Fisheries Committee on May 27th, 2010

[Gordon MacDonald]

I guess I can speak to that.

The price is an interesting.... I know that you gentlemen and ladies are looking at the snow crab fishery in Atlantic Canada, including Newfoundland, which has a price problem. We feel that to some extent we have the same problem.

When you bring in large volumes of a product that is sensitive, that product needs to be processed in a short period of time. There are only so many players who can do that. Again, it provides incentives for people to get together and save money by working collectively.

I don't know; we had the Competition Bureau come around in 2001, investigating processing companies, and while they said that they found no collusion, there was certainly a difference on the shore in the way the competitive pricing structure went.

The number of participants hasn't directly affected the price, per se, because we're more governed, as we've always been, by the science of the resource. The trawl survey provides us pretty well a two-year crystal ball that gives us a bit of an idea of what the future's going to look like, and we can adjust our management accordingly.

It's interesting; we were accused by various parties in the past of manipulating the resource to eliminate participants. That was one of the things Mr. Gardner referred to a second ago, about people fighting to keep thresholds one way or the other. In actual fact it's pretty hard to be straight up. You can tell people that you're honest, and that you mean well, and that you're trying to do the best, but that doesn't matter; you get thrown out with the bathwater.

At the end of the day, the proof is in the pudding since the panel report. We took the cuts--a 17% cut, a 29% cut--and the resource rebounded. That's management by science and trying to pay attention to what's going on.

So the number of traps, per se, hasn't had an effect, because we have an independent trawl survey analysis that comes afterwards and makes the difference. The price is a different issue. Again, we need to have the support of the fisheries committee in the sense that it tries to find a way for us to make the best bang for our buck here in Canada without having to ship the product outside of the country.

It's a big export product and it's great for our GDP, and we need value added to that point, but sometimes we don't see the benefit down on the wharf as much as we should. The price is not as good.

[The Chair, Conservative, Rodney Weston]

Thank you.

Mr. Denny, you wanted to add something.

[Leonard Denny]

I'd like to just comment on the question you asked, but I want to make a comment first.

With no disrespect, Gerry, I wanted you to see, and not to see double. I don't know where you get this four-group stuff. It is three groups.

And you asked about the industry and how we're getting along out in the water and stuff like that, and are we bumping into each other, and are there too many traps. Well, the reality is that the first nations fish and we create employment. We actually go out there and fish. The traditional licences do the same: they go out there and fish. The temporary ones don't do that. They sell it in the water and somebody else fishes it. So they get a cheque at the end of the day, and they don't go fishing for it.

And if you want to talk about price, the problem is that when they sell it in the water it usually ends up in a processor's hand, so that drives our price down because the processor now has a great deal of quota. So it does bring the price down; it doesn't help anything.

So just to answer your comment, no, we're out there. We're fishing. We employ safe practices. Our community does drug testing. We're the only ones who do drug testing for all our fishermen, so we're out there doing the safe thing. We're creating employment. We're doing conservation and we're going to these meetings.

This is an example. This is a leader in snow crab Atlantic fishery. You're going to be all over the Maritimes, but area 23 and 24 is a leader. We didn't fight when we were told to cut. We didn't write letters when we were told to cut. We didn't protest when we were told to cut.

And in the gulf they've experienced a huge cut—63%. But the question I would ask you to ask is whether they were told for years and years and years to cut. I think they were, and they fought it. And now they blame government.

We don't do that. We manage it. We work with DFO, all us groups, and we manage it as a collective group. So you cannot punish us for that. There was actually talk about taking some other areas and bringing them to our area. So punish us for managing our own resources properly, for taking the cuts when we were told to take the cuts? I don't agree with that.

And again, we do a great job here. This is a leader. Take note: this is a leader in industry.

[The Chair, Conservative, Rodney Weston]

Just briefly, Mr. Gardner.

[Michael Gardner]

In response to the question about pricing, broadly speaking the industry ships to two markets: the United States and Japan. Others are very minor.

The product is a commodity, first of all. There is really just one product: cooked, frozen crab sections. They find their way into the mid-range to low-end restaurants, food service. As a consequence, the industry is driven by price, price, price. So the real power in the industry is at the distribution end—this is in the product markets, either importers in Japan or major distributors in the U.S. They are commodity traders, effectively. They take a position in the market and have a great deal of influence over price.

