$3 million allocated for Southeast seine permits

Posted: Monday, April 07, 2008

KETCHIKAN - Southeast Alaska's commercial purse seine salmon fishing fleet is expected to shrink soon under a multimillion dollar permit buyback program.

The consolidation effort worth about $3 million is the first effort of its kind for a state-managed fishery in Alaska.

The Southeast Revitalization Association expects to mail bid packages to the 415 holders of Southeast seine permits today.

Any Southeast seine permit holder interested in selling a permits can submit a bid, according to SRA Manager Rob Zuanich.

"It will be a reverse auction, meaning they can bid whatever amount they want to sell their permit (for)," Zuanich said. "And then we'll accept (bids), starting with the lowest bid, up until we've exhausted the $3 million."

Permits sold in the buyback process will be retired permanently, according to Frank Homan, chair of the Commercial Fisheries Entry Commission.

"They won't be able to be used again," Homan said.

The buyback program is being conducted by the SRA, an entity created by the Alaska Legislature in 2002 for the purpose of consolidating the seine fleet. Its membership comprises all 415 seine permit holders.

Funding for the buyback came from a federal grant through the Pacific Coastal Salmon Recovery Fund.

Congress, meanwhile, has approved a larger loan program that could result in up to $23.5 million for a further reduction in the number of seine permits.

If approved by a referendum of permit holders, the National Oceanic and Atmospheric Administration would provide the loan to buy back permits. Permit holders who remained in the fishery would pay back the 40-year loan by paying annual fees of up to 3 percent of the ex-vessel value of their salmon harvest.

Zuanich said the overall goal is to remove at least all the inactive permits from the seine fishery.

An average of 228 seine permit holders have fished during the past five years. Based on that number, the general reduction target would be more than 180 permits.

"At the end of the day, those (permit holders) remaining in the fishery will have some sense that there won't be additional entrants into the fishery, which would just spread out the available revenue from the fishery," he said.

It's unclear how many permit holders will be willing to sell, and at what price.

Southeast seine permit prices are rebounding on the open market, jumping to an average of $59,700 in 2007 from the all-time-low annual average of $22,800 in 2002, according to Commercial Fisheries Entry Commission data.

The low permit values in 2002 - which dipped below $19,000 in March and April of that year - reflected the abysmal market conditions that seiners faced during the late 1990s and early 2000s as skimpy prices for pink salmon and other factors pushed average gross earnings down to about $74,000 per active permit in 2002, the lowest since 1987.

As a result, many seiners stowed their nets and stopped fishing. In 2000, 356 permit holders had fished. By 2004, the number had dropped to a 30-plus-year low of 209 permit holders.

But market conditions have improved since 2004 for active fishermen.

Better pink salmon prices and fewer participants helped boost the fleet's average gross earnings to more than $162,000 per active permit in 2007, according to CFEC data.

The improved market conditions could be a factor in how much funding will be available for a buyback loan.

Back in December of 2005, NOAA Fisheries Service contracted for an economic analysis that indicated the Southeast Alaska purse seine fleet could repay a loan of around $18 million.

But "there was never a definitive number thrown out there because we were never at that point (of providing a loan)," said Mike Sturtevant, team leader of the NOAA Fisheries Service's Fishing Capacity Reduction Program.

NOAA now will conduct another economic study to better determine what size loan could be supported by future revenues of the seine fleet, according to Sturtevant.

"A lot of stuff has changed in the past two years," he said. "I would feel comfortable in saying that the current program would allow (for a) maximum of $23.5 million, but it could be under that."

A major stipulation of the loan program approved by Congress is that NOAA Fisheries will conduct a referendum of seine permit holders before implementing the loan-based buyback program.

"That means before ... paying any money out here, we would conduct our own referendum to ensure that those fishermen left are willing to take on the debt to repay the loan," Sturtevant said.

Zuanich said permit holders would know the size of the loan and total number of permits to be retired in the loan buyback program before voting in the referendum.

The referendum probably will occur this fall, Zuanich said.

Sturtevant said NOAA Fisheries Service has yet to complete several documents required as part of the rulemaking process for the loan buyback program.

When those are complete, "then we publish a proposed rule, put it out for public comment, continue on toward a final rule before we would implement a buyback," Sturtevant said.

The agency will be able to estimate a better time frame once it has the economic analysis update in hand, Sturtevant said.

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