
                 l  Interjurisdictional         Fisheries   Act,
                 l  Sustainable         Fisheries     Act, and
                 l  American         Fisheries     Act.




                                      GAO/RCED-00-OSR   Commercial   Fisheries   Buyback   Programs
Enclosure   I




       GAO          0 bjectives


                l    What are the number,     objectives,
                     and key features  of federally
                     funded buyback   programs      since
                     1976?

                l    What are the costs, sources                     of
                     funds, and results of these
                     programs?

                l    What are the key features     and
                     estimated   costs of prooosed
                     federally funded buyback
                     programs?




                                  GAWRCED-OO-08R   Commercial   Fisheries   Buyback   Programs
Enclosure I




GAO Overview

                Ten buyback programs since 1976:
                   l Objective mainly to reduce fishing
                     overcapacity,
              -    l All programs bought fishing permits, six
                     also bought vessels or vessel restrictions.

                Funding mostly from federal grants and a loan:
                   l $160 million to date ($140 million since
                      1995),
                   l Over 3,000 permits bought, and
                   l About 600 vessels or vessel restrictions
                     bought.

               Six proposals:
                  l  Focus so far is on buying back permits.
                  l  Total cost about $150 million to $220
                     million.




                                     GAO/RCED-OO-08R   Commercial   Fisheries   Buyback   Programs
Enclosure I




GAO           Buyback      Programs:           Number


              Ten programs      since 1976 address

                l   Pacific Northwest         salmon:                  5
                    (none active);

                l   New England groundfish:                        2
                    (none active);

                l   Texas shrimp, Bering Sea
                    pollock, Glacier Bay Dungeness
                    crab: 1 each (all active).




                              GAWKED-OO-08R   Commercial   Fisheries   Buyback   Programs
Enclosure   I




G-0              Buyback               Programs:            Objectives


                Reduction           of overcapacity,       with                the
                following         additional   objectives:

                       l   Short-term    economic
                           assistance    to fishermen                    leaving
                           the industry,

                   l       Increased       profitability         for the
                           remaining       fishermen,            and

                   l       Conservation          of fish       stocks.




                                            GAO/RCED-OO-OSR Commercial   Fisheries Buyback Programs
Enclosure   I




GAO Buyback Programs: Key
    Features


                                                                                           Number of
                     Feature                                                                programs
                -.   scope
                          Bought state fishing permits                                                   7
                          Bought vessels or vessel restrictions                                         6
                          Bought federal fishing permits                                                 3
                     Eligibility
                          Hold a permit or be eligible to do so                                         10
                         Have significant participation in the industry                                  4
                         Impacted by a court case or other factors                                       3
                         Other                                                                           3
                     Participant selection
                          Ratio of bid to amount of catch or income lost                                4
                          Lowest bid or order of receipt of application                                 4
                         Catch information or time holding- .permit                                     2
                         Other
                     Provisions    for restricting reentry to fishing
                         F&entry of individuals allowed if permits obtained
                         Reentry of vessels banned or temporarily banned                                6
                         Reentry of individuals temporarily banned                                      2
                     Administration
                         State of Washington
                         National Marine Fisheries Service
                         National Park Service
                         State of Texas




11                                                     GAWRCED-OO-08R         Commercial    Fisheries        Buyback   Programs
Enclosure I




     GAO Buyback Programs: Amounts
         and Sources of Funds


                    hogm                                      8oum of funds (in millions)
              .-                                   kderel         Federal   Sate          0th~        Total
                                                     gm              lcan
                   WashirQtm salrlanl
                   (1976 t~1981,
                   iJl3r0unzJs                         $4.5                                 $2.5       V.0
                   washqtm         tirrcil
                   /1961 to 1966)                      12.8                                            12.8
                   ~egMsalmm
                   (1963 to 1986)                       0.7                                             0.7
                   WasMgtm salmon
                   (1996to1997)MthrcuKis                9.3                                             9.3
                   washingtmsalmm
                   p3!x) Both Kulds                     3.5                     $1.2                    4.7
                   NewEngbndm
                   plot (1995 to 1996)                  1.9                                             1.9
                    New Ergland golJfKffii
                   11996 to 1998)                     23.0                                             23.0
                    Texas sMt$
                   p396 to Dresent)                     1.4                      0.8         0.2        24
                   Bering    sea pollo&
                   j1933 tolxesent)                    15.2         $75.0                              90.2
                    Glacier Bay
                    L!urgenessaabb
                    (1999 to wSent)                     8.0                                             8.0

