Cooperative measures to address active participant and crew issues

AGENDA C-4c
February 2013

Cooperative measures to address active participant and crew issues
North Pacific Fishery Management Council
February 2013
At its December 2011 meeting, the Council received a report reviewing the performance of the crab
rationalization program during its first 5 years. Based on the report and public testimony, the Council
identified certain aspects of the program that it would like to give additional attention. Among those
issues, the Council requested a discussion paper concerning certain cooperative measures that might be
considered to promote acquisition of quota shares by crew and other active participants in the crab
fisheries and equitable crew compensation. The Council specifically requested that the paper examine the
“best practice” requirements for cooperative agreements. These cooperative agreement requirements
could include:


Provisions to promote quota share ownership among crew and active participants.



Maximum lease rate caps.



Maximum amount of lease rates that may be charged against crew compensation.



Minimum crew pay standards such as a minimum threshold of gross vessel revenue for
crew compensation.

This paper examines the use of cooperative agreements to address these four requirements. At this
meeting, the Council also requested an analysis of active participation requirements for holders of quota
shares. That analysis suggests that implementation of any active participation through direct NOAA
Fisheries administration would be very complicated and burdensome. Cooperative administration of such
a measure may avoid some of those costs and complications. This paper also discusses the potential to use
cooperative agreements to administer active participation requirements, as an alternative to direct
administration by NOAA Fisheries.
Background
Since implementation of the crab program (prior to the 2005-2006 season), critics of the program have
pointed to high lease rates, fleet consolidation, absentee QS ownership, and changes in crew
compensation as some of the program’s greatest shortcomings. Fleet consolidation reduced overcapacity
quickly, as the Bristol Bay red king crab and Bering Sea C. opilio fleets contracted to an average of less
than one-third of their sizes in the years preceding implementation of the program (see Table 1).
Table 1. Average catch and average number of vessels by fishery before and after implementation of the rationalization
program.

Fishery
Bering Sea C. opilio
Bristol Bay red king crab
Eastern Aleutian Islands
golden king crab
Western Aleutian Island
golden king crab

Seasons
2001-2005
2005/2006 - 2010/11
2001-2004
2005/2006 - 2010/11
2001/2 - 2004/5
2005/2006 - 2010/11
2001/2 - 2004/5
2005/2006 - 2010/11

Average number
of participating Average total catch
vessels
189
24,511,160
73
49,603,907
243
10,409,223
74
14,528,729
18
2,945,451
4
2,753,592
8
2,695,600
3
2,349,696

Sources: ADFG fish tickets for first time period and NMFS RAM catch data for second period.
Note: 1011/2012 uses TAC in place of harvests for Western Aleutian Islands golden king crab and
Eastern Aleutian Islands golden king crab to protect confidentiality.

Cooperative measures to address active participant and crew issues
North Pacific Fishery Management Council
February 2013

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Since the number of QS holders has changed little since implementation of the program, a large share of
this consolidation is asserted to arise from leasing of shares. The term leasing is often used loosely to
refer to short term transfers of shares. The program structure, however, complicates any discussion or
consideration of these leases. To induce cooperative membership, the program includes a prohibition on
transfers of annual allocations of individual fishing quota (IFQ), except by cooperatives. This prohibition,
together with the operational efficiencies gained in a cooperative, has led to almost all quota share holders
(i.e., holders of long term shares) joining cooperatives and almost all IFQ being held by cooperatives. A
cooperative receives annual allocations of IFQ based on quota share (or long term share) holdings of its
members and oversees the harvest and distribution of those IFQ. Although cooperatives trade IFQ, the
large majority of all transfers are within cooperatives. These intra-cooperative transfers result in little
information being available to know the extent to which transfers that most people would characterize as
a traditional lease (i.e., the purchase of IFQ) are the source of consolidation. Under the program’s
structure, those cooperative held IFQ may be harvested by any vessel registered to fish the cooperative’s
IFQ, without any documented transfer. Since all IFQ attributable to cooperative members’ QS are
allocated to the cooperative without identification of the member that contributed QS from which the
allocation arises, IFQ use cannot be tracked back to a QS holder. Consequently, a vessel’s harvest of IFQ
cannot be assigned to a specific QS holder. Even if vessel IFQ usage could be traced to an individual QS
holder, participants in the fisheries suggest that a variety of arrangements exist under which vessels
coordinate harvests of IFQ by member vessels (some of which may not be considered leases).1
While the masking effect of the cooperative IFQ allocations prevents identification of the specific source
of IFQ use by a vessel, the complexity of share distributions and the variety of ownership structures also
limits the extent to which leasing and lease rates can be fully identified. Even if it is assumed that all of
the IFQ attributable to a member’s QS are harvested by the vessel owned by that QS holder, the
prevalence of overlapping (but not identical) ownership of vessels and QS holdings limits the ability of
analysts to identify IFQ use arising from a lease (or a short term transfer at a negotiated price), rather than
IFQ use arising from transfers that are simply share management arrangements by a business. Often such
transfers are undertaken as a business practice among affiliated entities at non-market rates that are
structured for internal management reasons, rather than at negotiated lease prices. These arrangements
further complicate any understanding of leasing practices and lease rates.2
Despite these challenges, the Council has remained concerned with leasing practices and their effects on
the fisheries and fishery participants. Specifically, the Council has expressed concern that leasing
practices and associated exorbitant lease rates contribute to a substantial share of the fisheries’ value
being distributed to persons who are not active in the fisheries as either vessel owners or crewmembers.
Although reliable comprehensive lease data are not available, anecdotal information from the fisheries
suggests that some leases in the Bristol Bay red king crab fishery may result in compensation to QS
holders who transfer their IFQ of as much as 75 percent of the ex vessel revenue of crab landed with those
IFQ. In the Bering Sea C. opilio fishery, rates are said to be for as much as 65 percent of the ex vessel
revenue arising from the transferred IFQ. The removal of revenues through share leases by inactive quota
holders is said to have two effects. First, these lower revenues to vessel owners are said to decrease the
amount of revenue available for vessel maintenance and improvements. The absence of revenues may
pose a challenge to vessel owners who must decide the extent of improvements and maintenance for their
1

