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Seafood processors demand a piece of the pie

Environmental Defense, an international conservation organization, which said in a March 2007 report that catch share systems, if well-designed and fully monitored, have been shown to reduce waste and bycatch, improve safety in one of the world's most dangerous occupations, and bring economic benefits to fish communities and workers.

In “catch share” systems reviewed by Environmental Defense, fishermen reduced their catches to an average of 5 percent below catch limits. Such systems have reduced bycatch by 40 percent, and at least slowed down the destruction of habitat caused by certain types of fishing gear. Catch share systems have saved fishermen's lives, and resulted in an 80 percent gain in revenues due to higher yields and dockside prices.

These systems have produced increased economic stability in coastal communities that depend on fisheries, and increased stability of fish supply and quality to consumers, the report said.

However, catch share systems have resulted in job losses, as some positions have been converted from part-time to full-time. In the systems studied by ED, the catch shares were all award harvesters. As we will see, some systems have allocated catch shares to processors as well, but these have been fraught with trouble.

Johanna Thomas, Pacific Program director for the international organization, says the catch share program here, if done right, could be a “positive model” for similar programs elsewhere.

“The catch shares program is about aligning incentives and providing resources and opportunity to include key environmental elements in the management of the groundfish fishery — elements that wouldn't otherwise be contemplated or feasible under current management,” says Johanna Thomas of Environmental Defense. “Those elements include gear switching, 100% monitoring on vessels, individual caps on all bycatch species, and setting aside quota for community and environmental purposes. These elements, combined with the innate incentives with assigning quotas on the percentage of total harvest levels, will lead to measurable environmental improvements.”

Thomas and other conservationists have asked the Pacific Fishery Management Council to set aside some catch shares to assist communities that might be harmed by the program.

Peter Huhtala, conservation director for the Pacific Marine Conservation Council in Astoria, said poorly designed systems can work against goals to reduce bycatch, and protect marine habitats, while buoying coastal communities, he said.

“PMCC would support a market based plan that is comprehensive, prevents adverse impacts such as excessive consolidation, and provides strong incentives for a sustainable fishery,” he said.

Others, like Tony DeFalco of the Marine Fish Conservation Council, are skeptical. “The Pacific council has been squandering valuable time and resources dicking around for the last five years with an unproven (catch share) program, when they've had a legal mandate for the last 11 years to reduce bycatch and restore overfished species.

“There is still no solid evidence these programs work.”

Environmental Defense, along with other conservation groups and fishermen, have warned the Pacific council that a poorly designed system could actually do great harm to the marine environment, coastal communities and workers - especially if it allocates some of the harvest to seafood processors.

The seafood processors are demanding a significant slice of the pie: a 50 percent share of the whiting, and a 25 share of all the other groundfish.

“The processors seek a quota allocation which would allow us to be an equal stakeholder and partner,” Jay Bornstein, owner of fish processing plants in Astoria and Bellingham. “The allocation is a reflection of a processors' longstanding and significant involvement in the industry, exactly like the (fishermen).”

Speaking at a public hearing, Bornstein said anyone receiving a quota “will treat it as an asset and manage it in a way that protects and increases its value.”

Jim Wilen, an economist with the University of California Davis, and a consultant for Environmental Defense, said the processors’ share of the $200 million groundfish fishery could be worth $75 million or more. He said their actually losses, if any, would be much smaller. Wilen contends that $75 million as compensation is “implausibly high — that seems impossible to me.”

If each processor receives shares based on its volume, the big winner would be Pacific Seafood, based in Clackamas, Ore., which buys more than two-thirds of the groundfish, and up to 80 percent of the whiting, according to natural resource economist Hans Radtke and a former chair of the Pacific council. Two-thirds of $75 million equals $50 million, which approximates the value of Pacific Seafood's share.

Processors fear that if they don't receive shares in the harvest, the fishermen would have a stronger bargaining position during negotiations to determine prices for fish. But Wilen said it's the other way around.

“Processors already have a big advantage,” Wilen said. “I don't know any other industry in the United States that is as highly concentrated as this.”

“We know of no other quota system where harvesting quota has been allocated on the basis of processing history,” Will Stelle, former Northwest regional director of the National Marine Fisheries Service and a consultant for Environmental Defense.

Wilen said fish companies could incur some losses under a catch share system for just harvesters, but the losses would be small. The “burden of proof should rest with the industry to make some explicit estimate of verifiable stranded capitol losses,” he said.

A two-pie harvester and processor system in Alaska's Bering Sea crab fishery provided harvester quota shares to both harvesters and processors to the fish companies. Stelle says the system failed to produce the expected benefits.

In a letter to the Pacific council, he said during the 2005-06 season, many processors changed the pricing structure for crab, paying for the first time significantly less for crabs that had any barnacles on them or that were somewhat darker in color. As a result, estimates of at-sea high grading suggest that harvesters discarded more than 20 percent of harvestable crab, an eight-fold increase over the previous season.

The program “replaced the race for fish with a race to the processor,” Stelle said. Harvesters tried to avoid being the “last man standing” with few options to sell their catch.

Moreover, provisions in some agreements compelled an accelerated crab harvest to meet deadlines, which undermined efforts to improve safety in one of the most dangerous occupations.

Steve Bodnar, executive director of the Coos Bay Trawler's Association, says fishermen want a referendum so they can vote on the question of whether to issue quota shares to processors. “It would be detrimental to us. It would basically put us out of business if (the processors) got their wishes.”

He said Pacific Seafood, which buys the vast majority of groundfish, “controls the market. No one comes out with a price until Frank (Dulcich, owner of Pacific Seafood) says what the price is.” And yet, he adds, “We can't be in this business without him. If we stop selling to him we would have no other place to sell our fish.”

Pete Leipzig, executive director of the Fishermen's Marketing Association in Eureka, said issuing shares to processors would do nothing for conservation.

Leipzig said if shares are given to processors, only those boats that are owned by fish companies will be allowed to fish.

“I think allocating shares to processors is deliberately trying to change the balance of power (between fishermen and processors.) You are taking resources away from fishermen and reallocating them to processors.”
Leipzig said the system already favors processors when they are negotiating prices. Awarding shares to processors would tip the balance of power “even further” away from fishermen.

Mike Okoniewski, a spokesman for Pacific Seafood, said that if the company “has a stake in this, we are going to be better stewards, really be a partner in developing the resource.”

Pacific Seafood is known for his hardball tactics and is bitterly despised by some members of the fleet.
This year, some trawlers went on strike after, as they claim, Pacific Seafood dropped its prices while boats were hauling a large catch back to port.

Leipzig accused Pacific Seafood of threatening other seafood companies during the strike. He said so at a series of meetings with port officials up and down the coast.

But in a letter published Pacific Fishing newspaper, Pacific Seafood denied making any threats and warned Leipzig to “immediately cease and desist from making false statements” about the company. Their attorney, Bruce Campbell of the Portland firm Miller Nash, said, “Not one Pacific company dropped prices after a boat went on a trip. Not only is it false, but it is extremely harmful.”

Next: Dulcich’s insider access

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