Reducing Capacity in U.S. Managed 

Fisheries 

An analysis of overcapacity and the cost of a vessel 

buyback program determined that substantial 

overcapacity existed in the New England and West 

Coast groundfish fisheries, the Atlantic swordfish 

and the large coastal shark fisheries, and the Gulf 

of Mexico shrimp fishery. 

James E. Kirkley, John M. Ward, James Nance, Frank Patella, Karyl 

Brewster-Geisz, Chris Rogers, Eric Thunberg, John Walden, Will 

Daspit, Brad Stenberg, Steve Freese, Jim Hastie, Stephen Holiman, 

and, Mike Travis 

U.S. Department of Commerce 

National Oceanic and Atmospheric Administration 

National Marine Fisheries Service 

NOAA Technical Memorandum NMFS-F/SPO-76 

November 2006
ii
iii

Reducing Capacity in U.S. Managed 

Fisheries 

An analysis of overcapacity and the cost of a vessel 

buyback program determined that substantial 

overcapacity existed in the New England and West 

Coast groundfish fisheries, the Atlantic swordfish 

and the large coastal shark fisheries, and the Gulf 

of Mexico shrimp fishery. 

James E. Kirkley, John M. Ward, James Nance, Frank Patella, Karyl 

Brewster-Geisz, Chris Rogers, Eric Thunberg, John Walden, Will 

Daspit, Brad Stenberg, Steve Freese, Jim Hastie, Stephen Holiman, 

and, Mike Travis 

NOAA Fisheries – Office of Sustainable Fisheries 

NOAA Technical Memorandum NMFS-F/SPO-76 

November 2006

U.S. Department of Commerce 

Carlos M. Gutiérrez, Secretary 

National Oceanic and Atmospheric Administration 

Vice Admiral Conrad C. Lautenbacher, Jr., USN (Ret.) 

Under Secretary for Oceans and Atmosphere 

National Marine Fisheries Service 

William T. Hogarth, Assistant Administrator for Fisheries 
iv

Suggested citation: 

Kirkley, James E., John M. Ward, James Nance, Frank Patella, Karyl Brewster-Geisz, 

Chris Rogers, Eric Thunberg, John Walden, Will Daspit, Brad Stenberg, Steve Freese, 

Jim Hastie, Stephen Holiman, and, Mike Travis. 2006. Reducing Capacity in U.S. 

Managed Fisheries. U.S. Dep. Commerce, NOAA Tech. Memo. NMFS-F/SPO-76, 45p. 

A copy of this report may be obtained from:

Office of Sustainable Fisheries 

NMFS, NOAA 

1315 East-West Highway, F/SF8 

Silver Spring, MD 20910 

Or online at: 

http://spo.nmfs.noaa.gov/tm/index.htm 
v

Reducing Capacity in U.S. Managed Fisheries 

Contributing authors and researchers: 

Editors: 

James E. Kirkley 

College of William and Mary 

School of Marine Science 

Virginia Institute of Marine Science 

Glouceter Point, VA 

John M. Ward 

Partnerships and Communications Division 

National Marine Fisheries Service 

Silver Spring, Maryland 

Contributing Authors and Researchers: 

Karyl Brewster-Geisz 

Chris Rogers 

Highly Migratory Species Management 

Division 

Office of Sustainable Fisheries 

National Marine Fisheries Service 

Silver Spring, Maryland 

Will Daspit 

Brad Stenberg 

Pacific States Marine Fisheries Commission 

Seattle, Washington 

Steve Freese 

Northwest Regional Office 

National Marine Fisheries Service 

Seattle, Washington 

Jim Hastie 

Northwest Fisheries Science Center 

National Marine Fisheries Service 

Seattle, Washington 

Stephen Holiman 

Mike Travis 

Southeast Regional Office 

National Marine Fisheries Service 

St. Petersburg, Florida 

James E. Kirkley 

College of William and Mary 

School of Marine Science 

Virginia Institute of Marine Science 

Glouceter Point, VA 

James Nance 

Frank Patella 

Galveston Laboratory 

Southeast Fisheries Science Center 

National Marine Fisheries Service 

Galveston, Texas 

Eric Thunberg 

John Walden 

Social Sciences Branch 

Northeast Fisheries Science Center 

National Marine Fisheries Service 

Woods Hole, Massachusetts 

John M. Ward 

Partnerships and Communications Division 

Office of Sustainable Fisheries 

National Marine Fisheries Service 

Silver Spring, Maryland 
Reducing Capacity in U.S. Managed Fisheries Executive Summary 

vi

Executive Summary 

NOAA Fisheries (the National Marine Fisheries Service), the Food and Agriculture 

Organization (FAO), and numerous member nations have long been concerned about the 

presence of excess and overcapacity in commercial fisheries. Simply, fishing fleets 

around the world have the capability to harvest well in excess of desired and sustainable 

levels. More important, the presence of excess and overcapacity typically cause 

substantial economic waste in the form of higher than necessary costs of production, 

reduced net benefits to society, and biological overfishing. NOAA and various nations, 

along with the FAO, are, therefore, seeking ways to globally rationalize fleet sizes. 

There are, however, numerous aspects related to the concept of capacity, which have 

not been fully examined, particularly relative to promoting the sustainable use of marine 

resources. There is the issue of excess capacity vs. overcapacity (Ward, Thunberg, and 

Mace, 2005). The concept of capacity is, in general, a short-run concept. It is a measure 

of the potential maximum output that could be produced given the fixed factors (e.g., 

capital stock, vessel and engine size, gear, and equipment), full-utilization of the variable 

factors of production (e.g., labor, fuel, and days at sea), and customary and usual 

operating procedures (CUOP). Excess capacity generally pertains to the difference 

between the potential output, which could be produced, and the actual output, which was 

produced, given existing resource conditions, the fixed factors of production, and 

operating subject to customary and usual operating procedures. For example, an existing 

fishing fleet might only be capable of catching and landing 10.0 million pounds of fish, 

given existing resource conditions. If resource conditions improved, however, the fleet 

might well be able to catch and land considerably more than 10.0 million pounds. And if 

resource levels were restored to desired target or maximum sustainable yield (MSY) 

levels, an existing fleet may or may not have too much harvesting capacity. For this latter 

case, the concept of capacity is referred to as overcapacity, which is the maximum 

potential output a fleet could realize, given fixed factors of production, desired or target 

levels of resources, full-utilization of the variable inputs, and operating under customary 

and usual operating procedures. Another issue, which is of extreme importance relative to 

rationalizing fleet size, is how to reduce capacity in fisheries. 

NOAA Fisheries has become particularly concerned about the overcapacity in 

America’s commercial fishing industry, and the reduction in fleet size necessary to make 

it commensurate with sustainable resource levels. In response to this concern, Bill 

Hogarth, Assistant Administrator (AA) of NOAA Fisheries, has provided this report on 

the nature of overcapacity and the cost of reducing overcapacity in federally managed 

fisheries. In addition, an analysis of overcapacity and the cost of a vessel buyback 

program to reduce overcapacity in five federally managed fisheries was undertaken by 

NOAA economists and academic researchers. The five fisheries examined were the New 

England and West Coast groundfish fisheries, the Atlantic swordfish fishery, the Atlantic 

large coastal shark fishery, and the Gulf of Mexico shrimp fishery. All five fisheries were 

determined to have substantial overcapacity, with the more severe level of overcapacity 

occurring in the west-coast groundfish fishery. 
Reducing Capacity in U.S. Managed Fisheries Executive Summary 

vii

Vessel reductions necessary for eliminating overcapacity were as follows: (1) New 

England groundfish—588 vessels and 725 latent permits; (2) Gulf of Mexico shrimp 

fishery—875 vessels; (3) Atlantic swordfish fishery—86 vessels; (4) Atlantic large coastal 

sharks—206 vessels; and (5) West Coast groundfish fishery—1,260 vessels. The 

estimated costs of reducing capacity, through the use of a buyback program, for each of 

the five fisheries were as follows: (1) New England groundfish—$460.7 million; (2) Gulf 

of Mexico shrimp fishery—$329.9 million; (3) Atlantic swordfish fishery—$25.7 million; 

(4) Atlantic large coastal sharks—$34.0 million; and (5) West Coast groundfish fishery—

$149.3 million. The total cost of reducing overcapacity was estimated to equal 

approximately $1.0 billion (2002 constant dollars). 

This report provides a summary and overview of the methodology used to estimate 

capacity and the cost of reducing capacity. It also provides a description of the data and 

sources of data used to estimate overcapacity in the five fisheries. Last, it provides 

estimates of overcapacity and the cost of reducing overcapacity for each of the five 

fisheries.
NOAA Fisheries—2006 Reducing Capacity in U.S. Managed Fisheries 

viii

Table of Contents 

Section Page 

Executive Summary ........................................................................................................ vi 

1.0 Introduction............................................................................................................... 1 

2.0 Concepts, Methodology, Assumptions, and Data ................................................... 3 

2.1 Definitions and Concepts of Capacity ................................................................... 3 

2.2.2 Primal and Economic Measures of Capacity .................................................. 3 

2.2 Methods for Estimating Capacity Output.............................................................. 9 

2.2.1 Data Envelopment Analysis and Capacity...................................................... 9 

2.2.2 Capacity Utilization and DEA ...................................................................... 12 

2.3 Assumptions for Estimating Capacity and Capacity Utilization .......................... 13 

2.4 Estimating the Costs To Support a Buyback ........................................................ 14 

2.5 Overcapacity and Target Levels ........................................................................... 15 

2.6 The Fisheries and Data ......................................................................................... 16 

2.6.1 The New England Groundfish Fishery ......................................................... 16 

2.6.2 The West Coast Groundfish Fishery............................................................. 17 

2.6.3 The Gulf of Mexico Shrimp Fishery............................................................. 17 

2.6.4 The Atlantic Swordfish Fishery.................................................................... 18 

2.6.5 The Large Coastal Pelagic Shark Fishery..................................................... 18 

3.0 Estimates of Capacity.............................................................................................. 20 

3.1 The New England Groundfish Fishery................................................................. 20 

3.2 The West Coast Groundfish Fishery .................................................................... 25 

3.3 The Gulf of Mexico Shrimp Fishery .................................................................... 27 

3.6 Overview of Overcapacity and the Cost of a Buyback Program .......................... 40 

4.0 Summary and Conclusions..................................................................................... 41 

References....................................................................................................................... 43 
NOAA Fisheries—2006 Reducing Capacity in U.S. Managed Fisheries 

ix

List of Tables 

Table Page 

Table 1. Estimated Capacity Output and the Full-utilization Days at Sea for the Three 

Georges Bank Fisheries.................................................................................................... 22

Table 2. Estimated Capacity Output and the Full-utilization Days at Sea for the Three 

Gulf of Maine Fisheries ................................................................................................... 22

Table 3. Estimated Capacity Output and the Full-utilization Days at Sea for the 

Combined Georges Bank and Gulf of Maine Fisheries.................................................... 22

Table 4. Estimates of Overcapacity and the Costs of Reducing Overcapacity in the 

Georges Bank/Gulf of Maine Fishery .............................................................................. 23

Table 5. Overcapacity, Estimated Reduction in Fleet Size, and Estimated Cost of 

Buyback Program to Reduce Capacity in Five Federally-Managed Fisheries ................. 24

Table 6. Estimates of Capacity in the West Coast Groundfish Fishery........................... 26

Table 7. Overcapacity and Estimated Cost of Reducing Overcapacity in the West Coast 

Groundfish Fisherya ......................................................................................................... 27

Table 8. Estimates of Capacity Output for Area 5 and Five Corresponding Depth Zones, 

Gulf of Mexico Shrimp Fishery ....................................................................................... 28

Table 9. Estimates of Capacity Output for Area 4 and Five Corresponding Depth Zones, 

Gulf of Mexico Shrimp Fishery ....................................................................................... 29

Table 10. Estimates of Capacity Output for Area 3 and Five Corresponding Depth Zones, 

Gulf of Mexico Shrimp Fishery ....................................................................................... 30

Table 11. Estimates of Capacity Output for Area 2 and Five Corresponding Depth Zones, 

Gulf of Mexico Shrimp Fishery ....................................................................................... 31

Table 12. Estimates of Capacity Output for Area 1 and Five Corresponding Depth Zones, 

Gulf of Mexico Shrimp Fishery ....................................................................................... 32

Table 14. Maximum Average Annual Days per Year per Vessel and Year of Maximum 

In the Gulf of Mexico Shark Fishery................................................................................ 34

Table 15. Capacity Output for the U.S. North and South Atlantic Swordfish Fisheries . 36

Table 17. Summary Information for the Large Coastal Pelagic Shark Fishery............... 38

Table 18. Capacity Output and Cost of Buyback Program for the Large Coastal Pelagic 

Shark Fishery ................................................................................................................... 39
NOAA Fisheries—2006 Reducing Capacity in U.S. Managed Fisheries 

x

List of Figures 

Figure Page 

Figure 1. Economic-based concepts of Capacity .............................................................. 5

Figure 2. The Production Frontier and Capacity Output................................................... 6

Figure 3. Sustainable Yield Curve and Overcapacity........................................................ 8

Figure 4. Input and Output-Oriented Measures of Technical Efficiency ........................ 11
Reducing Capacity in U.S. Managed Fisheries Introduction 

1

1.0 Introduction 

U.S. fishery managers and administrators widely recognize that many fisheries of the 

United States suffer from either severe excess or overcapacity. That is, fishing fleets 

have the capability to harvest well in excess of levels actually being harvested or levels 

that can be sustained. The consequences of this excess harvesting capacity are typically 

severe biological overfishing; substantial economic waste in the form of higher 

production costs and reduced earnings for vessels and the fleet; and increasingly 

restrictive management that can be quite costly in terms of expenditures required to 

support management and regulation. 

