Evidence of meeting #130 for Fisheries and Oceans in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was licence.
A recording is available from Parliament.
Fisher, As an Individual
The quota is determined by the market and a big player in the market is the Government of Canada for the PICFI program, which I support because it's a willing buyer and a willing seller. However, there are—
Conservative
Todd Doherty Conservative Cariboo—Prince George, BC
Right. It does drive the price up though. Is that correct?
Fisher, As an Individual
There are consequences to that. Previously, I would say that they got the low-hanging fruit, so they got the guys who just wanted out. Now, it is harder to get the quota that is there to be sold, so this is driving prices up.
Conservative
Todd Doherty Conservative Cariboo—Prince George, BC
Is the Government of Canada holding onto that quota that is unattainable?
Fisher, As an Individual
In a marketplace for somebody who was selling quota, yes, it would be. It drove it up, as well as other factors, but it is a market. It fluctuates. Right now, it is around $90 a pound, specific to halibut, so it has come down quite a bit from $130, from just a little while ago.
Conservative
Todd Doherty Conservative Cariboo—Prince George, BC
Okay, it's $90 a pound. What would you get on the market for that?
Fisher, As an Individual
You would get one pound of halibut.
Sorry, I should explain that. You get a percentage of the TAC.
Conservative
Conservative
Todd Doherty Conservative Cariboo—Prince George, BC
You just get a percentage of the total allowable catch.
February 5th, 2019 / 5:05 p.m.
Fisher, As an Individual
That's right. You're buying a percentage of the TAC, the total allowable catch, whatever that is at that point.
Right now, we're at a point where TACs are somewhat low. That might have helped to drive prices up as well, in anticipation that in the future TACs may go up again.
Conservative
Todd Doherty Conservative Cariboo—Prince George, BC
Okay.
These questions are for all of our guests. We hear this in our individual conversations and meetings with those who have reached out to us.
Do you feel that DFO has been listening to concerns? Do you feel that you have been consulted? Do you feel you have been listened to, if you were being consulted? What have been your personal interactions with DFO?
Go ahead, Mr. Edwards.
Fisher, As an Individual
I answered that in my statement. The answer is no and I'm going right from your testimony from the RDG. They refused to even acknowledge the majority of the problems we are identifying here, in their testimony to you and so did the east coast fellow. He didn't identify the owner-operators, who are a fundamental plank that we're actually supposed to be here talking about. All three of them didn't talk about it and I found that incredibly insulting.
Conservative
Todd Doherty Conservative Cariboo—Prince George, BC
You see where I'm going with my questions.
Yes, Mr. de Greef.
Conservative
Todd Doherty Conservative Cariboo—Prince George, BC
I was just asking if you feel you have been fully consulted, if your interactions with DFO have been—
Fisher, As an Individual
I don't know if I have a good relationship with DFO, but I don't think they saw this as a high priority objective. We need to give a message that it is a high priority objective.
Conservative
Fisher, As an Individual
I will speak to that. I know some people who are part of advisory boards and who feel that there are hidden agendas made within DFO, so that when they come to the meeting their decision is already made. They're not taking the advice of the harvesters. There is that.
Generally, we just need to have a better relationship with them. We need more assurance. We need the minister to champion our fisheries and our industry. We also need to feel that somebody is going to bat for us, standing up for us, and letting us know that, with all the media hype with all these different issues, fisheries are going to stay and coastal communities are going to thrive and we're working toward better things.
We definitely need to hear more public statements.
Mr. Ken McDonald (Avalon, Lib.)
Thank you, Mr. Doherty. That closes up our session with the first set of panellists.
Thank you, all, for appearing in person and by video conference. As was mentioned by some members, if you feel there's something, whether it be a recommendation or something that wasn't covered, please by all means send it in either by email or in some form so we can include it in our report.
Thank you again.
We'll suspend for a couple of minutes while we get ready for the next witnesses.
Mr. Ken McDonald (Avalon, Lib.)
Welcome back, everyone.
We'll start our second panel now. We have guests in person. We have Duncan Cameron, who is a fisherman. We have Fraser MacDonald, who is a fisherman as well, and we have Dr. Jennifer Silver, associate professor, University of Guelph.
