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1997 October Report of the Auditor General of Canada

Assistant Auditor General: Don Young
Responsible Auditor: Douglas Timmins

Main Points

15.1 The Department has identified the need for fundamental changes in the fishery, in its relationship with the industry and in its management practices, in order to achieve a sustainable fishery. Since 1992, the Department has moved to reduce the number of groundfish licences, made changes in the management of the fishery and is developing new arrangements for the sharing of responsibility for managing the fishery in the future.

15.2 A key objective of The Atlantic Groundfish Strategy (TAGS) and other initiatives is to reduce existing harvesting capacity by at least 50 percent over the long term. The allocation of funds to reduce harvesting capacity under TAGS, originally $300 million, was subsequently reduced to $97 million. The Department focussed its capacity reduction efforts on the removal of licences and is paying about $88 million of this amount to fishers to retire 545 groundfish licences and 266 fishers without licences. The Department would have been able to reduce more licences had the funds allocated to licence buyback and retirement not been reduced by almost $200 million. A further 2,626 licences have been identified for eventual removal from the fishery once the current licence holders exit the fishery. Assuming that the Department is able to effect the removal of these licences, it will have removed approximately 23 percent of the groundfish licences in place at the time TAGS was introduced. However, this will still leave about 10,000 groundfish licences, a portion of which represents the groundfish harvesters who historically caught most of the fish. Thus, significant overcapacity, in terms of the ability to catch fish, will remain.

15.3 The Department has made many changes to its groundfish management activities since 1992, which it believes represent improvements over practices that were previously in place. These changes include the introduction of conservation measures in conservation harvesting plans and the integration of fisher knowledge in groundfish management. Nonetheless, fisheries management practices need to be further improved to ensure the sustainability of the resource base.

15.4 Past management practices were introduced with the intention of ensuring conservation. For a variety of reasons, these practices were not successful when implemented. To deal with the inherent uncertainty of the resource base, a precautionary approach is required as a basis for decisions. In addition, further improvements are necessary in catch monitoring, and enforcement must become a more important and active component of groundfish management.

15.5 While implementing Program Review cutbacks, the Department is also reorganizing. Its long-term strategy is to transfer more fisheries management responsibilities to the groundfish industry. The transfer has not yet occurred, in part because of legislative limitations but also due to the inability of some segments of the industry to accept greater responsibility. In the absence of assurance that industry can and will accept increased responsibility, we are concerned about the potential impacts on conservation as a result of reductions and planned changes to the Department's groundfish management activities.

Introduction

Crises are not new to the groundfish industry
15.6 The Atlantic groundfish industry has a history of critical problems, some of them social and economic. In the 1990s, the collapse of the stocks added to the existing social and economic factors, heightening the crisis.

15.7 Chapter 14 sets out the historic, biological, economic and social context in which the Department manages groundfish resources. It reviews some causes of the current crisis, describes the federal government's response, and thereby establishes a context that is important to a complete understanding of the issues raised in this chapter. Chapter 16 focusses on The Atlantic Groundfish Strategy (TAGS) and examines the labour adjustment component, for which Human Resources Development Canada is responsible, and the accountability framework of the Strategy.

Government initiatives to rationalize the industry and renew fisheries management
15.8 Fisheries management has been under great stress since the groundfish stocks began to decline in the late 1980s. By 1993, the full extent of the decline had become clear to the government.

15.9 In April 1994, the government established The Atlantic Groundfish Strategy as a response to the groundfish crisis. The Strategy provided for income support to fishers and plantworkers affected by the collapse of the groundfish stocks, as well as adjustment to employment outside of the fishery, reduction of industry capacity and renewal of the industry.

15.10 The 1994 Program Review exercise required government departments to rethink the rationale for all of their programs. As part of that exercise, Fisheries and Oceans Canada identified its core mandate as "the conservation and sustained utilization of fisheries resources in marine and inland waters."

15.11 The Department established a strategic action plan as a result of Program Review, covering all Atlantic fisheries, for implementing industry rationalization and fisheries renewal initiatives. An important factor in developing the strategy was the reduction in resources allocated to fisheries management (including the science function), which the Department has reported will decline by approximately 40 percent by 1999. The strategy for fisheries management focussed on three areas:

  • emphasis on the primary mandate, conservation and sustained use of the resource, and withdrawal from activities less relevant to this core business (such as industry support and small craft harbours);
  • simplified and more effective program delivery; and
  • devolution to fish harvesters of a greater decision-making role and more responsibility for costs of resource conservation and management.
15.12 The plan emphasized industry restructuring (changing the fishery and the Department's relationship with the industry) and fisheries management reform (changing the way the Department manages the fishery). The objective was to achieve a fishery that is:

  • economically and environmentally sustainable;
  • stable and capable of providing adequate levels of income; and
  • self-reliant, competitive and viable without subsidization.
The Department recognized that the move to this vision of the fishery of the future would take a longer period of time to institute for the groundfish industry than for other Atlantic fisheries.