These complications have also led to uninterpretable data being collected in the Economic Data Reporting
program. To date, that program’s collection of lease data contains no definition of leasing, leaving submitters to
apply their own interpretation of the term when completing the form.
2
These reporting issues contributed to the Council’s decision to restructure the economic data collection program
recently. Form revisions and rulemaking are underway to implement those changes in the near future.
Cooperative measures to address active participant and crew issues
North Pacific Fishery Management Council
February 2013

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vessels. When faced with mortgage payments and ongoing operational costs, vessel maintenance and
improvements, particularly those that are more discretionary in nature, are less likely. A second possible
affect is that crew compensation may decline. If a large share of a vessel’s revenue is devoted to lease
payments, crew (who typically are compensated with a share of the vessels adjusted revenues) may
receive less pay.
Although information is not available to assess QS holder participation in the fisheries, data are available
to examine changes in crew compensation since implementation of the program. These data can be used
to assess the effects of the program on crew.3 These effects vary across participants, but consolidation of
catch on fewer vessels has led to crews receiving greater average annual compensation from the fisheries,
but catching a substantially greater amount of crab. In the first 5 years of the program, average crew pay
is approximately three times the average of the three pre-program years for which data are available
(1998, 2001, and 2004) (see Table 2 and Table 3).4 Average crew pay in the Bering Sea C. opilio fishery
since program implementation is more than double the average pay from 2001 and 2004 (when the TAC
in that fishery was comparable to the TACs since the program was implemented). In 1998, when the TAC
in the fishery was near historical highs, average crew compensation was relatively similar to the post
program level (with the exception of 2011, the most recent year). In 1998 year, average vessel harvests
exceeded the average harvest since the program was implemented by almost one-third, but vessel gross
revenues were lower due to a lower crab price. In 2011, average crew compensation increased as a result
of a substantial increase in the C. opilio price with relatively high average vessel catch. In that year, the
average price rose to slightly higher than $2.50 per pound from approximately $1.30 in the preceding
year. These factors led to average crew compensation in the fishery of slightly less than $50,000.
While crewmembers, on average, are making larger amounts annually, the average share of a vessel’s
revenues paid to crew (including the captain) has declined from approximately 35 percent in both
fisheries prior to implementation of the program, to lows of below 20 percent in the Bristol Bay red king
crab fishery in 2010 and to approximately 23 percent in the Bering Sea C. opilio fishery before
rebounding slightly in 2011. Most (if not all) vessel owners are believed to have continued to pay crew a
share of vessel revenues after deduction of certain operating expenses (such as food and fuel). The
difference in compensation since implementation of the program is believed to have arisen from the
deduction of lease payments (made to quota share holders who lease their IFQ to vessel owners for
harvest) and mortgage payments or quota costs for purchases of quota share fished by the vessel.5
In 2011 (the most recent year), a portion of the fleet attempted to counter this decrease in the share of
vessel revenues being paid to crew, in part, through resisting high lease rates.6 These efforts appear to
have been somewhat successful, as the percentage of ex vessel revenues paid to crew increased from the
preceding year by more than 1 percentage point in the Bristol Bay red king crab fishery and in aggregate
in both fisheries on vessels that fish both the red king crab and Bering Sea C. opilio fisheries. This slight
3

The most obvious effect of the rationalization program on crew arose from the contraction of the fleet. The
contraction of fleets in the various fisheries to between one-third and one-half of their pre-program size has resulted
in the loss of approximately 975 crew jobs in the Bristol Bay red king crab fishery and approximately 675 crew jobs
in the Bering Sea C. opilio fishery. While these losses have clearly affected a large number of individuals, additional
effects have been felt by those crew who have retained their positions in the fisheries.
4
Note that all dollar amounts are adjusted for inflation based on the consumer price index (CPI-U) to 2011 dollars.
5
While the deduction of lease payments may be the immediate source of the reduction, it should be noted that
modification of crew payments (such as changing from crew share payment system to another payment system or
changing the structure of deductions away from charging royalties) could result in the same payment without
directly relating the changes to lease royalties (or other quota costs).
6
It should be noted that vessel owners also reap benefits if they successfully reduce lease rates, since a substantial
share of net revenues (after deductions) are retained by the vessel owner.
Cooperative measures to address active participant and crew issues
North Pacific Fishery Management Council
February 2013

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increase in the percentage of revenues paid to crew and the large increase in average vessel revenues
arising from the increase in Bering Sea C. opilio prices contributed to a substantial increase in average
captain and crew compensation on vessels that fish both fisheries in 2011.
Table 2. Average crew compensation before rationalization (1998, 2001, and 2004 through 2011).

