Fisheries Committee on May 27th, 2010

[Gordon MacDonald]

While the panel report was largely implemented and a success story compared with most government reports, it wasn't wholly accepted. The panel report recommended sharing the resource 50:50 between permanent and new corporate fleets. The permanent fleet was a composition of traditional and aboriginal fleets, which were roughly equal partners. The panel recommended reducing the aboriginal access that was part of a negotiated agreement, on top of the devalued treatment by DFO of these licences as temporary, for reductions for 2004. The net result of the recommendation for equity would see the traditional, aboriginal, and corporate fleets moved from 30-30-40 to--

[The Chair, Conservative, Rodney Weston]

I'm sorry, I asked you to speed up and now I have to ask you to slow down a little bit. The interpreters are having a hard time.

[Gordon MacDonald]

Je m'excuse.

The point is that there are three groups. As Leonard said, there was no recognition of the aboriginal fleet being part of the traditional fleet. Roughly, it meant that instead of being one-third, one-third, one-third, in some cases there was a disproportionate amount given to the temporary access, in the sense that the net result was 30-30-40, as opposed to 33-33-33. There was more given there. Then the concept that you would step even beyond that, into 25-25-50, is not equity by any stretch of the imagination.

Again, you can sit there and play the numbers and say that there are 350 of them and only 37 of us. That's the politics. To some extent that's the vote-buying that got them permanently fixed into place at a time when the resource was sliding off the scale with no sign of a future. It's part of the problem with the politics of the masses. You get people screaming and jumping up and down, and it becomes very difficult to ignore that as we're here today.

The minister didn't accept the 50-50 or the 25-25-50 recommendation, but chose to phase this in with a trigger threshold of 9,700 tonnes. I'll answer some of your questions later about why we didn't speak earlier about that. This was something that was completely contrary to the report. The report said there should be no thresholds, no triggers; just do it. The minister did not accept that. He chose a different path, essentially to put it outside of his mandate to some extent.

Unfortunately, the resource has been determined to be highly cyclical, and although resource abundance is high presently--today--it will inevitably drop again to low levels, regardless of management precautions, so when the minister implemented this, he said, “Listen, I can't implement this now because it's going to collapse, and this is going to create great suffering and economic viability pain to the fleet, but when it goes up, we'll do it then.”

The problem, as we now recognize, is that you can't keep it at that level. You can't make it take off to 30,000 feet and stay there; it's going to go up and it's going to go back down. If you permanently implement a change at this point, you're going to be in the same situation you were five years ago once it goes down again.

[The Chair, Conservative, Rodney Weston]

Excuse me. We'll get to a lot of the data during the questions, so if you don't mind, could you just...?

[Gordon MacDonald]

I have just one more paragraph and then I'll get to the bitter end for you. I'm sorry about this.

You know that Minister Shea decided to change the idea. I'll go through it as quickly as I can. Minister Shea decided in 2009 to fix the equity licences as established following the panel report in 2005. She just locked in the way they made the decision and didn't change it.

We were consulted in what we understood was a major review of that decision this winter, and we were informed upon the review that the May 2009 decision was to remain. She made the decision in 2009, then went through a big review, and then decided to implement it. Of course, now you folks are here.

Unfortunately, the success that is the eastern Nova Scotia snow crab fishery is tainted by a few who've become addicted to free handouts and have learned that bad behaviour and skewed truth reap rewards: money for nothing and your crab for free. It's sad that the politics of the numbers can yet again rise up to attempt to destroy yet another fish resource. Cod alone should have provided the lessons that we needed. The resource is shared among fishermen outside the fishery who own the rights to the resource, receive royalty rights for this ownership, and the gift isn't big enough.

Sadder still is the failure to respect the conservational, financial, and historic investments by the traditional fleet that have provided the basis for this resource success. Access of 100% is down to 30% access and possibly less. Saddest of all is the bait-and-switch treatment of the snow crab access values negotiated in good faith by aboriginal people under the rights deemed by the Supreme Court of Canada. They provide that under the negotiations, this is going to be the level that you have; then they take away from that under the temporary measure in 2004, and then they take away again to provide more access to non-aboriginal...well, new corporate entity fishermen.