Current status of the groundfish stocks
15.13 The number of groundfish stocks that were available for commercial fishing during the 1996 fishing season was very limited. The only significant fishing was off southwest Nova Scotia for cod, haddock, flounder and pollock. In other areas, there was fishing for flounder, redfish and Greenland halibut. The total allowable catch or quota for these fisheries represents only a small percentage of the fishery that existed prior to the moratoria.

15.14 During this audit, the Minister announced that fisheries would be reopened for cod stocks within Northwest Atlantic Fisheries Organization (NAFO) fishing zones off Newfoundland - 3Ps (the south coast) and 3Pn4RS (the northern Gulf of St. Lawrence). These fisheries were reopened at levels below the historical catch rates prior to the moratoria. Groundfish moratoria are still in place for 20 groundfish stocks across Atlantic Canada.

Focus of the audit
15.15 This chapter reports on fisheries management practices for the Atlantic groundfish fishery and the extent to which they have resulted in progress in dealing with historical fundamental problems in the fishery. It also describes the extent to which the capacity rationalization administered by the Department has contributed to the success of both fisheries management and The Atlantic Groundfish Strategy objectives. Details of the historical fundamental problems in the fishery are identified in Chapter 14, and can be summarized as:

  • overcapacity in the harvesting and processing sectors;
  • the difficulties in accurately assessing the status of the groundfish stocks on a timely basis, arising from variability in marine environmental factors and sampling variation; and
  • fishing at levels that are not sustainable, including the use of unsustainable fishing practices (misreporting, dumping of bycatch, highgrading, etc.).
The processing sector is the responsibility of the provincial governments and therefore was not directly covered by this audit. Overcapacity in the processing sector puts pressure on the federal government to ensure that sufficient fish are available to operate the plants. The management of groundfish stocks that are within the NAFO jurisdiction was not covered by this audit.

15.16 We examined selected key initiatives that the Department has taken to address these problems. In particular, we audited the capacity reduction initiatives designed to reduce excess harvesting capacity; the information-gathering initiatives designed to improve the assessment and management of stocks; enforcement initiatives designed to address unsustainable fishing practices; and initiatives designed to provide more control and responsibility to fishers. There are some government initiatives that could have an impact on the rationalization and renewal of the Atlantic groundfish industry but that were not within the scope of this audit, although they may be referred to in the chapter. Exhibit 15.1 displays rationalization and renewal initiatives, highlighting those that were included in the audit. With the exception of the TAGS programs, these initiatives apply to more than just the groundfish industry.

15.17 Further details are presented in About the Audit at the end of the chapter.

Observations and Recommendations

Industry Rationalization

Previous attempts to reduce capacity
15.18 The collapse of the northern cod stock, which led to the moratorium in 1992, focussed the government's attention on the problem of overcapacity in the fishery. As part of the Northern Cod Adjustment and Recovery Program (NCARP), the government set out to reduce the capacity in the groundfish harvesting sector through removal of groundfish licences. It was able to retire 876 groundfish licences at a cost of $24.8 million, but recognized that overcapacity still existed. Chapter 15 of our 1993 Report noted that the Department had achieved lower than expected reductions in the number of licence holders.

15.19 In 1992, the Minister "froze" 5,346 inactive groundfish licences. After appeals and the review of The Atlantic Groundfish Strategy Special Eligibility Criteria, 1,981 groundfish licences were eventually eliminated.

The Atlantic Groundfish Strategy continues response to groundfish crisis
15.20 Subsequent to 1992, the crisis in the groundfish fishery spread beyond northern cod to almost all of the other groundfish stocks. The government responded to this growing crisis with the announcement of The Atlantic Groundfish Strategy (TAGS) on 14 April 1994. TAGS was a multi-departmental strategy to provide income support to fishers and plantworkers affected by the collapse of the groundfish stocks, as well as adjustment to employment outside of the fishery, reduction of industry capacity and renewal of the industry. Exhibit 15.2 sets out the initial and final funding levels for each of the TAGS program elements.

15.21 The capacity reduction element, the responsibility of Fisheries and Oceans Canada, was approved in principle based on the number of groundfish licences being identified as the main factor in the overcapacity of the industry. In its initial approval of the program, the government indicated that a reduction of at least 50 percent was required. This reduction was to be accomplished through the buyback of licences and the provision of early retirement annuities for fishers, and the identification of a professional "core" group of fishers that would participate in the fishery when stocks had recovered; it was to be complemented by unemployment insurance reform. The licence buyback and early retirement programs would target those fishers that were to be included in the "core" group.

15.22 In December 1994, the government set criteria that limited the target population for licence buyback and early retirement to only full-time groundfish licence holders who had an annual fishing income of at least $3,000 and for whom fishing represented 75 percent of earned income. In addition, they had to be full-time fishers with seven years' experience. These criteria, called the Special Eligibility Criteria, set the target population for these programs at 6,200 licences, with a target of 2,000 licences to be retired by the licence buyback program.