 The concept of capacity, however, is often vague and sometimes ambiguous. It is 

often confused with the concept of capitalization, which refers to the level of the capital 

stock (Berndt and Fuss, 1989). To some, the concept equates to an output level, and to 

others, it may imply the productive capability (e.g., a fishing vessel, fuel, and labor 

utilization), or the input set required to produce a given level of output. The National 

Marine Fisheries Service (NMFS) and the Food and Agriculture Organization (FAO) 

have developed what appears to be a reasonable and increasingly accepted definition of 

capacity; it is the amount of fish (or fishing effort) that can be produced over a given 

period of time (e.g., a year or a fishing season) by a vessel or fleet if fully utilized and for 

a given resource condition. 

NMFS has, however, extended the concept of capacity to distinguish excess capacity 

from overcapacity (Ward, Thunberg, and Mace, 2005). While seemingly trivial, the 

distinction is an important one. Excess explicitly refers to a short-run phenomenon, 

which is likely to be self-correcting; overcapacity, however, refers to a more long-term 

phenomenon that is likely to be persistent and of indefinite duration. Alternatively, the 

concept—overcapacity—explicitly recognizes the possibility that a given fleet could 

utilize its variable and fixed inputs so as to have the capability to harvest well in excess 

of a desired target level of production (e.g., maximum sustainable yield, MSY). 

Economists have generally suggested that the problem of overcapacity can be 

addressed through the introduction of individual transferable quotas or other quasi-private 

property rights’ regimes (see, for example, Grafton et al. 1996 and Squires et al. 1995). 

An alternative approach for reducing capacity is to implement buyback programs. A 

buyback offers one way to quickly reduce capacity to help facilitate the rebuilding of fish 

stocks. Under a buyback program, industry, the government, or a collaborative 

industry/government structure agrees to purchase commercial fishing vessels. Albeit the 

National Marine Fisheries Service has a formal set of guidelines, which must be followed 

to implement a buyback program, considerable concern exists about the financial cost of 

a buyback program. As a result, Bill Hogarth, the Assistant Administrator (AA) for 

Fisheries, requested in May of 2002 that estimates of overcapacity and the direct financial 

cost of reducing overcapacity in federally managed fisheries be provided. Five federally 

managed fisheries were chosen including the New England and West Coast groundfish 

fisheries, Atlantic swordfish fishery, the Atlantic large coastal shark fishery, and the Gulf 

of Mexico shrimp fishery. 
Reducing Capacity in U.S. Managed Fisheries Introduction 

2

This report provides estimates of overcapacity and the cost of reducing overcapacity 

in the five fisheries. It is noted, however, that the estimates are preliminary or a firstround approximation of the level of overcapacity and cost of reducing overcapacity in the 

five fisheries. More precise estimates are anticipated to be available in the future as 

additional and more extensive information, particularly detailed economic data, becomes 

available. The next section provides an overview of the concept of capacity; 

methodology used to assess capacity and estimate the cost of reducing overcapacity; the 

assumptions required to estimate capacity and the cost of overcapacity; and the source 

and integrity of available data. Section 3 presents the empirical estimates of 

overcapacity, the number of vessels and costs required to eliminate overcapacity. Section 

4 provides the summary and conclusions. 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

3

2.0 Concepts, Methodology, Assumptions, and Data 

Estimation of capacity and the cost of reducing overcapacity require a methodology, 

assumptions, and data. Prior to presenting a discussion about the methodology, however, 

the basic concept of capacity needs to be defined and presented. 

2.1 Definitions and Concepts of Capacity 

The concept of capacity is often vague and confusing to individuals, particularly to 

non-economists. In its widest usage, capacity refers to the maximum output that can be 

produced, given full utilization of the variable inputs (i.e., utilization of inputs that can be 

varied and are used such that maximum possible production is realized), the limitations of 

the fixed factors (i.e., those factors that cannot be easily changed, such as the size of plant 

or fishing vessel), customary and usual operating procedures, and output and input prices. 

NOAA Fisheries, following the definition offered by FAO, defines capacity as the level 

of output a firm is able, or willing and able, to produce given specified conditions and 

constraints (NMFS, 2001). As such, both the general and NMFS concepts of capacity are 

output-based or output-oriented. That is, capacity is defined and measured in terms of 

output levels. 

In contrast, the notion of an input-based or input oriented measure of capacity has 

been offered (Kirkley and Squires, 1999). This concept, however, is not consistent with 

the basic notion of capacity. The input-oriented measure attempts to define capacity in 

terms of the minimum level of variable and fixed factors required to produce a given 

output. As such, it is inconsistent with the concept of capacity, which is primarily a 

short-run notion. An alternative input-based measure, which is actually derived from an 

output-oriented concept, is the level of fixed factors required to produce the maximum 

output, given full-utilization of the variable inputs. For example, assume that 20 fishing 

vessels could harvest 100,000 mt of product a year, given full utilization of the variable 

inputs, but were only producing 50,000 mt per year. Only 10 vessels would then be 

necessary to harvest the 50,000 mt per year. The fleet of 20 vessels would, thus, have too 

much harvesting capacity. It is this latter notion of capacity that is of increasing concern 

to NOAA Fisheries because it facilitates the determination of the number of vessels and 

their level of operation necessary to harvest a stated target level of catch. 

2.2.2 Primal and Economic Measures of Capacity 

Although the preferred measure of capacity is a measure based on economic 

decision-making behavior (i.e., an economic-based measure of capacity), which reflects 

capacity output and input levels consistent with economic optimizing behavior, data 

necessary for estimating the economic concept of capacity are not available for many 

fisheries of the United States (Kirkley et al. 2001; NMFS 2001). This is particularly the 

case for the five fisheries examined in this study. For the purposes of this study, it was 

decided to estimate the “primal” or “technological-economic” concept of capacity. The 

technological-economic concept is a physical measure of the capacity output, which 

although having no explicit economic motivations, does implicitly recognize that 

observed behavior is reflected in the empirical observations. This measure of capacity 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

4

provides a physical measure of capacity output that reflects economic decision-making 

behavior, but cannot be used to predict capacity output in response to changes in behavior 

or input and output prices. 

2.1.1.1 Economic-based Measures of Capacity 

The basic concept of capacity is an economic concept. Formally, it is defined as the 

level of output corresponding to a tangency between the short and long-run average cost 

curves. It is formally a short-run concept, because in the long-run, it is possible to 

change the levels of fixed factors, and thus, change the level of capacity. Capacity may 

also be defined according to output levels corresponding to maximum revenue or 

maximum profit (F@re et al. 2000; Coelli et al. 2001). Concepts of capacity based on 

economic optimizing behavior are referred to as economic-based measures of capacity. 

For the case of fisheries, however, economic data are seldom available, and thus, 

capacity can usually only be estimated using data on physical quantities of inputs and 

outputs. Kirkley and Squires (1999) refer to this concept as the “technologicaleconomic” concept of capacity. This is because the empirical data reflect decisionmakers responses to changes in economic conditions, but the analysis cannot 

accommodate changes in economic conditions. 

Coelli et al. provide a comparison of capacity output based on economic and 

technological-economic concepts. Coelli et al. discuss four possible concepts of 

capacity; three of which were economic-based concepts, and one was the Johansen 

(1968) concept. Two concepts, Klein (1960) and Berndt and Morrison (1981), were 

based on short-run cost functions. Klein defined capacity output to be that output (K) at 

which the short-run average cost curve equals or is tangent to the long-run average cost 

curve (Figure 1).1

 Berndt and Morrison defined capacity output (BM) as that level of 

output corresponding to the tangency between the minimum short-run average cost and 

the long-run average cost. Given constant returns to scale, where a given percentage 

increase in all input causes the same percentage increase in output, the concepts of Klein 

and Berndt and Morrison are identical. The Johansen concept of capacity output (J) 

equals the maximum potential output that could be produced given fixed factors and 

unrestricted levels of variable inputs. Coelli et al., however, argued that defining 

capacity output (CGP) based only on the tangency of short and long-run average cost 

curves completely ignores the possibility of firms earning negative profits, and that 

producers would not normally continue to operate at a loss. Coelli et al. argue, 

subsequently, that capacity output is the level of output necessary to maximize profits. 

 

1

 The short-run cost curve is the cost curve corresponding to a period during which some 

factors of production cannot be changed. In the long-run, it is assumed that all factors of 

production may be changed. 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

5

Figure 1. Economic-based concepts of Capacity 

In Figure 1, K stands for Klein’s level of capacity output; BM indicates Berndt and 

Morrison’s concept; and CGP indicates Coelli et al.’s measure; P indicates price; MC 

indicates marginal cost; and SR and LR indicate short and long-run. Johansen’s concept 

occurs at the far right of the short-run average cost curve. 

2.1.1.2 The Technological-Economic Concept of Capacity 

In the estimation and analysis of capacity in fisheries, it is usually necessary to 

consider the technological-economic concept; this is simply because input prices and 

costs data are typically not available. One technological-economic measure of capacity 

output is the maximum potential output that could be produced if a firm or fishing vessel 

operated efficiently and was not constrained by the availability of variable factors of 

production (e.g., fuel and labor). This is the traditional Johansen (1968) concept of 

capacity output. The technological-economic measure of capacity output used in this 

study is a weak variant of the concept (F@re 1984). The weaker concept permits a fixed 

factor (e.g., vessel size or level of capital) to limit or constrain output. 

To better understand the concept of capacity output, consider Figure 2, which depicts 

a production frontier. The production frontier or technology depicts the maximum output 

that can be produced given fixed and variable inputs. Points on the frontier represent 

technically efficient production, and points below the frontier depict inefficient 

production. The vertical axis, Y, indicates output levels, and the horizontal axis, K, 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

6

indicates capital—a fixed input. If capital equals K1, the maximum potential output, 

regardless of how much the variables inputs are expanded, equals the capacity output, YC. 

The fixed factor, capital (K1), constrains output to be no larger than YC. Under the 

Johansen concept of capacity, the maximum potential output would be the point of 

maximum output for the production frontier, which would be to the right of YC. 

Figure 2. The Production Frontier and Capacity Output 

The frontier and capacity output, as illustrated in Figure 2, are completely devoid of 

economic content. Capacity output, in particular and as presented in Figure 1, is a 

measure of the maximum amount of output a producer could produce if all variable 

inputs were fully utilized and only the fixed factor, capital, constrained production. This 

concept of capacity output does not provide a measure of the output level most likely to 

be produced given input and output prices. 

The output level most likely to be produced given input and output prices, producer 

behavior (e.g., maximization of profit), and the fixed factors is the economic concept of 

capacity. Our technological-economic concept of capacity output does not permit us to 

directly assess the most likely level of capacity output given input and output prices. If 

we estimate and assess capacity using empirical data or observations on actual input and 

outputs levels, we may obtain estimates of capacity output that reflect economic 

conditions since actual output levels were determined according to economic conditions. 

These estimates, however, cannot directly be related to economic conditions. 

 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

7

2.1.1.3 Overcapacity in Fisheries 

A major concern of the National Marine Fisheries Service (NMFS) is whether or not 

fishing fleets would have overcapacity if resource levels were fully restored to their 

desired optimum or target levels; e.g., maximum sustainable yield (MSY) biomass. Many 

of the nation’s fishery resources are at stock abundance levels below those necessary to 

sustain MSY harvests. Alternatively, some fisheries have resources that are fully utilized 

and are at levels consistent with desired levels, but fishing must be heavily regulated to 

prevent resource declines and associated problems. This latter situation characterizes 

wasted resources and lower than possible levels of economic productivity. 

 For those fishery resources with levels less than those considered to be optimum, 

production is lower than it would be if resources were at desired levels. Alternatively, 

our production technology (i.e., the technology that describes the relationship between 

outputs and inputs) yields output levels for a given level of fishing effort that is lower 

than it would be with more abundant resource levels. The case of overcapacity is, then, 

the potential maximum output that could be produced if resources were at their desired 

levels less the target level of landings (e.g., a MSY level of landings). 