The processors in Atlantic Canada are smaller. They can easily be played off by the larger distributors, one against the other, and that forces price down. The processors, for their part, are most anxious to cover their investment, so they are buying as much volume as they can. That tends to bid up the price at the wharf.

And Gordon referred to a competition investigation. He's absolutely right; that did occur, and there were reasons for that. But the industry itself, notwithstanding that, tends to be fairly competitive, and it's driven by price because it's essentially a commodity.

[The Chair, Conservative, Rodney Weston]

Mr. Donnelly.

[Fin Donnelly, NDP, New Westminster—Coquitlam, BC]

Thank you, Mr. Chair.

I thank all the panellists for coming to present your information. Your testimony today is appreciated.

We certainly would like to acknowledge the traditional territory of the first nation Mi'kmaq people.

I have two questions, and I'll put them out to all the panellists. One is on biomass and the other is on the quota-sharing formula or management plan.

I'm wondering if any of you could comment on the cycle. There's a four-year cycle, a 20-year cycle. Could you comment about the cycle of the snow crab and the outlook beyond 2010, to say 2012 and as far beyond as you can foresee?

In terms of the quota-sharing formula or the management plan, there has been reference to the 2005 agreement, and I simply want to know how relations are now among all the stakeholders and interest groups.

I'll open it up to anyone who wants to comment.

[Gordon MacDonald]

I could talk a little bit about.... I could talk a lot about it.

[Fin Donnelly, NDP, New Westminster—Coquitlam, BC]

I have five minutes.

[Gordon MacDonald]

Yes, I know. I'm going to be very quick.

With regard to the biomass projections, we've had a wonderful set of scientists. It started when we brought the trawl survey over in 1996-1997 with Mikio Moriyasu and the gulf-based snow crab assessment unit. In about 2002 or 2003 the Scotia-Fundy region took over its own science assessment with Dr. Jae Choi, a brilliant scientist, and we've had a spectacular relationship. I myself have a master's degree in science, and we have a great ability to communicate effectively.

We had the built-up biomass that came in the early 2000s and started to fish it. Unfortunately, for some particular reason, we lost all forms of recruitment. The female population disappeared. Everything looked bleak. In 2005 it looked very bleak, and we continued to take rapid serious cuts because that was the recommendation.

What ended up happening was that in about 2007 it attenuated on the bottom end, and then we've seen recruitment pulses start to come. There was a little blip, and it's grown. There is a series of histograms, and the picture would speak 1,000 words, but it has grown significantly.

Through that period of time, the 61 licences that were created in 2005 have all shared equally in the growth. Last year there was a 31% increase in the TAC. This year there is another 22% increase. The new corporate participants received a 31% increase last year and a 22% increase this year. They're over 50% above where they were just a few years ago, as all of us are, because it's been shared equally among us.

The prognosis for the future is that we still have recruitment pulses or waves coming in. The fishery looks very bright for the next two or three years. Then we are likely to experience some form of decline, as with all fisheries.

The increase that we're experiencing right now has occurred significantly more rapidly than what the scientists would have predicted. In 2005 there was no vision of any rebound at all, but it seems that the serious and significant cuts that we took have led to a more rapid rebound, and we're actually at the point now of having quite a bit of recruitment as well as fishing the resource. Last year, for example, the fishable biomass rose 45%. We took a 22% increase because there are reasons to be cautious still, but there was a 45% increase in our fishable biomass estimates from 2009 to 2010, which is huge. Again, a lot of that is attributed to the kind of cuts we have made. That is where we say we try to make the right decisions, because we interact with the science and respond to it.

I don't want to talk too much about what was discussed in the previous group, but the permanent fleet and the aboriginal fleet fully funded the trawl survey before the corporate licence holders came, and they will continue to pick up the slack. It will be funded 100%, regardless of whether they pay or they don't. It was crucially important to get them here, and it is still crucially important, so we have funded the survey for the last three years. They haven't fully paid in any one of those years, but it has just gotten worse.

That was the biomass issue.

I'm sorry; what was your formula question?

[Fin Donnelly, NDP, New Westminster—Coquitlam, BC]

How are relations now?

