COMMERCIAL

FISHERIES

Effectiveness of Fishing

Buyback Programs Can

Be Improved

Statement of Barry T. Hill, Director

Natural Resources and Environment

United States General Accounting Office

GAO Testimony

Before the Subcommittee on Fisheries Conservation,

Wildlife and Oceans, Committee on Resources, House of

Representatives

For Release on Delivery

9:30 a.m.,

Thursday,

May 10, 2001

GAO-01-699T
GAO-01-699T

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss our October 1999 and June 2000 reports on

the costs and effectiveness of recent buyback programs for specific U.S. commercial

fisheries.1 As the Subcommittee is well aware, fish populations in many commercial

fisheries are declining, resulting in a growing imbalance between the number of vessels

in fishing fleets and the number of fish available to catch. Federally funded fishery

buyback programs are one tool available for managers to bring the number of vessels

and the number of fish back into balance. In response to this growing imbalance, the

federal government has provided $140 million since 1995 to purchase fishing permits,

fishing vessels, and related gear from fishermen, thereby reducing the capacity of

fishermen to harvest fish. Generally, the government designed these buybacks to

achieve multiple goals, such as reducing the capacity to harvest fish, providing economic

assistance to fishermen, and improving the conservation of fish. Our two reports

focused on the principal buyback programs that have taken place in U.S. commercial

fishing waters since 1976.

In summary, Mr. Chairman, we found that buyback programs need to be carefully

designed if they are to be effective in helping to ensure sustainable fisheries. For

example, as we reported, recent U.S. experience shows the following:

• If buyback programs are not accompanied by other measures that reduce incentives

to reenter a fishery, capacity reductions resulting from buybacks will erode. Unless

a buyback program prevents it, fishermen can use previously inactive vessels or

permits and reenter the buyback fishery.

• Buyback programs, by themselves, do not address a root cause of overfishing, which

is called the “race to fish.” In most fisheries, fishermen have an incentive to increase

 1

Commercial Fisheries: Information on Federally Funded Buyback Programs (GAO/RCED-00-8R, Oct. 20, 1999) and Commercial Fisheries: Entry of Fishermen Limits Benefits of Buyback Programs (GAO/RCED-00-120, June 14, 2000). A fishery is one or more stock (defined as one species or several

species in a geographical area) of fish managed as a group.
2 GAO-01-699T

their fishing capacity to catch fish before someone else does or use their existing

capacity more intensely.

• Plans for evaluating the results of buybacks should also be considered when these

programs are being designed. Measuring and evaluating results can identify

important lessons that can improve the effectiveness of future buybacks. The federal

government has done little to evaluate whether recent buyback programs have

achieved their intended benefits.

Background

The management of commercial fishing waters in the United States is divided among

coastal states and the federal government. Coastal states issue permits and develop and

enforce regulations for fishing in waters that are near their shores. In areas outside state

jurisdiction, the National Marine Fisheries Service (NMFS), within the Department of

Commerce, is responsible for issuing permits and developing and enforcing regulations

for harvesting fish. NMFS works with eight federally established regional councils

consisting generally of federal, state, and private-sector representatives to develop plans

and propose measures that attempt to balance the economic benefits of fishing with the

need to protect the environment.

Commercial fishing is a major industry in this country. In 1998, commercial fishing

vessels in U.S. marine waters landed 9.2 billion pounds of commercial fish in domestic

ports, with an estimated value of $3.1 billion. However, also in 1998, the federal

government reported that of the 300 species of fish for which it had data, 100 were either

overfished or approaching an overfished condition.

U.S. Buyback Programs’ Experiences

As of our October 1999 report, the 10 buybacks implemented since 1976 were expected

to cost a total of about $160 million, when completed, from federal, state, and private
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sources. About $140 million (87 percent) of these costs are for buybacks implemented

since 1995, an indication of the increasing use of buybacks. The remaining $20 million

were incurred during the 1970s and 1980s for programs to assist fishermen in the

Northwest salmon industry.

The features, costs, and objectives of the buybacks vary.

• The most costly buyback, involving Bering Sea pollock, began in 1998 under the

authority of the American Fisheries Act of that year. The act required NMFS to

purchase 9 of 30 factory trawlers2

 working in the fishery and their associated fishing

permits. The total cost of the buyback was $90.2 million, with $15.2 million from

federally appropriated funds and the remaining $75 million from a federal loan to

Alaskan pollock fishermen to buy large fishing vessels. The loan is repayable over 30

years based on a fee tied to the amount of pollock caught by those left in the fishery.

• The next most expensive buyback, involving New England groundfish, took place in

two phases between June 1995 and May 1998 under the authority of the Emergency

Supplemental Appropriations Act of 1994 and the Interjurisdictional Fisheries Act.

NMFS spent $24.4 million to remove 79 fishing vessels, the fishing permits that

allowed these vessels to catch groundfish, and all other federal fishing permits

associated with these vessels. NMFS also required that the vessels it purchased be

scrapped, sunk, or transferred to activities other than fishing.

• The longest running buyback effort began in 1976 and involves five separate

programs since 1976 for reducing the number of salmon fishing vessels and fishing

permits in the Northwest. Three of the programs, costing a total of $20.5 million,

mostly in federal funds, were in effect between 1976 and 1986 under the

Interjurisdictional Fisheries Act. The remaining two programs, costing a total of $14

million, were implemented from 1995 through 1998 under this act and the Magnuson-

 2

A factory trawler catches fish by dragging a large net through the water and then processes the fish

onboard.
4 GAO-01-699T

Stevens Fishery Conservation and Management Act. All five of the programs were

administered by the state of Washington, which purchased state fishing permits. One

of the programs also purchased vessels, while another also paid some vessel owners

not to commercially fish for salmon for 10 years.

