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PRESENTATION TO THE MINISTERIAL ADVISORY PANEL FOR THE LIFO REVIEW

June 10, 2016

CANADIAN ASSOCIATION OF PRAWN PRODUCERS


PRESENTATION TO THE MINISTERIAL ADVISORY PANEL FOR THE LIFO REVIEW – June 10, 2016

The Canadian Association of Prawn Producers (CAPP), representing year-round frozen-at-sea (FAS) shrimp harvesters, provides this June 10/16 Presentation in Halifax to emphasize elements of our May 25/16 Presentation in St. John’s, and our two written Submissions to the Panel

Lack of Evidence from Anti-LIFO Presenters • At the outset we must emphasize that we are profoundly concerned with

the lack of evidence and in some cases erroneous or misleading statements provided by anti-LIFO presenters during the public meetings held in NL. Facts and figures often compare the benefits of the entire seasonal fishery (sometimes all species) against the year-round shrimp fishery, and ignore the tonne by tonne comparison of benefits over time, e.g. in each of the past 5 years, which should be a central consideration of the Panel.

• “…to ensure that the MAP is basing its decisions on the best available and factual information..” how will the Panel examine the socio-economic benefits for each tonne of SFA6 shrimp quota, and what experts will the MAP consult with to ensure that comparative benefits are examined properly (use of experts is explicitly envisaged in the TOR)?



Year-Round (FAS) Shrimp Harvesters • The FAS shrimp industry features:

• All Canadian crew • Modest foreign involvement in capitalization and financing of

vessels (quite similar to seasonal processing sector but control rests with Canadians)

• Far greater Canadian ownership than virtually all other resource-based industries in NL.

• Current licence holders: • Aboriginal interests (4.5) • “Inshore” companies including LFUSC and Torngat Coop (5) • Adjacent to shrimp resource (13) • Head-office in NL (8) • Vessels based in NL ports (7 of 10)

• About 700 people (crew and shore-based) from eastern and northern Canada (116 towns in NL) are directly employed by FAS shrimp fleet, many with advanced fishing and processing skills.

• More than 2,000 additional “inshore fishery” jobs are directly employed/supported by ~$30M FAS shrimp earnings



Profile of Access to Shrimp Fishing Areas (SFAs) • Year-round operations are absolutely critical to the

economics required for fleet replacement required to prosecute shrimp in SFAs 1-5

• Access to SFAs 1-4 is not possible during Feb-May • SFA 5 allocations are not sufficient to keep fishing until ice

leaves SFAs 1-4; SFA 6 is also key to full-time employment for crew, year-round service of markets, and maintaining shore-based service sector and communities.



Access to SFA6 is Critical During Winter-Spring • March 2016 Fishing in SFA6



Clear Entry/Exit “Rules” for N. Shrimp Fishery • Threshold Quotas and LIFO rules are clear, verified by Ernst & Young Report (2012)

• Minister Mifflin’s original announcement in April 1997 was unambiguous • ‘Participation by new entrants will be temporary and will end for those

SFAs where quotas decline in the future and the established thresholds are reached’ and ‘Current Northern shrimp licence holders will retain their full 1996 allocation in all Shrimp Fishing Areas -- 37,600 tonnes’

• Threshold quotas were also established for each SFA, e.g. 11,050t for SFA6 • Adjacency was primary principle to allocate temporary quota increases to

new entrants • Rules were understood and accepted by inshore interests – October 1997

letter from FFAW President (submitted to Panel), and we understand fishers had to sign an acknowledgement form in 1997.

• All eight subsequent DFO Ministers endorsed the policy • LIFO has been applied in accordance with the original announcement for 19

years, including five years of resource declines and attendant removals of new entrants

• There is no credible dispute about the clarity of the policy.


The Policy Case - Stability • Stable Access and Allocation Rules:

• Mitigates political pandering and deal-making • Reduces conflict among user groups • provides a stable environment for business investment and lender financing • Encourages all parties at the table to focus on resource sustainability within

their own sector. • After the Independent Panel on Access Criteria (IPAC) in 2002 and the

Atlantic Fisheries Policy Review (AFPR) in 2004 , it has become a foundational policy widely supported by industry and Provinces.

• The 2012 DFO Paper “The Future of Canada’s Commercial Fisheries” states the adjustment of quota sharing arrangement would occur, only in exceptional cases, such as responses to legal obligations and obligations stemming from comprehensive land claims agreements.



The Policy Case – Adjacency Not Paramount • 230-350 mid-size seasonal trawlers fish shrimp 60-320

miles from their home ports when the shrimp is of poorest quality, including during the sensitive spawning, moult and mating season in August-September.. Theirs is not an “inshore” fishery but a highly seasonal fishery conducted in the mid-shore and offshore areas.

