Fisheries Committee on March 31st, 2009

[Ed Frenette]

Kenny fishes LFA 24, so he's probably in the best position to explain.

[Ken Drake]

Did you want to know what the economic difference is?

[Randy Kamp, Conservative, Pitt Meadows—Maple Ridge—Mission, BC]

I mean, there's a huge difference, from my perspective, at least, one being that they have a slightly smaller number of licence holders in LFA 24, for example. What makes for profitability in one and not in the other? Is it the biomass, the stock in your area, the way it's fished?

[Ken Drake]

One thing that's very distinctive is that on the north side of Prince Edward Island there's no other fishery across from us that affects us, whereas if you fish in the strait, you have New Brunswick across the strait, and Nova Scotia is on the opposite side of the strait in this area. It definitely plays a part in it.

I'm not going to try to explain why there are differences, but one thing I have to say is when you go to a dealer to buy equipment for your boat, they don't ask you which LFA you fish in and then give you a reduction because you get fewer lobsters. It's the same price for everything, wherever you go. The costs are the same to go fishing in all three LFAs, and that's the hard part.

In an area where there's a decline in the fishery, it may not even have anything to do with the fishermen themselves; it may have something to do with the fact that there are concerns with pollution, for example, out of Charlottetown and Summerside. It could have something to do with the bridge. There could be a number of reasons. But in the final analysis, every fisherman has the same costs to go to sea.

[Randy Kamp, Conservative, Pitt Meadows—Maple Ridge—Mission, BC]

Yes, but if I'm fishing in LFA 24, am I going to catch more lobsters? Is that basically what's contributing--

[Ken Drake]

That's the way it's been for a little while. It wasn't always that way every year, but it seems to be that way on more of a continuous basis on the north side. It has the history of that.

[Ed Frenette]

I think, Mr. Kamp, if you look at LFA 25, for example, in the western part of the Northumberland Strait, with the fishermen from New Brunswick and Nova Scotia there are probably over 850 fleets at work in that fall season. The LFA 26A in the eastern portion of the strait, with Nova Scotia and P.E.I. combined, has easily over 800 fleets fishing that season.

What's happened as well is that in the central portion of the strait--and we're convinced this is from the effects of the construction of the Confederation Bridge, plus industrial pollution and municipal pollution--the stocks, as we mentioned earlier, are down seriously. That resulted in fleets or fishermen moving to both ends of P.E.I., within their own zone, which added more pressure and more fishermen fishing a limited amount in each area.

Consequently, the low tide brought everybody down.

[Randy Kamp, Conservative, Pitt Meadows—Maple Ridge—Mission, BC]

I think I understand that.

If we're talking about a rationalization program, I want you to explain a little bit more how you think that would best work and who would fund it and so on. But I guess the reason for a rationalization program would be overcapacity. Perhaps I'm wrong in making that assumption, but you can tell me if I am.

So how did we get there? If we have too much capacity, too many licence holders or whatever, and you say the stock is relatively stable and so on, is it just the price you're getting for lobster that's put us in this overcapacity, or was there ever a time when the stock could support the number of current licence holders?

[Ken Drake]

I think a lot of it is that DFO wants an effort reduction. How do you do an effort reduction and still keep that enterprise viable? One fishing enterprise can only reduce by a certain amount before that enterprise is not viable. So the conclusion you would take would be to reduce the number of enterprises. The reason for that is that if the enterprises get more concentrated in a certain area due to the fact that there are higher catches in that area, it would just normally bring down the catches in the area where the concentrations went to. If you reduced those areas that are heavily concentrated, it would make those enterprises more viable.

The lobsters are reproducing at a very good rate. The issue is that the economics of the fishing enterprise are making it harder and harder to make a living at it.

[Randy Kamp, Conservative, Pitt Meadows—Maple Ridge—Mission, BC]

I understand that, and I understand the theory of rationalization. If we have fewer people fishing for the same amount, they should make more money. But how did we get too many? That is my question.