Fishery

Bristol
Bay red
king crab

Bering
Sea C.
opilio

Mean
crewmember
pay
($US)

Mean percent of
gross vessel
revenues paid to
crew (including
captain)

23,907

9,468

35.3

26,951

10,590

35.7

326,749

37,440

14,769

35.7

194,812

1,010,460

73,177

27,863

25.0

76

201,666

817,790

55,608

21,632

23.4

2007

70

269,194

1,297,633

82,283

32,623

22.6

2008

75

246,932

1,338,084

83,302

35,249

22.8

2009

67

223,270

1,084,294

63,086

25,593

20.1

2010

61

229,189

1,716,929

94,186

37,736

19.3

2011

57

130,096

1,354,360

79,555

31,165

20.7

1998

162

1,098,577

848,016

101,588

34,745

36.2

2001

158

112,589

218,042

23,483

8,539

31.4

2004

167

123,606

298,051

35,090

14,067

35.1

2005

147

158,943

312,263

36,640

15,031

34.6

2006

73

453,455

561,169

40,274

15,489

23.6

2007

63

496,195

924,722

65,863

25,848

24.4

2008

72

780,820

1,393,415

98,927

36,232

23.5

2009

71

721,180

1,091,346

72,512

28,282

22.7

2010

63

703,543

918,880

59,089

23,773

22.8

2011

65

760,386

1,940,135

126,151

48,972

23.1

Year

Number
of
vessels

Mean vessel
harvest
(pounds)

Mean vessel
revenues
($US)

Mean captain
pay
($US)

1998

190

56,289

203,761

2001

182

36,195

218,518

2004

220

58,802

2005

83

2006

Source: Crab Econom ic Data Reporting.
Notes : Excludes any ves s els on which crew were paid in excess of 75 percent of the ves s el's gros s revenues . Period
after rationalization is 2005 and after in the Bris tol Bay red king crab fis hery and 2006 and after in the Bering Sea C.
opilio fis hery. All dollar am ounts are adjus ted to 2011 dollars .

Cooperative measures to address active participant and crew issues
North Pacific Fishery Management Council
February 2013

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Table 3. Crew compensation on vessels that fished both Bristol Bay red king crab and Bering Sea
C. opilio before rationalization (1998, 2001, and 2004) and after rationaliztaion (2006 through
2011).

Year

Number
of
vessels

Vessel revenues

Captain pay

Crew pay
(excluding captain)

Percent of gross to
crew (including
captain)

Mean

Median

Mean

Median

Mean

Median

Mean

Median
35.3

1998

151

1,071,273

1,018,863

127,395

121,108

258,845

241,267

35.9

2001

143

452,313

383,665

52,242

45,094

101,015

90,385

34.1

34.3

2004

162

649,796

610,987

75,713

72,911

154,995

141,605

35.7

35.5

2006

56

1,483,918

1,351,238

106,392

104,292

211,990

201,115

24.0

24.2

2007

55

2,372,439

2,102,188

154,639

156,231

322,239

304,663

23.0

22.4

2008

61

2,980,617

2,890,325

196,536

193,192

420,938

399,019

22.6

22.4

2009

57

2,356,263

2,181,501

146,961

145,014

318,907

284,371

21.1

20.9

2010

56

2,798,649

2,569,278

161,081

160,567

344,781

334,273

19.9

19.2

2011

53

3,548,382

3,187,901

223,231

225,834

489,948

460,036

21.9

20.9

Source: Crab Economic Data Reporting.
Notes: 2005 omitted, as Bering Sea C. opilio fishery prosecuted as limited entry derby and Bristol Bay red king crab prosecuted
as share-based fishery. Excludes any vessels on which crew were paid in excess of 75 percent of the vessel's gross revenues.
All dollar amounts are adjusted to 2011 dollars.

The relationship between compensation and quota consolidation becomes clearer, if the fleet is separated
into quartiles of pounds fished (see Table 4). Within each year, in almost all cases, the percent of
revenues paid to crew decreases as pounds of crab harvested increases. In other words, as a vessel
consolidates quota (by either leasing or purchasing quota), a smaller share of the revenues of the vessel
are paid to crews. Although the contractual arrangements likely differ across vessels, this pattern suggests
that quota costs are being absorbed, in part, by crew. Vessel owners share quota acquisition costs by
deducting those costs from gross revenues prior to applying the crew compensation percentage to net
revenues to determine payments to crew. In the first few years of the program, a downward trend in the
share of revenues paid to crews is suggested, particularly within the quartiles harvesting the greatest
amounts of crab. This trend likely arises, in part, from an adjustment to the change to rationalization.
Whether the downward trend reflects a distribution of additional costs (such as fuel costs arising from fuel
price increases) that are disproportional to added revenues or simply an labor market adjustment (arising
from vessel owners who perceive an opportunity to reduce crew compensation due to overall conditions
in the labor market) is uncertain. This trend seems to have abated in the more recent years, as the
percentage of ex vessel revenues paid to crew has fluctuated from year-to-year. Most notably, in 2011 in
the Bristol Bay red king crab fishery, the percentage of ex vessel revenues paid to crew increased in all
quartiles except the lowest quartile. This suggests that efforts to reduce the downward pressure of lease
charges against crew compensation appears to have had some effect.