• Recommendations of the IPAC (adopted by DFO in 2002) states as the fishery moves to the mid-shore and offshore areas….adjacency should not be the sole criterion used, nor is it paramount over other values.

• The 2005 Hooley Panel (3Ps scallops) found that “adjacency should not be the sole criterion in access decisions…” and recommended mid-shore and offshore fishing grounds (60-70 miles from land) to be exclusive areas for the traditional offshore fishing sector.

• Historic dependence is applied on basis of the specific stock in question (in this case by >100’), and not on the basis of other stocks in the area for which no single vessel size has a sole claim of history.



From St.Anthony 80-320 nMi

From Twillingate 60-240 nMi

Figure 8. Sailing distances for seasonal vessels from top ports

The Policy Case – Hierarchy of Historic Attachment & Economic Viability

• Adjacency does not trump the historic attachment and economic viability of the FAS fleet in this mid-shore and offshore fishery;

• There is a clear hierarchy of the application of principles in this instance

• Thresholds are designed to protect the viability of the existing permanent licence holders, and allow for new entrants;

• Adjacency was used to ensure the needs of the NL seasonal sector were met when providing allocations above the >100’ Threshold Quotas, but was never the exclusive principle even for this purpose;

• Notwithstanding, the FAS fleet has a strong adjacency profile of its own

• 13 licenses are directly adjacent to a SFA • 12 licences are based in NL • 8 licences are held by companies with NL

head-offices



The Economic Case • The year-round harvesters have far greater economic dependence on the northern shrimp

fishery than do NL seasonal harvesters, who are multi-species enterprises with access to crab and groundfish.

• Over time, the year-round shrimp harvesters produce more benefits from every quota tonne of shrimp than does the seasonal, harvesting and processing sectors combined

• The economic case is clearly substantiated based on; • 700 well-paid full-time jobs supported (CAPP survey); • $89 million spending in the shore-based services sector (CAPP survey); • $30 million “royalty payments” to support employment for 2-3000 shore workers in rural

communities (CAPP survey); • On-going higher contributions to GDP and Labour Income per tonne of SFA6 shrimp quota (data

from Pisces Report)



Consequences CANADIAN ASSOCIATION OF PRAWN PRODUCERS


Consequences of excluding the year-round fleet from SFA 6 and re-allocating the entire 11,050t threshold quota to the NL seasonal sector

Seasonal Sector Impacts: − Extra 7-8 fishing days

per average vessel; − 650 extra hours for

220-290 seasonal workers earning $8-$9,000 each by maintaining 1.5-2 plants (equivalent to <97 FTE).

Year-round Sector Impacts:

− Immediate loss of 130 high paying jobs and place 570 direct jobs at-risk;

− Lose access to ~25% of recent catch; ~35% of value − Lose an ice-free fishing zone critical for 12-month

operation (forcing vessel tie-ups); − Lose skilled personnel (Captains and engineers); − Reduce financial ability to replace vessels; − Reduce financial ability to provide “royalty payments”

~ $30 M/year that supports inshore fishery and community infrastructure (especially in far north);

− Reduces GDP and labour income by 24%/mt.

The Social Contract • In 1997, FAS shrimp harvesters accepted temporary new entrants having

preferential allocations for TAC increases, based on Government’s commitment to implement Quota Thresholds and entry/exit rules, which were rooted in a widely-applied policy that has been reiterated in subsequent years;

• The Government has implemented this fair approach faithfully for near 20 years, demonstrating commitment and building trust;

• Ministerial discretion notwithstanding, breaking this contract and placing at risk hundreds of millions of dollars of investments by those who followed DFO rules, without a compelling socio-economic rationale, would break a strong social contract with FAS shrimp harvesters, employees, communities, and investors;

• The consequences of this unfair decision would extend well beyond this fishery.**



Lands Claims Issues • Three relevant Lands Claim Agreements:

• Nunavut Land Claims Agreement (NLCA); • Labrador Inuit Land Claims Agreement (LILCA); • Nunavik Inuit Land Claims Agreement (NILCA).

• These are modern treaties with very precise language not subject to liberal interpretation;

• They extinguish any Aboriginal or treaty rights that these groups can claim other than those that are outlined in the text of the LCAs.



As detailed in its May 25th presentation, there are no provisions

of these three LCAs that would invalidate the application of LIFO in

SFAs outside 12 nMi.

