Changes in Fleet Capacity and Ownership of Harvesting Rights in the United States Surf Clam and Ocean Quahog Fishery, B.J. McCay and S. Brandt

B.J. McCay
Rutgers the State University
New Brunswick, New Jersey 08901 USA
<[email protected]>
and
S. Brandt
University of California, Berkeley
Berkeley, California 94720
<[email protected]>

1. INTRODUCTION

The surf clam and ocean quahog fishery of the Mid-Atlantic region was the first federal fishery to be managed with individual transferable quotas (ITQs). We report on its decade of experience with ITQs, focusing mainly on changes in harvesting capacity and in ownership patterns.

The Mid-Atlantic Fishery Management Council (the Mid-Atlantic Council) is one of eight regional councils charged with managing United States fisheries in the 3 - 200 nautical mile zone of federal jurisdiction under the framework of the Magnuson-Stevens Fishery Conservation and Management Act (Public Law 94-265) which went into effect in 1977. The surf clam (Spisula solidissima) fishery, which is under the jurisdiction of the Mid-Atlantic Council, was the first federal fishery subject to restrictions on entry. (The states have jurisdiction from 0 - 3nm; there were some limited - entry systems in state fisheries prior to 1976; in 1977 the State of New Jersey also imposed limited-entry on the surf clam fishery prosecuted in its waters). A moratorium was imposed beginning in 1978, limiting the fishery to the existing vessels, which then numbered 184, a number adjusted to 142 because of vessel inactivity (MAFMC 1990). An annual total allowable catch (TAC) was set and divided into quarterly quotas. Fishing-time limits (per vessel) were also established to encourage and balance distribution of fishing effort throughout the year and stabilize the supply to processors. The Council eventually agreed upon an explicit policy to set the TAC at a level that allowed for a ten-year supply of surf clams based on the present standing stock. A similar TAC-setting process occurred for the closely related fishery for ocean quahogs (Arctica islandica) but without fishing-time restrictions and for a 30-year supply horizon. In September 1989 the Mid-Atlantic Council voted to create individual transferable quotas (ITQs) in both the surf clam and the ocean quahog fisheries. The ITQ system went into effect 1 October 1990 (National Research Council 1999, McCay and Creed 1994).

An example of a hydraulic dredge as used by the Elizabeth C II, a 65’ vessel based in New Jersey

Photo credit: J.C. Normant and M. Celestino; N. J. Department of Environmental Protection, Division of Fish and Wildlife, Bureau of Shellfisheries

2. THE NATURE OF THE HARVESTING RIGHT

2.1 Prior to the introduction of ITQs

Before 1978, the harvesting right in surf clamming was free and open to anyone willing and able to acquire a vessel to prosecute the fishery, which takes place offshore and requires heavy hydraulic dredges as well as access to markets. Market demand is for raw product, which is processed into frozen or canned items before it reaches consumers.

In 1978 the rights were restricted to the owners of vessels then in the surf clam fishery through a moratorium on new vessels in the fishery. At that time there was no significant ocean quahog fishery. Only permitted vessels were allowed to catch and sell surf clams. Entry into the fishery depended on ownership of one of the permitted vessels or their replacements. Replacement of vessels that were severely damaged or lost at sea was allowed with a 10% leeway in their capacity. There were no restrictions on sale or purchase of these vessels and capitalized values of moratorium permits were high, estimated at between $50 000 and $150 000 (MAFMC 1990), and as a consequence many old vessels remained nominally in the fishery, i.e. they did not fish. Harvesting rights were conditional upon payment of a modest permit fee, detailed logbook reporting requirements, many restrictions on fishing-time, and for a while, the size of clams. Fishing-time was progressively reduced during this period, as catch per unit of effort increased while the TAC stayed roughly the same. During this vessel moratorium period, 1978-1990, the owners of surf clam boats had rudimentary individual rights, in that each had a right to fish so many days of the year. This had declined to 25 days by the mid-1980s.

Because vessels could not be utilized full-time in the surf clam fishery, many also entered the ocean quahog fishery, which developed in the early 1980s, harvesting rights remained free and open, subject to a modest permit fee and detailed logbook reporting requirements. There were no restrictions on fishing-time or clam size and the TAC was never reached (market demand for ocean quahogs improved during this period but remained lower than demand for surf clams).

2.2 Initial allocation

The initial allocation of ITQs in this fishery, the subject of much controversy and delay in accepting ITQs, is described at greater length in a separate report (McCay 2001). It was divided among owners of all permitted vessels that harvested surf clams or ocean quahogs between 1 January 1979 and 31 December 1988. Logbook data on landings were available for this period of time, which enabled the use of historical landings as well as other criteria in the allocation formula. The ITQ went to the owner of the vessel at the time of the allocation, and that vessel’s history and dimensions were factored into the allocation, irrespective of who owned and crewed the vessel in the past. Subsequent to the initial allocation, any person who met the U.S. requirements for owning a fishing vessel could purchase or lease ITQ, whether or not that person owned a fishing vessel or had any other qualifications. Entities with majority foreign ownership are excluded.

The formula finally chosen for surf clam vessels coming from ports in the Mid-Atlantic area - the vast majority of vessels in the fishery - was primarily based on a vessel’s average historical catch between 1979 and 1988. The last four years were counted twice and the worst two years were excluded. The resulting figures were summed and divided by the total catch of all harvesters for the period. Eighty percent of a vessel’s allocation came from this ratio. A second ratio was computed on the basis of the vessel’s cubic capacity (length × width × depth); it accounted for 20% of the vessel’s initial allocation. This was in response to complaints by younger and newer participants in the fishery who had invested in larger replacement vessels that did not have strong historical landings and, or, had large vessel mortgages. It was called a “cost factor” and was a key element in enabling an agreement to be reached (Creed 1991).

The method chosen for ocean quahog vessels (which might be surf clam vessels as well) and for surf clam vessels coming from New England ports (a distinct minority) was simpler. The allocation was determined from the average historical catch for years actually fished between 1979 and 1988, excluding the year of the lowest catch (McCay 2001).

2.3 Harvesting-rights after the introduction of ITQs

With the introduction of ITQs in October 1990 the harvesting-right was no longer associated with vessel ownership but rather with ownership or lease rights to shares of the TAC. For both surf clams and ocean quahogs - which are part of the same fishery management plan but managed separately - the ITQ is a percentage of the TAC. The ITQ has two components: (a) the “quota share,” expressed in percentages of the TAC, which can be transferred permanently, and (b) the “allocation permit,” which takes the physical form of a set of tags that are allocated at the beginning of each calendar year to the ITQ holders. These coded tags must accompany the 32 bushel steel-mesh cages in which the clams and quahogs are moved from the vessel to the processing plants. The tags can be transferred only within a calendar year. The amount of the allocation permit is calculated by multiplying the individual quota share by the TAC in bushels. Bushel allocations are then divided by 32 to yield the number of cages allotted, for which cage tags are issued. Cage tags may be sold to other individuals but are valid for only one calendar year.

The minimum holding of ITQs is five cages (160 bushels); there is no maximum holding and no limit to accumulation except as might be determined by application of U.S. antitrust law. By law the ITQ is not a property right; it is designated a revocable privilege.