 Using the surplus production framework of Schaefer (1954), the concept of 

overcapacity may be illustrated. Consider Figure 3, which depicts sustainable levels of 

landings for a fishing fleet given different levels of fishing effort. Points on the 

sustainable yield curve represent levels of landings corresponding to different levels of 

the resource, and for which additions to the stock equal removals. The maximum point 

represents maximum sustainable yield (MSY); the MSY is the maximum average yield 

that can be harvested for a given time period, usually per year. The origin of the 

sustainable yield curves corresponds to the maximum population, which is also referred 

to as the environmental carrying capacity (EEC). 

Catch is on the vertical axis in Figure 3, and fishing effort (a measure of total inputs 

expended to harvest fish) is depicted on the horizontal axis. The maximum sustainable 

yield catch occurs for EMSY in Figure 3. A short-run yield (SRYC) or catch-effort 

function of the form C = q E N, where C is catch, q is the catchability coefficient, E is 

fishing effort, and population size (N) is imposed on the sustainable yield curve. For the 

short-run yield function in Figure 3, N is the population corresponding to maximum 

sustainable yield. If the fleet exerted EMSY units of effort, the MSY level of catch would 

be harvested. As depicted in Figure 3, however, the fleet has the capability to harvest in 

excess of MSY in the short-run; in this case, the fleet has overcapacity because they 

could increase their fishing effort to EC and harvest in excess of the MSY (CMSY) level. 

The amount of overcapacity is CC – CMSY. Now consider a decline in resource 

conditions, such that the short-run yield function shifts downward to SRYC1

. If the 

difference between CC and CO, the observed catch, is considered, there is excess capacity, 

which equals CC – CO. Observe, however, that the observed catch (Co) could have been 

below the MSY level, and thus, the excess capacity would be more than overcapacity. 

The major distinction between the two—over and excess capacity—is the time horizon 

and the reference to a target or desired level of catch (e.g., MSY). 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

8

Figure 3. Sustainable Yield Curve and Overcapacity 

2.1.1.4 Capacity Utilization 

In addition to managers being concerned about the potential capacity output, they 

may also be concerned about capacity utilization (CU). Capacity utilization is simply a 

measure of the proportion of the productive inputs used relative to what could have been 

used to produce the capacity output. Capacity utilization is typically measured as the ratio 

of observed output or the technically efficient output (the output level that could be 

produced, given existing input levels, if production was technically efficient) to the 

capacity output. A CU measure less than 1.0 indicates the plant or vessel could produce 

more output without having to make investment or expenditures on new capital or 

equipment. A CU equal to 1.0 in value implies that the firm is fully utilizing all its 

variable inputs and the capital stock; e.g., the vessel. Capacity utilization and the concepts 

related to capacity should not be confused with capital utilization, which is ratio of the 

desired stock of capital, given output quantity and input prices, to the actual stock of 

capital (Berndt, 1990). Capital utilization is equivalent to capacity utilization if, and only 

if, production is characterized by constant returns to scale and there is only one fixed 

factor of production; i.e., capital. 

2.1.1.5 Input Utilization 

The term—input utilization—appears to have originally been offered by F@re et al. 

(1989). As offered by F@re et al., input utilization is the ratio of an observed level of a 

variable input to the level of input required to produce the capacity output (i.e., full 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

9

utilization). If input utilization is less than 1.0 in value, it implies that producers are 

using fewer variable inputs than necessary to produce the capacity output; if the ratio is 

greater than 1.0, producers have a surplus of variable inputs (i.e., they are using too much 

of a variable input). F@re et al. (1994) also offer an inverse measure of input utilization, 

which equals the ratio of the variable inputs required to produce the capacity output to the 

variable inputs actually used to produce a given output level. 

2.2 Methods for Estimating Capacity Output 

There are numerous methods for empirically estimating capacity output. A detailed 

description of the various methods is presented in Kirkley and Squires (1999a), NMFS 

(2001), and Kirkley et al. (2001, 2002). Briefly, there are five basic methods, which may 

be used to estimate capacity. One approach is to conduct a survey as done by Census for 

the Federal Reserve. In the survey, plant managers are asked to provide information 

about the maximum potential output given customary and usual operating procedures. 

Another approach is to specify a dual cost function when economic data are available, 

and determine the output level corresponding to short and long-run average costs being 

equal. A third approach is the stochastic production frontier. With this approach, a 

production function is estimated and evaluated at levels of the inputs needed to impute 

the potential output that would be possible with combinations of the fixed and variable 

factors; this approach is described more thoroughly in Kirkley et al. (2002). Another 

approach is the peak to peak approach of Klein and Long (1973). With the peak to peak 

approach, aggregate output levels are divided by number of firms over time; peak levels 

of output per unit input are identified; and these are interpreted as capacity output levels. 

Typically, the output per unit input levels between the peak levels are adjusted for 

technical change and used to estimate capacity for all periods. Ballard and Roberts 

(1977) used the Klein approach to estimate capacity output in ten U.S. fisheries. The 

approach used in this study is to use data envelopment analysis (DEA) to estimate the 

concept of capacity output offered by F@re (1984). Since DEA was the method used to 

estimate capacity output in the five U.S. managed fisheries, we restrict our 

methodological discussion to DEA; detailed discussions of the other methods are 

provided in Klein (1960), Berndt and Morrison (1981), Morrison (1985a,b), Segerson and 

Squires (1990, 1993, and 1995), Kirkley and Squires (1999a,b), and Coelli et al. (2001). 

2.2.1 Data Envelopment Analysis and Capacity 

 Data envelopment analysis (DEA) is a non-parametric, non-statistical approach for 

determining technical and economic efficiency. That is, no parameters, as in regression, 

are directly estimated, and no statistical distributions are assumed. It is based on 

mathematical programming. Charnes et al. (1978) offered the method as an approach for 

assessing the efficiency of decision-making units. The basic premise upon which DEA 

operates is the mathematical distance function. More recent work, however, is focusing 

on the use of directional distance vectors, which permit consideration of undesirable 

outputs (e.g., bycatch) and both expansions and contractions of, respectively, outputs and 

inputs. For the purposes of this report, however, we restrict attention to the conventional 

DEA framework, which uses distance functions. 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

10

 Although DEA permits numerous different types of distance functions, the Euclidean 

distance function is the most widely used. The Euclidean distance function is given by 

the following: 

2

1 2

2

1 2 (y y − ) +(x − x )

With DEA, a linear programming problem is solved that either attempts to minimize the 

level of inputs required to produce a given output level, or maximizes the outputs that 

might be produced by a given vector of inputs. These two optimization problems provide 

solutions in terms of, respectively, an input orientation (minimization of inputs given 

outputs) and an output orientation (maximization of outputs given inputs). In actuality, 

DEA uses observed levels of inputs and outputs to construct a best practice frontier, 

which reflects the production activities of the more efficient producers. 

 Initially consider the problem of determining the potential reduction in inputs, for a 

given output level, to operate efficiently. In this case, DEA uses an input-orientation and 

input distance function. The mathematical value of an input distance function is 

restricted to $ 1.0; for the most part, however, DEA solves for the inverse of the input 

distance function. Consider a production frontier with constant returns to scale, as in 

Figure 4. The vertical axis is output, and the horizontal axis is a variable input. For 

simplicity, we assume a single output (Y) and a single input (X). Points along the 

production frontier represent efficient combinations of output and input levels. Points to 

the interior of the frontier represent inefficient production. 

Consider a producer producing A units of Y using F units of X (i.e., the input). The 

producer, however, could produce the same level of Y using D units of X. The measure 

of technical efficiency (TE) is AB/AC, and 1 – AB/AC represents the proportion by 

which the producer could reduce the use of X and still produce the same level of output 

(Y). If the value of the ratio is 1.0 in value, production is said to be technically efficient; 

for values less than 1.0, production is inefficient. For the input oriented measure of TE, 

all points to the right of the frontier represent inefficient production (i.e., firms using 

levels of X greater than the level necessary to produce along the frontier are technically 

inefficient). 

What if the concern was on determining the potential expansion or increase in output 

given that the producer will use F units of X. In this case, technical efficiency is 

determined using an output orientation and output distance function. An output distance 

function is restricted to being # 1.0 in value. Technical efficiency, however, is typically 

measured using the inverse of ratios of output distance functions. Returning to Figure 4, 

we find that point E represents an efficient output level for F units of input (X). If the 

producer produces only C units of output using F units of input, production is said to be 

technically inefficient. The ratio of FE/FC is a measure of the amount by which output 

can be expanded; actually, the potential expansion is FE/FC – 1.0. If the value of the 

ratio equals 1.0, production is technically efficient; a value greater than 1.0 imply that 

production is technically inefficient. Some researchers, however, use the inverse ratio—

FC/FE—to assess technical efficiency (Coelli et al., 1998). In this case, the potential 

expansion of output levels equals 1/(FC/FE) – 1.0. 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

11

Figure 4. Input and Output-Oriented Measures of Technical Efficiency 

Since the primary focus of this research is on capacity, further attention is restricted 

to the output oriented DEA problem, which is the primary orientation used to estimate 

capacity. The DEA problem for estimating capacity attempts to determine the maximum 

output expansion given no constraints on the variable factors of production and inequality 

constraints of the fixed factors of production. The problem may be specified as follows: 

θ λ

θ

θ

λ

λ

, ,

, ,..., ,

, ,..., '

, ' ,...,

, ,...,

z

jm j

j

J

jm

j

j

J

jn jn

j

j

J

jn jn jn

j

jn

MAX

u zu

zx x

zx x

z

subject to m M

n n

nn N

j J

≤ =

≤ =

= =+

≥ =

≥

=

=

=

∑

∑

∑

1

1

1

1

1

1

0 1

0

 

where 2 is a scalar, representing the efficiency score; ujm is the mth output of the jth

producer (or observation); xjn is the nth input for the jth producer; z is an intensity variable 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

12

used to construct the linear, piece-wise frontier technology by taking convex 

combinations of the observations; and 8 is a measure of the variable input utilization rate. 

The problem, as specified, imposes constant returns to scale. For our analysis, we 

impose variable returns to scale, which simply requires adding the constraint 3j zj = 1.0. 

The inputs n through n’ represent the fixed factors of production, or those productive 

inputs, which cannot be varied during the production period. Inputs n’+1 through N 

represent the variable factors, or those productive factors which can be varied. The 

problem, as specified, allows for both multiple inputs and multiple outputs. For this 

particular DEA specification, the value of 2 is restricted to being $ 1.0. 

 The problem is solved for every observation. The various values of 2 (actually 2 - 1) 

provide a measure of the amount by which output can be expanded, with no change in the 

fixed factors but allowing the variable factors to change, to equal the capacity output. 

Alternatively, multiplying the existing or observed output levels (ujm) by 2 equals the 

capacity output for each product and each firm or observation. We note that by 

expanding each output by 2, we have a radial expansion of outputs. We stress, however, 

that this does not mean that the underlying production technology assumes that outputs 

are produced in fixed proportions (i.e., the ratio of two output levels is always constant). 

Russell (1985) and Coelli (1997) offer two approaches that permit non-radial expansions 

in outputs. For our purposes of estimating capacity, we utilize only the radial expansion. 

Last, the value of 8 equals the input utilization ratio offered in F@re et al. (1994), or the 

ratio of the level of a variable input necessary to produce capacity output to the observed 

level (level of variable input actually used by the firm) of the same variable input. 

2.2.2 Capacity Utilization and DEA 

 Capacity utilization (CU), which was previously defined as the ratio of observed or 

technically efficient output to capacity output, may also be calculated using DEA. As 

noted by F@re et al. (1989), the ratio of observed output to capacity output may be a 

biased measure of CU because it ignores the possibility that production may be 

inefficient. The same ratio also may suggest that capacity output could be obtained by 

changing variable factor levels, when in fact, producers really need to improve their 

efficiency. F@re et al., thus, recommend using the ratio of technically efficient output to 

the capacity output. The technically efficient output levels can be easily determined by 

simply modifying the problem for capacity; instead of including the equality constraint 

on the variable factors of production, it is only necessary to include the variable factors in 

the inequality constraint and omitting 8 from the problem. The solutions to this problem 

provide a basis for estimating the technically efficient output levels of all producers, 

given no change in the fixed or variable factors of production. If the ratio of 2 from this 

problem to 2 from the capacity problem is calculated, we obtain an unbiased measure of 

CU for all producers or observations. 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

13

2.3 Assumptions for Estimating Capacity and Capacity Utilization 

The National Marine Fisheries Service (NOAA Fisheries) desired to have estimates 

of capacity output, conditional on the assumption that resource levels were fully restored 

to desired targets. That is, what would be the maximum potential output, given 

customary and usual operating procedures, and resource levels at the desired targets? 

This is not an easy question to ask. First, available data do not reflect fishing 

observations during periods when fisheries were not heavily regulated or periods during 

which the resources were at desired target levels. Second, it cannot be easily ascertained 

how fishers would change their fishing strategies and input levels if resources were fully 

restored. Third, there is no information available to assess how production responses 

would change in response to fully restored resource levels. 

