Cost-Benefit Analysis and Economic Impacts Assessment of Artificial Reefs for the Southern Gulf of St. Lawrence

Marcel LeBreton Pierre-Marcel Desjardins Cost-Benefit Analysis and Economic Impacts Assessment of Artificial Reefs for the Southern Gulf of St. Lawrence

Cost-Benefit Analysis and Economic Impacts Assessment of Artificial Reefs for the Southern Gulf of St. Lawrence by Marcel LeBreton EcoTec Consultants and Pierre-Marcel Desjardins for Homarus Inc. March 2011! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 2

TABLE OF CONTENTS ABSTRACT / RÉSUMÉ... 5! EXECUTIVE SUMMARY... 6! INTRODUCTION... 12! SECTION I DATA AND MODELS... 14! A Biological Modelling... 15! B Modelling Uncertainty... 16! C Financial Data... 17! SECTION II COST-BENEFIT ANALYSIS... 19! A Landings and Revenues... 20! B Cost-Benefit Analysis of Artificial Reefs... 22! SECTION III ECONOMIC BENEFITS... 26! A - Production of Artificial reefs... 27! B - Harvesting and Processing... 28! IV CONCLUSION... 33! ANNEX A - METHODOLOGY... 35! I Biological Model... 35! II Modelling Uncertainty... 40! ANNEX B - METHODOLOGY... 44!! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 3

Acknowledgement This study has been possible thanks to the financial support provided by the Atlantic Lobster Sustainability Foundation, Blanchard Group and Homarus Inc. Essential financial and operational data about artificial reefs construction and installation was provided by Martin Mallet (Homarus) and René Blanchard (Blanchard Group). Last but not least, this study is mostly based upon a solid foundation provided by a new lobster biology model. It would have been impossible to successfully develop such a model without the unwavering collaboration of Michel Comeau, Lead Biologist, Department of Fisheries and Oceans, Gulf Region, Moncton. His extensive knowledge of lobster biology, endless patience and strong sense of humour were deeply appreciated. However, any factual error or programming issue in the model is solely my responsibility. Marcel LeBreton EcoTec Consultants March 2011! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 4

ABSTRACT / RÉSUMÉ A Live History (LH) Model was developed specifically for the purpose of doing a costbenefit analysis of building and installing cement blocks to create artificial reefs as a mean to enhance lobster habitat and to offset damage done to such habitat. Surveys done by divers on sites where artificial reefs had been set up have demonstrated that one year after the establishment of an artificial reef, the occupancy rate of such structures is 91%, compared to 47% for natural reefs. Over a 10-year period after reef building, the provincial GDP per block would be $56.91 for the Spring fishery and $64.07 for the Summer fishery. Over a similar period of time, the Canadian GDP per block would amount to $85.57 for the Spring fishery and $96.16 for the Summer fishery. Depending on the fishery, total tax revenues for both senior levels of government would amount to between $14.18 and $16.03 per block. Over 20 years, the provincial GDP per block would vary between $125.37 and $134.79. Over that period of time, the Canadian GDP per block would amount to $186.67 for the Spring fishery and $200.60 for the Summer fishery. Total tax revenues for both senior levels of government would amount to between $31.84 and $34.30 per block. Both biological and economic benefits for all stakeholders (including both senior levels of governments) are quite high. Artificial reefs, therefore, represent an efficient tool for lobster habitat enhancement and, consequently, can be used to offset human-generated damages to lobster habitat. Un modèle biologique de type Live History (LH) a été développé dans le cadre de cette étude afin de réaliser une analyse coûts-bénéfices de la construction et l installation de blocs de ciment pour créer des récifs artificiels comme moyen de bonifier l habitat du homard et de compenser la destruction d un tel habitat par des activités humaines. Des vérifications réalisées par des plongeurs un an après la construction de récifs artificiels démontrent un taux d occupation de 91 %, comparé à 47 % pour un récif naturel. Sur une période de 10 ans, le produit intérieur brut (PIB) généré au Nouveau-Brunswick serait équivalent à 56,91 $ par bloc pour la pêche de printemps et à 64,07 $ pour la pêche d été. Au cours de la même période, le PIB dans l ensemble du Canada varierait entre 85,57 $ (printemps) et 96,16 $ (été) par bloc. Les revenus de taxation par bloc pour les deux paliers de gouvernement varieraient entre 14,18 $ (printemps) et 16,03 $ (été). Sur une période de 20 ans, le produit intérieur brut (PIB) généré au Nouveau-Brunswick serait équivalent à 125,37 $ par bloc pour la pêche de printemps et à 134,79$ pour la pêche d été. Au cours de la même période, le PIB dans l ensemble du Canada varierait entre 186,67$ (printemps) et 200,60 $ (été) par bloc. Les revenus de taxation par bloc pour les deux paliers de gouvernement varieraient entre 31,84 $ (printemps) et 34,30 $ (été). Les bénéfices biologiques et économiques pour l ensemble des intervenants (incluant les deux paliers supérieurs de gouvernement) sont très importants. Les récifs artificiels représentent un outil efficace pour l aménagement d habitat côtier pour le homard et, ainsi, peuvent aussi servir pour compenser des destructions d habitat du homard.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 5

