Subduing a trophy Alaska halibut/Craig Medred photo

The North Pacific Fisheries Council has taken an unprecedented step to try to increase the value of halibut to the Alaska economy by allowing a yet-to-be-created, charter-boat fishing entity to buy fish from willing commercial fishing interests in order to boost sport harvests.

Collectively owned halibut-quota held by the charter entity would be used to liberalize limits for anglers wishing to charter-boat fish in Alaska. Charter businesses, many of them mom and pop operations, have been hard hit in recent years by size limits on halibut and fishing closures which have discouraged both resident and non-resident anglers from spending money on charters.

The restrictions came as the result of a controversial transfer of halibut harvest from the sport-charter fleet to the commercial fleet. The cost of the transfer to the Alaska economy is unknown, but it is believed to be in the millions of dollars.

Because of their built-in, fishing inefficiency and small limits of two fish per day or less, the charter businesses generate a far bigger economic bang per pound of halibut than the commercial fishery, especially if they lure north anglers from other states.

A 2012 study in the North American Journal of Fisheries Management estimated charter-caught halibut to be worth $3.49 per pound when hauled in by resident anglers and $9.81 a pound when landed by  non-residents. That compared to a commercial value of $1.82 per pound in the commercial fishery at the time.

Out-of-state anglers spend money on airfares, rental cars and motorhomes, restaurants and hotels, non-resident fishing licenses and a whole lot more even before they pay a charter-boat operator to take them out on the water for a day.

Efforts to shift some of the halibut harvest back toward tourism businesses comes in the wake of a study indicating that “individual fishery quotas” created for the commercial halibut fishery in the early 1990s have not worked out quite as planned.

A well-intentioned idea, IFQs (Eye-F-Cues) as everyone in the fishing industry calls them, were intended to shift halibut harvests away from big-boat operations toward individual fishermen working as owner-operators of fishing businesses hopefully  based in Alaska.

But that isn’t exactly how things turned out.

“Perhaps most problematic is the emergence of a class of wholly absentee quota shareholders, who hold only nominal interest in the vessel upon which their IFQ is fished, do not share in the risk of fishing, and continue to profit from the fishery while residing far away from the actual fishing grounds,” researchers Marysia Szymkowiak from the University of Delaware and Amber H. Himes-Cornell from the University of Washington wrote in a study published in the journal “Maritime Studies” last year. 

A brief Alaska history

Alaska Statehood in 1959 was largely driven by a desire to break the stranglehold Seattle held on the commercial fishing business in the Alaska Territory. Statehood did shift the balance of power north for a time, but it didn’t last long.

“By 1984, a year after the constitutionality of Alaska’s limited entry program was affirmed…the state seemed well on its way to realizing the goal of a healthy, resident dominated fishery, “Alaska Economic Trends,” a publication of the Alaska Department of Labor reported in 2004. “In that year resident fishermen harvested 58.8 percent of the 1 billion pounds landed in the fishery and captured 61.4 percent, or $484 million of the $787.7 million total harvest value….

“Less than twenty years later in a much larger 2002 fishery that produced 3.7 billion pounds, Alaska residents accounted for 771 million pounds or just 19.9 percent of the volume. Their share of the earnings had also fallen to $299 million, or only 38.7 percent of the $772 million total harvest value.”

The leakage of Alaska’s wealth to the lower 48 has continued since then.

“In 2014, 55 percent of Alaska skippers and crew were residents of the state,” the state-funded Alaska Seafood Marketing Institute reported in 2015, putting the best spin on the fact that 45 percent of Alaska skippers and crews are now non-residents and ignoring the fact that a majority of the most valuable fishing permits are held by those Outside skippers.

Gunnar Knapp, the now-retired director of the Institute of Social and Economic Research at the University of Alaska, in 2013 reported that 64 percent of the high-value drift gillnet permits in Bristol Bay, site of the world’s biggest fishery for wild sockeye salmon, were held by fishermen living outside of the 49th state.

Accurate, independent numbers on the percentage of halibut IFQ held by fishermen living outside of Alaska are not easy to find, but “The Halibut Coalition,” a commercial fishermen’s group, said in a 2007 report to the Alaska Legislature that only “50 percent” of the quota for halibut fishing Area 3A was held by fishermen in communities in that area.

Area 3A is the north Gulf of Alaska coast. It includes Cook Inlet, Prince William Sound and Kachemak Bay where Alaska charter businesses are concentrated. The fishing ports of Kodiak, Seward and Homer, the halibut capital of the word, are all in Area 3A.

With 50 percent of the quota held by commercial fishermen who live there, the other 50 percent is held by people outside the area.

Charters businesses, it should be noted, are also often owned by non-residents who flee south along with Outside commercial fishermen when the snow flies. But the charter businesses, unlike commercial fishermen, need onshore offices in places like Homer, Seward, Ninilchik, Valdez, Whittier and Kodiak in order to do business.