                   Total                                   so.3           $75.0        90          $27      $160.0
                   aAccwdi~tothernaMpementdr~fcrtheTexaspogam,asdSeptemberi,l999,the
                    sMehad~about$l.E~llionmitsshrirrpkrybadcprogam.                         &cut$7O,WOofa$1.4millii
                   federalgatiforthepfcgamrerwnedwsperU.                  Th3progamhasspent$264.ooOin.state
                   furdsand$30,000inpivatefundsmthebt@a&                     Theprogamhasatxut$64O,CCOavai&blein
                   statetuKs10contiNIBbuybadcdfatsandwillcontinuet0receiveabout8170,M)oamoallyfrom
                    state fishing license fees Aboul S125.ooO remalw available from pwate sources to fund bu@ack effotts

                   “AsdSeptember1,1999,theGladwBayDungeness~abComnerdalCorrpensatimRogram
                   hadndplxdkd        oxtpnsatim   to Cungeness crab fishermen. The National Park Service eqz&s
                   to begin fmviding axqxnstim      to fishermen by the end of September. The $6 rrillim dted in the
                   table refers to fwde apfxcgiated for the program.




12                                                                   GAO/RCED-00-OSR               Commercial          Fisheries   Buyback   Programs
Enclosure   I




     G-0           Programs to Buy Back Permits
                   Only: Results and Costs


                Dollars In thousands
                Program                  Number of       Buyback     Administrative          Total   cost
                                             permits          cost                    cost
                                         purchased
                Washington    salmon
                (1976 IO 1981)
                Round 3 of 3                     198          $967                    $33        $1,000
                Oregon salmon
                (1983 to 1986)                   133          5645                    $71            $716
                WashIngton    salmon
                (1995 to 1997)
                Both rounds                      438       a957                   $242           $9,199
                Washington    salmon
                (1998) Both rounds               391      $4,586                      $83        $4,669
                Texas shrimp’
                (1996 IO present)                369      $1.622                        $6       81,628
                ‘Cost figures are as of September    1, 1999.




13                                                             GAOIRCED-OO-08R               Commercial     Fisheries   Buyback Programs
Enclosure I




 GAO                    Programs to Buy Back Permits
                        and Vessels: Results and Costs


                   Dollars      in thousands
                   Program                               Number       of   Number       of Buyback       Administrative                   Total
                                                              permits           vessels           cost                     cost            cost
                                                         purchased          bought      or
                                                                            restricted
                   Washmgton               salmon
              --    (1976      to 1981)
                    Rounds         1 and 2 of 3                   231                252       $5,165                      $683         $5,848
                   Washington              salmon
                    (1981      tol986)                          1,059                257     $12.089                       S696       $12,785
                    New England
                   groundfish           pilot
                                                                     11’               11                                         D
                   (1995      to 1996)                                                         $1.890                                   91.890
                   New England
                   groundfish
                   (1996      to 1998)                              68O                68    $22,500                       $500       $23.000
                   Bering        Sea pollock
                    (1998      to present)                            9                9 $90.000                     $200              $90,200
                   “in addltlon          to the groundflsh      permits  purchased,     tnese    programs      also acquired          458 permtts      for
                   other     fisheries.         The permits    were associated      with the vessels      purchased.

                   bAdministrative         cost    was    not available.




14                                                                                  GAOAKED-OO-OSR                        Commercial             Fisheries   Buyback   Programs
Enclosure I




   GAO            Proposed                    Buyback                    Programs:
                  Number                 and Scope

              l    Six additional programs   have
                   been proposed.     Costs are
                   subject to change.
                  Proposed     program                Estimated  costs
                                                      (millions)
                  Bering Sea/Aleutian    Islands      $45 to $60
                  crab
                  Pacific salmon                      $32
                  Atlantic swordfish                  $18 to $20
                  Atlantic scallop                    $40 to $60
                  Atlantic shark                      $12 to $50
                  Pacific groundfish                  Not available




                                                   GAO/RCED-00-OSR Commercial Fisheries Buyback Programs
Enclosure I




     GAO      Examples of Proposed Buyback
              Programs: Key Features



                                                        Program
               Feature’         Bering Sea/Aleutian        Pacific Salmon
                                Islands Crab
               Funding          20-year federal loan      Federal grant supplemented
               mechanism        repayable by industry     by Washington State funds
               Eligibility      All permit holders        Puget Sound and coastal
                                                          fishermen affected by treaty
               Method of         Ratio of asking price    Ranked based on historical
               selection        to catch, or lowest       catch information
                                 asking price for permit
               Re-entry          Vessels surrender       Participants restricted from
               restrictions     future fishing rights    re-ent+y for 10 years
               Administration    Fisheries Service       Washington State
               ‘Features are based on latest business plan or proposed rule submitted to
               the National Marine Fisheries Service and are subject to change.