EXECUTIVE SUMMARY Biological Modelling and Uncertainty For governments and various stakeholders, the most important question to answer when considering the benefits of artificial reefs is as follows: If artificial reefs are installed as a lobster habitat rehabilitation measure, what will be the benefits on the lobster biomass as well as benefits for the economy as a whole over 10 and 20-year horizons? For lobster fishing enterprises, the question becomes: For X number of cement blocks used to build an artificial reef at Year Y, how many pounds (or kilograms) of lobster will be landed, by year, over the following Y+10 or Y+20 years? The cost-benefit analysis undertaken in this report relies on a Live History (LH) Model that was developed specifically for this purpose. The magnitude of these benefits depends on two elements, one biological and the other commercial. The biological variable is how many lobsters (and their size distribution) are observed on the artificial reef a year or two after its creation. From this the LH model will be used to identify the landings per year for up to 10 and 20 years. The commercial element is made of two components: the cost of producing and installing the cement blocks and the price per pound paid for lobsters. Some parameters were identified as being subject to enough variations and as having a sufficient impact on the outcomes of this exercise to warrant that we model for uncertainty. Monte Carlo models were used to take into account uncertainty for three parameters (exploitation rate, molt-related mortality rate and prices per pound). One of the key benefits of taking uncertainty into account with models such as Monte Carlo is to establish the full range of possibilities and identify the most likely outcomes, ie the ones associated with the highest probabilities. Financial Data, Construction of Artificial Reefs The blocks are produced at a plant located near Beresford, in Northern New Brunswick. Expenditures to date for the construction and installation of 59,658 cement blocks total about $1.67 million (average cost per block of $27.95). Six of the 11 sites where artificial reefs were built are in New Brunswick: together they account for 43,332 of all blocks installed (72.6%). Two sites are in Nova Scotia with a total of 9,730 blocks (16.3%). The! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 6

rest is divided between one site in Prince Edward Island (3,500) and two sites in Quebec (3,096). Landings and Revenues All calculations for lobster landings and revenues were based on a similar amount of $25,000 spent to build an artificial reef made of 894 cement blocks. Results for the first ten years after building the reef, for both fisheries over 10 and 20 years, are presented in Table 1. Over the first 10 years, revenues for lobster fishing enterprises would reach between $14,613 and $29,227 for the Spring fishery or $21,920 as a simple arithmetic average. The Summer fishery would generate more revenues with a minimum of $17,610 and a maximum of $35,220 for a 10-year average of $26,415. Over a 20-year horizon, revenues associated with the Spring fishery have a minimum value of $43,215 and a maximum value of $86,430, yielding an average of $64,822. The Summer fishery has a range between $47,151 and $94,302 with a resulting average of $70,727. TABLE 1 Revenues, Lobster Fishing Enterprises, 75 % Probability, $ Scenario Minimum Maximum Average Spring, 10 Years $14,613 $29,227 $21,920 Summer, 10 Years $17,610 $35,220 $26,415 Spring, 20 Years $43,215 $86,430 $64,822 Summer, 20 Years $47,151 $94,302 $70,727 Source: EcoTec Consultants Cost-Benefit Analysis Three statistics were used to assess the viability of artificial reefs: Internal Rate of Return (IRR) is used to determine the viability of an investment. The IRR is the discount rate at which the sum of all present and future revenues and expenditures for a given project is zero. If the IRR is higher than the discount rate used in the project (6% in the current case), the net present value will be positive. Net Present Value (NPV) is the standard method for assessing the financial viability of long-term projects. The NPV is calculated by subtracting costs from benefits and discounting the net result. A negative NPV means that the project should not proceed.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 7

Return on Investment (ROI) is calculated here as a more commonly used measure of the viability of an investment. The ROI as calculated here is the annual interest rate at which the initial expenditure to purchase 894 concrete blocks and build an artificial reef must be invested to generate the same amount of non-discounted benefits as each of the scenarios here. Table 2 shows the IRR and the ROI associated with the 75% probability for both fisheries and time horizons. Over a 10-year horizon after reef building, the IRR varies between - 13.0% and a maximum of -3.3% for the Spring fishery, resulting in an average of -8.2%. The Summer fishery yields IRR values between -10.8% and -0.1% with an average of - 5.4%. Over a 20-year horizon, the differences between the two fisheries are a bit less pronounced but are roughly of the same magnitude as what was found for the 10-year horizon. The IRR for the Spring fishery varies between -1.0% and 6.2% with an average of 2.6%. This is lower than the IRR for the Summer fishery with a minimum of 0.1% and a maximum of 8.1% and an average of 4.1%. TABLE 2 Internal Rate of Return and Return on Investment, 75% Probability, Artificial Reefs, Percentages Scenario IRR ROI Spring, 10 Years -8.2% -1.8% Summer, 10 Years -5.4% 0.0% Spring, 20 Years 2.6% 4.6% Summer, 20 Years 4.1% 5.1% Source: EcoTec Consultants Economic Benefits of Artificial Reefs Production and Installation The economic benefits of artificial reefs extend beyond the revenues of lobster fishing enterprises that were the focus of the previous section. Economic benefits measure the revenues for workers, profits for enterprises in all sectors of the economy and tax revenues of senior levels of government to better understand the real benefits for the society as a whole. All economic benefits have been calculated using an economic impact model developed by EcoTec Consultants and based on Statistics Canada Input-Output model of the! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 8

