Bering Crab Quotas Prove Their Worth

Safer, fairer, and saner than expected, “crab rationalization” rewards value creators, aiding one crabber’s fuel-efficiency venture.

 

By Brad Warren

 

This is a story I never expected to write. It’s about a Bering Sea crabber whose ingenious startup venture got an unlooked-for boost from the quota system he and I (like many others) once viewed with deep suspicion. It’s also about the fishermen and processors who transformed their industry from a wasteful scramble for crab into a highly functional business that aligns their interests in efficient production. The result is not flawless, but it is a far, far better fishery than it could otherwise be.

 

After a rainy summer packing salmon around Petersburg, Alaska, the crew of Erling Skaar’s Marco-built crabber North American delivered their final load and gratefully turned the bow southeast. Cruising home to Seattle, Erling and his crew proudly showed several visitors that the 110-foot vessel, driven by a muscular 1,100 horsepower Caterpillar main, was making 10 to 13 knots while burning well under 20 gallons per hour for nearly the entire 75-80 hour trip.

 

Throughout the summer, the North American burned about 20-25% less diesel than similar-sized vessels hauling salmon nearby. Seine skippers who climbed aboard got a glimpse of technology that can make even a Bering Sea crabber work something like a Prius. That fuel efficiency helps Erling compete for charters when the boat isn’t crabbing. It may soon do much more.

 

For seven years, Erling has poured his retirement savings and much of the boat’s annual earnings into engineering and assembling the fuel-efficiency improvements that his new venture, Gentech Global, is now bringing to market. The North American has become a floating showcase for the technology. The main elements add up to a patiently honed form of common sense: a super-efficient, computer-controlled shaft-generator, plus a FloScan fuel meter that allows the crew to track fuel use. Together, these tools permit optimal engine loading and exploitation of the “sweet spot” in RPM that squeezes maximum value from each gallon of diesel.

 

The North American saves thousands of dollars in fuel on each trip between Alaska and Seattle. Now distributors around the world are lining upto represent Gentech in major marine markets, and some commercial vessel owners and fleet managers are .Characteristically, Erling had humbler aspirations in when he hatched the technical concept that grew into this enterprise: he just wanted to pull stable 60-cycle power from a shaft drive despite varying engine speeds.

 

Erling’s venture reflects not only a personal mission, but an evolving culture of efficiency that is gaining traction worldwide in fishing and commercial marine operations. High fuel prices are an obvious spur. But the trend also gathers force as fishing fleets embrace individual quota management systems. Those schemes generally enable vessel owners and processors to make their operations more cost-effective, safer, and better tuned to markets than they could be under old-style “race-for-fish” regimes.

 

Erling has funded his ambitious startup—at a cost exceeding $1 million for engineering, testing, and business development so far—mainly through stubborn thrift. But to his surprise, the complex system of individual fishing and processing quotas hatched by the Bering Sea crab industry in 2005 has eased the burden ofthat outlay.

 

Erling’s chief engineer Henry Pagh, who has helped run numerous sea trials to test and refine the Gentech system, described this advantage during the run back to Seattle: “Once we got quotas, it became much easier to plan and invest, because we knew what the boat could earn. For the first time, we knew what we could catch, and we pretty much knew the price because it’s based on a formula for dividing the wholesale value. So Erling could plan how much of the boat’s income to put into maintenance and how much he could put into Gentech.”

 

 

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Initially, Erling was no fan of the new quota regime. “You could say we were pretty skeptical when it started,” he recalls now. After the North Pacific Fishery Management Council approved the quota plan, Erling explored legal options to block the new scheme. He worried that it would erode fishermen’s bargaining power because it assigned a handful of processing companies the rights to buy 90% of the catch from most boats.  I volunteered to help him write up his arguments for a lawyer to evaluate the case. The lawyer’s advice: drop it.

 

During the early 2000s, while the Bering Sea crab industry wrangled over how to restructure itself to survive on smaller harvests, I wrote a string of editorials for this magazine arguing against the creation of processor quotas.  I respected the processors’ right to press for inclusion in the benefits of any new quota system, but I figured that handing them a lock on most of the catch would tilt the bargaining table against fishermen.  I also reckoned the new system’s elaborate “checks and balances”—designed to protect not just fishermen but processors, crew, and communities — might inadvertently become shackles. I doubted whether crabbers could expect the big gains in price, market access, and safety that fishermen reaped from quota systems in fisheries like halibut and blackcod.

 

Sometimes it’s good to be wrong. A detailed report on the “crab rationalization” program’s first five years went to North Pacific Fishery Management Council this fall, together with a review of the crab fleet’s safety performance prepared by the Coast Guard and the National Institute of Occupational Safety and Health (NIOSH). Together, these documents provide an independent assessment of how crab fishermen, processors, and fishing communities have fared under the new system. The reports lay a lot of worries to rest.

 

Are fishermen getting shafted on prices? No. Crabbers now receive a slightly larger slice of the wholesale pie than they did before rationalization. True, crews are getting thinner slices of vessel revenues, but thanks to consolidation their paychecks have increased.

 

The fleet has downsized sharply, shrinking to about a third its former number, and some communities have seen their role in the crab industry dwindle. But these losses probably were inevitable in a time of reduced catches. Rationalization didn’t cause them. When the resource declined, no management plan on earth could keep every deckhand working and every port awash with crab money.

 

Did the new arbitration and management system burden fishermen with heavy costs?No. For arbitration, crabbers have paid no more than a penny a pound since the program began, and nothing at all in some years because the fee generated a surplus in earlier years. Cost recovery fees for fishery management and enforcement, capped at 3%, also run a surplus, so they were dropped to just over 1% two years ago, and waived completely last year.

 

The industry’s safety record has improved dramatically.  Most of the credit goes to mandatory Coast Guard vessel safety checks. But ditching the derby-style “race for fish” has certainly helped. In the fishery that inspired the “Deadliest Catch” television series, no one has died due to a vessel catastrophe since the quota system took effect. Fishermen are no longer charging out into lethal storms just to avoid losing catch to their rivals.

 

Instead of rewarding the most reckless competitors, the new system of fishing cooperatives binds fishermen together with each other and with processors in mutual quest to maximize earnings from a limited resource. They schedule deliveries and seasons to contain operating costs and to reach markets ahead of competing fisheries—not to cork each other. Through the cooperatives and the price formula established under the new regime, participating fishermen and processors share in the upside from these efforts.  They manage crab production like colleagues working together in a business, not like gladiators in a coliseum.

 

The system isn’t perfect. Processors grumble that the price formula saddles them with an unfair share of price risk, while the rewards go to fishermen. Crew complain they are getting squeezed by some quota owners. Both groups have a point.  But now that the incentives in the fishery mostly reward the creation of value, there is a better chance of reaching a fair deal for all. Meanwhile, the same incentives will help innovators like Erling Skaar provide vessel operators with tools to keep more of their money instead of burning it up in diesel fuel.

 

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