You each have seven minutes to give an opening presentation.
We'll start off with Duncan Cameron, for seven minutes or less.
Duncan Cameron Fisher, As an Individual
Thank you, Mr. Chair. It's a pleasure to be here.
I would like to begin by thanking the committee for giving me the honour of speaking here and for taking on this very important study. I am here with many other young harvesters who represent the future of our industry. We're ready to engage in proper process. We are the stewards of the resource and we know what we want.
That future is crystal clear for me: fishing licences in the hands of fish harvesters; benefits flowing from fishing enterprises into communities, creating jobs for boatbuilders, welders, shipwrights, grocery stores, fishmongers, carpenters; putting crew through university; and creating benefits for restaurants and many other businesses. Outside of those economic gains that would come from this, I want to be a part of the community again where fishermen are volunteering for school programs and trips, coaching sports and having cook-offs for charity. When we take care of our communities, they will take care of us. When salmon enhancement and creek monitoring are cut back, everyone has a stake, and we can make a measured approach because of it, and it is a public resource.
In the last two committee meetings you heard from people who have been at the helm of the situation as the value of B.C. fisheries fell while those of our neighbours to the north, south and east have surged. We heard the results of economic studies referred to as a myth, almost no acknowledgement of any problem from our own department in the Pacific. The Canadian Fishing Company stated that they have less fish and the lower supply means the prices are lower, and that they have a huge controlling stake in the fishery but somehow that doesn't mean they can control costs. The question was put to them around whether there's a formula or stake on the fish sold, and they said they don't have any magic formula around the margin. The sockeye price has been the same since the 1980s, so for me that raises a lot of red flags from pretty well basic economic principles.
You heard about many different types of licences, quota systems and management tools such as ITQs, but what you didn't hear about was ownership. Management tools were put in place to manage fisheries, not dictate the economic outcomes, or at least not good ones. We can have these different licences and have harvesters own them.
Just for clarity, there's been a lot of talk about ITQs. The leasing inequality happens in many other fisheries, basically where there's any value in the fish.
I've been a certified operating captain for 13 years. I have owned, leased, bought and sold licences and boats over that time period. I am here because of the advantages I'm afforded coming from a fishing family. My dad owns multiple licences, including halibut quota. We recently partnered on a prawn boat together. Without these advantages, there is no way I would have made it this far.
When fishing, I'm under surveillance 24-7 by video monitoring systems that incorporate GPS tracking and different coding to detect if I may be violating licence conditions. That data is uploaded on the water to a third party, and I am audited for any possible violation.
I work in one of the most dangerous occupations in the country, trap fishing for Dungeness crab. Four years ago I nearly became a part of that statistic when my 19-foot crab boat sank in the middle of the night, and I was picked up off the beach by the Coast Guard.
Yet in B.C., if you want to own a licence, you don't have to risk your life. You don't have to be monitored by video camera. If you're a foreign owner, you might have to create a shell company. Somehow this piece of paper yields you 80% of the landed value, with no risk. Again, that piece of paper is a privilege given by the people of Canada. I understand the importance of processors and the jobs they create. We need to make sure that there is a secure future for processors and harvesters. There does not need to be a future for people on the couch leasing out the quota they own, only removing jobs, economies, food security and tax revenue from this country.
At the heart of this problem is a very simple cause: licensing policy with no consideration for cultural or socio-economic concerns. This led to consolidation of licences and concentration of ownership, seafood companies vertically integrated to control costs and secure supply. Specifically for the fishing industry, it gave them the control of the advisory board process—big surprise that fishermen became a cost and our incomes went down. As fishermen became more fractured and unorganized, we became marginal costs rather than a fixed or variable cost. Like any marginal cost in a vertically integrated economy, our share is going to near zero per cent.
However, the fishing industry in Canada is not like other industries. First of all, it's a public resource that belongs to the citizens of Canada. A licence is a privilege, something we are quite often reminded of whenever we face access issues. The management of these fisheries, the harbours that welcome us and the Coast Guard that keeps us safe, are paid for by Canadians. Why are we spending all this money and not seeing the benefit, letting profits go to just a few, more and more of whom are in another country? Why are we not keeping the spinoff economies in Canada, more seafood in Canada, higher landed value generating more taxes to pay back these investments Canadians have made?