Canadian economy. Economic impacts are measured using three statistics: employment measured in terms of person-years of employment, the Gross Domestic Product (GDP), which is the real value-added contribution to the economy and provincial and federal tax revenues (personal income tax, sales and other indirect taxes and taxes on corporate profits). It is estimated that between 2003 and 2010, total employment generated by the production of 59,658 cement blocks as well as the installation of the artificial reefs was equivalent to 12.5 person-years (PYs) in New Brunswick and 20.0 PYs for Canada as a whole. Total Gross Domestic Product (GDP) generated in New Brunswick and Canada as a whole by the production of the artificial reefs amounted to $1.31 M in the province and $2.02 M in Canada. Total tax revenues for the provincial government are estimated at $86,100. Revenues for the federal government are estimated to have reached a total of $220,500. Hence, both senior levels of government have collected a total of $306,600 ($5.14 per cement block). Economic Benefits of Harvesting and Processing Estimations of the economic benefits generated by the harvesting and processing of the lobsters living on the artificial reef are provided in this section. Economic impacts assessments were done with revenue numbers from Table 1, ie with revenues expected from an artificial reef made with 894 cement blocks. Those revenue numbers were assigned as sales to the fishing industry and a value-added component was added for the seafood processing industry. The number of jobs generated in New Brunswick is estimated at between 0.6 and 2.0 PYs for both fisheries. For the whole of Canada, job estimates vary between 0.8 and 2.6 PYs. The Gross Domestic Product (GDP) generated in New Brunswick is estimated to vary between $31,286, and $92,491 for the Spring fishery and between $37,690, and $100,916 for the Summer fishery. The GDP generated in all provinces, including New Brunswick, by the harvesting and processing activities is estimated to vary between $46,186 and $136,570 for the Spring fishery and between $55,652 and $149,025 for the Summer fishery. Provincial tax revenues are estimated to range between $2,291 (10 years) and $6,749 (20 years) for the Spring fishery and between $2,761 and $7,363 for the Summer fishery. Hence, there is very little difference between the two fisheries as far as tax revenues are concerned. Federal tax revenues for all of Canada are expected to range between $5,796 (10-year horizon) and $18,702 (20 years): the Spring fishery is expected to generate between $5,796 and $17,123 while the Summer fishery would generate between $6,972 and $18,702. It should be noted here that those figures for federal revenues do not take into account any benefits collected under the fishermen UI rules. When tax revenues for! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 9

both the federal and provincial governments are added together, the Spring fishery would bring in a total of between $8,087 and $23,873 and the Summer fishery would result in fiscal revenues ranging between $9,733 and $26,065. Conclusion Although the current cost to purchase and install a cement block ($27.95) is too steep for lobster fishermen to bear the full cost of building artificial reefs, the biological and economic benefits are very significant. Table 3 provides a condensed overview of the GDP and tax revenues per cement block. Statistics include the construction and installation of the blocks as well as the harvesting and processing of the lobsters. Over a 10-year period after reef building, the provincial GDP per block would be $56.91 for the Spring fishery and $64.07 for the Summer fishery. Over a similar period of time, the Canadian GDP per block would amount to $85.57 for the Spring fishery and $96.16 for the Summer fishery. Depending on the fishery, provincial tax revenues would vary between $4.00 and $4.53 per block while federal revenues from all provinces would range between $10.18 and $11.50. Hence, total tax revenues for both senior levels of government would amount to between $14.18 and $16.03 per block. Over 20 years, the provincial GDP per block would vary between $125.37 and $134.79. Over that period of time, the Canadian GDP per block would amount to $186.67 for the Spring fishery and $200.60 for the Summer fishery. Depending on the fishery, provincial tax revenues would vary between $8.99 and $9.68 per block while federal revenues would range between $22.85 and $24.62. Hence, total tax revenues for both senior levels of government would amount to between $31.84 and $34.30 per block. Therefore, with provincial GDP per block ranging anywhere between $56.91 and $134.79, the artificial reefs are highly profitable for the economy as a whole. This includes both the provincial and the federal governments which together collect anywhere from $14.18 (10-year Spring fishery) to $34.30 (20-year Summer fishery). The biological benefits are also quite high given the high occupation ratio observed by divers only one year after the installation of a new artificial reef. These benefits are also reflected in the number of lobsters landed per block. For example, over 10 years, the average number of lobsters landed per block in the Spring fishery is 7.7 (6,906 / 894). As a tool to enhance lobster habitat in areas where not enough suitable shelter exists for lobsters, artificial reefs have a significant positive effect on the biomass and the overall economic benefits. Moreover, the positive effects on the biomass are expected to lead to increased landings for lobster fishing enterprises. Hence, artificial reefs represent an efficient tool to offset human-generated damages to lobster habitat.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 10

TABLE 3 GDP and Tax Revenues, Production, Harvesting and Processing, $ 10 Years 20 Years GDP per Block Province N.B. Spring Fishery $56.91 $125.37 Summer Fishery $64.07 $134.79 Canada Spring Fishery $85.57 $186.67 Summer Fishery $96.16 $200.60 Tax Revenues per Block Province N.B. Spring Fishery $4.00 $8.99 Summer Fishery $4.53 $9.68 Federal Spring Fishery $10.18 $22.85 Summer Fishery $11.50 $24.62 Total federal and provincial Spring Fishery $14.18 $31.84 Summer Fishery $16.03 $34.30 Source : EcoTec Consultants! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 11