Cooperative measures to address active participant and crew issues
North Pacific Fishery Management Council
February 2013

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Table 4. Crew compensation by quartile of pounds fished (1998, 2001, 2004 through 2011).
First quartile of pounds harvested
Fishery

Bristol
Bay red
king crab

Bering
Sea C.
opilio

Year

Number
of vessels
per
quartile

1998
2001

Second quartile of pounds harvested

Mean
Percent of
crewmember
gross to crew
pay
(including
(excluding
captain)
captain)
4,412
33.5

Mean vessel
revenues

47/48

24,360

94,948

45/46

14,209

87,167

4,484

33.2

25,222

153,668

7,880

36.5

2004

55

27,841

155,863

7,302

35.2

47,509

267,862

12,633

34.5

2005

20/21

61,177

308,985

15,419

32.8

111,565

573,128

24,117

28.6

2006

19

67,950

291,631

12,792

29.2

126,775

539,361

19,786

26.6

2007

17/18

98,619

475,406

22,172

32.9

192,984

944,352

28,522

22.7

2008

18/19

85,454

500,900

19,691

29.0

172,991

946,710

31,640

25.0

2009

16/17

92,251

447,608

16,172

26.9

184,818

894,010

23,176

19.9

2010

15/16

91,593

672,457

26,652

28.2

192,946

1,448,955

32,165

16.6

2011

14/15

60,365

633,120

22,278

27.4

101,410

1,075,792

27,453

19.9

1998

40/41

539,777

420,859

20,263

37.3

934,607

711,288

29,448

36.0

2001

39/40

45,411

88,506

3,157

27.4

77,664

151,143

6,082

30.7

2004

41/42

64,885

157,921

7,457

33.9

95,520

232,032

11,347

34.7

2005

36/37

84,930

177,560

8,663

32.4

122,265

254,399

13,084

36.1

2006

18/19

153,219

182,589

8,404

30.2

308,944

382,163

11,966

22.4

2007

15/16

185,828

346,518

16,056

32.4

346,523

651,836

21,927

24.5

2008

18

308,833

521,787

20,420

27.8

557,810

1,023,385

33,932

25.2

2009

17/18

300,835

434,538

15,794

26.9

512,418

764,198

24,139

23.6

2010

15/16

272,788

355,139

13,563

27.6

489,180

624,567

21,305

25.2

2011

16/17

302,207

875,870

27,985

27.0

570,582

1,400,821

49,257

27.0

Third quartile of pounds harvested
Fishery

Bristol
Bay red
king crab

Bering
Sea C.
opilio

Mean
Percent of
crewmember
gross to crew
pay
(including
(excluding
captain)
captain)
7,452
36.4

Mean 
pounds 
harvested

Year

Mean
pounds
harvested

Mean vessel
revenues

42,387

151,142

Fourth quartile of pounds harvested

Percent of
Mean
Mean
Mean vessel crewmember gross to crew Mean pounds
pounds
(including
harvested
revenues pay (excluding
harvested
captain)
captain)

Mean
vessel
revenues

Percent of
Mean
crewmember gross to crew
(including
pay (excluding
captain)
captain)

1998

60,997

220,962

10,011

35.1

96,844

346,085

15,902

36.0

2001

35,552

218,050

10,829

37.3

69,304

412,320

19,040

35.6

2004

62,574

351,874

15,875

36.7

97,283

531,397

23,268

36.3

2005

209,205

1,088,529

30,527

21.5

390,937

2,037,794

40,797

17.3

2006

212,079

912,578

23,052

20.5

399,862

1,527,589

30,897

17.1

2007

294,186

1,407,262

35,943

19.3

482,900

2,323,924

43,459

16.0

2008

282,308

1,521,728

47,571

21.8

438,476

2,338,936

41,275

15.6

2009

249,735

1,213,069

32,082

19.4

358,570

1,745,039

30,390

14.7

2010

243,171

1,811,094

43,287

17.6

379,055

2,859,069

48,145

15.1

2011

123,352

1,283,847

31,382

19.1

228,247

2,353,326

42,721

16.6

1998

1,222,998

938,038

37,642

34.7

1,686,333

1,313,656

51,344

36.8

2001

115,683

226,640

8,971

34.0

209,994

402,855

15,825

33.5

2004

128,412

311,502

15,586

36.4

204,208

487,413

21,720

35.4

2005

156,099

332,575

16,419

35.8

270,478

480,878

21,787

34.0

2006

480,291

607,615

17,092

21.8

849,371

1,045,408

24,020

20.3

2007

501,859

931,504

26,427

21.3

931,170

1,732,893

38,372

19.9

2008

818,908

1,493,960

37,662

21.8

1,437,727

2,534,529

52,914

19.2

2009

736,305

1,097,858

29,859

21.0

1,311,810

2,032,299

42,643

19.4

2010

708,306

926,423

23,966

20.3

1,316,975

1,734,156

35,619

18.6

2011

783,536

2,015,552

48,527

19.8

1,348,463

3,378,403

68,873

18.8

Source: Crab Economic Data Reporting.
Notes: Excludes any vessels on which crew were paid in excess of 75 percent of the vessel's gross revenues. Period after rationalization is 2005
through 2010 in the Bristol Bay red king crab fishery and 2006 through 2010 in the Bering Sea C. opilio fishery. All dollar amounts are adjusted to
2011 dollars.

Cooperative measures to address active participant and crew issues
North Pacific Fishery Management Council
February 2013

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An alternative way to examine crew compensation is to examine daily pay (see Table 5). Since
implementation of the program, daily crew pay (counting only days fishing, transiting, and offloading)
appears to have declined. If it is assumed that 10 days are spent doing boat and gear work (in addition to
the time fishing, transiting and offloading), daily pay appears to have changed little since implementation
of the program. It should also be noted that daily pay does not appear to follow any trend, but has
fluctuated annual. These fluctuations likely arise from changing conditions in the fisheries (such as
changes in catch rates, crab prices, and vessel operating costs). Notably, in the most recent year (2011),
average daily crew compensation (assuming 10 days of boat and gear work) increased to its highest level
in any year. If only days on the grounds are included, the 2011 average daily pay level is similar to the
average daily compensation prior to the rationalization program. The change in 2011 (in comparison to
other years since the program was implemented) arises largely from an increase in crab prices, with some
contribution likely from efforts on the part of vessel owners to resist high lease rates.
Table 5. Daily crew compensation 1998, 2001, and 2004 through 2011).

