Catch Shares are Illegal: aka Resource Theft – by Richard Grachek

Catch Shares Are Illegal: CATCH SHARES aka ITQ’S aka RESOURCE THEFT

A Groundswell webpost — author Richard Grachek:

Any form of quota trading leads to consolidation, as those with the deepest pockets win out.”

“The introduction of quota trading between member states could spell the end for many, if not all, of Scotland’s fishing communities.”

— Richard Lochhead, Scotland’s Environment Secretary – May 2011

And who wears trousers with the “deepest pockets” these days?

Call them ITQ’s, IFQ’s, LAPP’s, Catch Shares, use whatever label you like, the truth is surfacing worldwide that the free-market-environmentalist commodification and consolidation campaign is a corporate shill, nothing more than a scam aimed at privatizing publicly held natural resources for profit. This BBC article contains Scotland’s Environmental Secretary Mr. Lochhead’s clear warnings about the ill effects of potential consolidation from fish quota trading between EU states.

http://www.bbc.co.uk/news/science-environment-13378757

His statements about ITQ trading between EU members and his warnings of privatization and the consequent consolidation, address the same destructive process that’s already well underway for small boat individual license holders and fishing ports here at home, difficulties that are already apparent under a one year old catch share program.

Also Known As

At least the EU Commission is calling them by what they actually are, Individual Transferable Quotas, or ITQ’s; so then as a result they might begin a debate. U.S. fishermen never had a debate; they had a decree from EDF’s Jane Lubchenco when she took over NOAA. In addition to completely ignoring the Magnuson Stevens Act (MSA) Standard 8, which requires socio-economic studies before implementation, the Catch Shares program was never voted on by fishermen as required by law. The law, MSA 303A (D), requires a 2/3 referendum vote among the affected license holders before the installation of any new individual fishing quota management program.

NOAA and its ENGO “partners” chose subterfuge over following the law in order to impose ITQ’s. They simply called them something else, sneaking them in around the law, arrogantly assuming no one would catch on; or by the time anyone did notice, it would be too late to do anything about it. They claim that the National Standards and statutes of the Magnuson Stevens Act that prevent the negative consequences cited in the opening quote by the Scottish Secretary, simply don’t apply.

Word Games

NOAA and The Environmental Defense Corporation and their intrepid legal champions The Conservation Law Foundation play an ill-advised childish word game when they avoid using the term Individual Fishing Quota…they make a mockery of the intent of the law. Instead of calling them what they are, IFQ’s, NOAA uses concoctions such as a potential sector contribution (PSC) [Note: not to be confused with “prohibited species catch”] and annual catch entitlement (ACE) and “voluntarily” joining a sector (a cooperative of catch share holders). With these terms NOAA conveniently declares Catch Shares outside of the jurisdiction of the relevant Magnuson Stevens Act Standards governing such programs. The law refers to IFQ’s, so NOAA denies they need to comply since these are not IFQ’s. It’s a bit like …waterboarding is “enhanced interrogation”, so therefore, it is not illegal…torture is illegal.

However, applying a bit of common sense and some honesty, it becomes evident that a “Potential Sector Contribution” is the amount of uncaught fish poundage allocated, or quota assigned, to an individual boat and permit which is an Individual Fishing Quota or IFQ. Then if or when the IFQ is exceeded—during actual fishing—this requires the purchase or trade for additional poundage, i.e., quota that is transferable from another individual’s allocation in order to supplement one’s initial quota with the amount of quota that the initial allocation was exceeded by. Then a catch share is an allocation to an Individual permit holder of Transferable Quota or an ITQ. In an even more basic sense a catch share has to be an Individual Fishing Quota before it can be a potential sector contribution; otherwise, what is it the potential of, that the Individual is Contributing to the Sector, if it’s not the potential of, an Individual Fishing Quota? What potential does the Individual bring to the cooperative? If it’s not Fish Quota? Therefore, Judge Rya Zobel’s ruling, NOAA/EDF/CLF’s Monty Python Emperor’s New Clothes approach to defining Catch Shares, not prevailing when looking at this honestly, NOAA/EDF/CLF’s Monty Python, Emperor’s New Clothes, approach to defining Catch Shares, not prevailing, the Catch Shares management program is an Individual Fishing Quota program and consequently requires a 2/3 referendum vote of approval among permit holders (see below for excerpts of relevant statutes).