15.23 When it became apparent that the level of funding set aside for TAGS income support was not going to be sufficient for the number of eligible individuals, the government reprofiled funds from capacity reduction to income support. See Exhibit 15.2 for an explanation of these and other reductions in funding for capacity reduction initiatives. For more detailed information on the problems associated with the funding for TAGS, refer to Chapter 16.

15.24 Identifying the "core" fishers. As noted earlier, TAGS capacity reduction included an initiative to identify a professional "core" group of fishers who would remain in the fishery when stocks had recovered. The initial identification of "core" licence holders was to have been completed by 30 June 1994. Originally, the criteria for establishing who would be allowed to continue in the fishery were to be the same as those used in the TAGS capacity reduction exercise (namely the Special Eligibility Criteria). In December 1994, this exercise identified about 6,200 groundfish licences to be included in the "core" group and about 7,800 to be excluded.

15.25 There was an industry concern that the Special Eligibility Criteria were not appropriate for every Atlantic region, and that the Department should not impose any single set of criteria across all Atlantic fisheries. On 12 May 1995, the Minister announced that the Department would undertake a review of the licensing policy, including public consultation. The objective of the review was to promote multi-species licences and a "core" cadre of professional full-time fishers.

15.26 After consultation with the industry, the Department established four broad guidelines to be used in developing regionally based criteria. Fishers who would remain in the fishery would have to:

  • be the head of an enterprise;
  • hold key licences (lobster, crab, active groundfish, etc.);
  • have an attachment to the fishery; and
  • be dependent on the fishery.
Fishers who did not meet these guidelines would not be removed from the fishery, but their licences would be cancelled once they exited the fishery.

15.27 Criteria were developed in each of the Department's regions through consultation with industry to determine which fishers would be included under the new licensing policy. In December 1995, the regional criteria were applied to the active groundfish licence holders in Atlantic Canada and Quebec (about 13,600). This process identified approximately 9,800 fishers to be included under the new licensing policy, while the remaining 3,800 fishers would remain in the fishery with limits placed on their ability to transfer their groundfish licences. The Department sent letters to the fishers who were excluded to explain the reasons and to inform them that they had the right to appeal the decision.

15.28 Subsequently, public protests by a segment of the groundfish industry raised concerns about the licence reform process. The Minister and departmental officials met with the fishers and considered their concerns. On 8 March 1996, after a number of meetings with the fisher groups and their representatives, the Minister announced that some of the criteria would be modified.

15.29 These changes resulted in an increase in the number of fishers included under the new licensing policy. As of December 1996, there were 10,435 groundfish licence holders included in the "core" and 2,626 excluded. See Exhibit 15.3 for a summary of the targets for fishers to be excluded from the "core", and the final results.

15.30 The results of the Atlantic licence review are lower than the initial target and will not be fully felt in the groundfish industry until some time in the future. The changes to the licensing policy effectively put a cap on the number of groundfish licences in the future. Nonetheless, the fishers who will remain in the fishery have historically accounted for a significant portion of the Atlantic groundfish harvested.

15.31 Licence buyback element. The licence buyback element, eventually called the Groundfish Licence Retirement Program (GLRP), was to be administered by a federal-provincial board that would manage programs to reduce capacity in both the harvesting and processing sectors. Except for the Province of Newfoundland, the federal government was not able to get provincial participation. In October 1994, the federal government established four harvesting adjustment boards to carry out the licence buyback program. The harvesting adjustment boards were to operate independently of government. The boards were responsible for developing capacity reduction plans and providing advice and recommendations to the Department on eligibility issues. The boards were to make recommendations to the Department on the licences that should be retired. In December 1994, the government established terms and conditions for the program and the Minister began the process of accepting bids for the GLRP on 31 January 1995.

15.32 The harvesting adjustment boards developed capacity reduction plans that suggested setting $500,000 as the maximum amount to be paid to an individual licence holder. It was believed that this would remove the most harvesting capacity for the dollars expended. In August 1995, the capacity reduction plans were modified by the Treasury Board to reduce the maximum acceptable bid levels to $350,000 for vessels over 35 feet and $180,000 for vessels under 35 feet; vessels over 100 feet were excluded. The Treasury Board also required that 75 percent of the bids accepted be from licence holders with vessels under 35 feet. This was done so that all sectors would be affected in proportion to their historical share of the fishery.

15.33 The GLRP was conducted through a reverse auction bidding process (the lowest ratio of bid amount to groundfish landings wins). Two rounds of bidding were conducted; the first round of approved buyouts was announced in October 1995 and the second round in August 1996. In total, the GLRP retired 478 licences at a cost of $59.7 million. The GLRP effectively had to "buy down" a future stream of guaranteed TAGS benefits. Approximately 38 percent of the cost of licences retired represented the cancellation of future TAGS benefits. With no more funding available and the program completed, the harvesting adjustment boards were dissolved except in Newfoundland, where that board continued to work jointly with the Province on these and other issues. The harvesting adjustment boards were not able to achieve the targets initially set for them due in large part to the reductions in program funding. The Treasury Board modifications to the maximum bid amount and the historical share condition reduced the probability that vessels with historically higher landings would be removed from the industry. Exhibit 15.4 shows the estimated impact of the Groundfish Licence Retirement Program in terms of value of landings and number of groundfish licences retired.