Fishing, transiting and offloading
Fishery

Bristol Bay
red king
crab

Bering Sea
C. opilio

Year

Number
of
vessels

Mean
Mean daily
number of captain pay
days
($)

Mean daily
crew
member
pay ($)

Fishing, transiting and offloading plus
10 days boat and gear work

Mean
Mean daily
number of captain pay
days
($)

Mean daily
crew
member
pay ($)

1998

190

8.0

3,126

1,234

18.0

1,339

530

2001

182

6.1

4,730

1,869

16.1

1,697

668

2004

220

7.0

5,698

2,235

17.0

2,216

872

2005

83

26.6

3,079

1,203

36.6

2,053

794

2006

76

22.3

2,785

1,094

32.3

1,777

693

2007

69

32.4

2,783

1,112

42.4

2,020

805

2008

75

32.6

2,800

1,204

42.6

2,027

870

2009

66

30.7

2,323

954

40.7

1,628

666

2010

61

35.9

2,818

1,146

45.9

2,121

859

2011

56

18.7

4,861

1,888

28.7

2,905

1,133

1998

162

66.1

1,536

525

76.1

1,334

456

2001

158

33.4

697

253

43.4

537

195

2004

167

13.9

2,631

1,045

23.9

1,487

593

2005

147

11.1

3,679

1,525

21.1

1,790

738

2006

73

39.7

1,142

434

49.7

844

322

2007

62

36.8

1,964

763

46.8

1,450

565

2008

72

48.8

2,124

808

58.8

1,699

640

2009

70

50.5

1,544

606

60.5

1,235

484

2010

63

44.0

1,391

573

54.0

1,091

447

2011

64

48.4

2,751

1,090

58.4

2,201

869

Source: Crab Economic Data Reporting.
Notes: Mean crew size is a count of all crew paid shares excluding the captain. Excludes any vessels on which crew were paid in
excess of 75 percent of the vessel's gross revenues. Excludes vessels harvesting CDQ allocations for Bristol Bay red king crab in
1998, 2001, and 2004 and for Bering Sea C. opilio for 1998, 2001, 2004, and 2005. All dollars are adjusted to 2011 dollars.

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To consider addressing these problems, the Council has identified four measures that it would like to
explore in this paper: 1) limits on lease rates, 2) limits on the portion of lease rates that may be charged to
crew, 3) minimum crew compensation, and 4) measures to promote transfer of shares to active
participants. The remainder of this paper briefly discusses these provisions suggested by the Council. As a
part of the development of an amendment package, the Council must first develop a purpose and need
statement to guide and support the action. The Council’s purpose and need statement should be based on
its Magnuson Stevens Act management authority. This authority stems from both the general provisions
of the Magnuson Stevens Act, which are applicable to all Council actions and the specific authority
granted the Council to establish the crab rationalization program. That legislation provided:
Subsequent to implementation [of the program], the Council may submit and the Secretary may
implement changes to or repeal of conservation and management measures, including measures
authorized in this section, for crab fisheries of the Bering Sea and Aleutian Islands in accordance
with applicable law, including this Act as amended by this subsection, to achieve on a continuing
basis the purposes identified by the Council.7
This appears to provide the Council with authority to amend the program to achieve the purpose and need
identified at the time the program was adopted. That purpose and need statement provides:
Vessel owners, processors and coastal communities have all made investments in the crab
fisheries, and capacity in these fisheries far exceeds available resources. The BSAI crab stocks
have also been highly variable and have suffered significant declines. Although three of these
stocks are presently under rebuilding plans, the continuing race for fish frustrates conservation
efforts. Additionally, the ability of crab harvesters and processors to diversify into other fisheries
is severely limited and the economic viability of the crab industry is in jeopardy. Harvesting and
processing capacity has expanded to accommodate highly abbreviated seasons, and presently,
significant portions of that capacity operate in an economically inefficient manner or are idle
between seasons. Many of the concerns identified by the NPFMC at the beginning of the
comprehensive rationalization process in 1992 still exist for the BSAI crab fisheries. Problems
facing the fishery include:
1.
2.
3.
4.
5.

Resource conservation, utilization and management problems;
Bycatch and its' associated mortalities, and potential landing deadloss;
Excess harvesting and processing capacity, as well as low economic returns;
Lack of economic stability for harvesters, processors and coastal communities; and
High levels of occupational loss of life and injury.

The problem facing the Council, in the continuing process of comprehensive rationalization, is to
develop a management program which slows the race for fish, reduces bycatch and its associated
mortalities, provides for conservation to increase the efficacy of crab rebuilding strategies,
addresses the social and economic concerns of communities, maintains healthy harvesting and
processing sectors and promotes efficiency and safety in the harvesting sector. Any such system
should seek to achieve equity between the harvesting and processing sectors, including healthy,
stable and competitive markets.
The following discussion of the specific measures that follows identifies some possible sources of
authority, should the Council elect to advance an action concerning any of the four issues it has identified.
7

See Consolidated Appropriations Act of 2004, Sec. 801 amending the Magnuson Steven Act Sec. 313(j)(3).