[Ed Frenette]

I think a lot of it goes back to DFO regulatory measures over the years or over the decades. In the Northumberland Strait, back in the early 1980s, there was a massive amount of lobster, where there are hardly any today. People were landing 40,000 and 50,000 pounds of lobster in a two-month season. That has completely changed. From our point of view, it is environmental issues that have done it.

Global warming is having some effect as well, over and beyond what we've seen as a result of other environmental problems. There is also the pure economics of the fishery—things have changed drastically in the last few years, with higher input costs and lower prices. The economic squeeze is on.

[Randy Kamp, Conservative, Pitt Meadows—Maple Ridge—Mission, BC]

One of you said that if it's to be a challenging year, you were going to increase fishing pressure. Not being a lobster fisherman, and being from B.C., I'd like to know how you would do that. You have certain input controls, right? You have a number of traps and there's a certain distance between traps. You know when you can fish and when you can't fish. How are you going to increase fishing pressure to threaten the stock, which was the implication?

[Ken Drake]

Everybody assumes that all lobster fishermen do is put the traps in the water, then go out and haul them up. Actually, what you do is follow trends of lobsters, whether they are moving in or out or if they're doing this or that. You have options. You have things you can do. You can follow the fish. That increases your cost, but it also could increase your catch. There are a lot of different things you can do. You'll try that much harder if you're trying to qualify for EI, or if you're trying to make your boat payment. If you knew that you would qualify for EI, or if you were in an area where there were low catches, you would do it a lot more economically.

[Randy Kamp, Conservative, Pitt Meadows—Maple Ridge—Mission, BC]

Thank you. That is helpful.

Mr. Frenette, could you give us a little more detail? I disagree that there is nothing in the 2009 budget that will be of assistance to P.E.I. fishermen. But with respect to the rationalization program, what do you think the federal government's role should be?

[Ed Frenette]

The position we're taking is that we need a three-part approach to rationalization: a cash input from the federal government, a financial input from the provincial government, and money from the industry itself. We're talking with the minister's office, ACOA, the provincial government, and among ourselves about the possibility of a cash input coming from the community adjustment program. We're still waiting to hear whether this is available. It would be a long-term low- or no-interest loan from the provincial government that would be repaid by the fishermen.

Along with that, we are looking at trap reduction and other harvesting approaches to ease the pressure on the fishery. Included as well would be some sort of financial assistance to younger entrants. They are buying in at quite an expensive price, and this would ease the cost of interest on their fleet purchases.

[Randy Kamp, Conservative, Pitt Meadows—Maple Ridge—Mission, BC]

Thank you.

[Ken Drake]

We have three LFAs and each LFA may want to do it in just a little different way. We don't have a standard or anything set yet. We also have to go back to the fishermen. All we're discussing right now is the general concept. We haven't worked out complete details, because we have to go back to our fishermen before we make a final decision. They will decide how it's actually going to be done.

[The Chair, Conservative, Rodney Weston]

Thank you very much, gentlemen.

Unfortunately, our time here has come to a close. On behalf of the committee, I would like to thank you very much for your patience with us this morning and also thank you for appearing.

We will take a brief break and allow the next group to set up.

Thank you.

[The Chair, Conservative, Rodney Weston]

I would ask members to please take their seats at this time. We're going to resume the committee meeting.

I have just a couple of points of information for the members in the audience today. Coffee and tea are available at the side here. Please help yourself. Also, there are plenty of translation devices available. There are some sitting on the table up here at the front. If the sound quality is not that great, they help enhance the sound as well, so please take advantage of the translation devices.

We're about ready to begin. Today with us we have the Prince Edward Island Seafood Processors Association. I'm going to turn the floor over to you very quickly and you can introduce the people with you, Ms. O'Reilly.

I would ask one thing. We're under some fairly tight time constraints to make sure we are able to hear from everyone today, so the timeframe for presentations is about 10 minutes, and the members have time they're allotted for questioning as well. You'll hear a beeping noise. It's a little clock up here. Don't be alarmed if you hear it, but we'd ask you to stay as close to the timeframes as possible.

Ms. O'Reilly, I'll turn it over to you.