15.34 Early retirement element. The early retirement element did not achieve the level of participation initially expected. It retired 333 fishers at a projected cost of $28.5 million; of these, 67 fishers also held groundfish licences. The results of the early retirement element were largely affected by other aspects of TAGS. For example, fishers could remain on TAGS income support and receive financial support similar to that provided by early retirement while still retaining their groundfish licences.

Overcapacity remains
15.35 Exhibit 15.5 shows that the number of groundfish licences declined from 17,193 in 1993 to 13,061 in 1997, of which 10,435 represents the "core" group of fishers. However, a portion of this "core" group of fishers are the groundfish harvesters who historically caught most of the fish. Significant overcapacity still remains. Chapter 14 provides an historical perspective of the harvesting capacity problems associated with Atlantic groundfish.

Other capacity reduction considerations
15.36 Harvesting capacity reduction without direct government intervention has been achieved in the offshore groundfish sector, a sector that historically represented approximately 40 to 50 percent of the catch. The companies in this sector are managed under a quasi rights-based system called Enterprise Allocation (they are granted a right to a specific share of the quota and the right to sell or transfer this to others). When the Enterprise Allocation system became permanent in 1988, the number of vessels in the offshore sector was greatly reduced. The decline of the groundfish stocks in the 1990s brought about further substantial reductions. The companies continue to retain their proportional share of the quota should fishing resume. An exception is the northern cod fishery, where the Minister has indicated that the offshore sector will not be allowed to fish until the inshore sector has returned to its historical catch levels.

15.37 The inshore sectors also have licence holders that participate in quasi rights-based management systems, referred to as Individual Transferable Quotas (ITQ). Contrary to the offshore sector, these licence holders were eligible for the licence buyback program and 39 ITQ licences were bought under that program. The Department is holding the quota it bought pending a final decision on disposition (in at least one instance, the Department bought back quota but continues to permit it to be fished to fund research surveys by the ITQ fleet). Rights-based management systems are designed to allow industry rather than government to match the capacity with the available resource (a self-rationalizing system with no cost to government). In this case, the inclusion of ITQ licences in the buyback program provided a consistent approach with the remaining inshore licence holders. However, it did not permit the self-rationalizing rights-based approach to take effect.

Transfer of management responsibility to industry
15.38 As a result of the Program Review process, the Department established a strategic action plan that set out certain key intentions, including the move toward sharing fisheries management responsibilities with industry. The Fisheries Act establishes the responsibilities of the Minister and the Department for the management of Canadian fisheries, which places certain limitations on the devolution of fisheries management responsibilities to the industry.

15.39 On 3 October 1996, the government introduced new legislation that, among other things, proposed the establishment of fisheries management partnering agreements. This would allow the Department and any fishers' representative organization to enter into agreements on:

  • harvesting limits;
  • conservation and management measures for a fishery;
  • the development of sanction guidelines;
  • the number of licences to be issued; and
  • the funding arrangement for management of the fishery.
The Department would maintain responsibility for the assessment of groundfish stock status, setting overall resource harvesting levels, and managing intersectoral and interregional allocation and enforcement.

15.40 The proposed legislation died on the order paper when the House of Commons prorogued on 27 April 1997. The Department has continued to move toward increased industry involvement in fisheries management. Within the limitations imposed by the existing Fisheries Act , fishers and their representative organizations are increasingly involved in gathering scientific knowledge, developing conservation harvesting plans and monitoring catches. The Department, in collaboration with industry, is working on a Code of Conduct for Responsible Fishing to promote conservation-based harvesting.

15.41 In the Maritime region, community management boards have been established that set out specific harvesting measures (such as limits on the amount of fish that can be landed in a period of time, the means of sharing the resource among the participants and penalties for non-adherence) for the vessels operating in that community group. The responsibility for control of the conservation risks associated with these local fishing plans rests with the community management boards. Some of the measures included in the local fishing plans were previously considered by the Department to have had negative impacts on conservation. For example, the Department discontinued the use of individual trip limits in the early 1990s as it found that fishers tended to dump unfavourable species and small fish when subject to these controls. In this instance, the Department has indicated that trip limits are an interim measure that it believes will eventually lead to more effective conservation measures.

15.42 The Department is reorganizing and reducing its overall fisheries management activities (for example, at-sea observers, science and enforcement) in anticipation of increased fisher responsibility. It has indicated that its resources are scheduled to be reduced by 40 percent by 1999. There are potential risks to conservation should major changes to fisheries management occur prior to the industry's accepting responsibility.

15.43 The Department should ensure that accountability for the conservation and protection of the groundfish stocks is an integral part of any arrangements with industry to take on increased fisheries management responsibilities.