3. CHANGES IN FLEET CAPACITY

3.1 Fleet capacity

3.1.1 Gear; types of boats; age profile, structure in terms of GRT and engine-power and other proxies for capacity

Table 1 documents changes in numbers of vessels engaged in the surf clam and ocean quahog fisheries within the jurisdiction of the Mid-Atlantic Fishery Management Council, that is, between 3 and 200 nautical miles from coastal baselines, the waters inside being under the jurisdiction of the individual states. It shows an increase in the number of vessels during the 1980s despite the vessel moratorium. That was because many permitted vessels were not used in some years, because of low prices, repairs, or for other reasons. Table 1 also shows the major decline in vessel numbers following the introduction of ITQs in October 1990.

The fishing vessels used for surf clam and ocean quahog fishing are highly variable in size, capacity and age (Table 2). Some of the vessels in use in the 1980s were over one hundred years old, having been schooners used in the estuarine oyster fisheries. Some were converted oil-field supply boats while others were ex-shrimp-trawlers. In 1983 their sizes ranged from 57 to 146 feet overall length. Their tonnages ranged from 37 to 297GRT.

The major gear used is a hydraulic dredge, worked either from the side or from the stern of a vessel. Some vessels are equipped with two side dredges, but the standard has become one single large dredge deployed over the the stern. Average dredge-width has increased over time, from about 98 inches to about 110 inches. Another important variable affecting the capacity to harvest these sea clams is the hydraulic system which pumps water into the ocean bottom. The radius of the hoses has increased over time, allowing more water to be pumped. Once released from the bag of the dredge, the surf clams or ocean quahogs go onto a conveyor belt, from which bycatch is removed and the clams are shunted into large steel mesh cages, which hold approximately 32 bushels. In the 1970s and early 1980s some vessels continued to sort and shovel clams by hand, but the process has now become highly mechanized. Boats carry from three to five crew, which includes the captain and mate.

The cages are stowed in the hold of the vessel though some may also be stowed on deck (a practice now closely scrutinized by insurance companies, concerned about vessel stability). At the dock, a crane is used to lift the cages from the vessel and forklift trucks take them to waiting trucks or directly into the storage facilities of processors. The annual allotment based on the ITQ is provided in the form of a coded tag, which is placed on each cage, before or just after, it leaves the vessel. The captains and, or, owners of each vessel record which numbered tags are used in a particular shipment; this is checked at the processor end as well. The “cage tags” are kept by the processors for eventual inspection by government enforcement agents.

3.1.2 Change in capacity during the surf clam vessel moratorium, 1978-1990

During the moratorium of 1978-1990 there was a major change in the capacity of the surf clam fleet. The fleet was divided into three classes, based on tonnage: Class 1 (=50GRT), Class 2 (51 - 104GRT) and Class 3 (=105GRT). The number of boats in Class 1 decreased from 14 to 8 between 1980 and 1987, the size of Class 2 also decreased from 54 to 50 vessels, but the size of Class 3 increased from 59 to 75 in that period (MAFMC 1990) because replacements for moratorium vessels were typically larger, since the replacement policy during the moratorium had been liberal (see Nicholls 1985). There were other changes, less well documented, but no less significant. For example, vessels that used one dredge converted to the use of two dredges, and the radius of the hose used for hydraulic water pressure was increased, as did the average width of the dredges themselves. The moratorium did not include any constraints on technological change beyond the vessel itself.

Table 1. Fishing vessels, surf clam and ocean quahog fisheries, 1983-1999

Active permitted vessels, federal waters
Year	Total	Only	Ocean	Only	Both	Total	Total
	surf clam	surf clam	quahog	OQ	fisheries	FVs	GRT
1983	117	89	36	8	28	125	13992
1984	119	76	57	14	43	133	14691
1985	130	72	64	6	58	136	14846
1986	144	74	72	2	70	146	18006
1987	142	74	71	3	68	145	18145
1988	134	78	62	6	56	140	17786
1989	135	72	69	6	63	141	18150
1990	128	77	54	3	51	131	17103
1991	75	28	49	2	47	77	10550
1992	58	25	43	10	33	68	9464
1993	50	27	36	13	23	63	8800
1994	45	25	33	13	20	58	7962
1995	36	26	35	25	10	61	8420
1996	31	18	34	21	13	52	7391
1997	33	22	28	17	11	50	7057
1998	28	22	24	18	6	46	6507
1999	28	21	21	14	7	42	6067
Percentage change
1983-1986	23.1%	-16.9%	100.0%	-75.0%	150.0%	16.8%	28.7%
1983-1999:	-76.1%	-76.4%	-41.7%	75.0%	-75.0%	-66.4%	-56.6%
1989-1999	-79.3%	-70.8%	-69.6%	133.3%	-88.9%	-70.2%	-66.6%
1991-1999	-62.7%	-25.0%	-57.1%	600.0%	-85.1%	-45.5%	-42.5%

Note: The figures do not include state fisheries, which take place in waters 0-3 nautical miles from coastal baselines; New Jersey, New York and Massachusetts have their own fishery management systems for state waters. There is considerable overlap in participation between state and federal (3-200 nm) fisheries. Each of the state fisheries has limited entry, and New Jersey has weekly trip limits and has allowed the consolidation of vessels, but none uses individual transferable quotas.

Year	Gross tons	Main engine horsepower	Dredge width (inches)	Age (years)
1983	116	468	96	24
1984	120	479	96	24
1985	124	509	98	24
1986	130	534	98	21
1987	130	553	99	22
1988	134	577	99	22
1989	130	577	100	22
1990	131	594	100	22
1991	136	622	105	20
1992	143	646	109	19
1993	143	652	115	18
1994	138	643	115	18
1995	143	661	115	19
1996	148	694	118	21
1997	143	677	116	22
1998	145	676	115	22
1999	149	679	108	24

Note: Dredge width data were incomplete for most vessels.

Figure1. Gross tonnage, surf clam and ocean quahog fleet, 1983-1999

The ocean quahog fishery was open-access until October 1990 when it became part of the ITQ regime. The number of vessels involved in ocean quahog dredging doubled from 36 in 1983 to a peak of 72 in 1986. Virtually all of them were also involved in surf clamming, but new vessels did enter the ocean quahog fishery.

There was also an increase in surf clamming activity. In 1986 virtually the entire “moratorium-permitted” fleet was active in surf clamming. In most other years, many permitted vessels did not actually land clams due to lack of markets, need for repairs, etc. The short times allowed for fishing (as little as 6 hours every three weeks) contributed to the deployment of all available vessels, in order to meet the demand for clams. Another factor that probably led to the large numbers of surf clam vessels in the period 1985-1990, was anticipation of some kind of individual allocation based on landings history. Although the decision to adopt ITQs was not made until the fall of 1989, by 1985 and 1986 it was clear that some kind of individual allocation, with or without transferability, would take place. The “cut-off” date was 1988; landings after that date were not part of the allocation formula. However, the allocation formula for surf clams double-weighted the years 1983-1988.

The over-capitalized fishery that developed during the pre-1978 open-access period had become even more bloated during the moratorium. The only way to participate in the fishery was to own one of the permitted vessels or its replacement vessel. Restrictions on fishing-time were used to try to keep catches below the TAC; these restrictions were assigned to individual vessels, and their owners were not allowed to combine allowable fishing-time from two or more vessels onto one. Consequently, the only way to spend more time catching surf clams was to operate more permitted vessels. Some chose to fish ocean quahogs, and the state fisheries provided additional opportunities, but the general strategy was to acquire more vessels. Several clammers put together large fleets, one with as many as 28 vessels at one point in time.

