Quota ownership

The emergence of a class of absentee owners is the most troubling risk in ITQ management, and a number of mechanisms and safeguards have been suggested to prevent or minimize absentee ownership.  First and foremost, most agribusiness interests have very little desire to operate fleets of boats, something that some mighty large operators have already discovered.  So tying quota ownership to the ownership, management, and responsibility for the fishing vessel operation is critical. 

But even that principle can be taken too far.  Some people have suggested, for example, that the quota owner must be on board the vessel fishing that quota.  That, in effect, would mean that a fisherman could never semi-retire, allowing someone else to run his boat.  And it would also prevent the time-honored tradition of a successful fisherman growing into a two- or three-boat owner.   

Another suggestion is that only natural persons be allowed to own quota -- not any sort of corporation.  In this day and age, when the corporate structure is a key element of personal protection, that kind of limit seems impractical.  What would be the status of those quota shares in a divorce, personal bankruptcy, or home liability lawsuit?   

Some years ago, during the heady days of real estate investing, the IRS made a critical distinction between "active" and "passive" investments.  Something along these lines may be useful as a criterion for the ownership of quota shares. 

An active involvement in the ownership, operation, or management of a vessel would be a pre-requisite for quota ownership.  This would allow the semi-retired fisherman, or one who had come ashore permanently, to keep his quota shares as long as he kept his boat. 

Clearly, a processor who owns and operates vessels could own quota under this requirement.  But a processor that does not own and operate vessels could not.  The definition of "active involvement" could include hired captains and crew members, allowing them to own and accumulate quota shares without actually owning a vessel. 

The precision with which active involvement is defined can be refined in the development of fishery management plans for each fishery.  The key element is that the ITQ could not be simply a paper asset, rented out by someone who is essentially removed from the fishery in all other aspects. 

So we are suggesting that vessel ownership is the basis of any ITQ program that is intended to keep the rewards of fishing in the hands of the fishermen and fishing community.   

Leasing

But a vessel ownership requirement is not enough to guard against abuses and obvious loopholes.  Ownership of an 8' dinghy should not entitle some schemer to own a thousand tons of quota that he then leases out. 

Reactions against "slipper fishermen" who sit by the fire and lease out their quota have lead to recommendations that leasing be prohibited.  While the argument about leasing quota is often polarized, something in the middle may be far more reasonable.  Some ability to lease quota provides flexibility to both potential lessors and lessees. 

Take, for example, the case of a fisherman whose boat has sunk.  It may take a year or more to replace that vessel.  What about the widow who lost both her fisherman husband and the vessel?  And if we are truly interested in making it easier for young people of modest means to enter and expand in a strictly limited fishery, leasing of quota shares may provide an economically feasible mechanism.  Leasing may also be a key element in community or cooperative ownership of ITQs.   

One safeguard which would dampen the tendency for quotas to be leased continuously would be to reduce any quota shares that have been leased out repeatedly.  For example, quota that has been leased for three years might be subject to a 20% forfeiture penalty if leased for another year, and each year thereafter.  No one could afford to be an absentee owner if 20% of his capital investment were lost every year. 

Such a provision would encourage the sale of quota by those whose activity in the fishery no longer warrants the ownership of quota.  It would also encourage fishermen to keep their quota holdings somewhat in balance with their actual fishing activity, while still allowing a degree of flexibility. 

Most fishermen will probably have extra ITQ in different fisheries as a backup, and they might lease out that quota if they are not fishing it themselves in a given year. 

Group ownership

One obvious attempt to keep quota ownership close to the resource, and to preserve local benefits from the fisheries, is group ownership of quota. 

In the US, community development quotas, or CDQs, have been incorporated into various quota allocation programs.  The allocation to Maine for its mahogany quahog fishery comes close to a CDQ, but the managers never did tackle the touchy question of "ownership" of that quota, making it an area allocation instead, effectively controlled by the state of Maine.

In the Shetland Islands, both the fishermen's producer organizations and the local community have obtained quota to be used by local fishermen.

We have considered quota that is leased out, but what about quota that is not used at all, perhaps held by an environmental, preservationist, or animal rights organization?  If the same forfeiture provisions that apply to leased quota were applied to quota that is not used, it would seem to remove the threat that quota could be locked up forever. 

What about sport fishermen buying commercial quota?  We suggest that transfers between sectors go beyond the realm that anyone has contemplated at this stage in our consideration of market solutions to fishery problems.  Fundamental changes in resource allocation should still be subject to regulatory or legislative review.

In conclusion   

We have not attempted to offer a prescription to cure all of the perceived problems with ITQ management.  Our goal has been to defuse rhetoric in favor of reasoned discourse.  Congress will soon consider these issues, and we hope that others will bring forth their own approaches. 

Finally, we would suggest one guiding principle:  we should make every attempt to leave the system as free of restrictions as possible while achieving the goal of preserving economic opportunity and other social values.  We treasure the days when fishing was essentially unregulated.  We don't want our fears of regulatory abuses to lead to equally oppressive regulatory constraints. 

Dick Allen is a lobster fisherman from Wakefield, RI and Jim O'Malley is the executive director of the East Coast Fisheries Federation.