As an example, lets modify the very simple catch-effort relationship considered 

earlier. Specifically, lets give the production technology the form C = q E"

 K$ N', where 

as before C is catch, q is the catchability coefficient, E is a variable input—fishing effort, 

K is a fixed factor, and N is the resource condition. However, the added coefficients for 

each of the variables now provides a measure of the production response to changes in 

the levels of each input; formerly, these are referred to as output elasticities because they 

indicate the percentage change in output for a one-percent change in each input, including 

N. The output elasticities are assumed to be positive in value. Obviously, as N changes, 

C would change, given no changes in q, E, or K. The problem is that there is a high 

probability that the values of the output elasticities or production-response coefficients 

would also change as N changes in value. 

Data envelopment analysis or DEA, of course, does not assume or impose any 

underlying functional form of the technology. Estimates derived from DEA, however, 

are still based on the available empirical information. If data do not reflect fully restored 

stock or resource conditions, it is not possible to precisely determine the capacity output 

corresponding to fully restored levels. This applies to DEA as well as various statistical 

approaches (e.g., stochastic production frontier or dual cost function). To address this 

issue, the analysis for this research considered two options: (1) use available information 

and ascertain whether or not resource levels, as calculated by NMFS, limited output; and 

(2) base the estimates of capacity on the upper 85% confidence interval values. A review 

of existing information provided by NMFS to support the estimation of capacity 

suggested that the latter approach would provide a reasonable basis upon which to 

estimate capacity. This was because the subsequent data available were mostly trip level 

data; there were concerns about using average performance of firms or vessels over time 

in order to reduce Gaussian noise; management and regulation had often substantially 

limited the potential output of vessels; estimates based on the upper limits might best 

reflect higher resource levels; and data on resource levels were extremely limited relative 

to time periods and fisheries, and for most observations, pertained to relatively low 

resource levels. That is, the empirical data were not consistent with production activities 

and levels most likely to occur if resource levels were fully restored. As such, estimates 

of overcapacity presented in this report are likely to be substantially biased downward. 

A preliminary review of the estimates of capacity was conducted for each fishery and 

the 85% confidence interval estimates relative to the mean. The review raised issues 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

14

about using the ratio of the upper end of the 85% interval (mean plus confidence interval 

value) to the mean value as a basis for projecting capacity estimates to reflect the 

potential capacity output if resource levels were fully restored to desired target levels. A 

specific issue was the validity of assuming estimates based on the upper end of the 85% 

confidence interval actually reflected higher resource levels, when in fact, these estimates 

may also reflect random luck and high-liner captains. As a consequence, this latter 

approach for projecting capacity output to be consistent with restored resource levels was 

not pursued. 

It was, subsequently, decided to estimate capacity by considering the maximum 

number of days a fishing vessel could fish in a year, but conditional on observed days at 

sea a year. Data was subsequently analyzed by gear type, vessel and engine size, 

homeport, and upper limits on days were determined, after discarding statistical outliers. 

It was then assumed that vessels could, at least, fish the same number of days a year as 

those observed at the upper limit of days. This assumption does have the potential 

problem of ignoring the reasons why vessel operators may not have fished as many days 

as other operators in their fishery. For example, a vessel may often switch fisheries 

during a year, and that would be a reason why a given vessel did not fish as many days as 

another operator. Also, a vessel could be undergoing major repairs, and that would be a 

valid reason why the operator fished fewer days than observed for another operator. 

The analysis also assumes variable returns to scale. Under variable returns to scale 

(VRS), the response to proportionate scaling of all inputs results in disproportionate 

changes in outputs. In addition, the responses may vary relative to various returns to 

scale; i.e., at some levels of production, the technology may exhibit decreasing returns; at 

other levels of production, the technology may exhibit increasing or constant returns to 

scale. This assumption results in a lower estimate of capacity than would be obtained 

under constant returns to scale. Again, there is a potential downward bias in the 

estimates. The assumption of constant returns to scale would provide useful estimates 

because constant returns to scale best reflects long-run equilibrium conditions. It was 

concluded, however, that the more conservative estimates, based on variable returns to 

scale, would be preferred to the more cautious estimates based on constant returns to 

scale. In addition, data typically available on factors of production in fisheries are not 

particularly amenable to assessing a particular returns to scale. For example, fishing 

effort is typically viewed as a variable factor of production, and when combined with 

person-hours of labor, constitutes two possible variable factors of production. Fishing 

effort, however, is an intermediate output or produced input that requires the use of labor 

and other inputs. An assessment of returns to scale, thus, may be confounded by the 

factor that one input is an intermediate input requiring use of another input used in the 

production process. 

2.4 Estimating the Costs To Support a Buyback 

A particularly vexing problem for estimating the potential cost of reducing fleet size 

in the five fisheries is the determination of the purchase price of vessels. There is a rich 

theory about valuing capital stocks and asset pricing (see, for example, Snowden, 1994). 

Alternatively, American Express has a web site that provides basic information about 

business valuation methods (American Express Company, 2003). In a theoretical 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

15

context, the price of an asset should equal, after adjusting for risk and uncertainty, the 

expected present value of all future earnings; i.e., rents. This measure is consistent with 

the capitalization of income valuation approach used to value businesses. As shown by 

Snowden, however, it is best used for non-asset intensive businesses like service 

companies. Other methods include a multiplier or market valuation, fair market value of 

fixed assess and equipment, leasehold improvements, inventory, and owner benefit. 

 

The owner benefit approach for valuing businesses or assets appears to be 

particularly applicable to determining the purchase price of a fishing vessel. It is most 

applicable to businesses that are asset intensive (e.g., manufacturing or a fishing 

business). The basic rule is that the value of the asset equals a seller’s discretionary cash 

for one year. Snowden suggest that 2.2727 times the owner benefit equals the market 

value of the asset. The multiplier supposedly takes into account standard figures such as 

a 10% return on the investment, a living wage equal to 30% of owner benefit, and debt 

service of 25%. 

Unfortunately, information for determining the potential purchase price of fishing 

vessels using any of the methods are not available. A rule of thumb developed by 

Andreas Holmsen in 1975, however, is that the value of a vessel is approximately equal 

to one year’s gross stock or ex-vessel revenue. The rule of thumb by Holmsen appears to 

closely equate to the owner’s benefit approach to asset valuation. Kitts et al. (2000), in 

fact, assessed how well purchase prices in the New England groundfish buyout program 

followed this rule of thumb valuation procedure. They found that basically bid prices 

were approximately equal to 1.09 of a vessel’s annual gross stock or ex-vessel revenue 

for all fisheries for which the vessel participated. At the 95% confidence interval, the 

ratio of 1.09 was not statistically different than one. In this study, we subsequently 

assume that the purchase price equals the annual average gross stock over three years—

1999-2001. 

Another complication for estimating the cost of a buyback program is that NOAA 

Fisheries has not specified detailed goals and objectives of a buyback program. A 

primary goal is to reduce overcapacity in fisheries. That raises the issue, however, of 

how should fleets be reconfigured. Should the fleet remaining after a buyback be the 

most efficient, permit minimal community disruption, or exactly what? Since detailed 

goals and objectives of a possible buyback are not known, the cost of a buyback program 

was calculated in terms of average capacity units; i.e., total capacity of fleet divided by 

number of vessels per size category and per fishery. 

2.5 Overcapacity and Target Levels 

 The calculation of overcapacity requires information about desired resource or target 

levels. For those species having information on target resource levels, overcapacity is 

calculated relative to the catch levels appropriate for maintaining the target levels. Given 

the Sustainable Fisheries Act, the target levels for most of the species examined in this 

study equate to maximum sustainable yield. Overcapacity with reference to MSY could 

not be calculated, however, for the Atlantic large coastal shark fishery, the Gulf of 

Mexico shrimp fishery, and the Atlantic swordfish fishery. Target levels for these 

fisheries were as follows: (1) the sum of average annual yields of all species of shark in 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

16

the Atlantic large coastal shark fishery; (2) average annual yield of shrimp between 1981 

and 2001 was established as the desired target level for the Gulf of Mexico shrimp 

fishery; and (3) U.S. allocated TACs for the swordfish taken in the North and South 

Atlantic regions were used as the target levels for the swordfish fishery. Information on 

TACs and MSY were provided by various stock assessment documents and “Status of the 

Stocks” reports. The MSYs and TACs used in this study are summarized in Section 3 of 

this report. For the New England and West Coast groundfish fisheries, overcapacity was 

evaluated relative to the lowest MSY or desired long-run potential yield of each species. 

2.6 The Fisheries and Data 

The National Marine Fisheries Service proposed the examination of capacity in the 

five following federally managed fisheries: (1) New England groundfish fishery; (2) 

West Coast groundfish fishery; (3) the Gulf of Mexico shrimp fishery; (4) the South 

Atlantic large coastal pelagic shark fishery; and (5) the northwest Atlantic swordfish 

fishery, which is grouped by NMFS in terms of south and north Atlantic fisheries. Trip 

level information by vessel was initially requested for all five fisheries. Information on 

landings by species, year, area, gear type, vessel characteristics, and input usage was 

requested. Because of time constraints and the urgency of completing the estimates in a 

short time period, it was not possible to obtain trip level data for all fisheries and all 

years. In addition, it was not possible to obtain identical types of information for all 

fisheries. It, thus, became necessary to modify the estimation of capacity to reflect the 

available data. 

2.6.1 The New England Groundfish Fishery 

Data for the New England groundfish fishery reflected average annual activity of 

vessels using small mesh nets (gillnet), otter trawl, and hook and lines. Information on 

landings and vessel activity relative to ten species was included in the groundfish data. 

The ten species were cod, haddock, yellowtail flounder, plaice, window pane, winter 

flounder, witch flounder, redfish, white hake, and Pollock. Data reflected average annual 

activity between 1998 and 2000. Average activity was used to avoid over-estimating 

capacity that might occur if trip level data reflected extremely good luck or high-liner 

activities. The data were grouped according to areas fished, which included Georges 

Bank and the Gulf of Maine. Information on the fixed and variable factors included, 

respectively, vessel characteristics (e.g., vessel length, gross registered tonnage, and 

engine horsepower), days at sea, and crew size. Additional information on resource 

target levels and maximum sustainable yields for each species was obtained from 

assessment scientists at the Northeast Fisheries Science Center. The maximum 

sustainable yields for each species, for Georges Bank and Gulf of Maine combined, were 

as follows: (1) cod—86.5 million pounds, (2) haddock, 52.7 million pounds, (3) 

yellowtail flounder—83.9 million pounds, (4) window pane—4.2 million pounds, (5) 

plaice—10.8 million pounds, (6) winter flounder—30.0 million pounds, (7) witch 

flounder—6.6 million pounds, (8) redfish—18.1 million pounds, (9) white hake—6.9 

million pounds, and (10) Pollock—38.8 million pounds. 

The Georges Bank data for otter trawl was subsequently divided into four engine size 

classes: (1) 54-450 horsepower, (2) 451-700 horsepower, (3) 705-1000 horsepower, and 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

17

(4) 1001-1500 horsepower. The groupings were determined from a cluster analysis using 

K-means. A cluster analysis by K-means is similar to a multivariate analysis of variance 

in which groups are not known in advance, but are determined by Euclidean distances. Kmeans clustering searches for the best way to divide objects into different groupings. The 

groups were formed because the otter trawl fishery had an extremely large range of 

engine horsepower, and there was concern that capacity could be over-estimated by 

including all observations in one analysis. The other groundfish fisheries were not 

further divided into groupings; there would have been a problem with either the number 

of observations necessary for estimating capacity or inadequate variation in vessel 

activity. Capacity was subsequently estimated for the three Gulf of Maine fisheries—

gillnet, hook and line, and otter trawl, and for the Georges Bank fisheries--the hook and 

line and gill net fisheries and the four Georges Bank otter trawl fisheries 

2.6.2 The West Coast Groundfish Fishery 

Data on the West Coast groundfish fishery reflected annual vessel activity for eight 

different gear types or fisheries in 2001 and pertained to five species or species’ 

groupings. The species or groupings considered were groundfish, sablefish, pacific 

whiting, and flatfish. There were several different types of gear: (1) pots and traps, (2) 

shrimp trawls, (3) troll, (4) hook and line, (5) nets, (6) trawls other than shrimp, and (7) 

all other gears. Two fisheries were specified for trawls other than shrimp: (1) with 

Pacific whiting, and (2) without Pacific whiting. Vessels participating in a limited entry 

program land most of the whiting, and thus, the need to consider two trawl fisheries in the 

analysis. Data provided include information on landings, vessel characteristics (length 

and engine horsepower), and number of trips per year. Data on days at sea and crew size 

were not available. 