INTRODUCTION The lobster fishery is the most important one in the Maritimes provinces: it employs thousands of fishermen, plant workers and employees of various suppliers. Over the years, the wellbeing of whole communities has depended on the prosperity of the lobster fishery. This is why, from time to time, various endeavours have been undertaken to improve lobster production and, therefore, landings. Over the last decade, two initiatives have been underway to boost the productivity of lobster fishing grounds: lobster seeding and artificial reefs. The two initiatives are complementary. Lobster seeding is targeted at established lobster fishing grounds that provides adequate cover for the young lobsters (mostly weed beds) as well as for older ones (reefs with proper-size rocks and boulders). It is intended to boost the productivity of existing lobster habitat. Artificial reefs are mostly useful for fishing grounds where proper habitat is not available for mature lobsters. The establishment of such artificial reefs in areas where there is a definite lack of suitable shelter for mature lobsters is designed to increase the survival rate of the crustaceans, Artificial reefs are built by setting down on a suitable habitat (small pebbles or other types of hard and fairly flat bottoms) hundreds or thousands of specially built concrete blocks. These blocks (40 cm x 40 cm) have been designed to maximize attractiveness as shelters for lobsters. They are expected to last between 70 and 100 years, making them a very long-term method for lobster habitat enhancement. The reefs are designed to improve the habitat of the lobster. In other words, they are meant to provide them with additional suitable shelter in areas where existing natural habitat is clearly lacking. This additional shelter will increase the local population of lobsters as they have an adequate habitat to live and reproduce. Surveys done by divers on sites where artificial reefs had been set up have demonstrated a large and statistically significant improvement over a similar natural habitat. Surveys done one year after the establishment of an artificial reef have shown that the occupancy rate of such structures is as high as 91% (37% - observed lobsters; 54% - recent burrows). Currently, the blocks are mostly purchased for the purpose of habitat rehabilitation and are installed in areas identified by marine biologists as being suitable for such artificial structures (i.e. lobster-producing area and a bottom firm enough to support the structures). From 2003 to 2010 inclusively, a total of 59,658 concrete blocks have been installed to build a total of 11 artificial reefs in various locations in the Maritimes (see Map 1).! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 12

This report assesses the costs and benefits associated with the creation of artificial reefs using this specific reef design. The document is divided into four main sections:! Section I provides an overview of the data available and the lobster biology model that was developed for this study;! Section II focuses on the cost-benefit analysis;! Section III provides an estimate of the economic benefits generated;! Section IV contains the conclusions based on the findings of this study. MAP 1 Sites of Artificial Reefs and Lobster Fishing Areas Source: MFU-UPM! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 13

SECTION I DATA AND MODELS! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 14

A Biological Modelling The most important question to answer when considering the benefits of artificial reefs is as follows: For X number of cement blocks used to build an artificial reef at Year Y, how many pounds (or kilograms) of lobster will be landed, by year, over the following Y+10 or Y+20 years? For governments and other stakeholders, the question can also be rephrased as follows: If artificial reefs are installed as a lobster habitat rehabilitation measure, what will be the benefits on the lobster biomass as well as benefits for the economy as a whole over 10 and 20-year horizons? The cost-benefit analysis undertaken in this report relies on a Live History (LH) Model that was developed specifically for this purpose. The LH model is essential to answer the questions laid out above. See Annex A for details of the model. Building an artificial reef is presently the preferred measure put in place to rehabilitate lobster habitat that has been damaged as a result of human activity. It therefore represents a form of investment for governments and other stakeholders who spend money to offset damage done to lobster habitat. Hence, such an investment in artificial reefs is ultimately designed to enhance lobster habitat and, consequently, the number of lobsters that live in the immediate area. The corollary of this enhanced lobster habitat is that landings by lobster fishing enterprises should increase (compared to the damaged, pre-artificial reef, habitat). The end result should be a positive impact on both the local lobster biomass and on the economy as a whole (through the construction of the cement blocks and increased lobster landings). The magnitude of these benefits depends on two elements, one biological and the other commercial. The biological variable is how many lobsters (and their size distribution) are observed on the artificial reef a year or two after its creation. From this the LH model will be used to identify the landings per year for up to 10 and 20 years. The commercial element is made of two components: the cost of producing and installing the cement blocks and the price per pound paid for lobsters.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 15

B Modelling Uncertainty The LH model discussed earlier is used to calculate the number of lobster landed, their weight and dollar value from a total of 894 blocks (equivalent to a total expenditure of $25,000). Within that scenario, values will be provided for the 75 % probability range. The reason for such a probability is that a number of key variables may take on a range of values. A good example of this is mortality rates. If one looks at the available literature, estimated molt-related mortality rates can vary significantly. This is because in many cases it is difficult to (i) accurately measure a given variable and (ii) factor in environmental conditions and other complex variables. Three parameters were identified as being subject to enough variations and as having a sufficient impact on the outcomes of this exercise to warrant that we model for uncertainty. The parameters are:! The exploitation rate;! Mortality rate of lobsters in years when they molt;! Prices per pound for canner and for market lobster. Part II of Annex A provides more details on the Monte Carlo models used to take uncertainty into account.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 16

C Financial Data Table I.C-1 provides the cost breakdown of building and installing the specially designed concrete blocks used to build the artificial reefs. The plant constructing the blocks is located near Beresford, in Northern New Brunswick. Expenditures to date total about $1.67 million. With a total of 59,658 concrete blocks installed, the average cost per block is estimated at $27.95. Salaries are the most important expenditure with $397,072, followed by the main ingredients of concrete: cement ($227,641) and gravel ($100,750). TABLE I.C-1 Costs per category and average cost per concrete block, dollars Category of expenditures Amount Salaries and benefits $397,072 Cement $227,641 Gravel $100,750 Parts and repairs $96,427 Other * $845,682 Total $1,667,573 Number of concrete blocks 59,658 Average cost per block $27.95 * This category is composed of several dozens of smaller items. Sources : Homarus Inc. and Statistics Canada Table I.C-2 shows the location of the 11 artificial reefs built between 2003 and 2010. Six of the 11 sites are in New Brunswick: together they account for 43,332 of all blocks installed (72.6%). Two sites are in Nova Scotia with a total of 9,730 blocks (16.3%). The rest is divided between one site in Prince Edward Island (3,500) and two sites in Quebec (3,096).! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 17