The incentives to increase vessel-capacity were obvious to many. The management system had quarterly quotas and time-limits for vessels but no limit on how much each vessel could bring in. Each vessel competed with the others and against time to catch as much as possible. As time went on, and some kind of allocation based on the vessel’s catch history seemed likely, the motive for maximizing catch came to include increasing one’s share of impending property rights. The rise in catch per unit effort (MAFMC 1990) during this moratorium period, was important, reflecting both changes in harvesting-capacity and changes in the resource. Vessel-owners achieved this in two ways - larger catches per tow and per hour spent at sea, countered by shorter periods of time that they were allowed to be on the water. Frustration with the latter was important in fueling the social and political process that led to ITQs. In addition, larger vessels were needed to prosecute the ocean quahog fishery, which typically takes place much farther from port and in deeper waters, than the surf clam fishery. Diversifying into ocean quahog fishing was an important strategy as time limits became shorter in the surf clam fisheries (smaller vessels were used in the state fisheries, particularly New Jersey’s state surf clam fishery, which was restricted to the winter months, a season when smaller vessels had difficulty in offshore waters).

The occupational health and safety issues associated with the system were large, indeed tragic. Vessels frequently sank and men’s lives were lost each year in Mid-Atlantic waters during the moratorium. A study of mortality rates in New Jersey showed that fishing was one of the most dangerous occupations in the state, a result, almost entirely, of the surf clam and ocean quahog fisheries (pers. comm. P. Guarnaccia, Department of Human Ecology, Rutgers the State University, New Brunswick, N. J., USA). For example, five clam vessels capsized in New Jersey waters in 1989. A study of fishermen’s perspectives on marine safety (McCay 1992) showed that surf clamming and ocean quahogging were widely seen by commercial fishermen as the most dangerous fishery, partly because of the technology and partly because of the regulatory system (for surf clams). These created incentives to harvest as much as possible in a short time, often in bad weather. This too contributed to the decision to implement ITQs. However, in January 1999, almost a decade after ITQs were implemented, another four vessels capsized and ten lives were lost.

3.2 Changes in fleet-capacity arising from the introduction of transferable property rights

3.2.1 Numbers of active vessels

This period included that of the moratorium on the entry of new vessels to the surf clam fishery, which began in 1978 and lasted until September 1990, and the ITQ-based management regime, which began October 1990 and still continues. The harvesting sector of the fishery has become smaller, with fewer vessels, even though quotas and catches are larger than in pre-ITQ times (Table 3).

Table 3. Clam and ocean quahog catches and quota (TAC), 1979-1999

Year	Surf clams		Ocean quahogs
	Catch (bushells)	Catch (bushells)	Catch (bushells)	Catch (bushells)
1979	1674209	1800000	3034696	3000000
1980	1924033	1825000	2961789	3500000
1981	1976438	1825000	2888287	4000000
1982	2002830	2400000	3240775	4000000
1983	2411940	2450000	3215640	4000000
1984	2967026	2750000	3962967	4000000
1985	2909330	3150000	4569509	4900000
1986	3180642	3225000	4167205	6000000
1987	2819819	3120000	4743025	6000000
1988	3031681	3385000	4469373	6000000
1989	2838408	3266000	4930280	5200000
1990	3113976	2850000	4622417	5300000
1991	2673413	2850000	4839824	5300000
1992	2812270	2850000	4938700	5300000
1993	2834717	2850000	4811941	5400000
1994	2846670	2850000	4611395	5400000
1995	2545305	2565000	4628323	4900000
1996	2569319	2565000	4391428	4450000
1997	2413575	2565000	4279059	4317000
1998	2365374	2565000	3897487	4000000
1999		2565000		4500000

Source: C.E. Heaton and T.B. Hoff August 1999. Overview of the Surfclam and Ocean Quahog Fisheries and Quota Recommendations for 2000. Mid-Atlantic Fishery Management Council, Dover, Delaware.

After the implementation of ITQs, the numbers of vessels dropped dramatically as owners took advantage of the system to divest themselves of the older vessels they had accumulated during the moratorium period; some owners sold out or chose to lease their ITQ to others. The single vessel owner-operator was rare by the eve of introduction of the ITQs management system, and thus many owners were in a position to withdraw one or more of their vessels from the fishery in order to economize. Both consolidation within firms, and exit by firms significantly changed the fleet. By 1999 the total had declined 66.4% from the 1983 level (and 70% from the 1989 level!) to 42 vessels. Twenty-one were surf clamming, 14 were ocean quahogging, and seven were doing both.

The numbers of vessels fishing both surf clam and ocean quahog continued to decline during 1991-1999, after the ITQ management system was put into force and consolidation and down-sizing continued. Overall, there were 45.5% fewer vessels in 1999 than in 1991, the first year of ITQs (Table 1). There were even fewer in 2000 because of the loss of four vessels in a series of storms in January 1999.

Weninger and Just (1997) have analyzed these data for the period up to the 3rd quarter of 1994. They showed that after the initial major vessel exodus (about 35 vessels, or 27% of the active Mid-Atlantic surf clam and ocean quahog fleet, as soon as ITQs began on 1 October 1990), the rate of exit became slow, although steady, with an accumulated exit of 38 vessels by the 3rd quarter of 1994. Those that left were relatively inefficient.

3.2.2 Vessel specialization

One of the striking structural consequences of ITQs appears to be greater specialization, in contrast to the pre-1990 pattern of either surf clamming or combining surf clamming with ocean quahogging. Prior to the introduction of ITQs, most of the larger vessels fished for both surf clams and ocean quahogs because of the strong incentive to use capital assets that would otherwise be idle due to the constrained surf clam fishing-time. This situation changed with the advent of ITQs. In the 1991-1999 period, particularly from 1995 on, there was significant specialization in the vessels fishing either surf clams, or ocean quahogs. More vessels fished only for ocean quahogs rather than combining that fishery with surf clamming over the course of the fishing year (Table 1).

Changes in vessel tonnage and engine power

There has been a substantial increase of tonnage and engine-power in the fleet since 1983. For all-vessels-combined, the trend has been steadily upward for both average tonnage and average engine-power (Tables 1, 2). Following the implementation of ITQs in late 1990, tonnage and engine power declined in the ocean quahog fleet, as some large vessels were retired. Eventually, during the 1990s, average tonnage reached previous levels though average engine-power was considerably higher, probably because during this period the vessels tended to go farther from port in search of productive quahog beds, as a result of low catch-per-unit effort in customary ocean quahog grounds and the decision of one major processor to move to New Bedford, Massachusetts.

For vessels fishing surf clams (some of which were also used for ocean quahog fishing), their dimensions and engine power increased under ITQ management as older and smaller vessels were retired, but there was not much further increase during the 1990s.

3.2.3 Changes in aggregate fleet tonnage 1983-1999

During the mid-1980s there was a major increase in the number of vessels, largely due to the entry of ocean quahog vessels, but also because of the increased use of vessels that had moratorium permits, possibly in anticipation of a quota-allocation system based on historical landings. As shown there was also a structural change, whereby larger vessels replaced smaller ones. This translated into a dramatic increase in aggregate capacity, as measured by gross registered tonnage (GRT). Figure 1 shows this change and also the dramatic reduction in GRT after 1990 when ITQs were implemented and both the fleet and industry down-sized.