• Other buybacks have involved efforts to reduce the number of Texas state shrimp

fishing permits in the Gulf of Mexico and to eliminate commercial crab fishing in

some parts of the Glacier Bay National Park and Preserve in Alaska. These buybacks

cost a total of about $10.4 million, mostly in federal funds.

Lessons Learned From Recent Buybacks

We believe recent U.S. experience demonstrates three important lessons that should be

factored into the design of any future buyback program. The first lesson is that, unless a

buyback is designed to restrict reentry of fishermen, gains from a buyback will erode.

Our June 2000 report examined the capacity gains from buybacks in three diverse

fisheries—New England groundfish, Bering Sea pollock, and Washington State salmon.

These buybacks initially removed from 10 to 24 percent of each fishery’s respective

capacity. However, the prospects for maintaining these gains is different for each of

these fisheries, largely because of each buyback’s design. For example, while the New

England buyback initially eliminated vessels from the fishery, additional vessels

subsequently became active because the buyback did not take steps to prevent

fishermen from using previously inactive vessels and permits. We found that the $24.4

million New England buyback removed 79 vessels; however, because of the number of

unused fishing permits in the fishery, 62 previously inactive vessels began catching

groundfish after the buyback. These fishermen have begun to erode the capacity

reductions made by the buyback, replacing fishing capacity by as much as two-thirds of

that purchased through the buyback. In contrast, capacity removed through the Bering

Sea program has not returned, in part, because the buyback legislation prevented the

entry of additional fishing vessels. With respect to the recent Washington State

programs, while no steps were taken to prevent additional fishing vessels from entering
5 GAO-01-699T

the fishery after the buyback, significant declines in salmon stocks have made this

impractical and fishing capacity has declined. In some cases, however, this capacity has

shifted to fisheries in other states.

The second lesson focuses on the economic forces that, unless addressed, drive

fishermen who remain after a buyback to increase their fishing capacity, called the “race

to fish.” This race leads fishermen to invest in more fishing capacity, such as adding

fishing gear, increasing their time at sea and number of crew, and replacing older vessels

with bigger and more productive ones in order to catch as many fish as quickly as

possible in an attempt to maximize their individual incomes. Economists conclude that

left unchecked, this race to fish will lead to overall higher costs and lower profits,

economic hardship for fishermen, and harm to fish populations and habitat.

The Bering Sea pollock buyback addressed the race to fish that had previously existed

among factory trawlers by facilitating the creation of a fishing cooperative by the owners

of the remaining trawlers. This cooperative was designed to eliminate the race to fish by

assigning a specific amount of fish, or an allocation, to the cooperative, which divides the

allocation among its members. Because of this allocation, members of the cooperative

have no incentive to expand fishing capacity to catch the available fish before someone

else does, as they have in another fishery. Members are able to catch their individual fish

allocations at their own pace, at lower capital and operating costs, while increasing

product quality. These changes resulted in higher profits and longer fishing seasons for

the remaining factory trawlers.

The third lesson is that evaluating the results of a planned buyback should be built into

the design of any future programs. In June 2000, we reported that NMFS has made

limited efforts to evaluate whether buyback programs have achieved their intended

benefits. As required by the Interjurisdictional Fisheries Act, NMFS evaluated the effects

of the New England buyback program on fishing capacity. Aside from this

congressionally mandated effort, however, NMFS has not evaluated how any other

buyback programs have affected fishing capacity. Prudent management suggests that
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buyback programs be evaluated to identify lessons learned that might help improve

future programs. Planning for such evaluations, including developing measures to

evaluate program results, should be an important part of the design of future programs.

Actions Recommended in Our Previous Report

Mr. Chairman, buyback programs can and should be designed to be more effective. In

our June 2000 report, we recommended that the Secretary of Commerce direct NMFS to

• design future buyback programs to (1) restrict buyback participants from entering a

fishery that has fishing capacity problems ; (2) restrict the use of previously unused

fishing vessels and permits in a buyback fishery with such problems; and (3) identify

mechanisms to minimize the incentives to increase fishing capacity in a buyback

fishery;

• develop performance measures for buybacks that relate to program goals and

broader legislative goals, such as the need to better manage fishing capacity and

sustain fish stocks; and

• evaluate the results of future buyback programs against the performance measures.

The Department of Commerce generally agrees with our recommendations that it should

design future buyback programs to take into account these entry and evaluation issues.

Since our report, the Department has continued initiatives to assess capacity levels in

federally-managed fisheries. For example, the Department issued a preliminary report in

March 2001 that provides qualitative assessments of capacity in domestic fisheries. In

addition, buyback proposals being developed by industry and/or NMFS are considering

various approaches to address issues raised in our report. This week NMFS started a

series of public meetings on its proposal for a $10 million permit buyback for the
7 GAO-01-699T

Northeast groundfish fishery, which includes a provision intended to discourage

reactivation of previously inactive permits.

This concludes our statement. We will be happy to respond to any questions from you or

other Members of the Subcommittee.

GAO Contact and Staff Acknowledgment

For further information on this testimony, please contact Barry Hill at (202) 512-3841.

Bob Lilly, Timothy Minelli, and Peg Reese also made key contributions to this testimony.

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