Capacity was estimated for each gear type. Vessel length and engine horsepower 

were assumed to be the fixed factors and number of trips was assumed to be a variable 

input. Vessels were also further disaggregated by whether or not they were subject to a 

limited entry program. Information on resource conditions believed to be indicative of 

target levels was obtained from the National Marine Fisheries Service. The long-term 

potential yield for each species or species grouping, which provided the basis for 

assessing overcapacity, were as follows: (1) remaining groundfish—6.3million pounds, 

(2) sablefish—19.6 million pounds, (3) rockfish—20.3 million pounds, (4) flatfish—44.2 

million pounds, and (5) Pacific whiting—150.8 million pounds. It is highly likely that 

estimates of capacity for this fishery are substantially downward biased because of 

extremely restrictive management and very low resource conditions, particularly for 

many of the species of rockfish. 

2.6.3 The Gulf of Mexico Shrimp Fishery 

Initially, data on annual vessel activity for the years 1999-2001 for the Gulf of 

Mexico shrimp fishery were obtained. A review of the data revealed that the annual 

vessel level data was likely inadequate for estimating capacity. It was subsequently 

decided to use data reflecting annual activity between 1981 and 2001. The shrimp 

fishery was grouped into 25 different fisheries based on NOAA groupings by area, depth, 

and fishery. There are 21 statistical areas used to characterize the Gulf of Mexico shrimp 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

18

fishery; it was, however, decided to group the 21 statistical areas into five broad 

statistical areas. In addition, the data were organized by five fathom zones, which are 

regularly used by NMFS to record shrimp fishing activity. Total days fished, mean crew 

size per vessel per year, mean engine horsepower, mean gross registered tonnage, and 

number of vessels fishing per year. The data were subsequently modified to reflect mean 

vessel activity per year in each of the 25 groupings. Capacity was subsequently 

estimated for each of the sub-groupings, and then, extrapolated to reflect fleet level 

activity. The assessment of the potential for overcapacity was conducted relative to mean 

annual capacity and activity between 1981 and 2001. Maximum sustainable yield, which 

provided a reference level for assessing overcapacity, was assumed to equal the longterm average annual landings, which equaled 101.6 million pounds between 1981 and 

2001. 

The use of mean values and a limited number of observations likely results in the 

estimates of capacity being quite low relative to estimates that would be obtained with 

more detailed information. This is because the use of mean values limits the number of 

observations for constructing the reference technology. In addition, the use of average 

landings and mean vessel activity between 1981 and 2001 reduces the influence of high 

levels of landings on estimates of capacity in certain years. 

2.6.4 The Atlantic Swordfish Fishery 

Data on trip level activity for the Atlantic swordfish longline fishery between 1987 

and 2000 were obtained from the Highly Migratory Species Division of NOAA Fisheries. 

Data included area fished, landings, number of sets, number of hooks, number of days at 

sea, miles of longline, and vessel length. These data provided the basis for estimating 

capacity output. 

The data, however, were further aggregated into annual fleet activity. The estimation 

of capacity was, therefore, based on annual fleet wide activity per area fished. The fixed 

factors were number of vessels per year, total number of hooks, total miles of longline, 

total number of hooks, and total number of fish landed from each year. There were 11 

unique areas. The only variable factor considered was number of days per year per 

fishing area. This was done to partially eliminate the influence of extremely good years 

and extremely poor years. The estimates of capacity were initially in terms of number of 

swordfish; these estimates were converted to live weight by using a NMFS conversion 

factor of 71.78 pounds per fish. Although MSY has been estimated for this fishery, the 

analysis of overcapacity was done with respect to the allocation of the total allowable 

catches to the United States in the North and South Atlantic areas. The allocations were 

2,951 and 384 metric tons, respectively for the North and South Atlantic areas. 

2.6.5 The Large Coastal Pelagic Shark Fishery 

 Capacity output for the large coastal shark fishery was estimated using data on 

annual mean performance per vessel for vessels operating between 1998 and 2000. Mean 

values were used to mitigate against over estimating capacity because of an extremely 

lucky year for any given vessel. Capacity was estimated for three separate gear types—

longline, gillnet, and pelagic. Although each fishery involves a large number of different 
Reducing Capacity in U.S. Managed Fisheries Concepts, Methodology, and Data 

19

kinds of sharks—up to 26 different kinds of shark, it was decided to aggregate all sharks 

into one category—shark. The output variable was, thus, landings of all sharks. The 

aggregation was necessary because of a large number of zero valued landings for sharks. 

The fixed inputs considered were vessel length, vessel hold size, fishing effort, crew size, 

number of hooks in the longline fishery, net size in the gill net fishery, and miles of 

longline in the longline fishery. The only variable input was days at sea. 

 

 Information on maximum sustainable yield for each species was not available. 

Average annual landings of each species between 1990 and 2000 were determined for 

each species, and then aggregated to yield a total potential target level of landings. The 

potential target level of all species combined and with respect to all three gear types 

equaled 3.9 million pounds. Overcapacity was, subsequently, evaluated relative to the 

sum of average annual landings of all species of sharks. As is the case for swordfish, 

shrimp, and New England groundfish, it is highly likely that the use of mean values 

results in under estimating capacity output. In addition, the assumption that fishing 

effort, crew size, number of hooks, and miles of longline are fixed inputs also likely 

results in under estimating capacity output. Concurrently, however, the use of mean 

values may better reflect customary and usual operating procedures. 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

20

3.0 Estimates of Capacity 

 In this section, estimates of overcapacity and capacity utilization are presented. For 

the New England and West Coast groundfish fisheries, overcapacity is assessed relative 

to long-term potential yields or MSYs of each species. Overcapacity is, subsequently, 

determined relative to the species having the smallest or minimum resource level. For 

example, if all the resources of the New England groundfish fishery were at their desired 

biological levels, overcapacity would still exist for Plaice, winter flounder, and witch 

flounder. Alternatively, the existing fleet would not have enough capacity or productivity 

capability to harvest the MSY levels of cod, haddock, yellowtail flounder, and the other 

species. Overcapacity for the Gulf of Mexico shrimp fishery is determined relative to the 

long-run average annual landings, which is used as a proxy for maximum sustainable 

yield. For the shark fishery, overcapacity is assessed relative to the sum of the average 

annual landings of all sharks landed in the fishery. The shark fishery includes 32 species 

of sharks. Not all commercial fishers, however, land all 32 species. The gillnet and 

longline shark fisheries primarily land blacktip and sand sharks; the pelagic fishery, 

however, lands up to 32 species, but 13 species comprise the majority of landings. Three 

species—dusky, blacktip, and sand sharks—account for 85.8 % of the total landings in 

the pelagic shark fishery. Overcapacity for the swordfish fishery is assessed relative to 

the U.S. share of the TAC corresponding, however, to the MSY levels of 13,370 and 

13,650 mt for the North and South Atlantic. The U.S. share of the long-term potential 

yield of the swordfish resource equals approximately 9.0 million pounds. 

3.1 The New England Groundfish Fishery 

 Capacity for the New England groundfish fishery was estimated for all vessels 

participating in the groundfish fishery between 1998 and 2000. Average annual vessel 

activity was the basis upon which capacity was estimated. Two major stock or resource 

areas were considered: (1) Georges Bank, and (2) the Gulf of Maine. Three gear types 

were included in the analysis—hook and line, gillnet, and otter trawl. The Georges Bank 

otter trawl fishery, however, was further divided into four groupings based on engine 

horsepower. The estimates also reflect three conditions. First, the notion of capacity, in 

which days are allowed to only expand up to the full utilization level according to the 

number of days actually observed per vessel. Second, expanded vessel activity, which is 

consistent with customary and usual operating procedures. Third, increased activity 

consistent with the observed maximum days at sea by gear type and engine horsepower. 

In the second case, capacity is calculated conditional on the assumption that vessels 

spending less than 25 days at sea per year could spend up to 25 days at sea per year; 

vessels having more than 25 days at sea per year are assumed to be at sea at the level of 

days necessary to produce the capacity output. The 25 day threshold reflected the 

minimum number of days a full-time vessel (i.e., a vessel that exclusively fished a given 

gear type and landed any of the 10 groundfish species) was actually at sea between 1998 

and 2000. The third case reflects vessel activity corresponding to vessels fishing at the 

maximum observed days at sea per vessel (i.e., we assume all vessels could be at sea up 

to the maximum number of days actually spent at sea by each gear type and engine 

horsepower size group). 

 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

21

 Because of the large number of estimates, we present only summary estimates for 

Georges Bank, Gulf of Maine, and the two areas combined (Tables 1-3). It is apparent 

that the fleet could land considerably more than they have been landing. For example, 

the fleet could land up to 50.6 million pounds of cod from the Georges Bank resource 

area and up to 26.9 million pounds from the Gulf of Maine resource area. The fact that 

the vessels could land considerably more than they have, however, does not equate to 

having overcapacity. That is, the fleet could have excess capacity in the sense that they 

have the capability to harvest more than they actually did, even with depressed resource 

conditions. The critical issue is whether or not the fleet could harvest in excess of MSY 

for each species if resource levels were restored to their desired target levels. With 

respect to overcapacity, the fleet really only has overcapacity relative to Plaice, winter 

flounder, and witch flounder (Table 4). That is, if resource levels were restored to levels 

consistent with supporting the long-term potential yield, the fleet would have insufficient 

capability to over-harvest cod, haddock, yellowtail flounder, window pane, redfish, white 

hake, and Pollock. The fleet, however, would have the capability to harvest in excess of 

the MSY levels for Plaice, winter flounder, and witch flounder. As a consequence, 

overcapacity is determined relative to the most binding level of overcapacity. The most 

binding level of overcapacity is determined according to the largest number of vessels 

that must be removed to ensure that harvest levels do not exceed the MSY or long-term 

potential yields of any one species. In this case, the most binding or severe level of 

overcapacity is determined relative to witch flounder. That is, the largest number of 

vessels need to be reduced to ensure that the fleet cannot harvest in excess of the longterm potential yield of witch flounder. To ensure that the fleet cannot harvest in excess 

of the long-term potential yield of witch flounder, 588 vessels need to be removed from 

the fleet. Based on the assumption that the cost of each vessel equals approximately one 

year’s gross stock or total revenue, it is estimated that it would cost approximately $259.6 

million to buyback the 588 vessels (Table 5). 

 A remaining concern relating to capacity in the New England groundfish fishery was 

latent permits. There are 725 latent permits; that is, individuals hold permits to land 

groundfish, but may not have a vessel or may not fish regularly for groundfish. The 

potential output for these vessels was not estimated. It was possible, however, to 

estimate the potential buyback cost for these vessels. Using information on a previous 

buyback program in New England, which involved the purchase of permits, it was 

possible to regress the permit purchase price against the vessel characteristics, and to 

subsequently use these estimates to calculate the potential cost of purchasing all 725 

latent permits. Based on the estimated relationship between permit purchase price, vessel 

tonnage, engine size, and vessel length, it was estimated that it would cost approximately 

$190.0 million to purchase the latent permits. 
Reducing Capacity in U.S. Managed Fisheries Est

22

Table 1. Estimated Capacity Output and the Full-utilization Days at Sea for the Three Georges Bank Fisheries 

Georges Bank (And South)--Hook and Line, Otter Trawl, and Gillnet Landings--Pounds Days at Sea and Landings 

Days 

At 

Sea Cod Haddock Yellowtail Window Panes Plaice Winter Flounder Witch 

Observed 36,420 14,915,289 6,764,088 10,492,311 414,127 3,587,710 11,020,445 F@re—Reflects Excess Capacity 50,373 24,428,141 9,071,848 21,615,690 850,087 5,867,832 21,390,782 Expanded--Customary and Usual Operating Procedures 56,900 26,581,689 9,824,655 24,105,820 1,091,575 6,353,527 23,958,492 Conditional on Observed Maximum Days of Each Gear 108,452 50,638,750 16,713,000 43,233,336 2,520,519 10,776,210 45,944,667 1

Table 2. Estimated Capacity Output and the Full-utilization Days at Sea for the Three Gulf of Maine Fisheries 

Gulf of Maine—Hook and Line, Otter Trawl, and Gillnet Landings--Pounds Days at Sea and Landings 

Days

At 

Sea Cod Haddock Yellowtail Window Panes Plaice Winter Flounder Witch Flounder Re

Observed 16,848 5,362,388 1,468,903 2,657,320 11,522 4,772,782 968,128 2,600,227 34F@re—Reflects Excess Capacity 27,011 9,509,353 2,128,838 4,062,582 15,949 8,002,936 1,540,469 4,081,694 520Expanded--Customary and Usual Operating Procedures* 17,915 6,322,390 1,649,127 3,156,623 13,094 5,451,901 1,139,718 2,952,162 379Conditional on Observed Maximum Days of Each Gear 58,571 26,937,535 3,340,738 11,277,221 47,239 13,777,139 4,476,319 7,191,532 76

Table 3. Estimated Capacity Output and the Full-utilization Days at Sea for the Combined Georges Bank and Gulf of Maine Fishe

Georges Bank (And South) and Gulf of Maine (Only) Landings--Pounds Days at Sea and Landings 