Local governments collect property tax on those onshore facilities. The tourists who come to fish at these places also spend money in the communities while there and thus, in most of them, pay sales tax. The Kenai Peninsula Borough estimated tourists contributed 25 percent of its sales tax revenue in 2015, the Peninsula Clarion, the Kenai’s main newspaper, reported in March of this year. 

“…Marketing studies, which asked where people come from and what activities they seek, pointed to fishing as the number one draw,” the newspaper reported in 2014. 

Market decisions

The new, Council-approved halibut plan designed to play to the tourism draw of Alaska fish is complicated, but it is designed to establish a willing-seller/willing-buyer market that will allow individual fishermen to settle the long-running dispute between charter and commercial fishermen over who gets to catch what.

Basically, the plan would set up what is being called a  non-profit “recreational quota entity”  (RQE) to buy IFQ shares from willing sellers in the commercial fishing business. The funding for the purchases would come from a fee imposed on the charter industry.

The purchased IFQ would be added to the existing charter quota to try to eventually boost limits back two fish per day of any size as in the unguided halibut fishery. The amount of quota the RQE could own in 3A, essentially Southcentral Alaska, would be capped at 12 percent. The rate at which the quota could be acquired would be limited to a percent per year.

If the RQE bought more IFQ than the charter fishery could harvest, the extra quota would be redistributed to small-boat commercial fishermen for harvest. A large percentage of those fishermen are Alaska based.

Whether the U.S. Department of Commerce, which oversees the regulation of Alaska halibut fisheries, will approve the plan remains to be seen. How exactly the quota entity will be set up is yet to be determined. It is the same for the mechanism for collecting the money to fund the entity.

And commercial fishermen are already objecting. The Alaska Longline Fishermen’s Association called the Council’s 8-to-3 vote in favor of the plan a “dark day” for the commercial fishing industry.

Some see it as the beginning of new growth in the charter business at the expense of the commercial fishery, and thus the death knell for the latter.

Tom Gemmell, the executive director of the Halibut Coalition, another commercial fishing group complained to The Cordova Times that by letting the market reallocate halibut shares from the commercial fishery to the sport fishery would “drive localized depletion near coastal communities, reduce resident subsistence and sport harvesting opportunities, raise quota share costs in the commercial fisheries, reduce product availability to commercial processors, distributors, retailers and, ultimately, restaurants.”

Andy Mezirow of Seward, a former halibut charter skipper and the Council member who devised the plan, called those fears unwarranted, and noted that if any problems do materialize, there are regulatory solutions to fix them.

Why commercial fishermen would object to a plan that boosts the value of their quota shares, thus making them instantly richer, is unclear. Mezirow noted there is a lot of fear  in the commercial sector, and a fair amount of anger in the charter sector which finds itself on the verge of buying back halibut the Council took away without any compensation four years ago.

Reduced charter limits came after commercial halibut fishermen appealed to the Council, a regulatory group dominated by commercial fishing interests, to force charters to “share the burden of conservation” as halibut stocks declined in the North Pacific.

The Council responded by eliminating a guideline harvest level for the charter fishery and imposing a “catch share plan” that reduced the allowed charter catch from approximately 3.5  million pounds of halibut per year to about 2.5 million pounds. The commercial catch is more than five times that.

Unprecedented

Knapp, the retired ISER economist, has monitored the commercial fishing industry in the state for decades and said nothing like the RQE has been tried in Alaska before. He added that it is unlikely it has been tried anywhere, but argued it makes sense to “let markets decide what is more valuable.”

Still, he expects the program will run into problems of  some sort in the short run as quota shifts from commercial fishing to the charter industry.

“Open markets surprise you,” he said. “When IFQs started, who thought prices would go where they are now.”

IFQs eliminated derby fisheries structured around short fishery-openings that flooded the market with halibut. With fishermen on quotas, they could be allowed to fish all summer long, which allowed them to sell fresh halibut as market demand dictated.

This flexibility helped them profit as halibut stocks started declining in the 2000s. It didn’t take long for the demand for fresh halibut to exceed the supply and prices began to skyrocket. Restaurants that still serve halibut now complain it is the most expensive item on their menus, although this might be destined to change.

Aquaculture production of halibut is slowly but steadily increasing, and U.S. approval of offshore fish farms could open the door for a bigger increase. Large-scale salmon aquaculture gutted the price of Alaska wild salmon, and it never fully recovered. Alaska wild salmon is now a niche product in a market dominated by farmed fish.

Finfish aquaculture was banned in Alaska in 1989 in significant part to try to protect Alaska salmon fishermen from market competition. The scheme didn’t work. Salmon farms boomed in Norway, Canada and Chile. They drove down salmon prices and today control the salmon market.

Seventy percent of the salmon sold in the world today is farmed, according to the World Wildlife Fund, which calls salmon aquaculture the “fastest growing food production system in the world.”

The world is ever changing. The creatures and businesses that adapt to change survive. Those that don’t die. Mezirow believes the Council has come up with the fairest adaptive mechanism the fishing business has ever witnessed.

Time will tell.