Department's response: The Department agrees that conservation must remain the primary objective and must not be compromised. This requirement is integral to all co-operative arrangements with harvesters, such as co-management agreements, preparation of conservation harvesting plans, and integrated fisheries management plans. Achieving a sustainable fishing industry through conservation-based harvesting needs to involve co-operative action with harvesters.

Fisheries Management Renewal

Common approaches exist in groundfish management
15.44 The strategy adopted by the Department for fisheries management renewal has implications for the way it conducts its business and the way it relates to the fishing industry. Since the collapse of the groundfish stocks, the Department has made changes to certain of its key groundfish management activities.

15.45 The management of Atlantic groundfish stocks varies somewhat from stock to stock and from region to region, but there are some common characteristics. For instance, most of the stocks, certainly all of the significant stocks, are managed under a system of control over both quota and effort (for example, gear types and time allowed on the water). A quota is established for the weight of fish that can be harvested in a particular year. This quota is then allocated to various fisher groups based on their historical share of that fishery or on some other basis as determined by the Minister. An overview of the current groundfish management cycle is shown in Exhibit 15.6 .

Knowledge-gathering processes need to be improved
15.46 The Department and industry support the gathering of knowledge about the marine environment and related fisheries so that they can better understand the biology of various groundfish stocks and, therefore, make informed decisions for the sustained use of the resource. All of these knowledge-gathering processes are designed to provide support to the Minister in the conduct of his legislative responsibilities under the Fisheries Act , including decisions about stock use. (see photograph)

15.47 It should be recognized that the Minister can never be provided with information on the groundfish stocks that is 100 percent precise. The stock assessment process is intended to gather the information necessary to minimize the risk inherent in the decisions made by the Minister on the use of stocks.

15.48 Canadian fisheries managers and scientists are knowledgeable and experienced, as evidenced by their representation on, and significant contribution to, many international organizations dealing with fisheries. Yet the collapse of the groundfish stocks has provided ample evidence that there is still a great deal that must be learned by fisheries scientists and managers in Canada. Exhibit 15.7 sets out some of the past problems that the Department itself has identified in the knowledge-gathering processes. Canada is not unique in having to deal with these problems.

15.49 Stock assessments conducted by the Department rely on the completeness and accuracy of the information on catch and effort provided by industry and maintained by fisheries management, the level of understanding of the biology of the stocks under study and the quality of the research surveys. We have observed that problems still exist in the processes used to collect information used in the stock assessments.

15.50 Fisheries scientists have informed us that there are still problems with the assumptions used in the models that are difficult to remedy. For example, fisheries scientists may never be able to get ongoing current information about such things as the percentage of a stock mortality due to natural causes; therefore, the level of natural mortality is assumed to be constant at about 18 percent for most stocks. Also, no allowance is made for unsustainable fishing practices because the Department has not estimated the impact of such practices for stock assessment purposes. Instead, it assumes that the level of unsustainable fishing practices remains constant from year to year. The absence of support for these assumptions adds to the uncertainty involved in the stock assessment process and, historically, it is the imprecise nature of the stock assessments that has permitted industry to pressure ministers for access to more fish.

15.51 Industry input into knowledge gathering. The Department has increased its effort to improve understanding of the biology of cod and, to a lesser degree, the other groundfish species. The Department has included the knowledge of fishers in the assessment of stock status, through fisher participation in the Regional Advisory Process review of the initial draft stock status report. In 1993, the Fisheries Resource Conservation Council was established, in response to the collapse of the groundfish stocks, to provide advice to the Minister on groundfish conservation issues, including appropriate quota levels. Council members are appointed by the Minister and include independent academics and representatives from industry, the provinces and the Department.

15.52 While industry participation has been beneficial in gaining industry acceptance of the stock assessments, the Science Branch has not been able to fully incorporate into the stock assessment process the information gained from the work conducted by fishers. This is especially true of the work conducted under the sentinel fisheries (a small-scale fishery that provides data on catch rates, distribution, migration, population structure and condition of fish and that is conducted by fishers using traditional gear types under the Department's direction and government funding). Among the problems associated with the sentinel fisheries are that they provide information for only two years, which is not long enough for appropriate analysis, and they are more expensive than the comparable coverage provided by the ongoing science program.

15.53 Research surveys. The research surveys conducted by the Department's scientists represent the longest-running series of independently gathered data about the status of individual groundfish stocks. The reliability of these data is dependent on an understanding of the biology of the surveyed stock. For example, the Department acknowledged that it did not have a good understanding of the composition and movement of the various cod stock components for the Northwest Atlantic Fisheries Organization (NAFO) fisheries zone 3Ps cod. The timing of the research survey has varied considerably over time (mostly February or April). The 1996 stock status report indicates, "The origins of fish that make up the 3Ps cod fishery are diverse and as yet not fully understood."