3.2.4 Age of vessels

The average age of vessels in the fleet also increased in the 1980s - not only as existing vessels aged, but also because of the increased use of the older “moratorium” fleet of surf clam vessels in the ocean quahog fishery. Older vessels left the fleet soon after the introduction of ITQs, but the subsequent structure remained virtually unchnaged thereafter, with few replacements, thus the surf clam fleet continued to age. The average age of the surf clam vessels was initially much higher than that of the ocean quahog vessels because the moratorium had resulted in the retention of an old and aging fleet, whereas new vessels could enter the ocean quahog fishery. In 1983 the average age of an ocean quahog vessel was about 17 years; for surf clammers it was 25 years. With ITQs the average age of the surf clam vessels declined considerably, to 16 years in 1993, as older vessels were retired from the fleet. In 1993 the average age of the ocean quahog vessel was also relatively low: 17 years. By 1999 the difference had narrowed and ocean quahog vessels were older; the average surf clam vessel was 22 years old and the average ocean quahog vessel over 27 years old.

An analysis of the characteristics of the vessels shows that those that left the fleet were on the average considerably older (Weninger and Just 1997). Their data show that the average year of construction of the 35 vessels that left in the third quarter of 1990, when ITQs were implemented, was 1953 (over 35 years old); the average year of construction of the 38 boats that left the fishery from the 4th quarter of 1990 to the third quarter of 1994 was 1963 (Weninger and Just 1997). In contrast, the average year of construction of the vessels still operating in the surf clam or quahog fisheries in the 4th quarter of 1994 was 1976 (or 18 years old).

3.3 Consequences of changes in fleet capacity

3.3.1 Economic and impacts

Appraisals of the surf clam and ocean quahog fisheries have shown that since the introduction of ITQs in October 1990, economic efficiency in clam harvesting has increased and excess harvesting capacity has declined (Adelaja et al. 1998a, 1998b, McCay and Creed 1994, Wang 1995, Brandt 1999). The rapid reduction in the number of vessels in the fleet encouraged organizational changes that allowed more efficient use of production inputs (Menzo et al. 1997, Adelaja et al. 1998). The effects were more noticeable in the surf clam fishery, which had a much greater problem of over-capitalization than in the ocean quahog fishery. However, it is argued that down-sizing and economic restructuring should have occurred faster and had greater effects than it did (Weninger and Just 1997). This ITQ system was designed with few restrictions on the trading of harvest-rights in contrast with many others that have accumulation-limits on ownership, and rules restricting ownership to certain classes of people.

Several analyses of the economic effects of ITQs have been undertaken. Brandt (1999) estimated Tornqvist Productivity Indices[54] for the surf clam industry for three periods: from 1980 through 1984, when the fishery was managed by limits on the allowable number of fishing-hours per week, he showed that total factor productivity averaged 0.84. Between 1985 and 1900, during the period of increasing restrictions on allowable fishing-hours and ongoing negotiations regarding allocations of exclusive quota shares, it fell to an average of 0.70. Four of those years (1985-90) had a negative growth-rate of total factor productivity, a result consistent with the strategic behavior of industry participants. During 1991-1995, the initial years of ITQs, the index averaged 0.85. The largest growth-rates were in 1991 and 1992, the first two years after the transition in policy. Brandt used regression analysis, controlling for variables such as changes in the surf clam population, effective fishing-hours, the number of processing-plants, and the price of alternative clam harvest, to show that the mean Index of Productivity under ITQs was 39.8% higher than it was under the “command-and-control” regime of the previous period.

Adelaja et al. (1998a, 1988b) and Menzo et al. (1997) developed an econometric model that showed the effects of ITQs in the fishery. They showed that the use of ITQs in the surf clam fishery accentuated the effects of other variables on how many clams were caught. The rapid reduction in the number of vessels encouraged organizational changes that allowed more efficient use of production inputs. The effects were less noticeable in the ocean quahog fishery, which was not over-capitalizated to the same degree. The major effect of ITQs in the ocean quahog fishery came from the initial period of reduction in vessel numbers; those remaining after the initial round of ITQ allocation transfers had greater catch and market share than before. They also found that during the period 1991-1994 catches (as measured by average monthly landings) by different sized firms responded differently to changes in price, suggesting that industrial reorganization was taking place. Their results support the theory that large firms were relatively buffered against price changes whereas small - and medium-size firms are either more vulnerable to changes in price, or more flexible in responding to them.

Weisman (1997) used a hazard rate model to examine patterns of exit in the surf clam and ocean quahog fisheries from 1990 to 1994, finding that exit (from fishing, not necessarily from owning ITQs) was greatest at first, decreased during the first two years, and then increased, reaching an apparent equilibrium in the fourth year. In their analysis of the surf clam and ocean quahog fishery, Weninger and Just (1997) show similar evidence of a delay in the fleet restructuring expected from ITQs. They argue that the cost-minimizing, long-run equilibrium, (optimum) fleet-structure would consist of approximately 20 vessels each of 1485GRT with per vessel harvest-levels of 35 625 bushels of surf clams and 66 250 bushels of ocean quahogs per quarter. The estimated aggregate GRT was 2970. However, as of the 4th quarter of 1994, the fleet had approximately 2.5 times more GRT and vessels than the model predicted (Weninger and Just 1997). Using our data (which may differ slightly, given some discrepancies in counts of active vessels), as of the 4th quarter of 1999, there were slightly more than two times the number of vessels (42), and the aggregate GRT was 5943, also about 2 times Weninger and Just’s optimal equilibrium. Consequently, 10 years later the surf clam and ocean quahog fishery still appears far from the theoretical economic equilibrium.

Weninger and Just (1997) ask why so many owners of ITQ rights continue when their operations from a normative perspective are inefficient. For example, why didn’t they sell to the more efficient firms right away? These authors developed a game-theoretic analysis, which predicts a strategy of wait-and-see in a situation of high uncertainty about the value of ITQ and marginal inefficiency. The political decision not to charge for ITQs at the initial-allocation contributed by reducing the cost of holding ITQ and by not discriminating against the continuation of less efficient operators. In addition, fishers who wish to purchase ITQs to become more cost-efficient may also benefit from delaying investment. This industry, however, is one of minimal uncertainty, and there are other possible reasons for delays in operators leaving the fishery. One factor concerns the information and transaction costs involved in quota-trading. Another factor not yet developed analytically, is the “job satisfaction” factor, or the value that owners may place on remaining in the fishery despite the opportunity costs (Gatewood and McCay 1990). For example, one family firm we interviewed has tried to keep as many boats operating as possible in order to provide employment for themselves, plus the relatives and neighbors they have long worked with. There are others remaining in the business who, as some have said “know nothing else and can’t imagine doing anything else”. Such behaviour is often described as “stickiness”; a more accurate one is commitment and tenacity. Also it takes time for the market to clear vessels. Rather than eliminating all of one’s boats on the market at once, it makes sense to gradually sell-off boats over a period of years.

3.3.2 Social impacts

The restructuring of the industry that has taken place may be considered as a social impact, but in this analysis we follow custom by restricting discussion to employment and community impacts. The section on ownership that follows describes in detail the social dimensions of the fleet-restructuring.