Whether this quota, the privilege to land the uncaught poundage, is transferred (i.e., bought, sold, or traded) through a sector manager using a satellite phone from the fishing grounds, or at the local coffee shop then through the sector, or invested in, and traded indirectly through fishing company shares of the new Wall Street exchange traded Global X Fishing Industry Fund, or on the new allocation cyber trading site ACExchange, simply doesn’t matter, they are, nonetheless, individuals transferring quota. Whether the shares are a percentage of the Total Allowable Catch, or whether they are held in a sector or not, fishermen are still assigned Individual Fishing Quotas or Individual Transferrable Quotas to their individual boats and permits under the catch share/sector scheme. Catch Shares is an ITQ or IFQ management program in any language, in any logic, in any universe—even in the two dimensional computer model and Power Point world of NOAA-EDF and the Fish Councils. Calling them something else does not change what they are; and it does not change the intent of the MSA Law statutes written to regulate them.

In addition, NOAA’s use of the word “voluntary” to describe joining a sector is nothing but more verbal chicanery. When fishermen learned that the allowable catch for the “common pool” (the alternative to joining a catch share sector) was tightly controlled by, or at the whim of, the regional NMFS administrator, the common pool ceased to be considered a viable “option”. Having the ability to fish, and the fishermen’s income for the year, contingent on the decisions of one NOAA bureaucrat was not considered a very good business plan by the majority of fishermen. Joining a sector cooperative then, clearly, is not voluntary if it’s the only option for survival—just a bit too reminiscent of Stalin’s approach to “volunteering” for one of his cooperatives.

The European Commission apparently is not playing the same NOAA/EDF/CLF semantic shell game, i.e., calling ITQ’s by another name. NOAA, on the other hand, certainly is. They are skirting and violating specific U.S. laws, some laid out in the original Magnuson Fishery Conservation and Management Act, and again in the Magnuson Stevens Reauthorization Act, or MSA 2007, regarding the initiation and allocation and administering, of ITQ’s.

Claiming that Catch Shares are “voluntary sector contributions” and not IFQ’s/ITQ’s is not only ridiculous and underhanded, it is also illegal. It clearly violates the intent of the law. NOAA is violating statutes and standards of the laws that were written to assure fishermen a voice in this process and to protect their fishing communities from the devastating economic consequences of ITQ privatization and consolidation which were referenced by the Scottish Secretary.

There was never a comprehensive socio-economic study incorporated into the decision making process for the Catch Shares as mandated by Standard 8 of the MSA, there doesn’t seem to be much dispute about that; but following are a few fairly obvious examples of other Statutes of MSA Law that NOAA completely disregards in their myopic charge to impose Catch Shares.

In Violation of the 2/3 Referendum Law

This is the most important one; it goes right to the legality of the inception of these Catch Shares.

In the MSA Reauthorization Act 2007, Rep. Barney Frank made sure a Referendum Standard was included:

MSA 303A (D) NEW ENGLAND AND GULF REFERENDUM.

(i) Except as provided in clause (iii) for the Gulf of Mexico commercial red snapper fishery, the New England and Gulf Councils may not submit, and the Secretary may not approve or implement a fishery management plan or amendment that creates an individual fishing quota program, including a Secretarial plan, unless such a system, as ultimately developed, has been approved by more than 2⁄3 of those voting in a referendum among eligible permit holders, or other persons described in clause (v), with respect to the New England Council, and by a majority of those voting in the referendum among eligible permit holders with respect to the Gulf Council. For multispecies permits in the Gulf of Mexico, only those participants who have substantially fished the species proposed to be included in the individual fishing quota program shall be eligible to vote in such a referendum. If an individual fishing quota program fails to be approved by the requisite number of those voting, it may be revised and submitted for approval in a subsequent referendum.

In Violation of the (Conflict of Interest) Recusal Law

NOAA’s Jane Lubchenco soon after being installed as director presented the catch share program essentially as a fait accompli in an early meeting with the New England fishing community. Obedient to this “no uncertain terms” directive from Jane, the Catch Shares program was then rammed through the Fisheries Management Council (where several council members ignored conflict of interest standards and failed to recuse themselves from the catch share deliberations, they voted to initiate the catch share program for groundfish even though they stood to gain personally from such a vote). This passage by the council was, of course, pending final “approval” by NOAA/NMFS—who mandated the program in the first place. The fishermen (those most directly effected by this circular circus of management “regime change”) had little to no input in this process. Certain members of the council acting to enthusiastically approve this program could be seen in violation of the following statute.