I think it is also important to note that as bad as it is right now, it can get much worse. A large portion of our seafood is exported, and assuming that continues and we don't make regulatory changes, licences and quotas will also be exported.
In the first two hearings, this committee heard that the high cost of licences, and having to get a mortgage for that, is a barrier to entry. That is partially true, but the biggest issue is the low return on investment. No matter how big or small a debt load harvesters take on, they have to be able to service that debt.
We are not able to do this in most cases because we are competing against processors, large quota holders or foreign countries with a much lower threshold for return on investment than harvesters whose only revenue stream is fishing. Overcapitalization of our fisheries is a serious issue, but if only fish harvesters could buy licences, we would not have this problem.
A loan board for purchasing licences would only make the problem worse if returns on investment do not improve. However, if they do improve, it would be a great tool for us.
You also heard that overcapacity, conservation and safety were some of the main objectives with the evolution of licensing on the west coast. I do not believe the current licensing policy is achieving those objectives.
In any given year, I may fish herring, salmon, halibut, crab and spend over 200 days on the water. This is because I lease most of the licences I operate, and I see only a small percentage of the total profits. If I could own even one-third of those fisheries, I would reduce my capacity by over 60%, freeing up licences for other harvesters to do the same. This would have a domino effect, freeing up more licences as people fish less, people receiving a greater share of the fish they are catching, and at the same time alleviating some of these supposed overcapacity issues.
From a conservation standpoint, when people are at razor-thin margins and are most worried about making it from one year to the next, conservation priorities are very low compared to people who are able to plan the rest of their life.
The point of the study should be to look at what has actually happened from a conservation standpoint, not the theory or the hypothesis that the decision originated from.
As far as safety goes, I think the current regime continues to pose serious harm to harvesters, as well as increasing environmental impacts. Harvesters have very limited capital budgets and little of that can be spent on safety equipment or newer, cleaner technology.
The origin of these problems is simple; the problems it has created are immensely complex. It's overwhelming for someone like me, and I have lived in it my whole life. But the origin is simple and the solutions can be, too.
We need to put fishing licences back in the hands of fish harvesters. We need to let fishing economies benefit the communities we live in. We need to give Canadians the opportunity to buy the fish they are paying for to be managed. We need to transition in a way that lets people who are currently leasing plan for ownership, and not do any harm to people who have invested in good faith.
A few short-term goals that I believe are straightforward and concrete could be the following:
One, by the year 2022, licences or quota that are purchased must be operated by the person who purchases them. This is trickier on something like groundfish, where you may have to say, “You can value your halibut or the target species, but you can lease out the associated bycatch to meet conservation goals.”
Two, create a space for harvesters who are not licence holders to engage with DFO. We are the industry, not numbered companies. Currently this cannot be done through the current advisory board process.
Three, allow licences to be unmarried, to free up licences from the marketplace.
Long term, I believe the transition should be driven from principles and objectives harvesters agree upon, that is, active harvesters. We need to set a deadline of seven years, like PIIFCAF, for this transition to take place. It should also be noted that the current advisory board system cannot use this to address.... We heard that from the department's earlier meetings, and that will not work.
Thank you.
Mr. Ken McDonald (Avalon, Lib.)
Thank you, Mr. Cameron.
We'll go now to Mr. MacDonald, for seven minutes or less, please.
Fraser MacDonald Fisher, As an Individual
Good afternoon, Mr. Chair, and committee members. I would like to thank you very much for granting me the opportunity to speak to you today. It's a long way from the fishing grounds in B.C. to here, and it means a lot to be able to speak to you, our elected representatives, so thank you for that.
My name is Fraser MacDonald. I'm a first-generation fisherman from Vancouver Island. I'm 32 years old, and I have been commercial fishing for 14 years. I own two small commercial fishing vessels. I participate in three to four fisheries each season, and I own no licences. I lease everything that I fish.
