Southeast Alaska purse seine fishermen are preparing to vote on another permit buyback, with an eye toward making the fishery more viable in an era of more efficient vessels and smaller salmon runs.
The National Marine Fisheries Service is scheduled to send out ballots to fishermen starting Jan. 15 asking whether the fleet should take on $10.1 million in federal loans to buy out 36 permits, removing them from the fishery forever. If successful, the move would reduce the number of permits in the fishery to 279, down about 100 permits since 2012.
Like many things in the U.S. right now, the vote may be delayed as a consequence of the ongoing federal shutdown because most NMFS employees are on furlough. Pending the resolution of the budget battles in Congress, proponents of the buyback are hoping to get the ball rolling soon.
This would be the second buyback since the loan program was authorized by Congress in 2006, and so far, it’s been successful from the perspective of the fleet, said Bob Kehoe, the executive director of the Purse Seine Vessel Owners Association.
“I think it’s been successful; we’ve removed permits,” he said. “We’ve been able to generate more than enough revenue to service the loan. The service rate has been decreased.”
The purse seine permit buyback program in Southeast is something of an outlier; it’s a federally authorized loan program to buy back state-issued fishery permits.
The Southeast Revitalization Association, a group of stakeholders formed to pursue the buyback, worked with former Sen. Ted Stevens to pass the authority through Congress, establish a floor for the number of permits with the state Commercial Fisheries Entry Commission and communicate with permit holders.
The first fleet capacity reduction buyback happened in 2008, outside the loan program, through a federal grant. In 2008, about 415 permits existed in the fishery, though only about 200 were fished, according to information in the Federal Register.
The Southeast Revitalization Association used a reverse auction to purchase 35 permits in 2008, reducing the capacity to 380. After the buyback program was authorized, NMFS worked with SRA to request bids for permits on a $13.1 million loan, which the fleet approved to buy about 64 permits.
Kehoe said the original interest in fleet capacity reduction was because of very poor prices for salmon.
“There was a lot of (pink and chum) salmon available for harvest, but the prices were so low that it was hard for people to make a living,” he said. “There was very little competition among the processing sector, and so it worked fine for the processors having more capacity than was needed for harvest, but it wasn’t working for fishermen. Back in the early 2000s, there were some fishermen that couldn’t even find a market to sell their fish.”
With about $10.1 million remaining on the loan authority after the first buyback, the SRA asked for other bids to further reduce the size of the fishery. In 2016, after receiving 22 bids and asking the fleet if they cared to move forward with the buyback, the fleet voted it down and sent the second round of the buyback back to the drawing board.
Susan Doherty, the executive director of the Southeast Alaska Seiners Association, said the vote didn’t fail by much in 2016, but many ballots weren’t returned and communication efforts about the buyback were low.
Neither the Purse Seine Vessel Owners Association nor the Southeast Alaska Seiners Association boards of directors chose to take a position on the 2016 buyback and thus didn’t reach out to permit holders about the vote. The vote also took place over the Christmas holiday when people may have been away from home and did not see the ballots.
“Last time there were several issues with the process,” she said. “We didn’t do enough with encouraging folks to return their ballots. Anything that’s not returned is an automatic ‘no’ vote.”
This would be the last buyback for the foreseeable future, given that it would use up the remaining loan authority, Doherty said. The 279 remaining permits would still be greater than the floor of 260 set by the CFEC, which is the level at which it would be too exclusive. For the fishermen, it’s primarily an economic decision, Doherty said — the average vessel earnings in 2016 was $65,000. For scale, the average permit value at the end of 2016 was $163,400, according to the CFEC.
The fleet now has several seasons of extremely poor runs under its belt since 2016, so that may increase interest in voting for the buyback, said Dan Castle, a seine vessel owner and the president of the Southeast Alaska Seiners Association board.
“I think this time, after a few more mediocre to poor years, we have a full slate of people willing to extinguish their permits, and it will also extinguish all the money,” he said. “I think we have a much better chance of making the case … it’s going to grab more than 10 percent of the fleet. That’ll be permits that are not going to be fished, whether they’re latent or not … it’s going to be better.”
Castle said the buyback program was unique to start and required jumping through a “containerload of hoops to approve.”
One of the effects of the program, though, has been to overall increase the quality of the fleet, he said. Older boats, ready to retire anyway, left the fishery, and other concerns that people brought up over the buyback have proved to be non-issues, he said. One motivation for permit holders currently fishing is the hope to keep opportunistic fishermen from returning and ballooning the size of the fleet again when the runs return to larger numbers, he said.
Overall, he said he’s more optimistic about the vote this time.
“We’ve dispelled a lot of myths over the years,” he said. “Everybody’s familiar with how the process works. We have a lot better understanding in the fleet. This is going to be it … People can see the benefits of squashing the fleet down a little bit. We’re so efficient now, compared to how it was when the first issued the permit program.”
The buyback program works as a reverse auction, with each bidder asking a price to be bought out, but the average price per permit would be about $280,555 if the loan is approved. At the end of 2018, the average value for a permit was $195,000, down from an average value of $307,000 in 2014, according to the CFEC.
Kehoe said the price is based on bids, but there may some speculation going on as permit holders try to maximize the return based on the loan amount available.
“You’re asking people to give up a permit that has value forever and then the permits that will remain assuming the fishery bounces back will have a higher value,” he said. “People are free to put in their bid amount. These permit prices change constantly. It could be when we put this program together, the permit values were higher. If you look at the permit prices now, you’re just coming off two consecutive poor seasons. In order to make this work, you’re going to have to remove permits.”
Doherty said the value of permits may also be pushed down currently because people aren’t eager to get into a fishery that’s been hurting for the past several years.
The Alaska Department of Fish and Game raised concerns to NMFS about the reduction in the size of the fishery just before the 2016 buyback vote, according to a letter from former commissioner Sam Cotten dated Dec. 6, 2016.
The letter raised concerns about the lack of fishery impact analysis after the 2008 and 2012 buybacks and the buyback increasing the value of permits, making it harder for new fishermen to buy into the fishery, exacerbating the problem of high entry costs blocking younger fishermen entering the fleet, among other concerns.
“We are troubled by the lack of analysis informing this process, the lack of objective and measurable goals with which to measure the relative success of these buybacks, the potential impacts of this action, and the commensurate constitutional implications,” Cotten wrote.
Castle said that the SRA worked with the CFEC based on fleet size concerns and exclusivity, and if the fishery is judged to be too exclusive, the state can always issue more permits. To pay for the loan, fishermen pay a levy to processors at the dock, who then pay the federal government. So far, the ex-vessel value has also proved itself able to service the loans, with NMFS lowering the loan service rate because the applied rate was generating more revenue than needed.
The vote is currently scheduled to run from Jan. 15 to Feb. 14.
Elizabeth Earl can be reached at [email protected]