TABLE I.C-2 Location of Artificial Reefs Area Province Number of blocks Belledune NB 21,468 LeGoulet/Miscou NB 11,700 Caraquet NB 750 Grand-Anse NB 550 Petit-Shippagan NB 864 Richibouctou NB 8,000 Total NB 43,332 Rivière Bourgeois NS 1,730 Wallace NS 8,000 Total NS 9,730 Charlottetown PEI 3,500 Iles-de-la-Madeleine QC 96 St-Godefroi QC 3,000 Total QC 3,096 Grand Total 59,658 Source : Homarus Inc. / Blanchard Group! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 18

SECTION II COST-BENEFIT ANALYSIS

A Landings and Revenues All calculations for lobster landings and revenues were based on a similar spent amount of $25,000. With an average price per concrete block estimated at $27.95 (including installation), estimates were made with an artificial reef made of 894 blocks. It should be noted that in the case of artificial reefs, one must apply the notion of re-occupation: a lobster caught in the fishery will vacate a structure that is very likely to be re-occupied within a short period of time. Hence, the landing statistics shown below take into account a re-occupation rate between two times (minimum) and four times (maximum) the actual number of adult lobsters present on the artificial reef at the outset of the fishing season. Results for the first ten years after building a reef with 894 concrete blocks, for the Spring fishery, are presented in Table II.A-1. In that table, three statistics are presented: the number and the total weight of landed lobsters as well as the revenues for lobster fishing enterprises. It is estimated that the total number of lobsters landed over the first 10 years after reef building will range between 4,604 and 9,208 with a simple average of 6,906. Total landed weight could vary between 3,914 and 7,828 lbs, with an average of 5,871. Finally, total revenues for fishing enterprises will vary between $14,613 and $29,227, with an average of $21,920. TABLE II.A-1 Probabilities for Landings and Revenues, Lobster Fishing Enterprises, 10-year Horizon, Spring Fishery, 894 blocks Probabilities Minimum Maximum Average Number Landed 4,604 9,208 6,906 Weight (lbs) 3,914 7,828 5,871 Revenues ($) $14,613 $29,227 $21,920 Source: EcoTec Consultants! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 20

Table II.A-2 shows the expected range of revenues associated the Spring and Summer fishery over both a 10-year and a 20-year period. An artificial reef with 894 concrete blocks would, over the first 10 years, generate revenues between $14,613 and $29,227 for the Spring fishery or $21,920 as a simple arithmetic average. The Summer fishery would generate more revenues with a minimum of $17,610 and a maximum of $35,220 for a 10- year average of $26,415. The Summer fishery generates more revenues because, as mentioned before, it increases the capture rate for lobsters, especially females. TABLE II.A-2 Revenues, Lobster Fishing Enterprises, 894 blocks, $ Scenario Minimum Maximum Average Spring, 10 Years $14,613 $29,227 $21,920 Summer, 10 Years $17,610 $35,220 $26,415 Spring, 20 Years $43,215 $86,430 $64,822 Summer, 20 Years $47,151 $94,302 $70,727 Source: EcoTec Consultants Over a 20-year Horizon, revenues associated with the Spring fishery have a minimum value of $43,215 and a maximum value of $86,430, yielding an average of $64,822. The Summer fishery has a range between $47,151 and $94,302 with a resulting average of $70,727.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 21

B Cost-Benefit Analysis of Artificial Reefs This section focuses on using the cost-benefit methodology to assess the economic viability of artificial reefs. Three statistics were used: Internal Rate of Return (IRR) is used to determine the viability of an investment. The IRR is the discount rate at which the sum of all present and future revenues and expenditures for a given project is zero. The IRR measures the rate of return of a given investment, in this case, the purchase and installation of cement blocks to build an artificial reef. If the IRR is higher than the discount rate used in the project (6% in the current case), the net present value will be positive. An internal rate of return of 7% is considered a minimum acceptable return. This rate is considered to be a minimum given the inherent risks for this type of endeavour and the fact that the return must be superior to returns that an investor could obtain by placing his money into long-term obligations Net Present Value (NPV) is the standard method for assessing the financial viability of long-term projects. The NPV is calculated by subtracting costs from benefits and discounting the net result. A negative NPV means that the project should not proceed. Even a positive NPV can be too low to provide an acceptable return for a given project. This metric must therefore be used alongside the IRR in order to thoroughly assess the viability of a given project. A net present value of $20,000 will be considered a minimum acceptable NPV. Return on Investment (ROI) is calculated here as a more commonly used measure of the viability of an investment. The ROI as calculated here is the annual interest rate at which the initial expenditure to purchase and install 894 cement blocks ($25,000) must be invested to generate the same amount of non-discounted benefits as each of the scenarios here. The interest rate is compounded (i.e. interest income on investment is reinvested every year). For example, if the non-discounted return is estimated at $194,227 (which is the case of the maximum value for the 90% probability associated with the Spring fishery over a 10-year horizon, then one would have to invest $25,000 at a 24.3% interest rate (the ROI) to have, after 10 years, $194,227 in net revenues (including the initial $25,000 investment and before any applicable tax). This is the value found in Table II.B-1 for the ROI associated with the 90% probability. The ROI must be at least 7% to be considered acceptable here, considering the uncertainties surrounding this type of investment. It should be noted that due to the different nature of the IRR and the ROI, the later will be much lower than the former at longer time horizons (20 years). The reason being that most revenues (i.e. lobsters landings) occur during the first 10-14 years and therefore the ROI must be lowered to take into account the fact that revenues in the latter years are very small.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 22