[Maureen O'Reilly, Administrative Officer, Prince Edward Island Seafood Processors Association]

Thank you very much.

Mark Bonnell and Lorne Bonnell are here representing Mariner Seafoods. This presentation is by Olin Gregan, who is the executive director of the P.E.I. Seafood Processors Association and who is stuck in Halifax due to bad weather.

I would like to thank the committee for the opportunity to present a narrative on behalf of the P.E.I. Seafood Processors Association.

As an association, we represent 90% of the lobster processing capacity on the island, both mussel and oyster growers and crab processing.

Undeniably we have the opportunity to be operating our businesses amid some of the most beautiful and fertile lands in the world and with the view of some of the richest and most bountiful pristine waters known within the seafood industry.

I am a firm believer that the commercial fishery has three distinct partners: harvesters, processors, and both levels of government. Through this presentation my comments should in no way be interpreted as speaking for our other industry partners, except in passing reference or with respect to a direct impact on our business.

Also through this paper, do not misconstrue any thoughts or sentences as a pointing of fingers, because there is much blame to go around, so we must just accept the share and move toward trying to better the industry as seamlessly as possible.

Commercially on the Island we have every species of fish, from smelt to tuna, crossing our docks through the ice-free months of the year. When fisheries are unfolding and ongoing in our coastal communities, there is the unmistakable look and feel of community pride, involvement, and prosperity, with all the people seemingly in some type of a hurry because of the varying needs of the local catches and the noise of vessel engines at dockside that are sometimes drowned out by the squealing of tires from the new half-tons--the sounds and signs of another lobster, herring, or crab season.

This industry of more than a century has managed to spin off hundreds of millions of dollars to the coffers of the federal, provincial, and municipal governments of the day, and it has created ways of lives and livings that are interwoven into the Island fabric.

But these positive indicators are now becoming shallow looks, feels, and sounds. Our lobster industry is broken, and it certainly needs to be revived to the levels that it has known and enjoyed in previous times.

As industry partners, we must develop a vehicle to dialogue properly, establish new...and re-establish with others the trust factor that is necessary and evident in any successful partnership.

Our lobster fishery is arguably the most valuable fishery in Canada. It is a billion-dollar industry in Atlantic Canada, and in many areas and communities of P.E.I. the seafood sector is the economic engine and the community lubricant. This can't be lost sight of.

We have not paid nor given this fishery the focus and attention it has deserved, and now we are and will be paying a big price for industry complacency. This is a core industry to P.E.I. and Atlantic Canada and it is not going anywhere.

No one person nor company can pick this up and move it west. We now must bring the fishery into the new millennium. We have many new ideas on the local, national, and international front and many new demands and regulations, buzz words, and acronyms within which to operate or be shut down. The costs that are now being downloaded and attributed to our members, such as monitoring, electronic data-inputting, eco-labelling, traceability, catch certificates, and the MSC, will ultimately bankrupt our industry without proper focus, without proper implementation of such, and without a well-thought-out cost-recovery regime.

We have the Canadian dollar that tortures us steadily with its movement, making it nigh impossible to predict yet another impact on our business. This is coupled with the economic snowstorm that nobody really understands or knows how to wrestle to the ground.

We are now in the unenviable position of 30 days away from the opening of the Cadillac shellfish industry in the country with the operational moneys needed for a Lada.

The seafood industry is not the only industry that is being looked at with jaundiced eyes by the lending institutions, but we are and will be feeling the brunt of their belt-tightening decisions around the advancement of funds and credit lines.

Fishers are fearing prices at break-even levels. We hope this does not come to pass. In fact, we are telling our clients that our fishers and our businesses cannot continue under such strain, frustration, and anxiety.

As a processing sector, we have a myriad of meetings, internally as well as with both levels of government, to discuss and share ideas. But in 2009—30 days from the beginning—the fishery will begin with much uncertainty. Our employees are expecting the same employment opportunities as in previous years, and this is what we are expecting to provide. Without this continuity in our operations, our facilities are doomed to failure and closures. Unfortunately, there is a whole industry, as we know it, in peril.