Magnuson Stevens Fisheries Management Conservation Act, Sec301

(j) DISCLOSURE OF FINANCIAL INTEREST AND RECUSAL

(7)(A)After the effective date of regulations promulgated under subparagraph (F) of this paragraph, an affected individual required to disclose a financial interest under paragraph (2) shall not vote on a Council decision which would have a significant and predictable effect on such financial interest. A Council decision shall be considered to have a significant and predictable effect on a financial interest if there is a close causal link between the Council decision and an expected and substantially disproportionate benefit to the financial interest of the affected individual relative to the financial interests of other participants in the same gear type or sector of the fishery. An affected individual who may not vote may participate in Council deliberations relating to the decision after notifying the Council of the voting recusal and identifying the financial interest that would be affected.

In Violation of the Fair and Equitable Initial Allocation Law

In their first year under these Catch Shares (ITQ’s for all intents and purposes) New England communities have experienced far reaching negative consequences. They are reeling under the consequences of inequitable individual allocations, unrealistically low annual catch limits, enmity and distrust of NOAA management and law enforcement, compromised integrity of fisheries law and the council process, consolidation sponsored corruption and profiteering, and a great deal of stress caused by the demise of many independent fishing businesses with devastating effects on families and coastal communities.

There were several options “on the table” for calculating the individual license holder’s initial quota, the option that hurt the largest number of fishing operations was chosen. It was an option based solely on groundfishing history during a specific time frame, 1996 thru 2006. If a fisherman didn’t own the boat during that period, if a vessel and permit was purchased in 2005 based on the days-at-sea value for the permit, or if species other than groundfish were pursued as recommended by NOAA for that period, without knowledge of the impending management change in order to acquire additional permits and history, you lost big. Two particular fishing groups made out better than all the others after their allocation was calculated on the more favorable time period between the years 2000-2005. Again NOAA violating the law:

Magnuson Stevens Fisheries Management Conservation Act, Sec 303(d) (5)

(C) provides for a fair and equitable initial allocation of individual fishing quotas, prevents any person from acquiring an excessive share of the individual fishing quotas issued, and considers the allocation of a portion of the annual harvest in the fishery for entry-level fishermen, small vessel owners, and crew members who do not hold or qualify for individual fishing quotas.

Could It Be…

If Catch Shares are working so well, and if “revenues are up” as NOAA claims, and if all the fishermen just love them as EDF claims, if they are so successful and popular, would all these millions be necessary to push them?

Why are the majority of the affected fishing communities, the fishermen, the shoreside businesses, Congressional oversight committees, a bipartisan Congressional delegation from Maine to the Gulf of Mexico and now some on the west coast, the mayors, the governors, lawyers, judges, reporters, columnists, scientists, analysts and researchers, why are they all questioning, and most of them ultimately opposing, the catch share scheme?

Could all those people involved in resisting Catch Shares be deluded or ignorant or duped by the wiley fishermen? Could it just be a “…hotbed of whiners”, or perhaps a restless group of itinerant labor fishermen with nothing better to do, fishermen that bounce around from job to job, unskilled, unprofessional, low paid, with high drug use, as EDF’s David Festa characterized fishermen (when he pitched Catch Shares to a conference of Milken Institute investors in April 2009)?

Is it maybe the gobs of money that the fishermen are spending on media misinformation campaigns; and is it their grants to University departments to secure agenda-driven “scientific” propaganda in favor of their ocean exploitation that’s creating this catch share furor? And could all this resistance be happening so that the greedy fishermen can hunt down the very last fish and destroy their own future?

Or could the dissent point to the fact that there is something very wrong with the fisheries management program of Catch Shares?

The spending of tens (hundreds?) of millions of dollars pushing and defending Catch Shares by NOAA and “partners” is a clear indicator that this management scheme is a disaster. The intensity of their commitment and zeal to force this commodification—no matter what—would also indicate that these beleaguered Catch Shares, in reality, have little to do with the health of the fish and the fishing communities, and much more to do with a handful of investors looking for a new commodity and a brand new pair of economic roller skates.

