RATIONALIZING THE SALMON AND ROE-HERRING FISHERIES 115 



To deal with roe-herring gillnet Hcences that will not 

 specify vessel tonnage, the board should ascribe to them 

 a standard tonnage for this purpose, based on the statisti- 

 cal average catching power of these vessels relative to 

 seine vessels. 



There will be no need for the board to focus its activi- 

 ties on individual gear categories within each fishery 

 because the catch allocation proposal made earlier in this 

 chapter will protect the interests of licensees in each sec- 

 tor in any event. Nor should the board concern itself with 

 the zones in which the retired licences apply; those in 

 areas where capacity is most excessive will carry the low- 

 est value in any event. 



To retire licences at the lowest cost, the board should 

 regularly and publicly invite sealed-tender offers for 

 licences from licensees in each of the two fisheries and 

 accept the lowest offers within the funds available. I 

 intend that the board should not normally acquire vessels 

 with the licences, but circumstances might arise in which 

 acquiring options on licences or vessels, or both will 

 prove expedient. But whatever means it chooses, the 

 board should be free to respond to the most favourable 

 offers it receives, unfettered by political or social priori- 

 ties. First and foremost, the board's thrust should be to 

 reduce licensed capacity in excess of the target fleets. 



Funding Financing the compensation program should 

 be shared by the industry — because it can expect to 

 share the benefits — and by the government — because it 

 is directly responsible for ensuring that only the proper 

 number of fishing privileges is issued. 



22. Funds should be made available to the Pacific Fisher- 

 ies Licensing Board from four sources: 



i) An initial grant from the federal government of 

 $10 million. 



ii) A payment each year equal to the royalties paid 

 in that year on roe-herring plus one-half of the 

 royalties paid on salmon (the other half to be 

 devoted to resource enhancement as described in 

 Chapter 5). This amount should be doubled by 

 means of a dollar-for-dollar matching grant from 

 the federal treasury. 



iii) Payments from the federal government each year 

 in amounts equal to the revenues from competi- 

 tive bids for salmon and roe-herring licences. 



iv) Borrowing. The board should be empowered to 

 borrow, against its anticipated revenues, a maxi- 

 mum of $100 million. 



The initial grant approximates the amount of extra 

 licence fees, with interest, that have already been col- 

 lected for fleet-reduction purposes in recent years and not 

 ■yet expended. Revenues from royalties, matched by the 



government, and from licence sales will provide the 

 board's on-going funding. The borrowing power will 

 enable the board to generate the considerably greater 

 benefits from reducing the fleet as much as possible in the 

 early years, before it can realize much of its income. I 

 emphasize that the proposed corporate structure of the 

 board is an essential condition of the recommended fleet- 

 reduction program. Only in this way can the funds allo- 

 cated for this purpose be accounted for separately and 

 freed from the vagaries of year-to-year government 

 budgeting. The established procedures of the Treasury 

 Board and governmental departments are not suited to 

 an operation such as this, which must be flexible, busi- 

 nesslike and capable of making quick and independent 

 financial decisions. TTie operation should be largely sepa- 

 rate from the Department of Fisheries and Oceans and 

 provide for a large degree of control by the fishing indus- 

 try. The proposed corporate structure thus would meet 

 the essential conditions for an effective fleet-reduction 

 program. 



The target fleet will be achieved by 1993. After that 

 time the more systematic licensing system will provide 

 the government with much better control over fleet devel- 

 opment, and the need for the board to be involved in 

 compensating licensees for relinquishing licences should 

 therefore be reviewed. The board should continue with its 

 responsibilities over licensing and appeals, however. 



Economic and Financial Coasequences 



The economic implications of these proposals can be 

 illustrated by considering the range of possibilities. At 

 one extreme, no licences would be retired during the 

 transitional period. Assuming conservatively, as before, 

 that the fleet now breaks even, and that there will be no 

 increase in fish catches, costs or prices in excess of 

 inflation, no gains would accrue until the end of the tran- 

 sitional period in this case. Then, with the fleet reduced to 

 half the roughly $80 million annual net gain referred to 

 earlier would begin to accrue. At a 15 percent discount 

 rate, the present value of that future stream of net gains 

 (beginning 10 years hence) is $132 million. 



At the other extreme, the Pacific Fisheries Licensing 

 Board would purchase and retire all the capacity in 

 excess of the target fleet in the first year. Then the $80 

 million annual gain would begin to accrue immediately, 

 and would have a present value of $533 million. 



A third and middle possibility is that the temporary 

 licences would be phased out as I propose, and the 

 capacity in excess of the target fleet would be withdrawn 

 in equal increments in each of the 10 years of the transi- 

 tional period. In this case, the present worth of the gains 

 is $308 million. 



