RDC’s 24th Annual Conference Presentations
John Garner, Principal, Norquest Seafoods, Inc.
My name is John Garner. I am an owner in NorQuest Seafoods, a primary processor of many fishery resources in Alaska, and am currently executive director of the North Pacific Crab Association, representing a group of processing companies involved in the current efforts to change the management system of the Bering Sea crab fisheries.
By way of background, I was born and raised in Alaska, and began commercial fishing at a young age at Cape Yakataga and Bristol Bay in the 1960’s. I served on the Alaska Commercial Fisheries Entry Commission in the 1970’s when we implemented the first limited entry program in any United States fishery, and was a member of the Alaska Board of Fisheries in the 1980’s. In 1988 I stopped fishing and began running the operations of what became NorQuest Seafoods. My experiences have allowed me to participate in virtually every fishery in the state, as a commercial fisherman, a fish buyer, or a regulator.
A lot has changed in the Alaska seafood business in the 40 years I have been involved. More importantly, a lot has changed in the world food business in the last 40 years, and more change is yet to come.
Alaska resources must compete on the world market against both wild and farmed seafood and other proteins from both developed and under-developed nations. Yet Alaska’s production costs can make it very challenging to compete in that world market. We have developed a highly internal competitive structure to our fisheries, resulting in significant overcapacity in both the harvesting and processing sectors. That overcapacity developed in “open access” fisheries that ran like a free-for-all. The more capacity you had, the higher share you got of the fishery, and the more you earned. This overcapacity would lead to shorter and shorter fishing seasons, and adds unnecessary cost that cannot be recouped in the market. With rare exceptions, the market value of our seafood is established based on what competing products sell for. The market believes that it is our responsibility to control our costs, and it will not volunteer to make us whole should our costs be too high.
This basic fact of business – that goods must be produced for less cost than the goods can be sold for – is at the root of radical changes being sought in virtually all Alaska fisheries today.
Several Alaska fisheries have addressed these underlying issues. In the halibut and sablefish fisheries, for example, harvesters were granted exclusive individual fishing quotas, and in a few short years we significantly reduced the number of vessels in the fishery, increased the fishing season dramatically, increased the value of the product by new markets and improved handling technology, and, for those lucky enough to have received quota, a far far better fishery exists today than prior to the implementation of the program. This result though was not without consequences. Processors that had made significant investments in the fishery were not included, and their capacity no longer needed under the elongated season that individual fishing quotas delivered. Fishermen can control when and where fish will be delivered, causing some communities to be losers and others, including those in Washington, to be winners. Crewmen and hired captains were excluded from the initial allocations of quota, and many lost their jobs as the number of vessels consolidated.
Another fishery that addressed the underlying problem of surplus capacity is the Bering Sea Pollock fishery. Congress, by the efforts of Senator Ted Stevens and Senator Slade Gorton of Washington, enacted a system of cooperatives under which fishermen would receive an individual allocation of fishing history if it committed its production to an individual plant. The plan included consideration of processors and communities, and has resulted in spreading the benefits to a broader group of participants.
In the halibut, black cod and pollock fisheries, many benefits to the consumer and the public have occurred. There is no danger of the fishery catching more than the pre-season quota under the new systems, unlike the prior fishery system. This is good for the public resource, producing more value to the fishery by sound management practices. There are better product forms available now than was possible in the derby fishery, better quality, and higher yields, all producing more revenues for the public and better food for the consumer.
In 2000, a majority of the Bering Sea Crab fishermen petitioned Congress to immediately implement a system of fishing and processing quotas for the crab fisheries. In response, Congress directed the North Pacific Fishery Management Council to develop a recommended system to rationalize those fisheries, and report its recommendations back to the Congress. The Council was specifically asked to consider the interests of vessel owners, captains and crew, processors and communities. The Council established a working group that included all sectors to review alternatives. The Council itself held many hearings on the alternatives. The Council concluded there are very compelling reasons to establish a new system of management in the crab fisheries. The crab fishery in the Bering Sea is considered the most dangerous occupation in the United States, with over seventy lives lost in the last decade. Crab resources in most fisheries are at historic lows. Just five years ago we were typically harvesting in excess of 200 million pounds of opilio tanner crab annually. The quota in the last few years have hovered at 20 – 30 million pounds. The quotas in some fisheries are so small, and the fleet catching power so large, that regulators do not allow fishing at all, even though biologically some catch would be warranted. Current fishing systems result in bycatch and sorting practices that may contribute to low stock levels.
Fishing and processing capacity wildly exceed what is needed for the size of the current crab stocks. It is estimated that one-fifth the current fleet could harvest all of the crab now available and all of it could be processed by the smallest single plant operating in the Bering Sea today. Vessel owners, crew and processors are all operating with little or no profit. Communities and the support services in them are suffering with low crab revenues. Some particularly crab dependent communities (such as St. Paul and St. George) have few alternatives to the crab fisheries for their local economy.
In 2002 the Council unanimously recommended that Congress enact a system of quotas for fishing and processing in the crab fishery, including consideration for crew and communities to ensure the benefits of this change would be shared by all sectors. In May 2003, the U. S. Congress held a hearing on the plan. In September of this year, Senator Stevens, with support from Senator Patti Murray of Washington, included authorization for this program in an appropriation measure currently before Congress.