The traditional and aboriginal fleets have cooperatively worked towards the continued best management practice of this fishery regardless of financial hardship, as noted by a further cut in quota of 17% in 2005 right after the panel report, followed by a 29% cut in 2006, which came on top of the lowest shore price that we'd seen in a decade. We took those cuts specifically because we had to, because that's what the science was saying. The net result is that we've actually seen a rebounding effect that's gone beyond.

We are the stewards of the resource envisioned by the UNFAO, and while we're not here asking for more than can be justified, we're asking for no less. We support Minister Shea's decision in 2009, and the wisdom on behalf of the Government of Canada and the fishery that she used in making it.

We urge this committee to support the minister's decision on the allocation distributions to ensure that there's a viable snow crab fishery for generations to come.

[The Chair, Conservative, Rodney Weston]

Thank you, Mr. MacDonald.

Please go ahead, Mr. Gardner.

[Michael Gardner, President, Gardner Pinfold Consulting Economists Ltd.]

Good morning. Welcome.

I'm here as the chair of the panel that made the recommendations that the ministers have acted on. Having heard the discussion earlier on with the previous group, I'm going to zero in on one issue, which is what the report said about 50-50, and I'll be happy to entertain questions around that.

The approach we used was based on the principle of equity, but also on other principles, and they are all laid out in the report. We labelled each of the so-called temporaries at the time as “quota holders” because each had an individual share, and the idea was that each one of those quota holders would be organized into a company of some kind. They could determine whatever organization they wished to aggregate or to consolidate those quota holdings so that the overall increase in the number of vessels or the increase in effort really wouldn't change. In other words, the fishery prior to and after the entry of the temporaries would remain roughly similar, at just over 200 vessels. To do that meant consolidating those quotas into some form of entity.

The key, though, is that regardless of how many participants--how many quota holders--formed a company, that company's overall quota would be the sum of the individual quotas held. In other words, if you had 10,000 pounds and 10 licence holders formed a company, that company would have 100,000 pounds; if there were 10,000 pounds and 15 formed a company, it would have 150,000 pounds.

What seemed to get lost in the recommendations after the TAC hit the magic 9,700 tonnes was that each of the licences was simply treated as another licence and the overall quota was divided equally among them. The trouble was the tonnage in each one of these new companies either exceeded or fell short of the sum of the individual quotas that each of the quota holders took into the company when it was formed. As a result, when you aggregated these things, it no longer added up to 50-50, but fell somewhat short of that. It was effectively still a 60-40 arrangement.

I think the document makes clear the intention and how the mechanism was supposed to work. In the report the annex B that's referred to was used as an illustration of what an end result would look like, but we had no way of knowing at the time how the various quota holders would aggregate themselves into companies or how many companies would end up in the final result. However, it didn't matter how many companies there were; as long as each of the quota holders took in their allocation, it would sum to the 50%, the equitable level that had been intended.

Somewhere along the way there was a misinterpretation of how this was supposed to work.

Another important element here is that there is a recommendation, which had been accepted by the minister, of complete transferability of quota among the quota holders: company A could acquire quota from company B, or there could be consolidation within company A. The idea was that it was to be fluid, so that issues around viability could be addressed naturally through consolidating more quota to make sure your vessel was viable.

The recommendations were of a piece. They were meant to be taken as a whole, and that's the way the minister accepted them, with the exception of the 50-50 sharing, which was to be engaged at the trigger point of 9,700 tonnes.

So the idea of this one-third, one-third, one-third, or 25, 25, 50% share, and so on, is certainly one way of looking at it. But our mandate was to look at this as a fishery that could be put and maintained on a viable basis. Those recommendations were directed to that end, and not along classes of individuals. All of the licence holders participated, or had the opportunity of participating in the hearings, including the first nations, who were represented, and the permanent and the temporaries. Everybody participated, and we had briefs from all of them. These were the recommendations and those were the ones that were accepted by the minister.