[Gordon MacDonald]

You know what, since the panel thing has come along, as people have said, once it's done and they tell you it's done, it doesn't matter--it's over. So you just have to get along, because that's the way it is. But as soon as there's an expectation or there's blood in the water that something can change if they just turn ignorant and start jumping up and down and screaming bloody murder, it gets to be in a really bad way.

An example would be what happened at the advisory meeting this spring. This spring the word was that the issue was over. The minister sent people to talk to the temporary fleet, the aboriginal fleet, and the permanent, traditional fleet. They came back with a decision and said the issue was dead. At the advisory meeting, people were unhappy, but it was probably the easiest advisory meeting that I had been to in 15 years. So externally things are good, but as soon as the opportunity to gain something comes out of it and people think they can get something by acting in a particular way, it just creates animosity and makes bad friends of everybody.

[The Chair, Conservative, Rodney Weston]

Thank you.

Mr. Denny.

[Leonard Denny]

I'll comment on the relationship aspect.

I'm happy to say that over the years--and I'm talking about snow crab specifically--we've been able to develop strong relationships with DFO resource management and non-native fishers. We've made a lot of strides in that. To answer your question, yes, relations are good. This bickering causes friction, but in general relationships are good.

[The Chair, Conservative, Rodney Weston]

Mr. Kennedy.

[Fred Kennedy, Consultant, Area 23 Snow Crab Fishermen's Association]

I'll make just one point.

You asked about the cycle of the biomass. Typically speaking, I don't think there's any absolutely definitive answer, but by and large cycles in the biomass of the snow crab here and in the gulf, and I think in Newfoundland as well, are ten years. So it will go to the bottom after whatever period of time, and it will go up, and in ten years it will come back to the ten-year bottom. So from top dead bottom to top dead top, you have a ten-year cycle.

Now, in addition to all of that, snow crab—and I don't know if you know this—is not like lobster, which lives for 80 or 100 years. Snow crab typically will live for 13, 14, and sometimes 15 years. It takes about--and nothing is precise, because it varies by what's going on in the water--seven years for it to become what's called commercial size, 94 to 95 millimetres, at which point we can actually harvest this thing. Then we have a situation of having three or maybe four years to get it out of the water before it then gets too old and is no longer acceptable in the marketplace. It's kind of a sensitive thing you have to manage, and manage very delicately.

[The Chair, Conservative, Rodney Weston]

Thank you.

Mr. Allen.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much, Mr. Chair, and I thank the witnesses for being here.

I have just a few questions.

Mr. Gardner, when you brought up the report, one of the comments you made was that there was no way of knowing how quota holders would aggregate. I guess that wasn't contemplated in 2005. I guess what I'd like to ask you and the other panellists as well is, if that wasn't contemplated, could that change the potential interpretation for how the sharing would be done? Mr. MacDonald and Mr. Denny talked about the equity principle that the minister used. Is it fair to say that there could be some interpretations?

I'd also like to get the panellists' thoughts on this situation in which the quota is on the way up, and their interpretation, based on the minister's decision, of what will happen on the way down in a couple years' time. Could you address that, please?

[Michael Gardner]

Sure.

On the first point, when we say there was no way of knowing how they would aggregate, whether five would come together and form a company, or 15, I think that's the point. Appendix B simply averaged it, and we had 10 or 12 per organization. The more important point is it didn't matter if it was five or 15 because each were taking in their own quota shares. That licence would then be assigned whatever the aggregate of those quota shares was, if that was 5%, 7%, or 2%, as the case may be.

Where it made a difference is in the way the actual decision was made in 2009. If I'm a quota holder and I think ahead that we're all going to be equal, then I'll combine with two or three others, because I'm going to get a huge gain. I go in with only 2%, but I stand to get 10% when they're all equalized, if you follow the logic. The people who are penalized are the ones who organize more than the average. If there were 15 or 20 in a company that pool their quotas, then they're levelized to a point well below that, and they're losers.

If you follow the logical extension of what the department did and look back at the report, in my mind it's almost inconceivable that you could arrive at this approach.

I'm not going to comment on the second part. That's more for the people who are participating in the fishery. As far as the mechanism is concerned, there's the explanation.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

I see some head-shaking over there.

I wonder if you have a comment on that.