Table II.B-1 shows the cost-benefit analysis for the Spring fishery over a 10-year horizon after establishing a new artificial reef. The IRR varies between a minimum of -13.0% and a maximum of -3.3%. If we compare spending $25,000 to build an artificial reef (894 concrete blocks) with investing a similar amount of money into an safe investment, then this investment would have to yield a negative annual interest rate of -5.2% to match the minimum return over 10 years from building the artificial reef. The ROI the maximum revenues is 1.6%. The NPV varies between -$14,858 and -$4,716, with an average of -$9,787. TABLE II.B-1 Cost-Benefit Analysis, 10-year Horizon, Spring Fishery Probabilities Minimum Maximum Average Internal Rate of Return -13.0% -3.3% -8.2% Return on Investment -5.2% 1.6% -1.8% Net Present Value -$14,858 -$4,716 -$9,787 Source: EcoTec Consultants Table II.B-2 shows the IRR associated with the 75% probability for both fisheries and time horizons. Over a 10-year horizon after reef building, the IRR varies between -13.0% and a maximum of -3.3% for the Spring fishery, resulting in an average of -8.2%. The Summer fishery yields IRR values between -10.8% and -0.1% with an average of -5.4%. Over a 20-year horizon, the differences between the two fisheries are a bit less pronounced but are roughly of the same magnitude as what was found for the 10-year horizon. The IRR for the Spring fishery varies between -1.0% and 6.2% with an average of 2.6%. This is lower than the IRR for the Summer fishery with a minimum of 0.1% and a maximum of 8.1% and an average of 4.1%.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 23

TABLE II.B-2 Internal Rate of Return, Percentages Scenario Minimum Maximum Average Spring, 10 Years -13.0% -3.3% -8.2% Summer, 10 Years -10.8% -0.1% -5.4% Spring, 20 Years -1.0% 6.2% 2.6% Summer, 20 Years 0.1% 8.1% 4.1% Source: EcoTec Consultants Table II.B-3 is similar to the previous table, but does focus on the ROI in order to facilitate comparison with other investment opportunities. Over a 10-year horizon, the ROI varies between a negative annual return of -5.2% and 1.6% for the Spring fishery and between -3.4% and 3.5% for the Summer fishery. Average ROI is fairly similar for the two fisheries: -1.8% for the Spring fishery and 0.0% for the Summer fishery. Over a 20-year horizon, the returns vary between 2.8% and 6.4% (average of 4.6%) for the Spring fishery and between 3.2% and 6.9% for the Summer fishery (5.1%). As stated previously, returns over a 20-year period should be the preferred over the 10-year ones given the lasting nature of artificial reefs. TABLE II.B-3 Return on Investment, Percentages Scenario Minimum Maximum Average Spring, 10 Years -5.2% 1.6% -1.8% Summer, 10 Years -3.4% 3.5% 0.0% Spring, 20 Years 2.8% 6.4% 4.6% Summer, 20 Years 3.2% 6.9% 5.1% Source: EcoTec Consultants Table II.B-4 provides an estimate of the IRR statistics if the blocks could be bought and installed for $15 per unit instead of the current cost of $27.95 (a 46.3% reduction). The viability of the investment would be considerably improved under such a scenario. The average IRR for a 10-year horizon would increase from -8.2% to 1.4 % for the Spring! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 24

fishery and from -5.4% to 5.4% for the Summer fishery. Over a 20-year horizon, the IRR would increase from 2.6% to 9.9% for the Spring fishery and from 4.1% to 12.5% for the Summer fishery. TABLE II.B-4 Internal Rate of Return, $15 per Block, Percentages Scenario Minimum Maximum Average Spring, 10 Years -4.4% 7.2% 1.4% Summer, 10 Years -1.3% 12.0% 5.4% Spring, 20 Years 5.4% 14.4% 9.9% Summer, 20 Years 7.2% 17.7% 12.5% Source: EcoTec Consultants! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 25

SECTION III ECONOMIC BENEFITS! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 26

This section focuses on the economic benefits generated by the production and setting of the artificial reef as well as the fishing and processing of lobsters living in that reef. A - Production of Artificial reefs Table III.A-1 shows the employment and Gross Domestic Product (GDP) generated in New Brunswick and Canada as a whole by the production of the artificial reefs since the beginning of artificial reef construction. Direct employment over the 2003-2010 time period totals 7.9 person-years (PYs) of work. A total of 12.5 PYs was generated in New Brunswick, including 2.3 indirect employment (from suppliers) and 2.3 induced employment (generated by consumer expenditures). For the country as a whole, total employment reached 20.0 PYs, including 6.2 indirect and 5.9 induced impacts. TABLE III.A-1 Employment and Gross Domestic Product Production and Installation of Blocks, 2003-2010, Person-Years and $ New Brunswick Canada Employment Direct 7.9 7.9 Indirect 2.3 6.2 Induced 2.3 5.9 Total 12.5 20.0 GDP Direct $875,000 $875,000 Indirect $201,000 $590,000 Induced $231,000 $558,000 Total $1,307,000 $2,023,000 GDP per block (N=59,658) $21.91 $33.91 Source : EcoTec Consultants The direct GDP amounted to $875,000, including salaries for workers at the cement blocks manufacturing plant. Indirect GDP is estimated at $201,000 in the province and $590,000 for the country. Induced GDP added another $231,000 in New Brunswick and! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 27