My reading of this is, yes, there was a misinterpretation of how this equity was to be applied, and it was not applied in the way the report had intended.

[The Chair, Conservative, Rodney Weston]

Thank you, Mr. Gardner.

Mr. Nicholas.

[Hubert Nicholas, Commercial Fisheries Liaison Coordinator, Unama'ki Institute of Natural Resources]

First of all, I want to thank you for inviting me and Leonard Denny. We speak on behalf of 10,000 Mi'kmaq of Nova Scotia. There were five in the earlier group representing the corporate licences, so if we're talking equity here, I think what we should do is invite another 100 or so Mi'kmaq people to say what they have to say and how the snow crab industry affects them.

I prepared a little speech here. I work for UINR, the Unama'ki Institute of Natural Resources. It's an umbrella organization of the five Mi'kmaq communities of Nova Scotia. I can only speak for these five communities. As Leonard mentioned earlier, there are seven that currently fish in the Scotian Shelf for snow crab.

There are 10,000 residents who fish in the Scotian Shelf, and they represent 74% of the Mi'kmaq population of Nova Scotia. This equates to 21 and a half licences in area 23 and eight and a half licences in area 24. In addition to these licences, the Mi'kmaq communities currently own one, as mentioned earlier; Millbrook owns a fixed allocation.

The 30 licences and the fixed allocation equate to approximately 176 jobs for seven communities. That's just in the snow crab industry alone. These jobs mean that 176 families benefit from employment and a sense of well-being and belonging that being part of a community provides. The money generated from the snow crab industry and the commercial fisheries goes directly back into the community.

I want to go back. When I was contacted to do a presentation here, I asked why. It seemed as though the group before and a few now, maybe, were concentrating on the sharing formula. When I was asked to do a brief little presentation on what my view is, it was on how the snow crab industry affects the first nations Mi'kmaq communities that I represent. Based on that, I made a presentation based on how it affects the Mi'kmaq communities. I'll briefly mention the sharing formula, but it seems to me that this whole meeting here is focusing on that instead.

The money generated from the snow crab fishery and the commercial fishery goes back directly to communities. The chief and councillors of each community determine how best to allocate the money generated from the commercial fishery enterprises. Money that is generated for each community goes towards essential services within the community, such as housing, education, infrastructure, social services, health, community services, job creation, community enterprises, and improved well-being. Snow crab jobs provide opportunities and increased well-being that did not exist prior to the Marshall decision.

The amount of money generated from the fishery and the number of jobs it creates do not equate to a moderate livelihood for each community member; in most communities, snow crab revenue is used to help bail out other fisheries that are losing money, in hopes that the employees can accumulate enough income and enough employment insurance benefits to help them through the non-fishing season. Chiefs and councils decide for the communities how best to benefit the greatest number of people through work projects and supporting essential services, as well as supporting businesses and fisheries that are not profitable, in the name of job creation.

As you can see, there's a dependence on the snow crab fishery. We realize the importance of not fishing at all costs and want this resource to be there for generations to come to help our communities and their people; therefore, we support science recommendations and advice.

We feel that the definition of moderate livelihood has not been taken seriously. No moderate livelihood agreements have been honoured since the Marshall decision. The Marshall response initiative was a great thing for our communities, and things were much worse prior to the decision, but they are a long way from where we want them to be. More needs to be done to support economic opportunities and employment opportunities within Mi'kmaq communities, and more access to the snow crab industry is a start.

The snow crab industry on the Scotian Shelf is in good condition because of the cuts and management decisions that the participants made in the past. This has resulted in a high abundance of crab this year; the biomass has reached it peak and is now heading for a decline. This is a natural occurrence in snow crab and something that is easy to predict, whereas prices and political involvement are not.

The TAC is now at high levels never seen before, but unfortunately we have had to live with low prices because of the economy. With low prices for crab and increased operating costs, communities have had to adjust their budgets to compensate and have had to make decisions that affect the well-being of their members.