Rather than NOAA and “partners”, The Environmental Defense Fund and The Conservation Law Foundation, spending all those millions trying to defend this indefensible program, why not actually do some good in the world and put that money into a bit of …conservation? The Gulf of Mexico could use some attention; or how about monitoring and stopping the pollution of the coastal estuarine fish rookeries, that’s a campaign that would actually help the fish. These along with ocean warming and acidity increases are projects that are certainly in need of some of those millions.

It is possible for NOAA to save a lot of time and a lot of money and settle this catch share issue right now. NOAA could simply obey the law and put Catch Shares to a referendum vote.

This is not a matter of “further development” or “improving the design” for these Catch Shares; this is the very timely and important issue of whether the “institutions” and their “regulators” are bound by the law; or is it only the “the little people”, the “regulated community”, that must obey?

Catch Shares Are Illegal—and Destructive as Hell to an American Icon: The Family Owned Small Business!

Get rid of Catch Shares and the resulting commodification and consolidation—once and for all.

Richard Grachek

# # # #

Food & Water Watch extract from

http://www.foodandwaterwatch.org/factsheet/learning-from-iceland-mistake/

Legal Challenges

Iceland’s ITQ system has been challenged repeatedly in court. From 1998 to 2001, Iceland’s courts saw several legal challenges to the privatized catch share system — some won, some lost. Ultimately, fishermen took their case to the United Nations Human Rights Committee (the Committee) alleging that privatization violated the International Covenant on Civil and Political Rights because the system forced fishermen without quotas to pay money to a privileged group of citizens, the “holders” of quota, in order to pursue their occupation.

In October 2007, the Committee sided with the fishermen and ruled that Iceland’s privatized catch share market violated international law. In its written decision, the Committee reasoned that, although Iceland’s Fisheries Management Act stated that the fishing banks around Iceland were the common property of the people of the nation (as is also the case in the United States), the privatized catch share market transformed the right to use and exploit this public property into individual property. The Committee found that:

“…the property entitlement privilege accorded permanently to the original quota owners…is not based on reasonable grounds.”

The Committee argued that allocated quotas no longer used by their original holders should revert to the State for allocation to new quota holders in accordance with fair and equitable criteria. Although Iceland failed to immediately change its policy to comply with the decision, in 2009, the newly elected Icelandic government committed to review the country’s fishery management system. It has announced that it is considering reforms.

Groundswell notes:

Iceland went broke by converting itself from a country into a hedge fund, and ITQ holders – key depositors in the three major banks, including Glitner – played a role. Fisheries represented about 7% of the economy, and were a significant component in overall export earnings. In order to rectify Iceland’s situation, a total financial collapse, part of the solution was to renationalize the fish quotas. Glitner played a role in backing the investment firm Fox Paine’s involvement in financing the sale of Icicle Seafoods.

The Magnuson-Stevens Act allows privatized ITQs to be revoked and/or reallocated at any time without compensation. That’s what the U.S. Congress thought reasonable. In contrast, Iceland was going about buying back small percentages of quotas from those it gifted with public commonwealth, over a period of ten years.

Just days ago, Iceland’s special prosecutor arrested the former CEO of Glitner and others, in a delayed response to the October 2008 collapse of Iceland’s economy and banking system.

See also: http://www.reuters.com/article/2011/11/30/us-iceland-glitnir-idUSTRE7AT2UX20111130

Also Wesley Loy’s Highliner/Deckboss article: http://community.adn.com/adn/node/111138#ixzz1fLHvztUW

Groundswell was already (1996) experienced with a major Norwegian bank behind federal bankruptcies of factory trawlers in the North Pacific who were lined up by the Japanese-owned shoreside processing cartel for another round of failures, in Inshore-Offshore Pollock Wars. I was a forensic accountant on a case involving two factory trawlers who’d gone through bankruptcy, in part illicitly.

Pollock rationalization (privatization) thus gained a buyback provision, after I had spent nearly four hours in early 1997 explaining to the FBI, and OKOKRIM (Norway’s High Authority for the Investigation and Prosecution of Crimes Against the Environment and Economy) at the Seattle Asian Crime Task Force offices about how it all centered in on crossborder illicit accounting, abusive transfer pricing. I explained to international criminal law enforcement authorities how Factory trawlers were held hostage to that foreign cartel’s price fixing, plenary market power in surimi (pollock protein food ingredient) production, and the role of Norwegian Exportfinance subsidies where cash still lay in overseas banks despite U.S. bankruptcies, thus harming Seattle suppliers.

About Stephen
Founder of Groundswell Fisheries Movement

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