Days 

At 

Sea Cod Haddock Yellowtail Window Panes Plaice Winter Flounder Witch Flounder R

Observed 53,268 20,277,677 8,232,990 13,149,631 425,648 8,360,492 11,988,573 5,424,463 F@re—Reflects Excess Capacity 77,384 33,937,493 11,200,686 25,678,272 866,036 13,870,768 22,931,251 9,929,714 1,Expanded--Customary and Usual Operating Procedures 74,815 32,904,078 11,473,782 27,262,443 1,104,669 11,805,428 25,098,210 9,171,838 Conditional on Observed Maximum Days of Each Gear 167,023 77,576,285 20,053,739 54,510,557 2,567,758 24,553,349 50,420,986 17,750,285 1,
Reducing Capacity in U.S. Managed Fisheries Estimate

23

Table 4. Estimates of Overcapacity and the Costs of Reducing Overcapacity in the Georges Bank/Gulf of Maine Fishery 

Georges Bank/Gulf of Maine/Other Cod Haddock Yellowtail Window Panes Plaice Winter Flounder Witch Flounder Redfish Capacity—Georges Bank 50,638,750 16,713,000 43,233,336 2,520,519 10,776,210 45,944,667 10,558,753 1,045,4Capacity—Gulf of Maine 26,937,535 3,340,738 11,277,221 47,239 13,777,139 4,476,319 7,191,532 768,7Capacity—Georges Bank and Gulf of Maine 77,576,285 20,053,739 54,510,557 2,567,758 24,553,349 50,420,986 17,750,285 1,814,1Maximum Sustainable Yields 86,528,854 52,726,877 83,969,466 4,188,740 10,802,540 29,982,560 6,613,800 18,077,7Average Total Allowable Catches--TACs 14,193,420 20,290,448 33,221,117 3,816,163 5,707,709 28,247,540 9,310,026 4,605,4Overcapacity Relative to MSY 0 0 0 0 13,750,809 20,438,426 11,136,485 Overcapacity Relative to Average TAC 63,382,865 0 21,289,440 0 18,845,639 22,173,446 8,440,260 Vessel Reduction Relative to MSY 0 0 0 0 525 380 588 Vessel Reduction Relative to TACs 766 39 366 0 720 413 446 Funds Needed for Public Buyback 0 0 0 0 $231,719,203 $167,718,369 $259,589,624 
Reducing Capacity in U.S. Managed Fisheries Estimate

24

Table 5. Overcapacity, Estimated Reduction in Fleet Size, and Estimated Cost of Buyback Program to Reduce Capacity iFederally-Managed Fisheries 

Fishery 

Current 

Number 

of 

Vessels 

Landings Overcapa citya

Number 

of 

Vessels

For 

Required 

Vessel 

Reduction 

Cost of 

Buying 

back 

Active 

V l

Reduction 

of Latent 

Permits 

Cost of 

Removing 

Latent 

Permits 

Total Cost of 

Reducing 

Overcapacity 

T

O

(Millions of Pounds) MSY 

(OY)

(Number of 

V l)

(Millions of 

2001 D ll )

(Millions of 2001 Dollars) (M

New England Groundfish 

938 81.1 45.3 350 588 259.6 725 190.4 450.0 

Gulf of Mexico Shrimp

2,159 97.6 69.1 1,284 875 322.3 322.3 

Swordfish 170 5.3 9.2 84 86 25.1 25.1 Atlantic Large Coastal Sharks 

231 6.5 32.3 25 206 33.2 33.2 

West Coast Groundfish 1684 224.7 150.2 424 1,260 145.8 145.8 Total 5,182 415.2 306.1 2,167 3015 786 725 190.4 976.4 aOvercapacity is measured as the difference between the maximum potential output, given restore

levels and full utilization of the variable inputs, and the long-term potential yield or optimum yield. 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

25

3.2 The West Coast Groundfish Fishery 

 Estimating overcapacity in the West Coast groundfish fishery was considerably more 

complicated than it was for the New England groundfish fishery. This was because of the 

large number of gear types—pots and traps, shrimp trawls, troll, hook and line, nets, trawls 

other than shrimp, and all other gears combined. In addition, it was possible to obtain detailed 

data only for fishing activities conducted in 2001, a period subject to heavy regulation. In 

addition, data for some vessels were extremely limiting or incomplete (e.g., that is, vessel 

information or characteristics were unknown for several vessels). The estimation of capacity 

was, thus, based on detailed data available for 1,516 vessels. There was, however, an 

additional 168 vessels landing groundfish in 2001; these vessels were considered in the 

estimation of capacity by using observed average annual landings. As such, it is likely that 

the estimates of capacity output for the West Coast groundfish fishery represent, at best, 

substantially lower bound estimates (Table 6). Then, there was the additional complication 

resulting from the fact that there are both limited entry and unlimited entry fisheries, which 

occurs because of Pacific whiting. 

 Although capacity was estimated using annual vessel level activity for 1,516 vessels, 

there were 1,684 vessels operating in 2001. Overcapacity was calculated, however, with 

respect to all 1,684 vessels. The sum of overcapacity relative to all five species or species 

groupings and the 1,516 vessels equaled 134.3 million pounds (Table 7), and the overcapacity 

for the 168 other vessels equaled 15.8 million pounds. Total overcapacity was, thus, 

estimated to equal 150.2 million pounds. 

Estimation of the cost of a buyback was done with respect to number of vessels required 

to land the long-term potential yield (LPTY) of other groundfish, Pacific whiting, and the 168 

other vessels (Tables 5 and 7). It was estimated that 1,077 vessels would need to be reduced 

to satisfy the long-term potential yield of other groundfish; 15 vessels would need to be 

reduced to ensure that the landings of whiting did not exceed the LTPY; and 168 other vessels 

would needed to be reduced from the fleet. The total estimated cost of a buyback for all 1,260 

vessels equaled $145.8 million. 
Reducing Capacity in U.S. Managed Fisheries 

26

Table 6. Estimates of Capacity in the West Coast Groundfish Fishery 

Gear 

Number of Vessels Number Trips Remaining Groundfish Sablefish Rockfish Flatfish 

 Observed ObservedCapacity Observed Capacity Observed Capacity Observed Capacity Observed Capacity Obse

Shrimp Trawl 70 1,326 1,921 88,903 381,520 209,371 1,019,789 400,851 2,581,316 875,600 2,526,637

Other Trawl—Whiting 42 1,641 2,342 1,692,5941,878,4931,059,466 1,318,3723,655,089 4,560,266 5,433,908 6,295,132161,9

Other Trawl—No Whiting 155 4,281 5,785 3,636,6144,988,5094,143,916 6,088,0519,421,104 13,641,64722,554,26233,393,052

Troll 312 1,675 13,438 36,438 518,266 111,752 507,968 88,907 1,806,860 2,133 5,207

Pots and Traps 296 3,506 6,032 12,2332,489,4212,409,51514,620,470 492,685 6,028,258 1,133,636 3,959,670

Nets 62 1,775 2,252 101,7094,137,731 20,250 322,059 37,877 2,228,200 14,806 197,417

All Other Gear 38 390 1,290 19,7981,682,163 11,524 457,444 20,686 2,537,994

Hook and Line 541 11,170 23,791 939,3225,563,9382,741,376 8,285,0901,324,252 8,777,747 19,391 166,888
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

27

Table 7. Overcapacity and Estimated Cost of Reducing Overcapacity in the West Coast 

Groundfish Fisherya 

 Summary 

Remaining

Groundfish Sablefish Rockfish Flatfish Whiting 

Long-Term Potential Yield (LTPY) 6,261,064 19,600,00020,326,412 44,200,000150,794,640

Excess capacity 3,286,652 5,391,060 7,774,771 15,121,986 81,542,666

Overcapacity 15,378,977 13,019,24321,835,876 2,344,003 81,738,570

Total Overcapacityb 150,159,820 

Vessels for LTPR 439 911 731 1,440 27 

Vessels to Remove 1,077 605 785 76 15 

Total Removalsb 1,260 

Cost 121,062,96367,991,36988,224,332 8,578,994 5,865,889 

Total Cost for 1,092 Vessels 126,928,852 

Total Cost for 168 Other Vessels 18,877,827 

Vessels Remaining 424 

Total Costb 145,806,679 

a

Excess and overcapacity are calculated relative to the difference between observed output 

and capacity given current conditions and observed output and capacity output corresponding 

to restored resource conditions. 

b

Includes 168 other vessels. 

3.3 The Gulf of Mexico Shrimp Fishery 

Estimation of capacity for the shrimp fishery was complicated by the fact that vessel level 

data were judged to be inadequate. Information on vessel characteristics and fishing effort 

were often incomplete or not available. Subsequently, it was decided to use annual fleet 

activity and annual average vessel characteristics information. The data used to estimate 

capacity reflected mean vessel activity per year between 1981 and 2001. Capacity was 

estimated according to five statistical areas and five depth zones. Capacity was estimated 

relative to the standard DEA approach of F@re (1984), which permits inputs to be expanded to 

the full-utilization levels, and relative to the observed maximum effort or days per vessel per 

year. In the latter case, capacity output was calculated by multiplying the maximum effort per 

vessel times the capacity output per vessel per unit of effort. In addition, overcapacity is 

estimated relative to mean annual activity. The estimation of the number of vessels required 

to produce at MSY or lower was based on the number of active vessels in 2001, but using 

long-term averages. 

Given the large number of estimations required to calculate capacity output, we 

summarize only the capacity estimates for the groupings of statistical areas and depth zones 

and relative to the total for the fleet (Tables 8 through 13). In 2001, 2,159 vessels landed 97.6 

million pounds of shrimp in the Gulf of Mexico fishery (Table 13). Based on the maximum 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

28

average annual number of days per vessel in each fishing area and depth zone (the average of 

total effort for a fleet divided by number of vessels; e.g., Table 14), it is estimated that 1,284 

vessels could harvest the MSY level of shrimp. Therefore, 875 vessels could be removed 

from the 2001 fleet. The estimated cost of reducing the fleet in 2001 constant dollars is 

$322.3 million (Tables 5 and 13). 

 Given that capacity was estimated using fleet wide averages, it is likely that capacity 

output is underestimated for the Gulf of Mexico shrimp fishery. The use of fleet wide average 

information limits the number of observations, which in turn, limits the projection of the 

frontier technology. In essence, there is a tendency to underestimate capacity output when 

estimation is based on a limited number of observations and the data reflect mean values. 

Table 8. Estimates of Capacity Output for Area 5 and Five Corresponding Depth Zones, Gulf 

of Mexico Shrimp Fishery 

Average Annual Activity 

Area Depth 

Zone 

Level 

Of 

Activity Effort Vessels Pounds Value 

Over 

Capacity 

(lbs) 

Vessels 

Required 

For 

MSY 

 Levela 

Potential

Removala

5 5 Observed 324 39 115,486 782,899 

 F@re—Excess Capacity 362 39 154,105 1,069,841 38,619 18 3

 Max Days 528 39 225,906 1,592,815 110,421 15 6

5 4 Observed 4,107 315 1,577,047 10,189,773 

 F@re—Excess Capacity 4,293 315 1,853,495 12,071,409 276,448 180 34

 Max Days 8,807 315 3,933,832 25,836,914 2,356,785 76 138

5 3 Observed 15,662 718 7,248,447 41,670,398 

 F@re—Excess Capacity 16,750 718 8,067,106 46,406,283 818,659 407 90

 Max Days 21,554 718 10,502,488 61,653,818 3,254,041 279 218

5 2 Observed 28,723 1,280 16,653,080 75,731,391 

 F@re—Excess Capacity 27,860 1,280 19,390,292 88,642,495 2,737,212 903 436

 Max Days 43,518 1,280 30,978,110 142,864,559 14,325,030 494 845

5 1 Observed 15,800 1,012 6,780,903 32,321,385 

 F@re—Excess Capacity 16,459 1,012 7,594,850 35,938,708 813,947 673 -21

 Max Days 28,345 1,012 13,288,632 64,061,800 6,507,729 448 204

a

Although the estimates of capacity output are based on average annual activity, the estimated 

reduction in number of vessels to eliminate overcapacity is determined relative to the existing 

number of vessels in 2001. That is, using average annual activity, the number of vessels, on 

average, required to produce the MSY level is initially calculated, and then, that number is 

subtracted from the actual number of vessels operating in 2001. The MSY level is assumed to 

equal the average annual landings for each area and depth zone. 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

29

Table 9. Estimates of Capacity Output for Area 4 and Five Corresponding Depth Zones, Gulf 

of Mexico Shrimp Fishery 

Average Annual Activity 

Area Depth 

Zone 

Level 

Of 

Activity Effort Vessels Pounds Value 

Over 

Capacity 

(lbs) 