[Gordon MacDonald]

I think Mr. Gardner has misinterpreted what has gone on, even in the distribution.

The licences were created equal, but the quota shareholders haven't been punished. If there were 22 quota shareholders on one licence and 14 on the other, the licences were adjusted to meet that. It was based on the concept that 16 quota shareholders would equal one permanent fleet licence. So if there were 16 licences, they would be identical to a traditional licence. If there were 14 it would mean two units less or two units more, but they would be equally distributed because there are 16 shares to a licence for the number of licences that are there.

On how they're bantered about--some may have 22 and some may have 14--you just do the math. It all works out and everybody gets an equal share. There is no more for one particular person because they're bound to one group, or less for another.

The resource is up. It's at its highest level now, and that's great. We do our best through science to manage that. Unfortunately, we don't have any management capabilities over the economic value.

In the panel they were talking about a $3 price. Currently the shore price is around $1.45 here, and I think it's $1.35 in Newfoundland. That's less than half of what the value was back then. You can do the math any way you want, but if you catch twice as much fish and get half the money for it, you're at the same level.

The problem is, you have to average all of these things. There are three different things. You have to contend with the biomass, the economics, and the government, which can come along and say “You're making too much. We'll take it away.” But they're never really there when you're not making enough. Then they tell you, “You can just rationalize. You can just get together with your friends.”

Further to one of the questions that Mr. Blais asked earlier, our industry is over capacity. That has always been an issue in any kind of fishery, because when you have too much capacity, not enough fish, and too many fishermen there is a problem. When your economic viability starts to go south, at the end of the day nobody wants to leave. I was talking earlier about the temporaries who were looking at elimination from the fishery because the stock was going down and they didn't want to leave. So you do whatever you have to do. It doesn't matter about the level of C and P, policing, or whatever. If your choice is not feeding your family or giving up fishing, you take whatever you can until the bitter end.

If ultimately in your next step you're headed to the gulf, what they're facing right now is based on a wholesale push-back against new access to their fishery. They felt they were not stewards of their resource. The value of the resource was not theirs and it was going to be given away, so they fought tooth and nail against absolutely everything. They took a different approach from what we did, and they're in a different place from where we are. They used to have an excellent relationship with the scientists from the gulf, and now they don't.

We have to face the cycles up and down, as you've said. But we have to put away money, pay down debt, and get things prepared, because we know full well the resource is going to decline whether we like it or not. We have no control over the economic value. It has not been good in the last five years, and it doesn't have any prognosis of getting any better.

So those are factors that the minister took into consideration as well. She changed what former minister Regan had said, but Minister Regan was making his best decision based on the information available. It's five years later now. There is more information available and more understanding, and things change.

Talking about an integrated fisheries management plan--the bible--and that we need to follow this and listen, in 2004 they threw out the integrated fisheries management plan. The area 23 fleet and the aboriginal participants went to a judicial review because they didn't use the IFMP of the day. At the end of the day, the court said this was just a policy document, guidance, not something that needed to be held to. You cannot fetter the minister's discretion, because as the information becomes available they need to have the opportunity to make the best decisions based on the best information.

Things have changed. These things needed to be factored into consideration, and they were.

[Leonard Denny]

Gardner mentioned that a licence is a licence is a licence. I have some difficulty with that.

The permanent ones have licences. The first nations have licences. The others formed a licence because a licence wasn't given to each of them. It was an allocation to offset their losses in lobster when the abundance was high. They weren't given a licence; it was an allocation.

Is it our fault that it takes 16 allocations to mirror a licence? That's just math. I take exception to that and don't agree with it.

[Michael Gardner]

And that's fine.

[Leonard Denny]

They are allocations.

[Michael Gardner]

Sure. They started out as allocations.

One of the objectives of the panel and one of the objectives of the minister in establishing the panel was to find ways of eliminating the instability in the fishery. Our approach to this was to do what we could to redefine the basis of participation of all the various participants. One way to do that was to eliminate the labels and designations and say that if everybody's going to participate in this fishery on an equal footing, then everybody holds a licence. Over time—and we were taking a very long view of this—these distinctions that had been there at the beginning would gradually melt away, people would forget, and you'd just have a licence, a basis for participation, as it is in every commercial fishery.