Buy-Back Programs in the British Columbia Salmon

FisheryBy

R. Quentin Grafton and Harry W. Nelson

International Workshop on Fishing Vessel and License Buy-Back Programs

Institute of the Americas, University of California, San Diego

La Jolla, California

March 22, 2004

Overview

• Brief History of the Fishery• Introduction of Licensing• Buyback Programs (five in all over 30

years)• Lessons Learned (including unexpected

ones)• Did it Work?

Brief History

• Commercial fishery developed in late 1800’s

• Expansion to open ocean (troll fleet)

• Northern Region (Skeena)

• Southern Region (Fraser)

• Five commercial species– Sockeye, Coho, Chinook, Pink and Chum

Brief History (2)

• Overcrowding and capacity concerns raised at turn of the century

• Number of fishers increased as early limitations failed

• Long-standing Aboriginal participation

Introduction of Licensing

• Davis Report called for limitation in size of fleet and area restrictions

• Limited entry first introduced through Davis Plan in 1969

• Permitted multiple gear types and could fish anywhere open to commercial fishing (no area restrictions)

• Introduced first buyback• Gear restrictions and vessel replacement rules

subsequently introduced in 1970’s

British Columbia Buyback Programs

• Five distinct programs– 1970-1973 – 1981 – 1993 – 1996 – 1998-2000

• Differ in objectives and operation

Early Buyback Programs

• Purpose was fleet reduction

• Purchase vessels and licenses

• Small ($6 million or $25 million in $1992)

• funded from vessel sales and general revenues

• 1970-73 retired 361 vessels (6% of then salmon fleet)

Early Buyback Programs (2)

• First lesson learned– Government makes a poor vessel owner and vessel

broker

• Pearse Report in early 1980’s investigates problems in salmon fishery and calls for buyback– Also calls for area restrictions, limited length licenses

(put up for bid), and landing royalties

• 1981 buyback retires only licenses – 26 licenses retired (less than 1% of fleet)

Buyback Programs in the 1990’s

• Three different programs

• Different objectives

• Differ in scope

• Similar design

The 1993 Buyback Program

• Pilot program in 1993– Objective to retire licenses in commercial

sector to transfer to aboriginal fishery– Spent $5.95 million to retire 75 licenses (about

2% of the fleet)

The 1993 Program (2)

• Design of Program• Restricted to eligible licenses• Designed as a reverse auction

– Ranked by strict $ bid per potential catching effort per foot

– Retired predominantly smaller vessels and few seine vessels

– Use committee of industry representatives to evaluate bids

The 1996 Program

• Two major programs in late 1990’s

• Salmon fishery in as state of crisis

• Objective to reduce fleet

• Large program $80 million

• Introduced in conjunction with the Mifflin Plan

The 1996 Program (2)

• Again reverse auction

• Two multiple rounds

• Government announced funds available and target of 20%

• Attempt to maintain fleet balance (equal across gear types)

The 1996 Mifflin Plan

• The Mifflin Plan introduced major changes to licensing system

• Area licensing• Single gear licensing• Stacking (market rationalization)• Promised greater certainty through reaching

agreement over allocation and improved fishing opportunities

• Did it all work?

Results of 1996 Program

Gear Type Round 1 Round 2 License retired by gear type

Seine $405,118 $443,475 48Gillnet $73,719 $84,702 444Troll $70,881 $82,136 305Total licences retired

396 401 797

1996 Buyback

The 1998-2000 Buyback Program

• Same objective

• Significantly larger at $200 million

• Again a reverse auction

• Implemented in three multiple rounds

• Government target of 50% reduction across all gear types

Results of the 1998-2000 Program

Gear Type Round 1 Round 2 Round 3 License retired by gear type

Seine $420,152 $432,115 $435,578 216Gillnet $77,880 $80,830 $84,231 730Troll $77,532 $82,150 $85,872 460Total licences retired

99 645 665 1406

1998-2000 Buyback

The 1998-2000 Buybacks (2)

• Achieve balanced reduction

• Met through targeting seiners

• No longer strict $ per foot rankings

• Retirement of smaller vessels

• Exit of older fishers

Lessons Learned

• Voluntary buybacks enjoy fishers support• Need seen to maintain “equity”• Multiple rounds allow adjusting bid values

– Rules out “stink” bids

• Important for government to signal in forming expectations– Funds available and targeted level– Prices paid slightly greater than estimates of “market

value”

Unexpected Lessons

• Remaining licenses fished harder (but this was not completely unexpected)

• More unexpected was that proceeds went back into licenses (to shelter from taxes)

• Not a lesson but consequence?– license values have increased (up 20% for trollers and

gillnetters since last buyback)• Perceptions of improved profitability?• Further buyback?• Government purchases under ATP?

Did It Work?

• Fishers saw the buybacks as meeting a political objective with no meaningful reduction in capacity

• Localized benefits by area and gear type but not for all

• If salmon prices improve how much effort could return?

• Push for IVQ’s and lower numbers may make more politically palatable (as older fishers disproportionately exited industry)