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The regulatory structure that defines fishing privileges under the crab program allows for the transfer of
both quota shares and IFQ subject to limits on use and holdings of those shares. IFQ, however, may only
be transferred within and among cooperatives. In addition, leasing of IFQ (defined as the harvest of IFQ
by a vessel not owned by the quota share holder or on which the quota share holder is not present) is only
permitted by cooperatives. Transfers of IFQ within a cooperative are overseen only by the cooperative,
allowing a cooperative to distribute and redistribute IFQ among member vessels with no administrative
limitations or delays. The only IFQ transfers administered by NOAA Fisheries are those between
cooperatives. Cooperative vessels are exempt from vessel use caps, freeing cooperative vessels from any
regulatory limit on the amount of a cooperative’s allocation they may harvest. This cooperative structure
provides participants with relatively high operational flexibilities, particularly in comparison to fishing
opportunities outside of cooperatives. Because of the contrast between cooperative and non-cooperative
fishing opportunities, almost all fishing has occurred in cooperatives. As a result, it is self-evident that the
changes brought on by leasing (including changes in active participation and crew compensation) have
arisen almost exclusively in cooperatives.
The Council’s motion requesting this paper suggests that the measures be considered as requirements of
cooperative agreements. The rationale for using cooperative agreements for implementing the measures is
clear when considering the structure of the rationalization program. Each of the suggested measures is
intended to address effects that arise largely from the share trading and redistribution, which occur
exclusively within and among cooperatives. The Council has asked that the paper examine cooperative
implementation of these measures, in part, to address the problems at their root. Cooperative
implementation may also provide other advantages, which are discussed in the specific sections
addressing each of the various measures.8
Generally, cooperative implementation could be accomplished through each cooperative being required to
incorporate certain provisions in its cooperative agreement to establish the measure. Cooperatives could
also collect information from members verifying compliance with the measure. In addition, each
cooperative could be required to report to the Council showing its compliance with the measure. These
three requirements could be used to establish the measure and ensure that participants follow through with
internal oversight of the measure. In addition, the measures should be developed in a manner that
provides specific direction to the cooperatives and fishery participants who are subject to the measure.
Only measures that are specific can reliably achieve the intended results.
Promoting quota holdings by active participants
The first measure the Council has suggested for consideration is a measure to promote the acquisition of
quota by persons active in the fisheries. This measure may be intended to address an overall policy goal
of creating additional opportunities for persons active in the fisheries to have better access to quota.
Persons who are active in the fisheries may maintain a better understanding of fishery conditions. This
understanding is argued to create a stewardship ethic, helping to ensure that the resource is maintained.
Active quota holders are also argued to be more engaged in day-to-day operations and have a better
appreciation of risks in the fisheries and how those risks evolve. This understanding of risks may translate
into better vessel maintenance and operations, improving safety in the fisheries. A requirement that
persons holding QS maintain would also consistent with the dictate of the Magnuson-Stevens Act that

8

At times, it has been suggested that industry could independently adopt measures that cap lease payments, limit the
extent to which lease payments may be charged to crew, or establish a minimum crew pay standard as a percentage
of vessel revenues. Some members of industry have expressed concern that these arrangements could create antitrust
concerns, as they could be construed by a court as an attempt by industry to limit prices or payments. As a result,
cooperative administration of these measures is suggested to require Council direction.
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limited access privileges be held by persons who substantially participate in the fisheries (see Magnuson
Stevens Act Sec. 303A(c)(5)(E) or 16 USC 1853a (c)(5)(E)).
While promotion of quota holdings by persons active in the fishery may be argued to have benefits, it is
difficult to understand the effects of any such measure, given the vagueness of the current proposal.
Cooperatives could adopt a variety of different measures to promote quota ownership by members who
are active, such as loan assistance, buyer preferences, or rights of first offer. The specific measures being
suggested by the Council are not defined by the motion. The Council could choose one of two means of
pursuing the action.
First, the Council could develop specific requirements for cooperative agreements, which require a
cooperative to adopt certain measures to promote acquisition of quota shares by persons meeting active
participation requirements (such as vessel ownership or crewing requirements). The cooperative could
also be required to monitor the provision and annually report to the Council on the transfers that have
occurred and the extent to which transfers were received by persons who are active. This type of a
requirement could be difficult to develop. Specific thresholds for active participation will need to be
defined. Consequences for failing to meet those thresholds may also need to be defined. Persons could be
prevented from forming a cooperative in subsequent years or could simply be subject to enforcement
actions. Since cooperatives in the program are strictly voluntary, development of measures to address
failing to meet requirements could be complicated. While peer pressure from fellow cooperative members
may be effective in creating incentives for complaint behavior, imposing a penalty or limitation on
members of a cooperative who are active in the fisheries for the failure of another member to meet an
active participation requirement may be perceived to be problematic. If the Council wishes to pursue a
specific cooperative requirement, considerations such as these may be relevant.
An alternative could be to adopt a more general requirement that each cooperative develop and adopt its
own measures to facilitate the acquisition of quota shares by active participants. This alternative would
allow each cooperative the flexibility to address the issue in a way that it perceives to be the most
appropriate for its circumstances. Each cooperative could also be required to report annually on the
performance of the measures. Although a less specific requirement may be less effective in some
instances, it may also allow cooperatives flexibility to address their own circumstances. A small
cooperative that has mostly active participants may appropriately establish internal financing of crew
quota share purchases. A larger cooperative may better address active participation share acquisitions by
granting a purchase preference to active participants. This added flexibility may come at a cost, if
cooperatives choose to minimally address the issue with measures that do little to ensure that transfers are
made to active participants.
Under either of the suggested alternatives, the Council could also require cooperatives to annually report
on the extent to which its cooperative’s members are active. Such a report could identify the number of
quota share holders in the cooperative, the amount of IFQ brought to the cooperative by those quota share
holders that are active and inactive, as well as the changes in the number of quota share holders and
amount of quota shares that are held by persons who are active. The report could also separately identify
members who are active as crewmembers, as well as persons meeting a specified vessel ownership
interest.
Limits on lease rates
The high lease rates in the fisheries are said to contribute greatly to the decline in revenues to persons
who actively participate in the fisheries as vessel owners and crew. It is suggested that lower lease rates
would allow for more of the fisheries’ revenues to be realized by vessel owners and crews. These