Any negative adjustments in quota affect the seven Mi'kmaq communities that fish snow crab and their approximately 10,000 members. This includes the new licence that was issued as well as the effects that will occur if the proposed sharing formula is implemented. Less quota available for first nation communities means fewer jobs and less money for essential services within the communities.

The IFMP did not support additional access to the snow crab areas of area 23 and area 24, as it stated that the fishery was fully subscribed. The seven Mi'kmaq communities of Nova Scotia that fish on the Scotian Shelf asked for more access prior to the Rhyno decision and were denied, only to watch the minister of the day issue a new licence without any fee to a non-native and with no benefit to any Mi'kmaq community.

The Supreme Court decision should have been considered prior to making the Rhyno decision. The Rhyno decision made us lose faith in DFO and the entire process, and we are left to question whether the courts and the federal government are indeed protecting our rights. We are now ail wondering how a person can receive a licence in this lucrative fishing area without consulting the Mi'kmaq of Nova Scotia or the fishermen who have been affected. The Mi'kmaq should have had first right to more access to this area to help meet the premise of what was promised in the Marshall decision, a moderate livelihood. The Rhyno decision took quota away from each Mi'kmaw person and community, and any adjustment to the sharing formula will do the same.

The issuance of the Rhyno licence goes directly against the commercial fisheries 1996 licensing policy for eastern Canada, whereby DFO gives special consideration to aboriginal peoples for commercial licences when opportunities arise. The opportunity was there for the minister to live up to the Marshall response initiative and support Mi'kmaq communities in receiving additional access, but the minister did not. This decision was made with total disregard to conservation, first nations, and management protocols in place at the time. The Rhyno decision causes first nation communities to question DFO's managerial ability. We are left to wonder if DFO considers treaty rights or first nation community sustainability when making decisions.

Thank you.

[The Chair, Conservative, Rodney Weston]

Thank you, Mr. Nicholas.

Go ahead, Mr. Byrne.

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

Thank you, Mr. Chair.

To our witnesses, thank you very much for appearing before us. We don't have a huge amount of time for questions, but thank you for your input and your opening remarks.

We will hear more from Mr. Rhyno later on. He was included in the original list of witnesses--in the original motion that called this committee to study this issue. I understand that he's prepared to come to Ottawa now so we can hear from him directly.

I want to delve into it with Mr. Gardner. We have a couple of options here, I guess. We can either try to elucidate from the meeting of the minds what was the intent or understanding of parties from 2004-05 to 2009 based on the test of a reasonable person; or we can simply test the actual management, the final decision from Minister Regan, that was set in place from 2005 until 2009.

You could argue that there weren't two groups or three groups; there were actually four groups. There were the traditional fishers who had longstanding access. There were the aboriginal first nations that had their temporary access made permanent--albeit very succinctly done for a very special and unique purpose, a communal purpose, for the benefit of those nations--as per the Marshall decision. The third group was the core company fleet. The fourth group was the actual individual temporary licence quota holders--the individual fishermen who assembled those licences.

But the issue here, the former has minister decided, is that for the purposes of administration there will be two groups. For the traditionals and the first nations, while the purposes of their licences were very distinct, unique, and different from each other, the actual administration of the licence conditions was almost identical—that's a fair statement, isn't it, Mr. Gardner? For the non-traditionals, the core company fleet, from the groundfish displaced fleet, their licences were somewhat different.

The point is that there are only two sets of licence holders per se: the traditional aboriginal, and the core company fleet. But they are licence holders. The plan of the minister says, and I'll quote directly from the plan: “When the TAC reaches 9,700 mt the distribution of quota will be calculated as follows. The permanent licences existing prior to 2005”--that would make up the traditional fleet plus the aboriginal first nations--“will equally share 50% of the TAC and all licences converted to permanent status in 2005 will share the remaining 50%.”