15.54 Guiding principles. The preceding chapter referred to the absence of measurable indicators related to the Department's guiding principles for the fishery of the future. The Department has indicated that to achieve a sustainable use of the stock, it must adopt such concepts as "new biological references to avoid critical zones" and the "precautionary approach to decision making". In the past, reference points have been used but have not been effectively implemented. To date, the Department has not established any new biological references for use in the management of each of the individual groundfish stocks. The Fisheries Resource Conservation Council has provided examples of potential biological references in its report From Moratorium to Sustainability: Criteria for Re-opening and Sustainable Harvesting, but no action has been taken to implement these or any other potential guidelines.

15.55 In addition, key conservation decision rules have not been established to help guide decision making when applying the precautionary approach. The precautionary approach is described in Chapter 14, Exhibit 14.13 . Department scientists are taking part in projects with various international organizations for the development of guidance on the precautionary approach. It is important that international organizations develop and agree upon guidance for the precautionary approach. Meanwhile, guidance that can be applied to the Atlantic groundfish stocks is required. Exhibit 15.8 reflects some of the difficulties associated with applying the precautionary approach in the absence of formal guidance.

15.56 The Minister requested the Fisheries Resource Conservation Council (FRCC) to develop a conservation strategy for Atlantic groundfish. The Department and the Council have worked together on developing concepts included in FRCC reports, including the recent FRCC report A Groundfish Conservation Framework for Atlantic Canada. Nevertheless , the Department has not yet achieved agreement with industry on long-term objectives for each of the groundfish stocks. Without biological reference points as guideposts, decisions on the use of individual stocks could be influenced by current social and economic factors rather than their biological sustainability. We noted that improvements have been made in the type of information presented in certain stock status reports, in the timeliness of information used in the stock assessments and in the interaction between industry and the Department in the stock assessment process.

Resource management planning is evolving
15.57 The Department had planned, as a part of its fisheries renewal initiatives, to develop an integrated approach to producing management plans for the 1996 fishing season in the groundfish fishery. This integrated management planning process was to have considered such things as:

  • long-term objectives for each fishery;
  • current management issues;
  • key management measures for the upcoming year;
  • conservation and protection issues and strategies;
  • industry responsibilities; and
  • evaluative criteria.
15.58 While the Department has not yet formalized its integrated management planning process for groundfish, there has been progress toward this concept in the significant fisheries off southwest Nova Scotia. Industry and fisheries management have undertaken an ongoing series of meetings designed to deal with management and conservation issues. However, even in this area, we noted numerous cases where management planning was not conducted in an integrated fashion. For example, long-term objectives were not established and enforcement considerations were not incorporated into the management plans.

15.59 Conservation harvesting plans (CHPs) were initially introduced for the management of certain stocks that were in decline. CHPs are prepared by the various groundfish fleet sectors and include different conservation measures that each sector will follow, such as spawning area closures, gear selectivity and bycatch limits. During the 1996 season, all groundfish fleet sectors had to prepare a CHP and obtain approval for it from the Department before they began fishing.

Catch monitoring processes have deficiencies
15.60 The Department has two main processes to monitor catches; namely, the dockside monitoring program and the at-sea observer program. The purpose of these processes is to provide fisheries managers with timely, complete and accurate commercial catch data to manage fisheries, including the stock assessment process. The dockside monitoring program has been gradually introduced to different fisheries since 1992. The program calls for fishers to self-report, through the dockside monitoring organizations, on fish landings. Under the previous system, the fish buyers reported their purchases. (see photograph)

15.61 Dockside monitoring program. The dockside monitoring program has become the Department's key source of data on the amount of fish landed. Under this program, fishers procure the services of a dockside monitoring organization to monitor and report on their landings of fish. The individual dockside observers hired by the organizations are certified to perform their duties by Fisheries and Oceans Canada. While this program represents an improvement over the previous system, we observed weaknesses in the control environment for dockside monitoring, which include the following:

  • The Department does not have the authority to control the activities of the organizations that carry out the monitoring. For example, it has established standards for the conduct of dockside monitoring but has no authority to ensure that the organizations work to those standards.
  • The Department cannot ensure that the organizations that carry out these activities and the observers whom they employ are independent of the fishers they monitor.
  • The Department has not undertaken sufficient measures to determine whether the dockside monitoring program is producing complete and accurate data.
  • The Department has not evaluated the dockside monitoring program's effectiveness in contributing to groundfish conservation.
See Exhibit 15.9 for examples of specific deficiencies noted in the Department's dockside monitoring activities.

15.62 At-sea observer program. It is very difficult for the Department to get good information on the industry fishing practices at sea. The at-sea observer program is one means by which the Department's fisheries managers have historically obtained such information. In this program, the Department has independent observers accompany and monitor fishers while they are engaged in fishing activity. The observers obtain data and information vital to the stock assessment process and other important fisheries management activities.

15.63 A benefit and also a limitation of the at-sea observer program is that fishers are not likely to conduct unsustainable fishing activities when an observer is onboard. However, only the largest of fishing vessels have 100 percent coverage by observers; all other vessels are observed on a percentage basis. Therefore, the impact of the program may be limited to those vessels that are observed. To overcome this, the Department could prepare an "index" of the catches by observed vessels or vessels that have been subject to at-sea surveillance by enforcement officers. This "indexed" catch would then be compared with the catches reported by all of the other vessels. While this type of analysis can be very complex and difficult to complete, it would yield important information about the unsustainable practices of industry and would support the Department's enforcement activities.