Vessels 

Required

For 

MSY 

 Levela

Potential

Removala

4 5Observed 513 47 159,560 1,284,841 

 F@re—Excess Capacity 555 47 172,878 1,384,177 13,318 22 -8

 Max Days 991 47 307,805 2,522,829 148,245 17 -3

4 4Observed 3,611 223 1,260,468 9,229,654 

 F@re—Excess Capacity 4,273 223 1,673,725 12,342,234 413,256 141 -34

 Max Days 5,577 223 2,240,620 16,698,524 980,152 103 4

4 3Observed 6,502 429 2,460,355 15,202,650 

 F@re—Excess Capacity 5,903 429 2,729,175 16,898,544 268,819 252 85

 Max Days 9,659 429 4,546,352 28,594,954 2,085,996 140 197

4 2Observed 15,784 998 6,693,251 32,330,614 

 F@re—Excess Capacity 15,981 998 7,867,422 38,032,345 1,174,170 727 344

 Max Days 22,964 998 11,645,296 57,222,068 4,952,044 389 682

4 1Observed 72,297 2,023 39,093,780 129,605,720 

 F@re—Excess Capacity 76,531 2,023 43,926,917 146,206,535 4,833,138 1,602 198

 Max Days 101,140 2,023 58,586,070 195,943,487 19,492,290 1,139 661

a

Although the estimates of capacity output are based on average annual activity, the estimated 

reduction in number of vessels to eliminate overcapacity is determined relative to the existing 

number of vessels in 2001. That is, using average annual activity, the number of vessels, on 

average, required to produce the MSY level is initially calculated, and then, that number is 

subtracted from the actual number of vessels operating in 2001. The MSY level is assumed to 

equal the average annual landings for each area and depth zone. 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

30

Table 10. Estimates of Capacity Output for Area 3 and Five Corresponding Depth Zones, 

Gulf of Mexico Shrimp Fishery 

Average Annual Activity 

Area Depth 

Zone 

Level 

Of 

Activity Effort Vessels Pounds Value 

Over 

Capacity 

(lbs) 

Vessels 

 Required 

For 

MSY 

 Levela

Potential

Removala

3 5Observed 361 12 140,563 549,361 

 F@re—Excess Capacity 501 12 217,230 1,208,258 76,666 2 4

 Max Days 1,797 12 782,385 5,184,076 641,821 1 5

3 4Observed 326 30 122,675 595,184 

 F@re—Excess Capacity 377 30 165,930 1,177,941 43,255 12 -8

 Max Days 577 30 250,864 1,807,100 128,189 11 -7

3 3Observed 1,017 94 439,040 2,044,761 

 F@re—Excess Capacity 1,137 94 509,155 3,248,662 70,116 54 18

 Max Days 1,685 94 766,200 4,917,983 327,160 37 35

3 2Observed 5,813 279 2,478,998 10,627,940 

 F@re—Excess Capacity 6,559 279 2,884,909 15,400,109 405,911 149 144

 Max Days 10,618 279 4,755,964 25,897,407 2,276,966 110 183

3 1Observed 7,907 502 3,632,418 12,116,119 

 F@re—Excess Capacity 7,612 502 4,082,848 18,205,802 450,429 289 62

 Max Days 11,556 502 6,162,896 27,357,777 2,530,478 248 103

a

Although the estimates of capacity output are based on average annual activity, the estimated 

reduction in number of vessels to eliminate overcapacity is determined relative to the existing 

number of vessels in 2001. That is, using average annual activity, the number of vessels, on 

average, required to produce the MSY level is initially calculated, and then, that number is 

subtracted from the actual number of vessels operating in 2001. The MSY level is assumed to 

equal the average annual landings for each area and depth zone. 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

31

Table 11. Estimates of Capacity Output for Area 2 and Five Corresponding Depth Zones, 

Gulf of Mexico Shrimp Fishery 

Average Annual Activity 

Area Depth 

Zone 

Level 

Of 

Activity Effort Vessels Pounds Value 

Over 

Capacity 

(lbs) 

Vessels 

 Required 

For 

MSY 

 Levela

Potential

Removala

2 5Observed 96 3 35,528 145,372 

 F@re—Excess Capacity 294 3 99,070 486,391 63,541 0 3

 Max Days 609 3 213,933 1,132,693 178,405 0 3

2 4Observed 50 4 21,995 113,199 

 F@re—Excess Capacity 54 4 35,449 202,720 13,454 2 -1

 Max Days 168 4 107,220 619,731 85,224 1 0

2 3Observed 271 30 157,382 817,825 

 F@re—Excess Capacity 402 30 229,893 1,212,437 72,512 14 0

 Max Days 693 30 408,175 2,301,091 250,794 8 6

2 2Observed 5,034 286 2,671,578 11,603,724 

 F@re—Excess Capacity 6,430 286 3,528,619 15,713,547 857,041 145 69

 Max Days 9,998 286 5,558,816 25,490,055 2,887,239 95 119

2 1Observed 4,948 341 2,278,097 9,712,888 

 F@re—Excess Capacity 6,193 341 2,557,933 10,979,968 279,836 231 32

 Max Days 10,217 341 4,437,773 19,365,580 2,159,676 124 139

a

Although the estimates of capacity output are based on average annual activity, the estimated 

reduction in number of vessels to eliminate overcapacity is determined relative to the existing 

number of vessels in 2001. That is, using average annual activity, the number of vessels, on 

average, required to produce the MSY level is initially calculated, and then, that number is 

subtracted from the actual number of vessels operating in 2001. The MSY level is assumed to 

equal the average annual landings for each area and depth zone. 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

32

Table 12. Estimates of Capacity Output for Area 1 and Five Corresponding Depth Zones, 

Gulf of Mexico Shrimp Fishery 

Average Annual Activity 

Area Depth 

Zone 

Level 

Of 

Activity Effort Vessels Pounds Value 

Over 

Capacity 

(lbs) 

Vessels 

Required 

For 

MSY 

Levela

Potential

Removala

1 5Observed 71 4 35,381 157,651 

 F@re—Excess Capacity 99 4 49,424 219,783 14,042 2 0

 Max Days 123 4 61,584 272,796 26,203 1 1

1 4Observed 37 5 14,804 71,647 

 F@re—Excess Capacity 52 5 21,262 104,905 6,459 2 1

 Max Days 45 5 18,709 92,663 3,905 3 0

1 3Observed 223 22 82,135 444,363 

 F@re—Excess Capacity 286 22 108,976 600,265 26,841 6 0

 Max Days 687 22 265,051 1,489,743 182,916 5 1

1 2Observed 12,862 473 6,557,856 28,292,767 

 F@re—Excess Capacity 13,134 473 7,642,848 33,362,707 1,084,992 349 74

 Max Days 15,030 473 8,784,972 38,537,936 2,227,116 269 154

1 1Observed 1,658 86 863,560 2,717,324 

 F@re—Excess Capacity 2,945 86 1,247,031 4,001,294 383,471 37 49

 Max Days 3,155 86 1,834,803 5,974,791 971,243 27 59

a

Although the estimates of capacity output are based on average annual activity, the estimated 

reduction in number of vessels to eliminate overcapacity is determined relative to the existing 

number of vessels in 2001. That is, using average annual activity, the number of vessels, on 

average, required to produce the MSY level is initially calculated, and then, that number is 

subtracted from the actual number of vessels operating in 2001. The MSY level is assumed to 

equal the average annual landings for each area and depth zone. 
Reducing Capacity in U.S. Managed Fisheries 

33

Table 13. Capacity Output, Fleet Size Reduction, and the Costs of a Vessel Buyback Program in the Gulf of Mexico Shrimp Fishe

Average Annual 

Basis for Projecting 

Capacity Effort Vessels Pounds Valueb

Over 

Capacity 

Number Of

Vessels To

Harvest 

MSY 

Potential 

Number of 

Vessels To 

Reduce 

Fleet Size in 

2001 After 

Reduction 

Approx

Valu

Per Ve

Observedc 203,997 3,916 101,574,387 428,359,450 F@red—Excess Capacity 215,042 3,916 116,810,539 505,117,361 15,236,152 1,877 282 1,877 36Max Days 310,043 2,159 170,664,456 757,433,187 69,090,069 1,284 875 1,284 36

aVessel to be removed, on average, to yield MSY (approximated by average annual landings); average annual vessel gross tonnage 

 between 1981 and 2001 equals 77; average annual vessel gross tonnage in 2001 equaled 84; in 2001, 2,159 vesssels harvest 97.6 m

 pounds of shrimp and expended 226,928 days of fishing effort. Estimated number of vessels to harvest MSY and reduction in fle is based on the number of vessels operating in 2001. 

bValues are in 2001 constant dollars (the implicit gross domestic product price deflator was used to convert to 2001 constant dollar cReported level of activity. dEstimates based on the F@re (1984) approach, which requires either a contraction or expansion of the variable inputs to produce theCapacity is estimated assuming that vessels could fish the maximum average number of days per year. The maximum average nu

 days per year is calculated by taking the average number of days per year per vessel between 1981 and 2001 and for each of the fi fishing areas and depth zones. 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

34

Table 14. Maximum Average Annual Days per Year per Vessel and Year of Maximum In the 

Gulf of Mexico Shrimp Fishery 

Area Depth ZoneYear of Maximum Days

Maximum Average Annual Days 

Per Year Per Vessel 

5 5 1995 14 

5 4 1990 28 

5 3 2000 30 

5 2 2001 34 

5 1 1998 28 

4 5 1990 21 

4 4 1988 25 

4 3 1993 23 

4 2 1992 23 

4 1 1992 50 

3 5 1997 154 

3 4 1990 19 

3 3 1995 18 

3 2 1998 38 

3 1 1984 23 

2 5 1993 191 

2 4 1992 40 

2 3 1992 23 

2 2 1992 35 

2 1 1996 30 

2 5 1982 31 

1 4 1990 9 

1 3 1993 31 

1 2 1999 32 

1 1 1988 37 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

35

3.4 The Atlantic Swordfish Fishery 

Capacity output for the swordfish fishery was estimated using data on area fished, total 

number of vessels operating in an area in a year, number of hooks, number of miles of 

longline, and number of days. This information was the most complete information available 

on the fishery. Capacity output was calculated relative to the TACs in 2000 and the long-term 

potential yields, which was set equal to the sum of U.S. shares of the maximum sustainable 

yields for the north and south Atlantic areas. Capacity was also estimated using the number 

of days corresponding to full-variable input utilization and the actual reported total days per 

year. The analysis suggested that the fleet could reduce the number of days per year and still 

harvest the same level of swordfish. The cost of the buyback program was calculated 

assuming the fleet would fish the reported number of days in each year. 

The analysis of capacity revealed that the fleet had substantial overcapacity in 2000, the 

year for which the data were the most current. The fleet had the capability to harvest 9.2 

million pounds more than the long-term potential yield of nearly 9.0 million pounds (Tables 

15 and 16). The number of vessels necessary to harvest the long-term potential yield, with no 

change in the number of days at sea relative to the number of days reported in 2000, was 

estimated to equal 84. In 2000, the actual number of vessels landing swordfish was 170. The 

analysis, thus, suggest that the number of vessels could be reduced by 86 relative to the 

number of vessels operating in 2000. Using average annual gross stock per vessel, again this 

pertains to the gross stock from all fisheries for a given vessel, it was estimated that the 

dollars necessary to purchase the 86 vessels equaled $25.1 million (Tables 5 and 16). 

One result that stands out relative to the analyses of the other fisheries is the projection 

that days at sea should be substantially reduced to harvest the capacity output. At the annual 

mean level, the fleet is expending 40% more effort, in terms of days at sea, than it needs to 

expend. This is clearly indicative of rather severe technical inefficiency. Alternatively, 

capacity output could be realized mostly through gains in technical efficiency. The reasons 

for the high level of inefficiency, however, are not known. They may be related to resource 

conditions, changes in prices, weather patterns, and management and regulation of the fishery. 

 The estimates of capacity output for the swordfish fishery, however, are likely to be 

extremely low or downwards biased. This is because of declining resource levels and intense 

regulation, which have limited the landings of swordfish. Alternatively, none of the years 

included in the analysis were years during which resource levels were at their MSY levels. In 

addition, the use of fleet-wide information tends to result in underestimating capacity output. 