This provision (called a “rider”) is under intense attack in the national print media and by the environmental community. It is being attacked because of the inclusion of processors in the plan, and some argue that the “process” used to develop the plan has not been fair or thorough enough. Others, particularly those in the environmental community, seem to oppose it simply because it is Ted Stevens promoting it. Additionally, there is a very legitimate debate at a national level over the policy implications of granting quotas to existing industry participants rather than an auction or lease system as is used in many other cases of public resource utilization. A few samples of recent press on the crab plan:
“Alaskan Outrage” is how the Washington Post characterized the crab program.
“…send the dreadful Stevens amendments into the legislative oblivion they deserve” said the New York Times.
“Crab cartels” blared the Anchorage Daily News, saying that “Stevens pushes a plan that gives processors too much market power”.
Some in the environmental community have been even more vitriolic in their attacks. The PEW Charitable Trust funded group Oceana says on its web site: “Senator Stevens has a history of abusing his position to benefit his campaign contributors and friends in Alaska.”
Why would the North Pacific Council recommend, unanimously no less, such a program? Why would Senator Stevens and Murray do this?
The answer of course is that neither the Council, nor Senator Ted Stevens, believe they are doing what the editorialists say. The plan developed by the Council attempts to recognize the capital and human investments of all sectors to the crab fisheries. It is one that will achieve the fundamental goals – safety, resource conservation – while giving all participants a shot at economic viability. It is a plan that provides the tools needed to produce crab for less money than it can be sold for, whether you are a fisherman selling to a processing firm or a processor selling finished product into the world market. It is one that gives crab dependent communities, and the service providers in them, hope for an economically viable fishery. It is a plan that recognizes the history of this highly industrial fishery, and the huge investments of vessel owners, processors and communities.
In order to understand why it is fair to consider each of these sectors including processors, I must divert to a bit of history. In the early 1970’s, the majority of the crab in the Bering Sea was harvested and processed at sea by foreign owned factory trawlers. The harvest was unregulated, and the economic benefits flowed exclusively to companies based in foreign nations. These trawlers also harvested salmon, herring, cod, pollock, halibut, rockfish and many other species important to U. S. fishermen and processors. Senator Stevens and Senator Warren Magnuson of Washington State teamed up to convince the Congress that vital U. S. fishery interests were at stake. Together they obtained passage of the Magnuson-Stevens Fishery Management and Conservation Act – the “MSA” that extended U. S. jurisdiction over fishery resources out to 200 miles. For the first time, a process was put in place to put conservation and management of the resources as the priority in these offshore waters.
The MSA included a Regional Council system to provide local input on fishery regulations. It established a priority to convert the fisheries to acceptable harvest practices, and encouraged the development of catching vessels and shore side infrasture and processing.
The change in the Bering Sea crab fisheries from one of harvest and processing at sea to a fishery primarily of catcher vessels delivering to inshore processing companies did not happen easily nor overnight. Tremendous investments in catching and processing capacity were needed. Markets were needed for this U.S. produced crab that never existed before. Community support was needed in the form of support services and infrastructure. Each of these investments were specialized and could not be moved easily to other fisheries. It was almost as if, back in 1976, three risk takers stood on a barren beach in Dutch Harbor, and agreed that they would work together to develop the crab resources in the Bering Sea. One said, ok, I want to be a fisherman, so I will invest in the vessel and gear that I think can catch the crab. But I need someone to buy my crab. The second said, ok, I’ll develop the market and build processing plants for you to deliver to. Both said, we need some community support, this is remote country, with no services. The third person said, ok, lets work together, I’ll build a boat harbor, invite in the support sector, build the clinic we need, make sure you have an airport, fuel, water. And, so, those three individuals launched on that enterprise together, each dependent on the other, no one of which could have succeeded without the other two. Fishermen-processor-community were linked from the beginning.
The Council recommended plan, and Senator Stevens rider, recognize this co-dependency and the huge investments and risk taken by each sector to develop the crab fisheries. They recognize that most investments are not easily used in other businesses. If the plan did not include the interests of a particular sector, then the investments made by that sector would be stranded, and any value would be lost. Inclusion of the sector will allow for an opportunity to maintain a viable business even in the face of low quotas as the incentives to adjust capacity allow for a rational cost structure and improved product quality.
Many fishermen, both in Alaska and nationally, do not want a system like the crab plan in their fishery. Well and good, but that does not change the many significant challenges faced by virtually every fishery in the United States, and particularly those in Alaska, to address these underlying problems of surplus capacity. The painful part of all of these changes is the transition from one system of management to a radically different one. All of the changes require regulatory and/or statutory changes. And therefore policy makers will play a significant role in determining whether we address these problems, or whether we ignore them and hope they go away.
After participating in the seafood business for forty years, as a regulator, catching, buying, processing and selling Alaska seafood into Domestic, European, Asian and Latin American markets, I feel it is safe to say that our problems will not go away. But if we change, if we as policy makers and industry representatives have the courage to address the capacity and cost issues of our fisheries, we will have the opportunity to compete in the world food market, and in the process re-create viable communities with a vibrant fishing fleet and processing firms.
I would be happy to answer any questions that you may have, and thank you for the opportunity to speak today.
