Collateralized Fish Obligations?

Collateralized Fish Obligations?

A program promoted by the National Oceanic and Atmospheric Administration and Environmental Defense Fund aims to address overfishing, but will small fishermen get squeezed out of the process?

Multiple studies suggest our world’s oceans are being overfished. While alarming, such studies often eclipse successful examples of sustainable fishing practices, such as Oregon’s Port Orford Ocean Resource Team (POORT). This community-based organization focuses on both healthy fish stocks and the economic viability of the town, where operators of small fishing boats work alongside scientists and researchers to ensure sustainable fishing methods.

Rather than strengthen and expand efforts like Port Orford, however, fishermen say the National Oceanic and Atmospheric Administration (NOAA) is strongly pushing a different program to address overfishing: the privatization of the seas through “catch shares.”

Proposed years ago by the Environmental Defense Fund (EDF), of which NOAA head Dr. Jane Lubchenco served as vice-chair, and supported by former President George W. Bush, catch shares is a management program in which fishermen or investors buy, sell, or trade shares of total fish catch limits, also known as individual tradable quotas (ITQ). The shares become a permit, issued for a fixed period, which is renewed if not revoked, limited, or modified. NOAA would like the program to be national, and is pushing for its implementation in New England fisheries starting May 1.

According to EDF’s website, the program is designed to spur fishermen to maximize the value of their share, rather than capture the most fish they can, a neoclassical conception of human nature known as the “tragedy of the commons”. And “as the fishery becomes more efficient, fewer boats and gear are needed and seasons lengthen.”

Fewer boats, however, does not necessarily mean less fish, but could mean more commercial consolidation and fewer fishermen and fishing communities. Indeed, critics fear that catch shares may permanently transform our national fish stocks into a tightly controlled financial trading scheme dominated by investors and industrial seafood producers. Ironically, since catch shares are often allocated based on historic catch levels, smaller, more sustainable fishers are initially eligible for fewer shares than large commercial fisheries.

Equally controversial is its advocate, EDF, an organization that has promoted using private investors to address environmental problems. Its board of trustees consists of directors and investors of private equity firms, capital management firms, and large financial institutions like Morgan Stanley that stand to profit from the transformation of natural resources into tradable market assets. According to journalist Richard Gaines, EDF’s Vice President David Festa has been urging institutional investors to buy shares of New England groundfish, touting a projected 400 percent return on investment based on experiences with catch shares in other fisheries.

Indeed, evaluation of existing ITQ fisheries suggest reason for smaller-scale fishermen to be concerned. According to a study by Ecotrust Canada, a group that promotes community-based eco-management, the conversion of British Columbia fisheries into ITQ markets has encouraged speculative buying and leasing of quotas by “armchair” fishermen and investors, driving up business costs for working fishermen.

In Alaska, NOAA’s National Marine Fisheries Service found that, after implementation of catch shares, the number of persons holding halibut quota shares in small Gulf of Alaska communities dropped by 46% from 1995 to 2004. Most alarmingly, in Iceland quota shares became part of mixed-investment portfolios containing mortgage-based derivatives, which are now part of that country’s toxic assets. The program was so economically disastrous for small fishermen that the United Nations Human Rights Commission declared it illegal; the Icelandic government is considering altering the program, but must first buy back the now privatized catch shares from investors.

Many fishermen are therefore opposed to the push by NOAA to implement this program on a national level. Maine fisherwoman Mary Beth de Poutiloff questions who catch shares really benefit: “The small boat family fleet does less harm to the resources and the environment, and our money supports coastal communities. Why is NOAA favoring huge, corporate fleets while the small boats are practicing sustainable fishing?”

EDF senior scientist Rod Fujita, however, says that if fishermen are active in shaping catch shares regulations, the program can actually work to their benefit. “A lot of catch shares are built on the idea that those with the biggest catch history get the biggest shares, but it doesn’t have to be that way. There is a very strong argument to be made that the majority of catch shares should go to the best stewards of the environment, regardless of how much fish they catch, because some fishermen choose to remain small because of their values. And they should be rewarded for their stewardship behavior rather than punished, and catch shares can be built to accommodate that.”

Fishermen, however, say they have historically had little power in shaping fishery regulations. And many have had a rocky relationship with NOAA, which recently suffered further blows due to allegations of unjust fishing fines by the agency and the shredding of NOAA documents in the wake of an investigation into the fines, costing Dale Jones his job as NOAA director. Additionally not helping matters is that catch shares will siphon away $10.5 million from cooperative fishery research toward implementation of the $54 million NOAA program, including funding for fish monitoring and observer data that local fishermen say often excludes their input.

POORT Executive Director Leesa Cobb wonders why the funding is being so focused on only one management tool: “It seems disingenuous for NOAA to say that they understand catch shares is only one tool, and then NOAA in turn allocates $54 million to exclusively develop catch shares. NOAA is not offering this funding to help (fishery) councils decide how to best manage for sustainable fisheries, they are only providing this money for catch shares.”

More broadly, many fishermen are concerned that catch shares are vulnerable to the consolidation of quotas by large commercial fisheries and, potentially, financial speculators, squeezing out smaller fishermen that cannot afford to compete. The effect would be not only financial speculation and possible inflation of fish and fishing prices but also the further erosion of our country’s shrinking ties to generations of more ecologically-based ways of living, much like small-scale farmers crowded out by large agri-business.

Fisherwoman Rhonda Maker said that, based on her experience with catch shares in Alaska, once the program is implemented, “fishing jobs become scarcer, with little or no chance for new fishermen to advance beyond deckhand. Because the rights to the fish are consolidated outside of local communities, profits pass by rather than into local economies.”

Indeed, some congressional members are expressing alarm at NOAA’s rush to implement catch shares. At a March 2010 hearing on catch shares by the US House Subcommittee on Insular Affairs, Oceans and Wildlife, Congressman Peter DeFazio (D-Oregon) laid out his concerns with the program: “The last thing I want is Goldman Sachs buying up all the shares of a fishery in three years, and (having) derivatives of fishery shares being sold on Wall Street. I don’t think (NOAA management) has a clue.”

To prevent such market consolidation and financialization, community-based environmental organizations advocate that catch shares be modified or complemented with broader marine management “tool kits,” tailoring regulations to specific communities and fisheries to avoid monopolization and overfishing, and helping small, remaining fisheries survive and grow. Ecotrust proposes strengthening community fisheries, further integrating them as fishery co-managers and, where catch shares are implemented, having transparent quota share trading and direct allocation of some quota shares to community entities.

Taking a cue from the lessons of Iceland, Food and Water Watch also supports holding some quota off the market to allocate to vulnerable coastal communities, to avoid the buying up of quotas by industrialized seafood production at the expense of more sustainable and local seafood producers.

EDF’s Rod Fujita agrees that catch shares should be designed and implemented thoughtfully. “If that is a social value – you want to preserve the social value of the fishery and you don’t want outside investment – then you can set up catch shares to preserve those values.”

POORT Executive Director Leesa Cobb, however, says NOAA’s push for catch shares has eclipsed discussion of and support for other management tools. “Unfortunately, the catch share campaign has drowned out all other ideas and approaches to fisheries management. Another approach, community-based fisheries management, has gotten a lot less attention even though it offers a lot of benefits, particularly an enhanced level of stewardship for ocean resources among community participants.”

Mary Beth de Poutiloff said that rather than manage the ocean as a trust, catch shares encourages it to be viewed as just another stock market. “This is water real estate.”