As might be expected from the down-sizing of the surf clam and ocean quahog fleets, employment opportunities in the fisheries have declined. We estimated that within two years of the introduction of ITQs the number of jobs in the fleet was reduced by one-third. This was less than would be expected by the reduction in the number of boats. But, employment had already been reduced by the time ITQs came along. During the 1980s, when fishing time was severely restricted, many vessel-owners moved their captains and crew members among two or more boats, reducing employment accordingly (McCay and Creed 1987). Nonetheless, when 35 vessels left the fishery on 1 October 1990, as well as another 38 over the next five years, the unemployment that resulted was considerable. Some owners tried to mitigate the impacts by keeping boats fishing even when not needed, but the reduction of crew, as well as boats, still remained a serious problem.

A major social effect of the fleet reduction was the lower bargaining power of crew members and captains, which is symbolized, and to some degree exacerbated, by changes in the share system of returns (McCay et al. 1990, McCay and Creed 1994). A common practice adopted with the introduction of ITQs was for the owners of vessels to deduct from the amount that would be shared out, the cost of leasing quota. (Almost all remaining active vessels leased more cage tags than their owners held; in some cases the leases were among corporations owned by the same persons or company). The lease price for cage-tags or “allocation” became an operating expense similar to the cost of fuel and food. The price paid to the crew by the vessel-owner also might be reduced. For example, an owner might receive $8.00 per bushel for surf clams from a processor, but only pay the crew $4.00 per bushel - to be shared out - because he deducted the cost of leasing allocation from the processor buying the clams or quahogs. This might be done even if the vessel-owner actually owned the allocation, or the owner might transfer the allocation to the processor and lease it back, to create a legitimate paper trail for tax purposes (Ross 1992). Thus, the share of catch revenues for crew-members declined sharply. The negative effects on crew incomes have been compensated, it is alleged, by the increased catches of the vessels on which they work - but they also must work much longer than before. This is a sensitive area and few accurate data exist on what has happened. There are reports of difficulty finding qualified crew, suggesting that the monetary and other returns may not compete with alternatives.

The social distance between vessel-owners and the crew (including hired captains) has increased with the introduction of ITQs. Many owners had been crew-members and captains themselves, working their way to vessel-ownership from similar regional and social backgrounds. With the advent of ITQs, the owners became holders of harvest-rights as well as owners of technology. Some of them, particularly those who had established sizeable fleets prior to the initial allocation of ITQs, became wealthy from their new assets. Prospects for working one’s way up to become a vessel-owner now appear bleak, given the large cost of owning or leasing the ITQ needed to participate in the surf clam or ocean quahog fisheries.

There are no data on the effects of the ITQ schemes on local ports and communities. Down-sizing of the fleet has clearly affected employment opportunities for welders, vessel-supply companies and other ancillary fishing industries. And, it is difficult to disentangle the effects of down-sizing from the effects of shifts in industry activity subsequent to 1990. Changes in clam and quahog abundance, and other non-ITQ factors, led to the movement of many vessels towards the north during the 1990s. One large processing firm relocated to New Bedford, Massachusetts, and it was able to bring to work there many ocean quahog vessels from its earlier location. The surf clam fleet concentrated its activities on the grounds off New York and northern New Jersey. Ports in Virginia and Maryland were hurt by these moves, but ports to the north were helped. The processing component of the fishery has direct community impacts, too, particularly for the low-income and minority rural and urban communities that supply most of the processing labor. This sector has undergone many changes since 1990, including consolidation and down-sizing, some of which might be related to ITQs, but it is difficult to demonstrate the linkages.

Another important impact on communities has been health and safety. Improved safety was a major selling point for the ITQ system. During the 1980s the system of restricted fishing-time had promoted unsafe races to and from the clam beds. Overloaded boats and other unsafe practices contributed to a series of vessel sinkings and loss of life. In the Mid-Atlantic region an average of one vessel a year was lost at sea. In the early period of ITQs, 1990-1992, three more vessels sunk, throwing doubt on the safety value of ITQs. In interviews, people said that ITQs did not help because the processors still demanded that vessels dredge for shellfish when the product was needed, regardless of weather conditions (Beal 1992, McCay and Creed 1994). For five years there were no vessel losses, but between 1997 and early 1999 six clam boats and eleven lives were lost out of a much smaller fleet. As noted earlier, sea clamming remains a dangerous occupation, with or without ITQs, and the impacts on communities are memorialized and given cultural significance in the services for the dead, the benefits held for the families left behind, and in statues created to honor fishermen lost at sea. One was erected at Point Pleasant Beach, N.J. in the year 2000 in memory of all fishermen from the area lost at sea; the process was in response to the tragic losses in the surf clam fleet in the January 1999 storms.

3.3.3 Management effects

Prior to ITQs, the surf clam and ocean quahog fisheries were problematic to federal, Council, and state managers. Deciding on a management-regime to replace the vessel-moratorium became one of the most time - and labor-intensive tasks of the Mid-Atlantic Council. Enforcement of the various restrictions of that period, particularly the limit on fishing-time (plus a minimum-size limit and a closed-area, in place for some years to protect young clams), was very costly. Another major cost was the staff time devoted to running alternative scenarios for determining the initial allocation and rules of the ITQ system. Although ITQs are very data-demanding, the staff involved in enforcement, data-management, and management report that demands and costs are much lighter than during the moratorium period.

4. CONCENTRATION OF OWNERSHIP

4.1 Ownership structure before and after the introduction of transferable property rights

4.1.1 Number of owners

Prior to the introduction of ITQs in the surf clam and ocean quahog fisheries, the number of owners increased in the latter 1980s, with the rise in fishing activity for ocean quahogs and the entry of new firms from New England. There were 43 individuals, families or businesses who owned active surf clam and/or ocean quahog vessels in 1983; in 1990 there were 49 (the peak was 55 in 1988). Interestingly, in 1999 there were 51 owners of ITQ allocations, a slight increase, but only 21 owners of vessels actually being used for fishing (Table 4).

4.1.2 Fewer “true” owners after ITQs were introduced

The harvesting sector of the fishery has become smaller, with fewer vessels, even though quotas and catches are in fact larger than in pre-ITQ times (prior to 1990). There are also fewer individuals and firms who own the vessels. The numbers of owners of ITQs themselves has also declined but at a lower rate (Table 4).

We worked closely with industry members and Mid-Atlantic Council staff to develop a record of “true ownership”.[55] Table 5 shows changes in the numbers of owners of vessels active in the surf clam and, or, ocean quahog fisheries (there were other owners of permitted vessels that were not active). Evident is a rise in ownership during the latter 1980s, with new entrants in the ocean quahog fishery (and also in the New England part of the fishery). Following the initiation of ITQs in 1990, the number of owners among those holding surf clam ITQ declined, from 54 in 1990 to 47 in 1991, and among those holding ocean quahog ITQ from 43 to 36, with a decline from 57 to 52 overall. Some vessel owners who had been allocated ITQ in 1990 sold out entirely, while some just sold their vessels and chose to lease out their ITQs to others.

Between 1989 and 1999 the number of vessels used in these fisheries declined by 70% (from 141 to 42), and the number of owners of vessels (rather than owners of ITQs-although almost all owners of vessels also owned some ITQ) declined by almost 60% (from 52 to 21). The highest rate of decline in the number of vessel owners occurred between 1990 and 1992, when 15 had given up vessel ownership. Another period of rapid decline was between 1995 (33 owners) and 1999 (21 owners). In contrast, overall the number of owners of ITQ allocation has remained very stable since 1991 (Table 4).