Today I will tell you about my personal experience within B.C.'s commercial fishing industry and specifically my experience with relying on the lease market. I will describe how the current and past fishing policies have created roadblocks for me and other young fishers or people trying to grow within the industry.
Without a doubt the licensing policies that were introduced in B.C. over the past 25 years have helped stabilize and improve management and sustainability—and safety, to some extent—in the fisheries. The benefits have increased the market value of our common resource and have made B.C. a world leader in management. Simultaneously, though, these policies have attached a value to access. This is something that should never have been allowed to be valuated, bought, sold or invested in from the start.
Quotas and licences should never have been opened up to free market, but they were. Now the licence and quota markets more closely resemble a speculative stock market than a fisheries management tool. The implementation of this system created winners and losers then and today. Some lost out and left the industry or were priced out when ITQs were introduced. Others were initially gifted ITQ allotments and limited-entry licences that have valued to the point where they are worth millions of dollars.
B.C.'s access to harvest fish was privatized and profited from. This privatization of access has created insurmountable entry costs and what I will call a lost generation of fishers. I have watched this take place within my own group of friends. Ten years ago, in 2008, there were 15 to 20 men and women from my close network of friends where I grew up who actively commercial fished. In 2018, there were three of us left from this group. My friends chose to leave the commercial fishing industry, often reluctantly, for other careers because they could not see a stable and profitable future for themselves. Buying a boat and licence package was financially unrealistic due to the high cost and lack of access to capital for young people. This exodus has caused a serious labour shortage for crew and is foreshadowing a successional crisis that we will soon face as the current generation of fishermen ages out and needs to retire.
In 2011, after a couple of seasons of working as a hired skipper, I realized that I needed to increase my earnings if I wanted to make a decent living and stay in the fishery. Buying a vessel would increase my share of the catch's revenue, so I started looking for a boat. The price of a prawn licence for the boat that I bought in 2012 was $750,000, putting the boat and licence package at almost $1 million. As the licences were out of my price range, I would rely on the lease market to secure my access. I used equity from my home to get a loan for $200,000 from a federal government-funded loans program, and I got a boat.
In 2012, when I bought the boat, it happened to coincide with the full implementation of PICFI. I do agree with the stated objectives of PICFI, but from my experience and as the committee heard yesterday from Chris Cook, PICFI's stated objectives have not been achieved. By implementing PICFI the way it did, DFO actually created a lot of negative effects in many fisheries through the lease market and by driving up costs as well. For time's sake, I won't get too much into that, but I'm going to submit a written summary of my experience with PICFI to the committee.
My biggest obstacle as a boat owner was securing access to leasable licences. I had to convince fish buyers to take a chance on someone new and young, guaranteeing them my product if they would cover the lease costs up front for me. Paying a lease up front is a condition demanded by almost all lessors, and I learned quickly that banks aren't too keen on approving $50,000 lines of operating credit for 26-year-old seasonal business owners, regardless of equity or a co-signer. I learned the hard way that if you don't come from an established fishing family on our coast, entering the industry without a licence is nearly impossible. The uncertainty of access each year was very stressful and made growing a business extremely challenging. It was only because of stubborn optimism that I managed to keep my fishing business moving forward. My challenges were witnessed by many of my close friends and reinforced their lack of faith in the licensing system.
In 2017, I bought my second boat, a 40-foot fibreglass freezer troller capable of fishing multiple fisheries. This boat's versatility meant that if one fishery was poor during the year, I could rely on income from the other fisheries and still put a year together. With my previous lessons learned, I was not about to go buy another boat without making sure I had secure access to licences. An offer was made to me by a processing company to form a partnership, and after some negotiation, we came to an agreement and I bought that boat.
This arrangement meant that I had purchase financing, access to the buyer's pool of licences and quota, and access to operating credit, if needed. In return, the company will maintain a minority stake in my boat indefinitely and have first access to my product as long as it is willing to pay market value. I will say that the company's partnership offer was very forward-thinking, and it has been mutually beneficial.
I'm happy with how things are going in this particular case, but this is not a solution to our licensing problem on the coast. This is only available to a very small number of people. When I speak to people who have joint ventures with other companies, they don't speak very highly of their situation.