This is because there are fewer data points to construct the frontier technology, which, in turn, 

tends to force the frontier to be equivalent to the observed production activities. 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

36

Table 15. Capacity Output for the U.S. North and South Atlantic Swordfish Fisheries 

Year 

Number 

of 

Vessels 

Swordfish 

kept 

(number) 

Weight 

(lbs) 

Number 

of hooks

Number 

of 

Mainline 

Miles 

Number 

Of 

Days 

Days 

Required 

to 

Harvest 

Capacity 

Output

Capacity 

Given 

Fleet 

Reduces 

Days 

(lbs) 

Capacity 

Given 

Fleet Fishes

Observed 

Number 

Of Days 

per Year 

(lbs) 

1987 260 111,290 7,987,283 4,632,653 304,196 11,863 7,611 15,447,956 24,078,127

1988 299 146,623 10,523,133 5,096,433 324,808 12,615 8,403 17,405,649 26,128,979

1990 316 129,052 9,262,062 5,680,414 365,344 14,170 9,561 19,978,252 29,610,320

1991 237 85,528 6,138,345 5,286,425 299,605 11,730 8,265 17,477,999 24,806,037

1992 238 62,286 4,470,266 5,268,494 265,313 10,257 7,717 16,068,056 21,356,115

1993 245 62,922 4,515,912 5,517,101 263,965 10,345 7,714 16,309,048 21,872,169

1994 244 63,738 4,574,476 5,451,459 269,662 10,035 7,939 16,998,160 21,486,167

1995 255 72,680 5,216,244 6,778,583 324,768 11,153 8,468 18,154,814 23,911,751

1996 235 72,980 5,237,775 6,688,529 288,654 11,168 8,112 17,943,367 24,704,437

1997 230 68,263 4,899,236 6,071,732 264,222 10,006 7,287 16,061,302 22,054,109

1998 191 68,345 4,905,121 5,469,457 231,892 8,686 6,580 14,561,438 19,221,077

1999 174 64,112 4,601,318 5,003,082 200,748 8,024 5,695 12,711,816 17,910,915

2000 170 60,913 4,371,726 5,308,229 224,157 8,279 5,643 12,397,302 18,189,099

Mean 238 82,210 5,900,223 5,557,892 279,026 10,641 7,615 16,270,397 22,717,639

Table 16. Estimated Cost of Reducing 86 Swordfish Vesselsa

 

Long-term Potential Yield (LPTY) lbs live 8,996,267 

2000 Excess Capacity—lbs live 12,397,302 

2000 Overcapacity--lbs live 18,189,099 

Number of Vessel in 2000 170 

Vessels for LTPY 84 

Vessel Reduction Given Number of Vessels in 2000 86 

Cost of Purchasing 86 Vessels 25,116,813 

a

Estimates are based on assumption that fleet would fish the number of days reported for 

2000, which is the year for which the data are most recent. In 2000, the fleet had the potential 

to land 18.2 million pounds of swordfish, and the long-term potential yield is nearly 9.0 

million pounds. The fleet had overcapacity of 9.2 million pounds in 2000. 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

37

3.5 The Large Coastal Pelagic Shark Fishery 

The large coastal pelagic shark fishery involves more than 25 different types of sharks. 

There are three primary gear types—longline, gillnet, and pelagic gear. The longline and 

gillnet fisheries primarily target black tip and sand sharks, while the pelagic gear primarily 

targets up to 13 different kinds of sharks. For the pelagic gear type, however, many of the 

different kinds of sharks are not frequently captured or are captured in very low quantities. 

Capacity output was subsequently estimating relative to all three types of gear and a 

composite or aggregate output, which equaled the sum of all shark landings. 

The assumed fixed and variable inputs were designated by three gear types. First, in the 

pelagic gear fishery, vessel length and vessel hold size were assumed fixed, while days at sea 

were assumed to be variable. In the gillnet fishery, the inputs assumed to be fixed factors 

were vessel length, fishing effort, length of net, and crew size, while days at sea were 

assumed to be variable. Finally, in the longline fishery, the inputs assumed to be fixed factors 

were vessel length, vessel hold size, fishing effort, length of the longline, and crew size, while 

days at sea were assumed to be variable. Subsequently, trip level information was aggregated 

to annual vessel performance. These data were used to estimate capacity for the large coastal 

pelagic shark fishery. Estimates of maximum sustainable yield for each species were not 

available, and thus, MSY was calculated as being equal to the sum of average annual landings 

of each species of shark between 1990 and 2000. The sum of average annual landings, 

however, was considerably lower than the sum of quotas imposed on each species or various 

species of sharks. It was subsequently decided to calculate the capacity output and number of 

vessels to potentially remove from the fishery using the quota necessary to achieve MSY—

3.9 million pounds. In addition, the calculation of capacity output was restricted to the 

number of days required to produce the capacity output rather than the number of days (8,547 

days), which based on observed activity, the fleet might be able to be at sea during a year 

(16,667 days). 

Although the analysis was based on mean annual vessel performance between 1998 and 

2000, we present a summary of fleet wide activity only for 2000 (Table 17). This is because 

estimates of the number of vessels necessary to harvest the quota necessary to support MSY 

are based on the number of vessels operating in 2000, the most recent year for which data 

were available. As indicated in Table 16, the longline fleet is the primary fleet in terms of 

landings of coastal pelagic sharks. In 2000, the longline fleet landed 85% of the total landings 

of sharks in the coastal shark fishery. The pelagic gear landed slightly less than 5% of total 

landings. The longline fleet also had the highest observed landings per day at sea; 7,579 

pounds. The gillnet fleet had the second highly observed landings per day at sea; 5,459 

pounds. 

Relative to the number of days required to harvest the capacity output, the longline fleet 

would require the largest increase in number of days; a 468% increase. The gillnet fleet 

would require only a modest increase in number of days to harvest the capacity output; a 

28.3% increase; the pelagic fleet, if it operated in an efficient manner, could actually land 

their potential capacity output with fewer days at sea. 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

38

In 2000, the fleet (all three gear types combined) landed 6.5 million pounds of sharks, but 

had the capability to land 36.2 million pounds (Table 18). This would, however, require a 

substantial increase in the number of days at sea per vessel per year. Rather than being at sea 

an average of 11 days per year, vessels would have to increase their days at sea per year to 37. 

The fleet had an overcapacity, relative to the quota necessary to achieve MSY, of 32.3 million 

pounds in 2000. 

The number of vessels required to harvest the quota, assuming they operated at capacity 

output, was estimated to equal 25. The reduction in fleet size relative to the number of vessels 

operating in 2000 was estimated to equal 206 vessels. Assuming the average value per vessel 

equals its annual gross stock, it was estimated that the cost of reducing the fleet size by 206 

vessels equaled $33.2 million or $161,328 per vessel. 

A particular difficulty for interpreting estimates of capacity output in the shark fishery is 

the apparently large number of part-time operators. For example, in the longline fishery, days 

at sea per vessel in 2000 varied between 1 and 92. It is unknown how many operators were 

actually full-time in 2000. The assumption that all vessels could or would increase the 

number of days per year to 37 may be without basis. In 2000, 41 out of the 126 vessels had 

days at sea greater than or equal to 37 (Tables 5 and 18). 

Table 17. Summary Information for the Large Coastal Pelagic Shark Fishery 

Fishery Capacity Base Days Days per Vessel Output Vessels Maximum Landings Per Daya 

Longline Observed 1,294 11 5,505,604 126 7,579

 Capacity days—Excess Capacity 7,345 61 31,755,815 126 4,323

 MAX Days 11,040 92 47,360,347 126 4,290

Gillnet Observed 304 9 634,014 34 5,459

 Capacity days—Excess Capacity 390 11 1,528,447 34 3,916

 MAX Days 2,006 59 2,034,699 34 1,014

Pelagic Observed 948 13 315,171 71 4,258

 Capacity days—Excess Capacity 811 11 2,951,598 71 3,638

 MAX Days 3,621 51 12,227,276 71 3,377

a

Maximum landings per day for the observed level of activity based on actual maximum and 

not average. The maximum landings per day for capacity days and maximum days were 

based on the capacity output divided by the number of days required to achieve capacity 

output and the number of days that the fleet could be at sea per year; MAX days equals the 

maximum number of days reported per year for the vessel having the most days at sea per 

year. 
Reducing Capacity in U.S. Managed Fisheries 

39

Table 18. Capacity Output and Cost of Buyback Program for the Large Coastal Pelagic Shark Fishery 

Level of Activity Days at Sea Days Per

Vessel 

Output Number of Vessels

In 2000 

Vessels 

Required 

To 

Harvest MSY 

Number of 

Vessels 

To Reduce 

 Relative 

To MSY Harvest

Vessels 

Required 

To 

Harvest Quota

N

T

 

T

Observed 2,546 11 6,454,789 231 95 136 141 Capacity days—Excess Capacity 8,547 37 36,235,860 231 17 214 25 MAX Days—Overcapacity 16,667 72 61,622,322 231 10 221 15 
Reducing Capacity in U.S. Managed Fisheries Estimates of Capacity 

40

3.6 Overview of Overcapacity and the Cost of a Buyback Program 

Relative to the five fisheries examined for this study, it was estimated that fleet size 

needed to be reduced by 3,015 vessels (Table 5). In contrast, the number of active vessels 

operating in the fisheries equaled 5,182. It was estimated that 2,167 vessels were required to 

harvest either the maximum sustainable yields or quotas necessary to achieve MSY. The 

largest reduction in the number of vessels was for the West Coast groundfish fishery (1,260); 

the Gulf of Mexico shrimp fishery had the second required largest reduction (875). The New 

England groundfish fishery required a reduction of 588 vessels, but when latent permits were 

included, it was estimated that another 725 permits would need to be reduced to prevent 

overcapacity in the New England groundfish fishery. 

The total cost of reducing fleet size to match capacity output to allowable desired target 

levels of landings and resources was estimated to be approximately $1.0 billion; this equates 

to an average buyback cost of $323,847 per vessel. Albeit the estimated buyback cost per 

vessel may appear high, particularly relative to observed activity in each of the fisheries, it 

must be considered that the estimated buyback cost is based on retiring the vessel from all 

commercial fishing. The estimated cost of the buyback program, thus, considers revenues 

received from other fisheries. 

Although the West Coast, groundfish fishery requires the largest vessel reduction to 

avoid having overcapacity, the highest direct or vessel buyback program cost is for the Gulf 

of Mexico shrimp fishery. The New England groundfish fishery has the second highest 

program cost relative to the direct purchase of vessels; when latent permits are considered, the 

New England groundfish fishery has the highest buyback cost. 
Reducing Capacity in U.S. Managed Fisheries Summary and Conclusions 

41

4.0 Summary and Conclusions 

The report presented estimates of overcapacity and the potential cost of a governmentsponsored buyback program for removing overcapacity in five federally managed fisheries. 

The five fisheries selected for examination were the New England groundfish fishery, the 

West Coast groundfish fishery, the Atlantic swordfish fishery, the federal Gulf of Mexico 

shrimp fishery, and the Atlantic coastal shark fishery. Overcapacity in the two groundfish 

fisheries was determined relative to the smallest maximum sustainable yield or the species 

requiring the largest reduction in number of vessels to prevent having overcapacity. 

Overcapacity for the shrimp and swordfish fisheries were, respectively, determined relative to 

average annual yield and United States shares of the north and south Atlantic total allowable 

catches. For the shark fishery, overcapacity was determined relative to the total landings of 

all sharks combined and an over-all quota necessary to achieve maximum sustainable yield. 

Overcapacity was determined to characterize all five fisheries. The most severe case of 

overcapacity existed in the West Coast, groundfish fishery; the fleet operating in 2001 had the 

potential to harvest 150.2 million pounds over the maximum sustainable yield for the fishery. 

It was also determined that the West Coast, groundfish fishery would require the largest active 

vessel reduction to prevent overcapacity—1,260 vessels. The New England groundfish 

fishery, however, may have the potential for having the most severe overcapacity, if latent 

permits are considered. For example, the analysis suggested that 588 vessels should be 

reduced from the New England fishery to reduce overcapacity, but 725 latent permits 

remained that could be activated and used to harvest groundfish. It was also estimated that 

the total cost of a buyback program to eliminate overcapacity in all five fisheries was 

approximately $1.0 billion. 

The fisheries analyzed for this report constitute approximately 12.5% of the fisheries 

under federal management or five out of approximately 40 EEZ fisheries under federal 

management (http://www.nmfs.noaa.gov/sfa/domes_fish/FMPS.htm). In addition, fishery 

management plans (FMPs) are under development for nine more fisheries. The extent of 

overcapacity in many of these other fisheries is not known, but there is significant evidence of 

excess capacity in several of these fisheries (NMFS Task Force, 2001). Implementing a 

buyback program, just for the five fisheries examined in this report, would cost nearly $1.0 

billion; implementing a buyback program for the other 35 or so fisheries would likely be 

extremely expensive if the federal government was to fund the buyback. 

If the U.S. Congress desires to promote the sustainable use of the nation’s marine 

resources and maximization of benefits to society, programs for reducing capacity in many of 

the EEZ fisheries will have to be developed. Given the expense of buyback programs, it is 

likely that alternative capacity reduction programs will be necessary. Options for buyback 

programs include industry sponsorship of buybacks; government financed buybacks, in which 

the government absorbs either the entire cost or a portion of the cost; and joint 

industry/government government sponsored buybacks, in which the government offers loans 

to industry to reduce overcapacity. Alternatively, the use of various management/regulatory 

strategies could be implemented to rationalize the fleets. One possible management strategy 

is individual transferable quotas or ITQs. Individual transferable quotas or individual fishing 
Reducing Capacity in U.S. Managed Fisheries Summary and Conclusions 

42

quotas (IFQs) have worked relatively well in addressing problems in the west coast halibut 

and sablefish fisheries, the South Atlantic wreckfish fishery, and the surfclam and ocean 

quahog fishery. The efficient reduction of overcapacity will likely require a combination of 

capacity reduction actions. 

 
Reducing Capacity in U.S. Managed Fisheries References 

43

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