Table 4. Owners of active vessels, 1983-1999 and owners of ITQ allocations, 1990-1999

Active vessel
Year	Owners	Vessels
1983	43	125
1984	43	133
1985	44	136
1986	51	146
1987	54	145
1988	55	140	Allocation owners
1989	52	141	All	Surf clam	Ocean quahogs
1990	49	131	57	54	43
1991	37	77	52	47	36
1992	34	68	53	48	37
1993	35	63	53	47	35
1994	32	58	51	45	32
1995	33	61	51	45	31
1996	29	52	51	45	31
1997	26	50	50	45	30
1998	23	46	53	47	31
1999	21	42	51	45	30
Percent change
1983-1999	-51%	-66%	na	na	na
1990-1999	-57%	-68%	-11%	-17%	-30%

Note: “Owners” are the best estimate of the number of true owners or beneficial owners, i.e., individuals, families or firms widely known to be the owners of vessels or ITQ; they are not necessarily the same as the recorded owners on the permit and transfer files. In many cases ownership of record is a vessel corporation. One “true owner” may have several corporations.

The “true owners” are making a transition from owning vessels to owning allocation, hence the growing discrepancy between the numbers of vessel-owners and the numbers of allocation-owners. For example, in 1999 there were 21 owners of vessels and 51 owners of ITQ. Although there has been marked decline in the number of individuals, families, or firms owning surf clam or ocean quahog fishing vessels, some former owners of vessels continue to own ITQs, choosing to lease them out. And a few owners of vessels currently used for surf clamming or ocean quahog fishing do not own ITQs, instead leasing them from others.

The number of owners of surf clam and ocean quahog ITQ (as reported at the beginning of each calendar year) have remained remarkably stable since the first year of ITQs. In 1990, at the outset of the program, there were 57 entities that owned quota allocations (54 surf clam and 43 ocean quahog). In 1991 there were only 52. However, between 1992 and 1999 the number varied at the same overall level: between 50 and 53 owners. A similar pattern is evident for owners of surf clam ITQ: remaining at 45-47, after an initial reduction from 54 to 47. The number of owners of ocean quahog ITQ has shown more consolidation. There were 43 “true owners” in 1990, 36 the following year, then a continued decrease but which stabilized at between 30 and 31 during the period 1995-1999 (Table 4).

The market for quota apparently has not developed as much as simple economic theory might predict. Most market activity concerns the yearly quota-shares, which change hands through leasing, and much of that leasing is reportedly through long-term contracts, which in effect sustain and replicate the institutional structure.

4.1.4 Average sizes of fleets

An important industry variable is the size of a business. Prior to the introduction of ITQs a major indicator of size in the harvesting sector was the number of vessels that an individual or business owned and operated. During the moratorium period of 1979-1990, the system of management through time-limits gave strong incentives to buying more boats for surf clam fishing,as each boat was allowed only so much time to dredge for clams. Moreover, as the advent of ITQs approached, some entrepreneurs realized the potential advantage of purchasing old boats that would confer them the rights to part of the TAC allocation. A few former deckhands and hired captains managed to put together sizeable fleets of vessels. There were also large fleets owned by vertically-integrated processing firms.

The large independent vessel-owners and the vertically-integrated processors drastically reduced the numbers in fleets between 1983 and 1999 (Table 5). The average number of boats in 1999 was 4.0 for the independent fleet owners, a 43% reduction from the 1983 total (7.0), and for the processors it was 2.2, a 68% decline from the 1983 average number (6.9). The major decrease occurred, as expected, at the onset of ITQs. The decline in number of boats per owner was higher for the ocean quahog fleets than the surf clam fleets (but be reminded that many of the fleets were essentially the same).

4.1.5 Changes in the proportion of small-scale “independents” to large-scale “independents” and processors

Throughout the moratorium period, the ownership structure was highly skewed, with few large and powerful players and numerous smaller ones. The long period of debate about ITQs, particularly about the method of initial allocation and about regulations concerning industry consolidation, was fueled by concerns about the power relations among different kinds of owners. Within the industry, people distinguish between “independents” and “processors” as the major contrast in types of owners; the “processors” being vertically-integrated firms. Throughout the history of these fisheries, vertically-integrated firms have been involved. Some of these are subsidiaries of multinational food corporations with fleets of a dozen or so boats; others a family businesses with large fleets; and yet others were small rural clam-processing operations with one or two boats of their own. Their ability to rely on their own vessels to supply raw product for their plants gave them bargaining power vis-à-vis the “independents.” The independents include small-scale owner-operators, individuals and families with one or two vessels. Independent operators also included sizeable numbers of vessels owned by individuals, families, or businesses which, by virtue of their magnitude, exercise more “market power” vis-à-vis the processors. Some of the owners of these fleets have from time to time developed processing operations of their own.

The number of “independent” owners increased during the late 1980s, but declined dramatically with the advent of ITQs, as many withdrew from the fishery (Figure 2). The decline is marked for both the small-scale and large-scale “independents.” Granted, some of the larger-scale independents became small-scale ones by consolidating their efforts from three or more vessels to one or two vessels, which explains the relative stability of the number of small-scale owners between 1992 and 1996. The general and striking pattern though is one of severe decline in the owner-operator nature of this fishery. By the end of the 1990s proportionately more of the owners were vertically-integrated firms or owners of large fleets of boats: 43% in 1999 compared with 25% in 1989. Moreover, even where the owner had only one or two vessels, it had become rare that he worked on the vessel.

4.1.6 Change in the proportion of vessels owned by firms of different ownership types

The structural results of down-sizing, in terms of ownership of active surf clamming and ocean dredging vessels, are not much different from that which existed in the past (Figure 2). Although there are relatively few vertically-integrated processor firms, they own just about as many vessels as either the large fleet owners (three or more vessels) or the small-scale independents (one or two vessels). The situation was similar in the early 1980s, albeit at a much higher level of capacity. Figure 2 shows the pre-ITQ expansion of the large fleet class. It also shows the rise in numbers in the small-scale independent class between 1993 and 1996. This largely happened because several independent owners of fleets down-sized to only one or two vessels. Within a short time, by 1997, this class declined in numbers of boats. A couple of large fleet owners increased their ownership. Data for 2000 are not yet available, but further consolidation occurred in 1999 and 2000, as one of the largest independent fleet owners bought a controlling share of a large processing corporation.

Table 5. Mean number of boats per owner, 1983-1999, by species, or by independent fleets versus processors

Year	Both	Surf clam	Ocean quahog	Independent fleets: both	Processors both
1983	5.1	5.1	5.7	7.0	6.9
1984	5.0	6.4	5.3	7.1	6.6
1985	4.9	5.2	5.2	6.8	6.7
1986	4.6	4.6	4.9	5.6	7.1
1987	4.4	4.5	4.8	5.3	6.9
1988	4.5	4.5	4.7	5.2	7.0
1989	5.2	5.2	5.7	6.1	8.3
1990	5.0	5.0	5.4	6.0	7.8
1991	2.9	2.9	3.0	4.0	3.7
1992	2.8	3.0	2.9	4.2	3.2
1993	2.7	2.9	2.9	4.2	2.7
1994	3.0	3.1	3.2	5.0	2.8
1995	3.0	3.1	3.1	5.3	2.5
1996	2.8	2.8	2.9	5.0	2.3
1997	2.7	2.7	2.8	4.5	2.4
1998	2.6	2.5	2.5	4.0	2.4
1999	2.5	2.5	2.4	4.0	2.2
Change
‘83-’99	-51.0%	-49.9%	-58.2%	-42.9%	-67.9%
‘89-’99	-52.6%	-51.5%	-58.0%	-34.9%	-73.6%

Note: “Independent Fleets” are owners with three or more active vessels; Processors are vertically integrated owners with one or more active vessels

With the introduction of ITQs, ownership of ITQs began to become more important in the structure of the industry, than ownership of vessels. Accordingly, relative market power is indicated by holdings of ITQ rather than numbers of vessels. In this report we focus on the proportion of the overall TAC that is held by the top owners (continuing to use “true owners” rather than “recorded-owners” - the latter include large financial institutions, which have become owners as part of lending arrangements). Where possible we have identified the “true owner” of these and other holdings.