In the test of a reasonable person, how would someone interpret that any differently than that 50% of the quota, once it reaches 9,700 tonnes, would go to the traditional and aboriginal fleet licences on an equal basis? And since there are no individual licences issued to all 650 or 300, there are approximately 40 licences. But there are licences—the key term here is “licences”. The other 50% of the quota will be issued to those licence holders.

How, as a committee, do we decipher what the meeting of the minds was on that? It seems pretty well spelled out in black and white what the minister's final intention was.

Could you offer some comments on that?

[Michael Gardner]

The only comment I have is that I agree with your interpretation. It's very clear. I think the wording was carefully chosen in the management plan. It captures essentially what the recommendations were from the panel. I don't know how it got to where it ended up in 2009. I'm not privy to that, so I have no idea.

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

When you say there was a misinterpretation somewhere down the road, was it Minister Geoff Regan who misinterpreted your panel, or the licence holders?

[Michael Gardner]

It seems to be fine, insofar as the management plan reflects Minister Regan's understanding of the panel report and the recommendations that flowed from it. The misinterpretation is on how it was actually applied in 2009.

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

As I said, it's in black letters here. There are two categories of licence holders, and each one can arguably be made up of two different groups. But the black letters say it cannot be interpreted in any other way:

When the TAC reaches 9,700 mt the distribution of the quota will be calculated as follows. The permanent licences existing prior to 2005 will equally share 50% of the TAC and all licences converted to permanent status in 2005 will share the remaining 50%.

As to the 9,700-tonne threshold, would you say as an economist that this was created to ensure stability? It created a guarantee of special status for the traditionals and first nations. It stipulated that the economic viability of their licences would be assured after the threshold of 9,700 tonnes is reached. There can be a different or new sharing pattern, while maintaining stability and economic liability. Is that the rationale, do you think?

[Michael Gardner]

It goes to the issue of viability. One of the concerns we had as a panel in developing the recommendations was that we knew the resource was heading for a decline. It was already under way and would bottom out and then increase in a few years. So I understood the minister's reluctance to implement the recommendations as framed. The panel report addresses the concern about the decline and what the optimal time might be. But it seems to me that selecting a relatively high quota level—9,700 tonnes—implies a concern for viability. If it doesn't ensure viability, it at least supports it.

As for the other issues around stability, there was a huge problem in this fishery before 2004. It had to do with the thresholds and the way they were triggered. There was pressure from one group to keep below the threshold and pressure from the other group to keep above it, or to get it up there to ensure participation. Settling these issues was one of the major reasons for the panel. In our view, the issues could best be settled by first eliminating all the labels, so that at some point a licence holder is a licence holder. A licence is a licence, and there are no distinctions. It makes no difference whether you were adjacent or non-adjacent, temporary or not, or this or that. Everybody is a commercial participant in this industry.

A mechanism for getting at that, and for achieving stability and viability, was to allow transferability and divisibility of the quota. This allowed people to trade. If you had a bigger boat, higher costs, you could buy quota to make your enterprise more viable. If you wanted to get out of the business, you could sell your quota. This device is more commonly used on the west coast, but there are several fisheries using it on the east coast as well. You have individual quotas, but there is transferability. This became a cornerstone of this set of recommendations. Viability would be there, and people could, with transferability, trade, buy, sell, and adjust to changes in quota over time.

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

We understand this is occurring right now. I think members of the panel will have some personal knowledge that quota is now being traded. In fact, I have second-hand information that Mr. Rhyno, for example, just sold off 10,000 pounds of his quota, indicating that the 10,000 pounds, now that it's gone above his current quota levels, are surplus to his overall enterprise as economic viability. Otherwise, you couldn't do that and maintain an enterprise.

So, Mr. Gardner, you're suggesting that the recommendations, the panel, and the 2005 management plan are pretty well meshed.

[Michael Gardner]

I think it's operating the way we had envisioned it would, subject to the sharing formula. People adjust their enterprises to economic circumstances, to quota, so it becomes a more stable and more viable fishery.