15.64 For example, we identified an analysis completed by departmental officials for one groundfish fleet sector in southwest Nova Scotia. This study established an estimate of the extent of unsustainable fishing practices in that fleet during a given period. The Department has not developed a systematic approach that integrates at-sea observer and other information into its management practices.

15.65 In the future, the Department will require industry to pay for the at-sea observer portion of the cost of the program. The level of observer coverage for each fleet sector will be subject to negotiation between the Department and industry. The Department has not yet developed standards for at-sea observer coverage that could assist in its negotiations with industry.

Enforcement is not fully integrated into groundfish management
15.66 As stated in paragraph 15.11, fisheries management planned to increase its sharing of management responsibilities with industry. As part of that strategy, the Department moved to reorient the activities of its Conservation and Protection Branch (referred to as enforcement), from an emphasis on enforcement of fisheries regulation to auditing, where possible, programs of monitoring funded by industry and run by private enterprises (such as dockside monitoring and at-sea observers). The Department has made limited progress toward this objective. During the audit, the Newfoundland region started to make changes to its enforcement function and the Branch has started developing work plans based on a risk analysis.

15.67 Existing information systems do not always meet enforcement needs. Our review of the catch monitoring processes indicated that they do not provide the information needed for effective enforcement. For example, the information received from both the at-sea observers and the catch data system does not give enforcement officers the lead time to plan their enforcement activities. In addition, there are problems associated with the data being used by the enforcement function. The Department is aware of these problems and has a project in place that, among other things, will attempt to provide the information that the enforcement function needs. In addition, the Department has indicated that there is a need to train enforcement officers in the use of the existing information systems.

15.68 Groundfish not always given enforcement priority. We observed that in most districts with significant groundfish fisheries, enforcement effort has been diverted away from the groundfish industry to other fisheries where the potential is greater for successful identification of violations of fisheries regulations. In these districts, enforcement officials informed us that they do not have the resources and/or understanding of what the Department expects of them when conducting enforcement for groundfish. In 1996, the Department removed several administrative responsibilities (for example, the issuing of licences) from the enforcement function, which should allow for more time to be spent on enforcement duties.

15.69 Sanctions. When the Department catches a fisher violating regulations, it has the authority to charge the individual and have the fisher tried before a court of law. In 1993, the Department developed the Administrative Licence Sanction Policy under which, should a serious conservation-related offence occur, the Regional Director General could apply an additional sanction or suspend the right to fish for a period of time.

15.70 While some regions have applied the sanction policy aggressively, others either have failed to apply it at all or have only partially implemented it. The implementation of the policy was left to the discretion of the regional officials, which accounts for the differences in its application.

15.71 The legality of the policy has been challenged on several occasions. Due to recent court rulings, the legal status of the policy is not clear. While the Department is appealing these recent decisions, it has indicated that it will continue to prosecute violations through the courts while sanction action is put on hold. The Department and the industry have indicated that sanctions are an important mechanism to deter unsustainable harvesting practices.

15.72 The Department should:

  • improve its catch monitoring systems to ensure the accuracy and completeness of the commercial catch data that are used for fisheries management and stock assessment purposes;
  • develop working interpretations or definitions of such key principles or concepts as the precautionary approach and biological reference levels;
  • ensure that integrated fisheries management plans link the Department's conservation principles and related measurable objectives with departmental resource planning for individual fisheries;
  • address the weaknesses in the dockside monitoring program;
  • ensure that enforcement is an important and active function that is conducted based on an appropriate analysis of conservation risks and that provides assurance about the effectiveness of catch monitoring processes; and
  • ensure that enforceable mechanisms for deterring unsustainable harvesting practices are in place.
Department's response: The Department agrees that improvements can be made to strengthen conservation management practices, and has initiatives under way to address the issues identified. Internal controls are being redesigned to improve the reliability of catch information from dockside monitoring programs. Integrated Fisheries Management Plans are being designed by the Department in co-operation with representatives of fleet sectors in the Atlantic. The enforcement program is being redesigned and strengthened. Stringent groundfish reopening measures have been adopted for deterring unsustainable harvesting practices. The Department has been and continues to be highly influential in the development of the precautionary approach to fisheries management. The Department notes that the precautionary approach is a new concept (outlined at the 1995 Conference on Straddling Fish Stocks and Highly Migratory Fish) for which biological reference points and conservation decision rules have not yet been established anywhere in the world. International Commissions such as the Northwest Atlantic Fisheries Organization and the International Council for the Exploration of the Sea are currently working on this issue and the Department will continue to work closely with the Fisheries Resource Conservation Council on the development and implementation of a Groundfish Conservation Framework for Atlantic Canada.