The structure of the industry was asymmetrical before ITQs, dominated by owners of large fleets and by vertically-integrated firms. After ITQs, the structure as indicated by ownership of ITQs is clearly asymmetrical too. The top 10 owners of ITQ allocation represent about 20% of the total number of owners, but account for between 67 and 75% of the total surf clam quota and between 70 and 80% of the total ocean quahog quota (Tables 6 and 7). There is a discernable but small tendency for these proportions to increase over time. The number of surf clam ITQ owners was reduced by 21% between 1990 and 1999, but the percentage of the surf clam allocation held by the top-ten owners was increased by 12% (Table 6). The number of ocean quahog ITQ owners was reduced even more, by 30%, and the percentage of the top-ten owners also increased by 12%. However, in that case the proportion held by the top-three, top-four, or top-five owners actually declined or stayed the same (Table 7).

4.1.8 Changes on the buying/processor side

We were not asked to address changes in the processing sector of the fishery but it should be noted that in the post-ITQ period (since 1990) the number of buyers of surf clams and ocean quahogs - whether middlemen or processors - has declined. Some small processors (that did not get substantial initial allocation of ITQs because they had few or no vessels at the time) suffered difficulties getting financing, compared with other processors, and essentially left the business. The role of ITQs in these and other changes is hard to disentangle from other influences. For example, consumer market, labor, and environmental problems have worked against these and other processors, contributing to consolidation and reduced participation in the industry. In addition, the situation is very dynamic, including major changes among the processors with or without consolidation.

Figure 2. Number of true owners by ownership type, 1983-1999

Table 6. Percent of surf clam quota held by the top-three, top-four, top-five, or top-ten owners, 1990-1999

Year	Top-3	Top-4	Top-5	Top-10	Number
1990	47.5	51.8	55.0	67.1	57
1991	44.0	49.8	54.8	70.1	47
1992	44.0	49.8	54.8	70.1	48
1993	40.7	48.2	53.6	70.1	47
1994	39.4	48.7	55.2	71.8	45
1995	38.2	47.6	54.0	70.8	45
1996	41.9	49.6	56.0	72.6	45
1997	44.4	50.9	56.1	72.6	45
1998	47.7	53.4	58.6	72.5	47
1999	50.3	55.9	61.1	74.9	45
Percent change 1990-1999	6	8	11	12	-21

Table 7. Percent of ocean quahog quota held by the top-three, top-four, top-five, or top-ten owners, 1990-1999

Year	Top-3	Top-4	Top-5	Top-10	Number
1990	46.1	50.3	54.4	70.7	43
1991	42.8	48.7	53.8	75.4	36
1992	42.8	48.7	53.8	75.4	37
1993	42.2	47.8	53.2	75.5	35
1994	44.6	51.3	56.9	80.2	32
1995	36.1	44.2	51.0	75.6	31
1996	33.3	41.4	48.2	73.8	31
1997	33.8	41.9	48.8	75.9	30
1998	40.6	47.4	53.1	77.7	31
1999	42.4	48.8	54.4	79.1	30
Percent change 1990-1999	-8	-3	0	12	-30

Reflecting consolidation on the processing side of the business, the owners of surf clam and ocean quahog fishing vessels are likely to sell to fewer different buyers than before (Table 8). In 1983 the overall mean was about 5.0 buyers per vessel; in 1999 it was 2.4, overall. Median data are even lower in 1999, closer to 2.0 for surf clams and 1.0 for ocean quahogs. This trend is also a reflection of increased reliance on long-term contracts.

Table 8. Number of buyers per vessel owner, 1983-1999

Year	Mean number of buyers per owner
	Both	Surf clam	Ocean quahog
1983	5.0	5.0	5.5
1984	4.8	5.5	5.1
1985	4.3	4.5	4.4
1986	4.3	4.3	4.7
1987	3.8	3.9	4.2
1988	3.7	3.7	3.9
1989	3.7	3.7	3.9
1990	4.0	4.0	4.3
1991	4.2	4.2	4.4
1992	3.4	3.5	3.7
1993	3.0	3.3	3.0
1994	3.4	3.3	3.6
1995	3.4	3.3	3.6
1996	2.6	2.7	2.5
1997	2.8	3.2	2.9
1998	2.3	2.5	1.8
1999	2.4	2.7	1.8

4.2 Restrictions on transfer of ownership

There are few restrictions on the transfer of ownership of either ITQs or the annual allocations of cage tags. The initial owners were owners of permitted vessels in the surf clam and/or ocean quahog fisheries. Thereafter, any person or business that meets U.S. legal requirements for owning a fishing vessel in the United States is eligible to own ITQ. The minimum holding of annual allocations is five cages (160 bushels). There is no maximum. There is also no limit to how quota tags can be held by one person or business except as might be determined by application of U.S. antitrust law. Cage tags are transferred only within a given year and cannot be transferred between 15 October and 31 December of any year. All transfers, whether permanent sales of ITQs (“quota shares”) or temporary transfers of the annual allocations, must be approved by the regional director of the Northeast Region of the National Marine Fisheries Service. This is primarily for monitoring and enforcement purposes.

4.3 Prices received

In the surf clam and ocean quahog management-system, prices received for quota shares or for the annual allotments of cage tags are private, not public, knowledge. The administrative system of the NMFS does not require provision of price information even though all transfers must be approved. Consequently, there is no problem about biased information. Based on what we learnt through interviews with vessel-owners and processors during the Spring of 2000, the industry is almost totally dependent on long-term contracts, including long-term leases of ITQs.

4.4 Effectiveness of regulations governing ownership of rights

Because there are no effective restrictions on ownership, the problem of loopholes, false accounting, etc. is not relevant to the surf clam and ocean quahog fishery. Nonetheless, the issue of ownership concentration is extremely important because it is an issue of much public discussion of fisheries policy.

Obtaining information about concentration of ownership is complicated by the widespread practice in the fishing industry of this region (and especially of the surf clam and ocean quahog industry) of creating a legal corporation for each vessel. The result is that the official government records of ownership only list such corporations. Much of our work has been directed toward the task of identifying functional ownership.

5. DISCUSSION

5.1 Reduction in fleet capacity and policy objectives

Until 1988 most industry representatives and Council staff assumed there would be some kind of constraint on the rate at which owners of large numbers of boats could reduce the size of their fleets. However, the final design of the ITQ system had no limits on the rate of “consolidation.” Rapid reduction in fleet capacity was an objective of the design of this transferable property-rights system, and in a general sense the results were expected. As noted above, the only major “surprise” is that down-sizing of the surf clam and ocean quahog fleets has not been faster (Weninger and Just 1997). A related issue is the unexpected event that ownership of ITQs has remained fairly stable, at least in terms of the numbers of quota-owners, since the mid 1990s. This was apparently enabled by the proliferation of long-term contracts among ITQ owners, vessel-owners, and buyers (mainly processing firms).