As has been previously explained, halibut ITQ owners get paid up front each season for their quota before the season opens, usually by processors who have to secure quota to ensure their market share of the catch. As processors work on margins, their business is one of scale. The more quota they can secure in their pool, the more they can market and, theoretically, the more money they can make. This has turned most fish buyers on our coast into quota and licence brokers, which adds a huge financial and administrative burden to companies whose main objective is to buy fish, market it and process it. The current structure completely insulates quota owners from price fluctuations during the season, and leaves 100% of the risks on fishermen and fish buyers.
I had an experience in 2017 fishing leased halibut quota that illustrates how the current system is out of balance. In April 2017, I leased 32,000 pounds of halibut quota from a buyer for $7.50 a pound. This was the going lease rate at the time, and the landed value for halibut had been between $9 and $10 for the past two seasons, so we estimated that we would be able to get $2 of gross profit to the boat after paying our lease. By August, the landed price had fallen to $7.50, so we were waiting until the end of the season, hoping the price would come up a little bit so we could make a small profit to pay for the expenses. However, the price did come up a little bit, and there was a small margin, but because I had to wait so late in the season for the price to come up, we had only a few days of fishable time due to weather, and I wasn't able to land all of my quota that I'd leased. Luckily, I was able to carry over the additional 16,000 pounds of quota that I didn't land until the 2018 season.
When the season opened in March, a few months later, I went back out to the grounds to catch this last 16,000 pounds of quota, but the market price had fallen to $7.50. We had to go fishing because the buyer had leased this fish 12 months before and had already paid $124,000 to that quota owner, so I couldn't not go. I had to go so they could recoup their costs. We went out and we landed the fish for a net gain of nothing to me, and I actually borrowed $30,000 from the buyer who leased the fish for me so I could pay the trip expenses and pay my crew fair wages, because they did the work and they deserved to get paid.
The two quota owners I leased from in 2017 both got cheques for $120,000 for their quota. My crew and I spent a month on the water and landed over a quarter million dollars' worth of fish, and I finished $30,000 further behind where I started, not including the $50,000 in capital expenditure to rig my boat up to long-line that fall.
Going fishing and losing money on a trip is very much a reality in this business, and I accept that financial risk every time I leave the dock, but it's a lot easier to accept a loss when the landed value of the fish simply doesn't cover the trip's expenses. In this case the landed value was substantial, but my crew and I just weren't in on the take.
One point I'm sure all stakeholders can agree on is that if we continue operating the way we are now, eventually we will not have enough active fishermen left to sustain the harvest requirements of our industry. Fishing is both a trade and an art. It takes years of experience on the water to master, which means we need to start reforming licensing policy now to avoid a critical labour shortage in the near future. It's essential that the recommendations from this study aim to solve the problems we face today, and not just put a Band-Aid on their symptoms. We need urgent action with set timelines for industry and DFO to introduce balance to the leasing market and ensure fair distribution of wealth from the landed value of our fish. A one-size-fits-all policy won't work, as was mentioned by our previous guests. It needs to be done fishery by fishery, but it needs to happen quickly. Any delays or strategies from the corporate side of things, I believe, would be extremely short-sighted, and I hope we can all work together to find a solution that benefits the industry.
Looking at the long term, we need to find common ground and look at where we need to be 10 years from now as an industry, and then design and implement well-thought-out specific policies that will get us there. I see a sustainable fishing industry in B.C.'s future being made up of fishermen and fish processors. The timelines for the industry's future must allow sufficient time for investors and retiring fishermen to divest and retire with dignity. The fishing industry is tight knit and many of the retired investor fishermen are still mentors and close friends to active fishers.
In conclusion, I think there's recognition here that our system is not working as it was intended to, and I think it's crucial that we seize this opportunity to transition our industry into a brighter future.
Thank you very much for listening to my experiences today, and I'm sorry if I went long.
Mr. Ken McDonald (Avalon, Lib.)
It was just a little bit over. Thank you, Mr. MacDonald.
We'll now go to Mr. Antilla, for seven minutes or less.