$558,000 for Canada, for a grand total GDP of $2.02 M in Canada, including $1.31 M in New Brunswick. Table III.A-2 provides an estimate of provincial and federal tax revenues generated by the construction and installation of artificial reefs since 2003. Total tax revenues for the provincial government is estimated at $86,100: $43,600 in tax revenues from direct impacts, $10,600 from indirect impacts and $31,900 in induced tax revenues (including sales taxes). Revenues for the federal government are estimated to have reached a cumulative total of $220,500, including $70,800 from direct impacts, $53,100 from indirect impacts and $96,600 in induced tax revenues. Hence, both senior levels of government have collected a total of $306,600 over that period. Average provincial tax revenues per block is estimated at $1.44 while federal tax revenues amounted to $3.70 per block, for a grand total $5.14 for both levels of government. TABLE III.A-2 Federal and Provincial Tax Revenues, Production and Installation of Blocks, 2003-2010, $ New Brunswick Federal Total Direct $43,600 $70,800 $114,400 Indirect $10,600 $53,100 $63,700 Induced $31,900 $96,600 $128,500 Total $86,100 $220,500 $306,600 Tax revenues per block $1.44 $3.70 $5.14 Source : EcoTec Consultants B - Harvesting and Processing Estimations of the economic benefits generated by the harvesting and processing of the lobsters living on the artificial reef (with 894 blocks) are provided in this section. Economic impacts assessments were done with revenue numbers from Table II.A-2 (i.e. are based on the minimum and maximum values for the range of revenues). Those revenue numbers were assigned as sales to the fishing industry and a value-added component was added for the seafood processing industry. In order to simplify the analysis, it was assumed that all landed lobsters would be purchased by the processing! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 28

industry and transformed according to the actual product mix for lobster processing in the province (including live, frozen and canned products). Table III.B-1 contains the estimates of total job creation as measured in person-years (PYs) for the two fisheries and the two time horizons. The number of jobs generated in New Brunswick with an artificial reef made of 894 cement blocks (total cost=$25,000) is estimated at between 0.6 and 2.0 PYs. The Summer fishery provides a little more employment (0.8 to 2.0 PYs vs 0.6 to 1.8). The number of jobs generated in the country as a whole, including New Brunswick, vary between 0.8 and 2.4 PYs for the Spring fishery and between 1.0 and 2.6 for the Summer fishery. TABLE III.B-1 Employment, Harvesting and Processing, 894 blocks, Person-years 10 Years 20 Years Province N.B. Spring Fishery 0.6 1.8 Summer Fishery 0.8 2.0 Canada Spring Fishery 0.8 2.4 Summer Fishery 1.0 2.6 Source : EcoTec Consultants Table III.B-2 contains the estimates for the Gross Domestic Product (GDP) generated by the harvesting and processing of the lobsters caught on an artificial reef. The GDP generated in New Brunswick is estimated to vary between $31,286, and $92,491 for the Spring fishery and between $37,690, and $100,916 for the Summer fishery. The GDP generated in all provinces, including New Brunswick, by the harvesting and processing activities is estimated to vary between $46,186 and $136,570 for the Spring fishery and between $55,652 and $149,025 for the Summer fishery.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 29

TABLE III.B-2 Gross Domestic Product (GDP), Harvesting and Processing, 894 blocks, $ 10 Years 20 Years Province N.B. Spring Fishery $31,286 $92,491 Summer Fishery $37,690 $100,916 Canada Spring Fishery $46,186 $136,570 Summer Fishery $55,652 $149,025 Source : EcoTec Consultants Table III.B-3 provides the estimated tax revenues generated by the harvesting and processing of lobsters caught on the artificial reef. Total tax revenues for the provincial government are estimated to range between $2,291 and $6,749 for the Spring fishery and between $2,761 and $7,363 for the Summer fishery. Hence, there is very little difference between the two fisheries as far as tax revenues are concerned. Federal tax revenues, for all of Canada, are expected to range between $5,796 (10-year horizon) and $18,702 (20 years): the Spring fishery is expected to generate between $5,796 and $17,123 while the Summer fishery would generate between $6,972 and $18,702. It should be noted here that those figures for federal revenues do not take into account any benefits collected under the fishermen UI rules. When tax revenues for both the federal and provincial governments are added together, the Spring fishery would bring in a total of between $8,087 and $23,873 and the Summer fishery would result in fiscal revenues ranging between $9,733 and $26,065.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 30