16                                        GAO/RCED-00-08R        Commercial    Fisheries Buyback Program
Enclosure I




  G-0          Scope and Methodology


            Reviewed studies by Fisheries Service
            overcapacity tel!sk force, Congre ssional
          - Research Serv ,ice, and universi t)/
            researchers.

              Analyzed   reports on buyback programs
              prepared   by federal and state agencies.

              Interviewed officials in Fisheries Service,
              National Park Service, and state
              agencies.   Met with fishery management
              council and industry representatives
              proposing new programs.




17                              GAWRCED-OO-08R   Commercial   Fisheries   Buyback Programs
 Enclosure II


                            Comments       From the Detmrtment                  of Commerce



                                                              UNITS0           STATES         OEPARTMENT                 OF     COMMER
                                                              National         Oceanic      end   Atmosphario             Administrstic
                                                              CHIEF       FINANCIAL      OFFICEWCHIEF           AOMINISmATIVE             OT=FII:




                Mr. James K. Meissner
                Associate       Director
                Energy,     Resources         and Science     Issues
                Resources,        Community       and Economic
                   Development         Division
                United     States      General     Accounting      Office
                Washington,        D.C.       20548

                Dear   Mr.     Meissner:

                I am pleased       to enclose      the Department     of Commerce's      comments
                on the General        Accounting      Office's  draft   report  entitled,
                "Commercial      Fisheries:      Information    on Federally    Funded
                Buyback    Programs."

                These comments  were prepared      in               accordance             with         the     Office
                of Management  and Budget   Circular                   A-SO.

                                                              Sincqrely,




                Enclosure




18                                           GAO/RCED-00-8B              Commercial       Fisheries       Buyback        Program
Enclosure II


                COMMENTS

                Draft Repon on Commercial Fisheries: Information on Federally Funded Buyback ProTams
                (GAO/WED-OO-08R)

Nowonp.    1.   GAO Report: Page 2, top of the page

                             “In 1995,the federalgovernmentclassified56 of the201 federally managedfish
                             stocksasover fished.”

                N0.U Response:

                             The National Maxine FisheriesService(NMFS) recommends         that a better source
                             for this data is the “Report to Congress,Statusof the Fisheriesof the United
                             States,” October 1998,publishedby NMFS.

                             In 1998,basedon criteria specifiedin Magnuson-Stevens    Act, the NMFS in Its
                             Report to Congresson the “Statusof Fisheriesof the United States,”classified90
                             speciesas“overfished,” 200 species“not overfished,” 10 species“approachingan
                             overfished condition,” and for 544 species,the statuswith respectto overfishing
                             was“unknom.”

Now on p. 15. GAO Report: Page 11 Proposed Buyback Programs: Number and Scope

                NOAA Response:

                             Two industry fundedbuyback proposalshave beensubmittedto the NMFS:
                             Bering Sea/Aleutian Islandscrab fishery and the Pacific proundfishfishery. The
                             industry is reconsideringboth proposalsdue to lowerthananticipatedTotal
                             Allowable Catch projectionsfrom NM%. Estimatedloanamountsof the current
                             proposalsare $50 to 585 million.

                             Four proposalsare at various stagesof developmentby the industry: swordfish,
                             shark,scallopandPacific salmon. Estimatedloansand/orappropriatedcostsof
                             theseproposals(there are no estimatesfor sharkat thistime) are $92 million.’

                NOAA Comments:

                            The 1996SustainableFisheriesAct [SFA (Public Law 104-297)]which
                            re-authorizedthe Magnuson-StevensFishery ConservationandManagementAct
                            authorizedNMFS to administerappropriationfundedor industry fundedbuyback
                            programs. NMFS publishedproposedtiamework regulationsfor buybackson
                            February 11, 1999. The commentperiod endedApril 12,1999, and a final rule is
                            underdevelopment.

                            Buybacks are one of the fisheriesmanagementtoolsto control fishing capacity.
                            Last year, NOAA electedto explicitly addressovercapacityin it’s strategic
                            planningprocess. Towardsthat end,NOA established     a performancemeasure
                            underthe element“Build SustainableFisheries”to reducethe numberof over
                            capitalized fisheriesby 15% by 2004. A NMFS TaskForce hasbeenformed to
                            developdefinitions, measures,and categoriesof capacityin commercialand
                            recreationalcapture fisheries.




(141347)
19                                         GAO/RCED-00-8B Commercial Fisheries Buyback Program
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