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additional revenues could address concerns that vessel owners have reduced revenues for vessel
maintenance and that crews have suffered declines in compensation under the rationalization program.
As noted earlier, understanding leasing in the crab fisheries is complicated by the regulatory structure.
Most transfers of shares occur inside cooperative and, as such, are not directly reported to NOAA
Fisheries. These internal distributions of IFQ are typically directed by members, without cooperative
managers having full knowledge of the terms of the transaction (particularly financial terms). Similarly,
transfers between cooperatives are often made at the direction of members, without cooperative managers
having full information concerning the transfers. For cooperatives to take on a role of overseeing all
transactions to implement a cap on leases would require that cooperatives take on the role of monitoring
all transfers of shares to ensure that the cap is not exceeded. To effectively monitor transactions in this
manner will require that the Council develop a definition of a lease. Defining a lease for purposes of
limiting the lease rate (or the amount of revenues that may be transferred in exchange for use of the
shares) may seem relatively straightforward, in comparison to defining a lease for purposes of
determining the overall market lease rate. For example, the limitation could be applied to any transfer of
IFQ within a cooperative or between cooperatives. While the documentation of specific lease rates could
be problematic, as a variety of arrangements (including in-kind transfers) among a variety of different
entities are likely, verification that lease rates do not exceed a specified level may be possible.
If adopted, a lease cap could be implemented by requiring each cooperative to include in its cooperative
agreement a provision that prohibits leases in excess of the cap. Cooperatives could also be required to
report on leases within the cooperative and between the cooperative and any other cooperative, verifying
simply that no lease rate exceeded the specified cap. The cooperative could use a system of affirmations
from its members to support its report. It should be noted that the report (and supporting affirmations)
would not specify any lease rates, but only that lease rates did not exceed the cap.
Whether a measure such as caps on lease rates will achieve desired effects, however, is uncertain. While
limiting cash payments to persons who lease QS could complicate efforts by those persons to realize the
maximum return from their share holdings, such a limit may not mean that alternative means of achieving
the maximum return are not developed. The simplest means of avoiding the cap would be to enter
arrangements that avoid the characterization of the share distribution as a lease. Transfers between
persons active in the fisheries can include shares of other species or other goods obscuring lease rates.
Persons not active in the fishery may use partnerships and corporate share holding arrangements to avoid
leases. For example, partnership agreements could be entered annually (or less frequently) that specify
that IFQ yielded by certain quota shares will be distributed within a cooperative for harvest by a specific
vessel owned by one partner. An inactive quota share holder (who holds no interest in the vessel) may
transfer quota to the quota holding partnership and hold a large interest in that partnership, effectively
receiving payments equivalent to a lease that pays in excess of the cap. The specific arrangements could
be tailored to accommodate a rule developed by the Council to ensure that the distribution of IFQ to the
vessel for harvest would not be considered a lease, since the vessel owner may hold an interest in the
quota holding entity.
The Council could attempt to close off these opportunities by providing better definition of instances that
would be considered a lease for imposing the cap. A lease could be defined as use of IFQ on a vessel that
is not owned in part or crewed by the holder of the quota shares that yielded the IFQ. A threshold
ownership amount could be established for determining common ownership of a vessel and the held quota
shares. Through this definition of leasing, the Council might effectively drive inactive quota share holders
into partnerships with persons active in the fishery, but these measures may not fully address the concern
of persons whose only interest in the fisheries are quota holdings receiving a substantial amount of the
value associated with harvests from the fisheries.
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Capping lease payments that may be charged to crew
Crews in the crab fisheries are typically paid a share (or percentage) of adjusted vessel revenues.
Historically, adjustments have been made for normal vessel expenses, such as bait and fuel. Since
implementation of the rationalization program, many vessel operators have also made adjustments for
quota share lease payments. To limit the effects of the leasing market and these lease payment on crew, it
is suggested that the amount of any lease payments that may be charged to crews could be limited.
Limiting these charges could be used to attempt to protect crews from the financial impacts of high lease
rates and widespread leasing practices in the fisheries, which may be contended to contribute to both
equity and economic stability in the harvesting sector.
Any limit on lease charges passed on to crews could be implemented in a manner similar to the suggested
implementation of the limit on lease rates, discussed above. A cooperative could be required to include a
provision in its cooperative agreement prohibiting charging lease rates to crew in excess of a threshold
percentage. Cooperatives could also be required to report to the Council that no crews were charged in
excess of the threshold. Cooperatives could use affirmations from members to support their reports.
Although capping the amount of lease payments that may be charged to crews is intended to insulate crew
from the effects of leasing in the fisheries, whether such a measure would be effective is uncertain. Vessel
owners can structure contracts a variety of ways to arrive at the same payment. If lease rates charges are
limited, it may be possible to add other charges or adjust the crew share percentage to arrive at the same
crew payment that would have been made, if the full lease rate was charged.9 It is difficult to envision
how a measure could be developed to address these modifications, given the variety of structures crew
contracts can take and the number of elements that may be incorporated into those contracts.
Minimum crew pay standards
An alternative to capping lease payments that may be charged to crew could be to establish minimum
crew pay standards. Such a standard could define the minimum percentage of gross ex vessel revenues
that a vessel may pay to its crewmembers. Such a limit could serve a purpose similar to a minimum wage
law. Such a measure would be intended to more directly and comprehensively protect crew from further
declines in the share of vessel revenues paid to crew that has occurred under the rationalization program.
The more general goal of these measures may be to achieve equity and economic stability in the harvest
sector.
As with the preceding measures, cooperative implementation could be accomplished through
requirements that a cooperative: 1) to include in its cooperative agreement a provision that requires all
vessels to compensate crews in excess of a specified percentage of the vessel’s gross revenues, 2) collect
from each members’ vessels gross revenues and total crew compensation that can be used to verify
compliance, and 3) annually report to the Council concerning compliance with the requirement. The
annual report may not require a cooperative to specifically report on crew compensation amounts (due to
confidentiality limitations), but would simply be an affirmation that the cooperative’s vessels all met the
standard. A cooperative, however, may elect to provide more specific information concerning crew
compensation.