Credit: Lands Claim Coalition

Myths & Facts (evidence provided in May 25th Presentation)

• MYTH: there is a crisis in Newfoundland’s seasonal shrimp fishery. • Fact: revenue seasonal shrimp fishing enterprise (from shrimp, crab and

turbot) remain much higher than normal, and Northern Cod is rebounding

• MYTH: seasonal shrimp harvesters must have shrimp quota re-allocation

from year-round harvesters to survive • Fact: seasonal harvesters can rationalize capacity within their own sector,

just like year-round sector has balanced its capacity • ~20% of SFA6 seasonal quota held by non-adjacent seasonal vessels in 3L that

contributes only 20% of their income • why should unsustainable capacity in 4R or 4T (who have their own shrimp

and groundfish quotas) be propped up by the year-round shrimp harvesters



Myths & Facts (evidence provided in CAPP’s May 25th Presentation)

• MYTH: re-allocating year-round SFA6 quotas to seasonal harvesters will solve the needs of the seasonal shrimp sector without which rural NL will die

• Fact: transferring the full threshold quota (11,050mt) of the year-round harvesters in SFA 6 would;

• supply the seasonal harvesters for only 7-8 days (data from Pisces Report), and • maintain only 1.5-2 plants with 220-290 seasonal workers who earn $8,000/year

(data from Pisces Report • Result in a net loss of 24% in GDP and Labour Income to NL (2012-14) (data from

Pisces Report)

• MYTH: MYTH: year-round harvesters can still be viable by fishing more quota in areas north of SFA 6.

• Fact: There are no additional fishable quotas to be fished north of SFA6, and the loss of 25-30% revenue will have severe viability consequences.

• Quotas in SFA0, SFA1 and SFA2 (exploratory) are “paper fish”. • >100’ fishable quotas in 2015 were ~10% higher than 1996. • Economic viability in 2016 requires partnering of multiple licenses/quotas.



Myths & Facts (evidence provided in CAPP’s May 25th Presentation)

• MYTH: This is a battle between the ”small owner operators” and ”corporate foreign operators" who bring little benefit to Newfoundland

• All FAS lcenses are Canadian controlled, all vessels are Canadian flagged, and all but 3 of 530 crew are Canadian. This sector provides hundreds of well-paying year-round jobs people, supports 2-3,000 shore jobs and contributes 24% more economic and

labour income for every tonne of shrimp landed. • Myth: The FFAW and NL Govt. support adjacency as the only/primary quota

allocation principle • Fact: These two advocate groups flip-flop to use other “principles” to

support their interests in other fisheries • New access to crab: “cannot be done at the expense of existing participants in the crab

fishery.” • For Gulf Halibut: “Fishery management policies must be more reflective of historical

attachment and economic dependence”. • For Northern Cod: Adjacent offshore license holders should only be allowed to participate

in the harvest after the inshore and midshore seasonal quotas exceed their claimed threshold of 115,000 tonnes



The Proposals of FFAW and Govt NL • Their case for casting aside >100’ Quota Thresholds and LIFO, and re-

allocating quotas to the NL seasonal harvesters, is not compelling… • Adjacency does not apply to mid-size seasonal trawlers fishing mid-shore and

offshore areas • Economic dependence on shrimp by the year-round shrimp harvesters is far greater

than the seasonal multi-species harvesters • Government studies verify that huge overcapacity in processing plants was created by

Govt NL issuing too many licenses in spite of concerns expressed by DFO • On-going contributions to GDP and Labour Income by the year-round shrimp fishery

are greater per quota tonne

• This attempted “quota grab”: • Is inconsistent with the long-standing Government approach in support of

transparent and stable quota allocation policies • Is inconsistent with the application of adjacency (the seasonal fishery takes place in

mid-shore and offshore areas that are 60-320 miles from their ports) • Is unfair to those hundreds of people who have invested their savings and lives by

following the rules that were established for this fishery



Other Ways Forward for NL Seasonal Sector • ……maintaining the year-round Quota Threshold in SFA6 (11,050t) will not

cause a single lost job in the seasonal fleet; no fisher’s job will be lost by the average seasonal shrimp vessel not having that extra week of fishing.

• A rationalized seasonal harvesting and processing sectors can still be viable based on crab and groundfish along with lower quotas of shrimp (a conclusion supported by the recent Federal/Provincial MOU process)

• For shore-based shrimp processing plants, lower EU tariffs resulting from CETA will enable the further processing of whole raw "industrial shrimp" from the year-round fleet, about 25% of which was utilized in this way in 2015. This alone could offset the reduced supply to seasonal plants from lower SFA6 TAC

• The bottom-line issue is whether owners of about 250 seasonal fishing corporations will have $55-60 million in revenue given to them by the Government of Canada, by virtue of taking that revenue and undermining the viability of the traditional year-round shrimp harvesters.


A Strong Year-Round Shrimp Fishery Creates a Strong Rural Economy

in Atlantic Canada “Do members know how Canadians know their government is

working? ... They know it when we have well-paying, full-time jobs.” Prime Minister Justin Trudeau, House of Commons, April 22, 2015.



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