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

And that's no longer the case as of 2009.

[Michael Gardner]

Well, I think reality is different from the expectation.

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

Thank you, Mr. Gardner. I appreciate it.

[The Chair, Conservative, Rodney Weston]

Thank you.

Monsieur Blais.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

Thank you, Mr. Chair.

Good day, gentlemen. Thank you for your welcome.

I would like to hear Mr. Gordon MacDonald who was alluding, earlier... Perhaps he could provide us with further explanations about why there was no earlier intervention. We are talking about a program, a plan or a type of agreement that was launched in 2005. In 2009, this was changed and you intervened, it would seem, in 2009.

Unless I am mistaken, you said earlier that you could perhaps explain to us why you did not intervene prior to that.

[Gordon MacDonald]

Merci.

The independent panel report came out in 2005, just prior to the fishing season. The recommendation on the 50-50 was not accepted by the minister. There were a series of meetings that were held after that to discuss how that was going to be implemented. The eventual recommendation was the 50-50, as discussed.

The interpretation of a reasonable man, though, is an interesting point. I consider myself to be reasonable, and I know other people who consider themselves to be reasonable, who completely misunderstood the concept of the trigger value, in the sense that we thought the 60-40 was actually a threshold and not a trigger.

The subtlety is in the word and what it means. A trigger, like a gun, goes off and shoots you in the head. The threshold, on the other hand, applies when you're beyond that level and it retracts when you're not. Having come from a series of thresholds and adjustments, we thought it was something that was in place when you were beyond that level--in other words, in times of excess.

This was implemented in the management plan, 2007-11, which I see some people have on the table. The management plan was not available to us until the 2008 advisory meeting, which was the first time we recognized some kind of problem.

So the panel report was in 2005. I mean, I fish for a living--that's what I do--and we don't hover over documents. We get an understanding of what we think it means and we go on.

When we saw it in the integrated fisheries and management plan in the March meeting of 2008, we recognized there was an interpretation problem, that it was trigger, not a threshold. At that point we started asking questions for clarification. We asked for clarity on what it meant, whether it was the trigger or the threshold. We spoke again....

A lot has been made about the Joan Reid letter that said if we hit this level this is going to implement this. Absolutely. I mean, with the minister's report Mr. Byrne was talking about, his announcement, there was clarity in what they intended to do; we just misunderstood it. We misunderstood it because we didn't get the fact that it was a threshold versus a trigger. But as soon as we did, again, we presented cases, and we made recommendations and spoke publicly. We went into the advisory meetings. We talked openly. There hasn't been anything done behind closed doors.

Again, with the different things that the panel took into account, it had a very difficult job. The bulk of the recommendations were implemented. Whether it was 50-50 or 60-40 is an interesting problem. It has a series of dilemmas attached to it, and ultimately it's the reason it wasn't directly accepted at the beginning.

The problem doesn't change. But what has changed is that the economic value of snow crab in the 2004 season was over $3 a pound. We put a price of $2.50 in our economic analysis to the panel, which was scoffed at because it was never going to go below that. We haven't seen $2.50 since. I mean, you add an economic crisis and the rest, and beyond that you've got resource fluctuations; you have economic fluctuations. You can't just give your quota away for free and then say you can be viable by buying it back. In low times you don't have the money, and in high times, again, it's expensive. The value goes up and the value goes down.

We misunderstood trigger versus threshold. We didn't get the IFMP until three years from this report. I mean, even this meeting here today is on a decision that was made over a year ago. We're in the second fishery from there. Sometimes it just takes time to get down to what's going on. It doesn't happen overnight.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

I would now like to discuss with you some matters involving the resource as such, the way in which you harvest it, and how things work regarding price-setting. A little earlier, you talked about the price. What is the price you have here? Does the fact that there are more marine traps have an impact on the resource, according to you? We're not talking about overfishing here, if I understood correctly.

I would like to hear your comments on how the season unfolds, prices, and the number of marine traps. Is there a problem there or not, in your opinion?