This document discusses problems facing Atlantic Canada's lobster fishery and potential solutions. The key problems are that fishing licenses are increasingly leaving coastal communities as fishermen retire, prices are prohibitive for new individual entrants, and licenses are being consolidated by corporate interests. Several potential solutions are identified, including license banks that pool licenses for community ownership and leasing, loan funds for new entrants, policy changes to allow graduated license ownership, and developing regional seafood distribution models. The next steps proposed are to build a financial model, seek partners to design a small license bank pilot, and work on improving regional distribution value chains.

2. Contents
1. About this project
2. The lobster fishery in Atlantic Canada
3. Problem definition
4. Identifying problem causes
5. Potential solutions
6. Our current initiatives

3. About this project
 Work stream that accompanies Valuing our Fisheries
work
 ‘Social Finance for Sustainable Fishing Communities’
April 2013 workshop
 Now looking for feedback on
proposed steps forward and
suggestions

4. Atlantic Canada’s Lobster Fishery
 Backbone of coastal economies
 Limited entry fishery
 38 LFAs
 Trap limits and short seasons
 10,000 licenses
 $550 million landed / year
 Supreme Court Saulnier v. Royal Bank of Canada 2008
‘Fishing license is property’

5. Owner-Operator and Fleet
Separation Policies
 Have protected and maintain the inshore fishery as an
economic driver
 License holders must fish
 Processors cannot own fishing licenses
 Essential policies, but:
 Limited role for producer coops
 No incorporate financial partnerships

6. Identifying THE Problem
 Fishing licenses are leaving communities
 Fishermen retire
 New entrants don’t buy licenses
 Licenses get consolidated by corporate interests
 Not based in geographic communities
 Business based on reducing number of harvesters through
capital-intensive production
 Larger volume operations creates ‘efficiencies’ that allow more
offshore processing, low-value export

7. Example: Grand Manan
 Population of 2,500 with 130
active lobster licenses
 Approximately 1.5 hours by ferry
 In 2012 temporarily won
protection of residency
requirements
 Currently ~5 licenses at risk

8. Some current license prices
 LFA 31 (Eastern NS) $ 525,000
 LFA 32 (Eastern NS) $ 540,000
 LFA 33 (Shelburne) $ 300,000
 LFA 34 (SW Nova) $ 475,000
 LFA 36 (Fundy Bay) $ 495,000
 LFA 36 (Fundy Bay ) $ 450,000

9. Why is this a problem?
1) License costs do not reflect enterprise revenues
2) Upfront cost is prohibitive to individuals
3) Corporate interests are willing to pay more for
licenses

10. Problem Drivers (1/3)
1) License costs do not reflect enterprise revenues
a) Inflated by government ‘buybacks’
b) Retirement needs not built into current business plans
c) Uncertainty in fishing
i. Price fluctuations
ii. Regulatory environment
iii. Uncertainty about catch rates

11. Problem Drivers (2/3)
2) Upfront cost is prohibitive to individuals
a) No formal way to ‘graduate’ ownership of a license
b) Loans made with personal guarantees
 Fisheries Loan Boards offer loans for ~20 years @ 6%
 Very low default rate
 Limited funding available and difficult to access

12. Problem Drivers (3/3)
3) Corporate interests over-value licenses
a) High premium on supply control and predictability
b) Longer time horizons
c) Management leverage from well-organized interest
groups

13. What kind of solutions?
1. License banks
2. Loan funds
3. Policy changes
4. Distribution system changes

14. 1. License Banks
 Cooperative ownership that pools licences and quota that is
leased back to members at "fair“ rates
Opportunities
 Community investment in productive resource
 Allows long time horizons and better access to capital
Challenges
 Determining ‘fair’ rates
 Securing licenses at fair cost
 Matching with owner-operator principles
 Most existing examples are annual rotating lease structures

15. 2. Loan Funds
 Fund to facilitate new entrants as patient capital to assist in
finding other funding
Opportunities
 Can offer business planning / mentoring and strengthen fishing
associations
 Can support good types of ‘trust agreements’
 Could be funded through community platforms like CEDIFs
Challenges
 Matching with owner-operator principles
 Fisheries risk factors are enormous
 Will not address fundamental issue of license cost

16. 3. Policy Changes
 To allow formal graduated license ownership
 To allow fishing associations to ‘own’ licenses in
license banks
Challenge
Avoiding making the situation worse by diluting
owner-operator protections

17. 4. Distribution Model Development
 Developing a ‘Seafood Hub’ to redirect products away
from commodity markets
 Partners:
 Small and medium processors
 Farmers markets, local retailers and restaurants
 ‘Regional’ wholesalers
 Regional markets provide
price premiums and reduced
uncertainty

18. Next Steps
1) Building Financial Model with Common Good
Solutions
 Financial questions – what should a license costs?
 Retirement costs, revenue expectations, financing options
2) Seeking community partners to design details of a
small license bank (~6 licenses)
 Potential to fund through a Nova Scotia CEDIF
3) Value chain work to improve regional distribution –
September 2013 ‘launch’