Difficult times such as these can and may show us a new direction. We must design a strategy to deal with stagnant inventory and cashflow challenges. Along with our basic product forms, we must start to develop new products. We need new market research studies. We need new marketing and product promotion initiatives. Conceptually, nothing I have said here is new, but to an industry that has not had a new commercially viable product introduced since the lobster popsicle 25 years ago, these are very new ideas to be discussing and then trying to implement.

This is the time for the industry to pause, discuss, understand, and hopefully agree on the need for proper change; the need for understanding our clients' and customers' wants, needs, and wishes; the design of a fishing plan that understands and addresses those wants, needs, and wishes through new marketing and merchandising campaigns; the design of a plan that allows for product development to satisfy societal changes; and the design of a plan that allows for technological change and advancement.

As an association, we have just recently introduced to our members, as well as some select government people, a concept paper with some strategic initiatives to try to revitalize the lobster industry. At best, after discussions and rewrites, it will be at least a three-year to five-year plan. But it must be done. Change usually requires time, and most are averse to change, so there is a nurturing process to endure.

At times such as these, we must look to governments for both monetary and directional assistance with the changes that need to be introduced. There must be tough decisions made that will probably cost a vote, either land-based or water-based, but political fisheries have no place in the economy we now find ourselves playing in. The reality is that the vote is the biggest hurdle to overcome, as the fishery always has been a very valuable political tool in all levels, as the 200-mile limit has shown us time after time.

As processors, we must do a better job in our facilities. We must revisit and invest in our commitment to quality. We must have better dialogue and discussions with the harvesters who are bringing us the raw materials. It is essential that they not feel alienated from what is happening to their catches and that they feel part of the highway to market. We must have better dialogue with DFO officials. We must present our cases and points of view better through the advisory committee process. We must stop testing the tried and true method for business failure by paying the most and selling for the least. We simply must implement and adhere to good business practices. We must decide it is okay to make money.

There are other Island seafood processors, such as the mussel processors, who are operating without much fanfare, but certainly their operations are diamonds in the rough. Left to their own devices for the most part, they have developed this aquaculture fishery to levels that now represent $67 million and 80% of the mussel growers and processed mussels in North America. They have achieved these levels of growth and process in a short 30 years, levels that have not been achieved by other areas such as Europe and New Zealand in more than 100 years of operation.

Forty million pounds of mussels require a lot of support material, packaging, services, and variable spinoffs in many communities throughout the Island. These facilities provide many Islanders the opportunity to work within their home communities through the year, as well as allowing their $10 million to $12 million payroll to be injected into the communities. Young Islanders see this part of the seafood industry now as something they can identify with, as the industry is young, growing methodically, and certainly sustainable.

As of late, this part of the industry has also been taking advantage of NRC, the PEI Atlantic Shrimp Corporation and the processing association to develop projects that are vital to the industry with respect to health claims and omega-3s. All of this looks very positive for the aquaculture side of our association.

In closing, it is absolutely critical that we design a new strategy. We must develop trust so that discussions have meaning and merit, as opposed to disdain and malcontent. This may suggest a liaison of neutrality between the partners that have the wherewithal to cut through the chaff and the smoke and then suggest the path.

Again, the Prince Edward Island Seafood Processors Association and I thank you for this opportunity.

[The Chair, Conservative, Rodney Weston]

Thank you very much, Ms. O'Reilly.

Mr. Byrne, I believe you're going to share your time with Mr. MacAulay?

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

I am, indeed. Thanks, Mr. Chair.

I wanted to say a very special thank you to our witnesses, not only those before us right now but those who preceded you. Thanks for sharing your thoughts and opinions about this.

Our colleague, Mr. MacAulay--

[The Chair, Conservative, Rodney Weston]

Sorry, Mr. Byrne.

Ms. O'Reilly, my understanding was that you wanted to check out at this time, and that Messrs. Bonnell will be answering the questions. So if you want to leave, it's quite all right.

[Maureen O'Reilly]

Thank you very much.

[The Chair, Conservative, Rodney Weston]

Thank you very much for coming.

Sorry, Mr. Byrne.