Conclusion

15.73 The Atlantic Groundfish Strategy (TAGS) and other related initiatives such as licensing reform, unemployment insurance reform and fisheries management changes have not resulted in the removal of a significant amount of real or "fish catching" harvesting capacity that existed in the period prior to 1992. The Strategy and the other initiatives targeted the removal of 50 percent of the groundfish licences as the capacity reduction objective over the long term. The decrease in TAGS capacity reduction funding from $300 million to $97 million had an impact on the Department's ability to remove more licences. For the most part, the licence holders removed or to be removed by the initiatives do not represent the fishers that historically caught most of the fish.

15.74 Since the introduction of TAGS, the number of licences that have been removed represents approximately four percent of the licences that existed at that time. A further 19 percent have been targeted for eventual removal through the Atlantic licence review. The changes to the licensing policy effectively put a cap on the number of groundfish licences in the future. The eventual removal of approximately 23 percent of the groundfish licences shows progress but overcapacity still remains.

15.75 Past management practices were introduced with the objective of achieving conservation, but, for various reasons, without success in protecting the resource base. Since 1992, the Department has been introducing further changes to its groundfish management activities. Since 1994, these changes have been focussed on the Department's strategy that flowed from the Program Review exercise. We found that improvements have been made in certain fisheries management activities, but there are areas where progress has been slow or deficiencies of the past continue to exist. These areas include implementing a precautionary approach to conservation and improving catch monitoring and enforcement.

15.76 Changes planned for the renewal of fisheries management are based on the assumption that the restructuring of the industry and the changes in its relationship with the Department will take place. In the groundfish sector, few fisheries management responsibilities have been transferred to industry. The transfer has not occurred in part because of legislative limitations but also due to the inability of some segments of the industry to accept greater responsibility. We are concerned about the potential conservation impacts of changes to fisheries management without the planned transfer of increased responsibility and accountability to industry occurring at the same time.

Department's comments: This report confirms the significant role of the fishery in the economy of Atlantic Canada and the importance of ensuring that the fishery resource is capable of supporting a sustainable fishery industry. The Department believes that it is important to ``stay the course" and continue with its program of Fisheries Management Reform and Renewal. While more needs to be done, much has been accomplished to ensure the conservation of Atlantic fisheries, including:

  • science partnership with industry such as for sentinel fisheries;
  • creating the Fisheries Resource Conservation Council;
  • a new Atlantic commercial licensing policy;
  • implementation of capacity reduction measures to the full extent of the Department's authority;
  • strengthening of fisheries enforcement;
  • the Canada-European Union Agreement to curtail foreign overfishing;
  • new management structures such as integrated fisheries management plans and partnerships or co-management arrangements;
  • collaboration with industry on a code of conduct on responsible fishing; and
  • industry conservation harvesting plans involving: small fish protocols, zero tolerance for discarding, tightened bycatch control, spawning and juvenile fish closures, effort reduction and control, improved dockside monitoring, at-sea observers, and gear selectivity and restrictions.

About the Audit

Scope and Approach

The main subject of this audit was the industry rationalization and fisheries renewal initiatives and their impact on the Atlantic groundfish industry. The audit covered the capacity reduction elements of The Atlantic Groundfish Strategy, and other fisheries management initiatives that are listed in Exhibit 15.1 . It should be noted that several other initiatives could have some impact on Atlantic groundfish rationalization but were not the subject of this audit. They include unemployment insurance reform and access fee increases. These areas were not covered in this audit as their impact on industry rationalization would be indirect.

The Atlantic groundfish industry is regulated by both the federal and provincial governments. The federal government is responsible for the harvesting sector and the export of fish products from Canada, while the provincial governments are responsible for the processing sector. The regulation and management of the Atlantic groundfish processing sector has significant impacts on the federal government's management of the harvesting sector. For example, the existence of overcapacity in the processing sector puts significant pressure on the federal government to provide groundfish necessary to operate the plants. While we have taken the processing sector into account during the conduct of the audit, it was not the subject of the audit.

Objective

This chapter assesses whether fisheries management practices for the Atlantic groundfish fishery have resulted in progress in dealing with the fundamental problems in the fishery. In addition, it assesses the extent to which the capacity rationalization initiatives administered by the Department have contributed to the achievement of both fisheries management and The Atlantic Groundfish Strategy objectives.

Criteria
We would expect that:

  • fisheries management practices would ensure that industry capacity is in balance with fisheries resource levels;
  • fisheries management practices would ensure appropriate involvement of industry and communities and ensure that industry is held accountable for following sustainable fishing practices; and
  • groundfish management practices (science, fisheries management and enforcement) would implement the principle of conservation to ensure sustainable stocks.
Audit Team
Glenn Doucette
Kathleen Hobbs
Donald MacNeill
Kevin Potter
Kimberlea Redden
Michael Ryan

For information, please contact Douglas Timmins, the responsible auditor.

Working together with the fishing industry, the Department of Fisheries and Oceans is committed to conservation and a sustainable fishery.