5.2 Concentration of ownership and policy objectives

The ITQ system was designed with no limits on accumulation or trade, and thus with the tacit recognition that concentration could take place. There was an expressed intent that no one could accumulate an “excessive share,” but this has proved of little value in controlling the rate, or degree, of quota-holding concentration.

In the decade-long debates leading up to the choice of ITQs in 1989, the issue of ownership concentration was central. The industry has always had one or more large players with concentrated harvesting - or market-power and the future relationship of these large players to the smaller players, particularly the owner-operator and small “independents,” was a major question framing negotiations over initial allocations, transfer rules and other matters. In the preamble to the final ITQ system agreed upon was a provision that the government would periodically monitor the number of quota-shares owned by each person, and advise the Department of Justice if any one had an “excessive share” (MacDonald 1992). This provision was intended to compensate for the lack of limits on accumulation in the plan. Attorneys are uncertain about how, if at all, this could be applied - which raises questions such as to whether or not the surf clam and ocean quahog quota market is a “market” within the meaning of the U.S. anti-trust act (MacDonald 1992). The “excessive share” provision has no definition, and the courts thus far have not been concerned unless concentrations approached monopoly levels, which appeared to not be the case in this fishery, at least during the first half of the 1990s (Milliken 1994: Sea Watch International v. Mosbacher, 762 F.Supp. 370 [D.D.C. 1992]). The decline in the number of owners of ocean quahog allocations by the latter 1990s, and the overall decline in the number of owners of allocation by almost half (from 39 in 1992, to 21 in 1999) may result in renewed inspection of the “excessive share” provision. However, this had not occurred by early 2001, despite even fewer owners in 2000.

In conclusion, the surf clam and ocean quahog ITQ-system for federal waters of the Mid-Atlantic region of the United States has met the objective of rapidly down-sizing an over-capitalized fishery. It was designed with few restrictions on market forces, and market forces have led to increased concentration of ownership, as well as reliance on long-term contracts.

The concentration of ownership and related changes observed in the surf clam and ocean quahog fisheries have contributed to resistance to the use of ITQs in other fisheries in the region and the nation. On the other hand, the administrative and enforcement burdens of the agencies involved (primarily the National Marine Fisheries Service) have also been reduced from the pre-ITQ level, which involved a complicated and costly regulatory structure. Administration also has been eased by the far smaller number of key actors in the fishery following consolidation. Moreover, ITQ - and vessel-owners in the industry have shown the capacity to organize far better than in the past to influence decisions at the Mid-Atlantic Council, possibly related to the rights secured through ITQs and the reduction in the number of players involved. They have also been at the forefront of a recent surge in “collaborative research” in the region, contributing money, vessel - and crew-time, and expertise to at-sea research in order to test and calibrate the gear used in government stock-assessment surveys, and to expand the surveys.

6. ACKNOWLEDGEMENTS

The research on which this report is based was supported in part by the New Jersey Agricultural Experiment Station, the National Science Foundation, the New Jersey Sea Grant College Program, and the CMER (Cooperative Marine Education and Research) Cooperative Agreement between Rutgers the State University and the Northeast Fisheries Science Centre of the National Marine Fisheries Service, NOAA, Department of Commerce. Particular thanks must be given to people in the surf clam and ocean quahog industry, including consultants Dave Wallace and Ricks Savage, as well as vessel-owners: Barney Truex, Warren Alexander, the Marriner family; the Osmundsons and Joe Garvilla, for trying to explain the industry and allowing us to go out clamming; and to people in the agencies who cooperated, especially Clay Heaton, Tom Hoff, and David Keifer (ret.), at the Mid-Atlantic Fishery Management Council. Thanks are also due to Dr. Barbara Grandin, for her assistance in developing the database, and to graduate students who worked on aspects of the project: Carolyn Creed, Jonathan O’Neil, David Weisman, Julia Menzo, all formerly at Rutgers University.

7. LITERATURE CITED

Adelaja, A., B.J. McCay and J. Menzo 1998a. Market Share, Capacity Utilization, Resource Conservation and Tradeable Quotas. Marine Resource Economics 13(2): 115-134.

Adelaja, A., J. Menzo and B.J. McCay. 1998b. Market Power, Industrial Organization and Tradeable Quotas. Review of Industrial Organization 12(2): 589-601.

Beal, K.L., 1992. Surf Clam/Ocean Quahog ITQ Evaluation Based on Interviews with Captains, Owners, and Crews. Exhibit 2. In: MacLeod, E. Memorandum, Review of the Effectiveness of Our Administrative and Enforcement Obligations Under the Surf Clam/Quahog ITQ Plan. February 25, 1992. Northeast Region, National Marine Fisheries Service, Gloucester, Massachusetts.

Brandt, S., 1999. Productivity and Industrial Structure Under Market Incentives and Traditional Regulation; A Case Study of Tradable Property Rights in the Middle Atlantic Surf Clam Fishery. Working Paper No. 900, Department of Agricultural and Resource Economics and Policy, University of California at Berkeley.

Creed, C.F., 1991. Cutting Up the Pie: Private Moves and Public Debates in the Social Construction of a Fishery. Unpub. Ph.D. dissertation, Department of Anthropology, Rutgers the State University of New Jersey.

Gatewood, J.B. and B. McCay 1990. Comparison of Job Satisfaction in Six New Jersey Fisheries: Implications for Management, Human Organization 49(1): 14-25.

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MAFMC - Mid-Atlantic Fishery Management Council, 1990. Amendment #8, Fishery Management Plan for the Atlantic Surf Clam and Ocean Quahog Fishery. June 20, 1990. Dover, Delaware: Mid-Atlantic Fishery Management Council in cooperation with the National Marine Fisheries Service and the New England Fishery Management Council.

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TFP_t = Y_t / X_t

The aggregate variable input is written as a weighted sum of inputs with the weights equal to the cost shares of the inputs

X = S_i ((WⁱXⁱ)/C) X^I

where: Wⁱ is the cost of input i, Xⁱ is the quantity of input i, and the total cost is C=S_iWⁱXⁱ.

Likewise, the aggregate output is written as a weighted sum of outputs with the weights equal to the revenue shares of the outputs

Y = S_i ((PⁱYⁱ)/R) Y^I

where: Pⁱ is the price of output i, Yⁱ is the quantity of output i, and the total revenue is R=S_iPⁱYⁱ.

For further information on this estimator, see Applied Production Analysis: A Dual Approach by Robert Chambers 1988, Cambridge University Press. Pages 233, 243 and 248-249.
[55] True ownership is difficult to determine. The official record of ownership in government permit files is often for a corporation that was created for a particular vessel. It may be one of several or many owned by an individual, family, or business. In addition, with the advent of ITQs many vessel owners signed over ownership to banks or other financial institutions. Because the ITQs are explicitly defined as revokable privileges rather than property rights, they cannot be used as collateral for loans. It has become common for lending institutions to own the ITQs themselves, letting the original owners use them until the loan is repaid. The listing of banks in the ownership record of quota is an artefact of the ITQ system.