Fisheries Committee on May 18th, 2006

[John Hughes]

We have none whatsoever, except we can advise, and we do.

[The Chair, Conservative, Gerald Keddy]

Back to your main issues: your share of the Cultus Lake stock, which you don't feel you have enough input into; your allocation based on value; and what other issue is the main issue you would like us to take away from this meeting?

[John Hughes]

The other issue is reallocation without compensation. If you're going to take these stocks and give them to the sports people, to the natives, to anybody, and that's what you're determined to do, we disagree with it. But the least you can do is compensate us and let us have fair market value.

[The Chair, Conservative, Gerald Keddy]

Go ahead, Mr. Nightingale.

[Jim Nightingale]

In other resource industries, it's not acceptable to reallocate without compensating the people who presently use the resource.

[The Chair, Conservative, Gerald Keddy]

It would seem to be only fair to have fair compensation for your quota.

Thank you, gentlemen. We are out of time. I appreciate your coming today. You gave an excellent brief. Hopefully you'll see some movement on some of your issues.

To the committee, before we go to our next witness and while we have quorum, we do have an interim budget, until the end of June, to approve here. It's to cover the travel and the cost of our witnesses. We're just going to be two seconds here if we can approve this, and then everyone can say farewell to the witnesses.

Do we have approval on $6,400?

[An hon. member]

I so move.

[The Chair, Conservative, Gerald Keddy]

(Motion agreed to)

[The Chair, Conservative, Gerald Keddy]

We will suspend for two minutes so everyone can say farewell.

[The Chair, Conservative, Gerald Keddy]

Pursuant to Standing Order 108(2), a study on the proposed reform of the Fisheries and Oceans Canada's at-sea observer program, I'd like to welcome our witness.

Welcome, Monsieur Gagnon. If you would like to proceed, go ahead.

[Marc Gagnon, President, Biorex Inc.]

I want to thank the committee for providing me with this opportunity to express our serious concerns with the proposed reform of the At-sea Observer Program announced last year by FOC.

Biorex management and staff are strongly opposed to the proposed reform of the Program. We believe that its implementation will have very negative consequences for all the stakeholders, including fishermen, observers, the Department and observer companies like Biorex, and that it will go directly against the objectives of conservation and protection of Canadian fish resources.

There are many reasons why we make this statement and it would be difficult to explain them all in this short period of time. A document detailing all of our concerns has already been distributed to the members of the committee and I will therefore limit my presentation to two major aspects of the proposed reform, which are the integrity of the program and its cost.

Our main concern with this project is that it grants fishermen the right to choose who is going to observe their fishing operations. Therefore, the observer companies and the observers themselves will be in a conflict of interest. Indeed, competitive pressures between the companies that will try to obtain or keep contracts with the fishing industry will create a situation where industry will try to manipulate the system to its benefit.

Furthermore, as with the dockside weighting program, which is being used as a model for this proposed reform, the new system will allow the fishing industry to create and control its own programs.

Finally, at-sea observers will constantly have to make compromises between the requirements of the program and the desire of some fishermen that they ignore irregularities or manipulate the data. One should understand that an observer who ignores an irregularity or who falsifies some data could considerably increase the profits of fishing operations and that, with the new system, this might guarantee some future contracts to his employer or guarantee his own employment.

The problems affecting the credibility and integrity of multiple provider programs such as the one that is proposed are well-known by national and international experts and stakeholders. They have been highlighted in several international conferences and government reports mentioned in our brief. I would only mention the two most relevant examples.

First, an independent expert hired by FOC to look at the various options to reform the At-sea Observer Program recommended in 2000 to maintain the existing regional exclusivity system. Obviously, the proposed reform goes completely against this basic recommendation.

Second, out of the hundred observer programs existing in the world at this time, only two allow fishermen to select their own observers. Both operate in Alaska and both have credibility problems.

As a matter of fact, the American government is carrying out studies at this time in order to change this system and to make sure that fishermen will not have the right in the future to select their observers.

To conclude my remarks about the integrity of the program, the general consensus is that granting the industry the right to select the providers of observation services would be akin to hiring the fox to protect the chickens.

As far as cost is concerned, the government claims that it will save about 2 million dollar per year across Canada with the new system. Not only that, it claims that the cost of the program to fishermen will be reduced.

Our contention is that this is not based on credible estimates and that the economic impact of the reform on fishermen and on society in general would be negative, for the following reasons.

First, the 2 million dollar saving for the government would come from transferring to industry the cost of coordinating the program which at this time is paid by the department to observer companies. In the existing system, this amounts to a cost of 3 million dollars a year for the whole of Canada. Secondly, the government is forecasting an increase of one million dollars of its internal costs relating to the control of the new system. So, 3 million dollars minus one million dollars equals the 2 million dollars the government hopes to save.