9

If the Council wishes to proceed with an action to limit lease payments charged to crew it should also consider that
quota charges that serve a similar function as lease charges (such as mortgage payment charges) may have a similar
effect on crew compensation. The Council should consider whether its measure should be written to include these
other charges.
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As with other cooperative measures under discussion here, the Council should consider factors that may
either limit the success of this proposed measure or pose challenges in defining the measure. Since
implementation of the program, crew compensation as a percentage of gross revenues has varied with the
amount of harvests. Some participating crews have suggested that the consolidation of quota provides a
benefit, even if payments for harvest of that added quota are at a lower percentage due to charges for lease
payments. In other words, some crew may believe that the acceptable minimum share of vessel revenues
paid to the crew should differ with the amount of harvests. Whether appropriate minimum percentages
can be defined that protects crews on vessels that harvest substantially different amounts of crab is
uncertain.
Owner operated vessels and vessels that harvest quota of crewmembers could also pose a challenge. It is
possible that owner operated vessels and vessels that catch a substantial amount of quota held by crew
may be able to achieve the standard by disguising payments for vessel ownership or quota holdings as
crew compensation. Developing a measure that accurately separates pay for working as the captain on the
vessel (or payments for share holdings) from payments for crewing could be difficult.
Reasonable compensation may differ across fisheries due to a variety of factors (such as crab prices, catch
rates, working conditions, and risk). These differences are suggested by historical data from the fisheries.
For example, the percentage of vessel gross revenues paid to crew in the Bristol Bay red king crab fishery
has been lower than that percentage in the Bering Sea C. opilio fishery; however, daily pay in the red king
crab fishery has exceeded daily pay in the C. opilio fishery. Any percentages should consider the whether
different percentages are appropriate for different fisheries. In addition, to the extent that harvests overlap
across fisheries (such as C. bairdi harvests made in the Bristol Bay red king crab and Bering Sea C. opilio
fisheries), it may be difficult (or inappropriate) to attempt to separate payments by fishery.
Another consideration (that is more concerning) is whether the adoption of such a measure would lead to
all (or most) vessels simply paying the proposed minimum payment. Some vessel owners may be tempted
to adopt the minimum payment as the Council’s recommended crew compensation, rather than as an
acceptable minimum. If this practice is adopted, some crew could be harmed substantially.
Active participation requirements
While the high degree of flexibility allowed cooperatives in use of their IFQ has permitted quota share
holders to achieve operational efficiencies increasing the benefits derived from their share holdings, it has
also allowed for inactive quota share holders, which concerns the Council and some stakeholders. These
QS holders have used cooperative membership to derive ongoing benefits from the fisheries despite
maintaining no role in the fisheries beyond leasing of their fishing privileges to vessel operators. Many
stakeholders do not object to these QS holders receiving compensation for their share holdings, as those
holdings are derived from fishery investments (either in QS directly or in licenses and vessels from which
QS allocations were derived). Some stakeholders, however, question whether these QS holders should be
permitted to continue to hold QS and receive continuing annual payments from the fisheries, as their
holdings may limit the ability of some vessel owners and other active participants in the fisheries from
gaining more secure positions through the development of long term share holdings. To the extent that
these lease arrangements have limited the amount of QS on the market, vessel owners and active
crewmembers are subject to the vagaries of the lease markets for a large share of the vessel’s harvests,
rather than having a more certain allocation that arises from QS holdings.
A means of redressing this circumstance could be to develop a requirement that any cooperative member
meet an active participation requirement. For example, a cooperative could be required to verify that all of
its members either own a threshold interest in a vessel that actively fishes in the crab fisheries or meet a
crewing threshold in the fisheries. These requirements could be similar to the suggested requirements of
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the Council’s current active participation alternatives. Incorporating these active participation
requirements into cooperative requirements, however, could reduce the administrative burden of the
agency considerably, by shifting that burden to cooperatives. Each cooperative would need to maintain
vessel ownership and vessel and crew harvest records of member quota share holders sufficient to
demonstrate compliance with the active participation requirements, as needed to support an annual
report.10
Conclusion
The Council requested this paper as a first step in its consideration of a variety of measures to address
issues related to share purchase opportunities for persons active in the crab fisheries and high lease
payments in the fisheries and the effects of those payments on active participants. The paper outlines
possible measures that the Council could consider to develop alternatives for analysis. If the Council
wishes to proceed with an action, it will need to first develop a purpose and need statement identifying its
reasons for undertaking action to address these issues. Relying on that purpose and need statement, it can
then identify alternatives that will address perceived specific issues.

10

Shifting the burden to cooperatives could have the effect of distributing those costs among cooperatives in
proportion to the complexity of their circumstance, possibly creating a direct incentive for cooperatives (and their
members) to maintain simple ownership structures for purposes of meeting active participation requirements. Under
agency administration, this incentive is lacking since any administrative cost borne by industry would be through
cost recovery.

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