Second, according to figures published by FOC, the cost of administering the program would increase by one million dollars per year. With the reform, the level of competition between observer companies is more likely to decrease than increase. As is presently the case with the dockside weighting program, observer companies that will be controlled by the fishing industry will end up with a monopoly to provide services to their own fleets.

Third, the proposed reform would include the fragmentation of the regional programs in smaller units, which will lead to a substantial loss of savings of scale as far as coordination is concerned and will increase the cost of moving observers between the ports of a registry of the ships.

Finally, we do not believe it is it realistic to claim that the implementation of the new system would lead to a cost reduction for fishermen and for society in general. What is more likely is that the negative impact of the reform on administration and coordination costs as well as on the cost of moving observers will create very strong pressures to cut the salaries of observers and to erode the data validation procedures, to the detriment of the quality of the program.

In conclusion, we cannot understand why some are willing to compromise the quality, the integrity and the effectiveness of the program for 400 000 dollars per region, especially since the savings that the government hopes to make would not really be savings at all for society but would rather be mostly a transfer of costs from the government to the fishing industry.

We believe that it would be a serious and probably irreversible mistake for FOC to implement this reform. In order to preserve the integrity and effectiveness of the program it is absolutely imperative to keep the contractual link between FOC and the observer companies and to preserve their exclusivity on a regional basis through their contracts.

In conclusion, we recommend that the costs of the program be recovered from the industry by FOC rather than by the observer companies through the fees for fishing rights. This change would significantly improve the program for the great majority of stakeholders.

Thank you very much, Mr. Chairman, this is at the end of my statement.

[The Chair, Conservative, Gerald Keddy]

Thank you, Mr. Gagnon.

Mr. Matthews, you have 10 minutes.

[Bill Matthews, Liberal, Random—Burin—St. George's, NL]

Thank you very much, Mr. Chair. I don't know if I'll take 10 minutes or not.

I want to thank Mr. Gagnon for coming.

Mr. Gagnon, the current fisheries observer program, as I understand it, is funded two-thirds by industry and one-third by government. Is that correct?

[Marc Gagnon]

It depends on the region. I would say the government pays between 25% and 30% of the total cost of the program, depending on the region.

[Bill Matthews, Liberal, Random—Burin—St. George's, NL]

Your concern is that if the industry pays 100% of the observer program, you think it's going to create a conflict of interest, in that observers would be totally hired by and paid for by companies. Is that your main concern?

[Marc Gagnon]

Not exactly. My main concern is that the proposed reform would eliminate the regional exclusivity in providing services and would create a new system in which an undetermined number of certified fisheries observer companies could offer service to the same fleets in the same region in direct contracts between the industry and these companies. Transfer of 100% of the costs of coordination from government to industry is just one aspect of the big picture.

[Bill Matthews, Liberal, Random—Burin—St. George's, NL]

Are you concerned that observers wouldn't do their jobs as well as they're doing them now because they would be paid 100% by the industry? Is that your concern? Really, let's cut through it. Is that basically what you're insinuating?

[Marc Gagnon]

What I'm saying is that right now we are presently under pressure from the industry, by some fishermen, in our conduct of the program, and we have no incentive in listening to any of those pressures. In the new system that the reform projects, these safeguards will be lost, because the client of the observer companies will not be DFO; it will be the fishing industry.

[Bill Matthews, Liberal, Random—Burin—St. George's, NL]

One other interesting observation you've made is that you say the proposed system runs counter to recommendations of independent audits done, I guess, within the department. Have those audits recommended that the present system stay?

I'm not familiar with it, but I observed that you said the proposed reforms run counter to recommendations by DFO internal auditors. Can you tell me what the internal auditors of DFO really said?

[Marc Gagnon]

I refer there to an audit made in 1995. It was done to address directly a request from the Northern Shrimp Trawlers' Association to enable them to create their own program or to eliminate the present regional exclusivity in providing service that the observer companies have.

The answer to this request was that it was not possible because it would

It would compromise the integrity of the program.

[Bill Matthews, Liberal, Random—Burin—St. George's, NL]

I guess it would be fair to say you're concerned that we might develop a situation similar to what many east coast people, particularly Newfoundlanders and Labradorians, feel about the foreign observer program. In that situation you have foreign countries and foreign ships put on their own observer. It seems to me you now have a comparable or somewhat similar concern about what we might do with our observer program within Canada. There is a great suspicion in my province that observers on foreign ships don't really serve the best interests of the resource we're all concerned about. I gather those are some of your concerns as well.

That's just an observation; I don't expect you to answer that.

That finishes my remarks, Mr. Chairman.

[The Chair, Conservative, Gerald Keddy]

Monsieur Roy.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chairman.

The questions were quite clear, Mr. Matthews. In fact, I see two problems when I read your document. First of all, if I understand correctly, 3 companies would be affected in the East but they are presently independent from industry.

[Marc Gagnon]

Absolutely.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

With the proposed reform, they would become completely dependent upon the industry--and would even be subject to its orders--without having any contractual link with Fisheries and Oceans Canada.