TABLE III.B-3 Federal and Provincial Tax Revenues, Harvesting and Processing, 894 blocks, $ 10 Years 20 Years Province N.B. Spring Fishery $2,291 $6,749 Summer Fishery $2,761 $7,363 Federal Spring Fishery $5,796 $17,123 Summer Fishery $6,972 $18,702 Total federal and provincial Spring Fishery $8,087 $23,873 Summer Fishery $9,733 $26,065 Source : EcoTec Consultants Table III.B-4 shows the high GDP per block values generated by the harvesting and processing of lobster caught on an artificial reef made of 894 cement blocks. For New Brunswick, depending on the fishery, the GDP per block would reach between $35.00 and $42.16 over 10 years and between $103.46 and $112.88 over 20 years. For the whole country, it would be equivalent to between $51.66 and $62.25 over 10 years and between $152.76 and $166.70 per block over 20 years. Table III.B-5 provides government tax revenues per block values. For the provincial government, depending on the fishery, fiscal receipts per block would be between $2.56 and $3.09 over 10 years and between $7.55 and $8.24 over 20 years. For the federal government, tax revenues would be between $6.48 and $7.80 per block over 10 years and between $19.15 and $20.92 over 20 years. When both levels of government are added together, tax revenues would amount to between $9.05 and $10.89 over 10 years and between $26.70 and $29.16 per block over 20 years.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 31

TABLE III.B-4 Gross Domestic Product (GDP) Per Block, Harvesting and Processing, $ 10 Years 20 Years Province N.B. Spring Fishery $35.00 $103.46 Summer Fishery $42.16 $112.88 Canada Spring Fishery $51.66 $152.76 Summer Fishery $62.25 $166.70 Source : EcoTec Consultants TABLE III.B-5 Federal and Provincial Tax Revenues Per Block, Harvesting and Processing, $ 10 Years 20 Years Province N.B. Spring Fishery $2.56 $7.55 Summer Fishery $3.09 $8.24 Federal Spring Fishery $6.48 $19.15 Summer Fishery $7.80 $20.92 Total federal and provincial Spring Fishery $9.05 $26.70 Summer Fishery $10.89 $29.16 Source : EcoTec Consultants! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 32

IV CONCLUSION Although the current cost to purchase and install a cement block ($27.95) is too steep for lobster fishermen to bear the full cost of building artificial reefs, the biological and economic benefits are very significant. Table IV-1 provides a condensed overview of the GDP and tax revenues per cement block. Statistics include the construction and installation of the blocks as well as the harvesting and processing of the lobsters. Over a 10-year period after reef building, the provincial GDP per block would be $56.91 for the Spring fishery and $64.07 for the Summer fishery. Over a similar period of time, the Canadian GDP per block would amount to $85.57 for the Spring fishery and $96.16 for the Summer fishery. Depending on the fishery, provincial tax revenues would vary between $4.00 and $4.53 per block while federal revenues from all provinces would range between $10.18 and $11.50. Hence, total tax revenues for both senior levels of government would amount to between $14.18 and $16.03 per block. Over 20 years, the provincial GDP per block would vary between $125.37 and $134.79. Over that period of time, the Canadian GDP per block would amount to $186.67 for the Spring fishery and $200.60 for the Summer fishery. Depending on the fishery, provincial tax revenues would vary between $8.99 and $9.68 per block while federal revenues would range between $22.85 and $24.62. Hence, total tax revenues for both senior levels of government would amount to between $31.84 and $34.30 per block. Therefore, with provincial GDP per block ranging anywhere between $56.91 and $134.79, the artificial reefs are highly profitable for the economy as a whole. This includes both the provincial and the federal governments which together collect anywhere from $14.18 (10-year Spring fishery) to $34.30 (20-year Summer fishery). The biological benefits are also quite high given the high occupation ratio observed by divers only one year after the installation of a new artificial reef. These benefits are also reflected in the number of lobsters landed per block. For example, over 10 years, the average number of lobsters landed per block in the Spring fishery is 7.7 (6,906 / 894). As a tool to enhance lobster habitat in areas where not enough suitable shelter exists for lobsters, artificial reefs have a significant positive effect on the biomass and the overall economic benefits. Moreover, the positive effects on the biomass are expected to lead to increased landings for lobster fishing enterprises. Hence, artificial reefs also represent an efficient tool to offset human-generated damages to lobster habitat.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 33

TABLE IV-1 GDP and Tax Revenues, Production, Harvesting and Processing, $ 10 Years 20 Years GDP per Block Province N.B. Spring Fishery $56.91 $125.37 Summer Fishery $64.07 $134.79 Canada Spring Fishery $85.57 $186.67 Summer Fishery $96.16 $200.60 Tax Revenues per Block Province N.B. Spring Fishery $4.00 $8.99 Summer Fishery $4.53 $9.68 Federal Spring Fishery $10.18 $22.85 Summer Fishery $11.50 $24.62 Total federal and provincial Spring Fishery $14.18 $31.84 Summer Fishery $16.03 $34.30 Source : EcoTec Consultants! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 34

ANNEX A - METHODOLOGY I Biological Model The Life History (LH) model that was built for this report provides the information required to answer the questions regarding the number and size, and the time horizon, of lobsters that will be landed. The model must accommodate two very different fisheries: the Spring fishery which take place in May-June and does not interfere with the biological cycle of the lobsters and the Summer fishery (August-September) which does interfere significantly with lobsters biology. The model as built divides up a year into 20 periods of time. The first period encompasses the January to end of June period. The following 18 periods represent one week each, from the beginning of July to mid- November. The last period of time runs from mid-november through the end of December. The more detailed time periods during the Summer period were built into the model to ensure that the Summer fishery and its intricate relationships with important biological events (molt, egg bearing, larval release, etc.) could be modelled as accurately as possible. Key variables The model uses several variables to model the survival and growth of lobsters using the most up-to-date research information available. Some of those variables have different values for the Summer and the Spring fisheries. The key variables are: 1. Survival Rates Survival rates are mostly a function of the life-stage at which lobster are at. Survival rates for larvae (from release to the benthic stage) can vary, according to available literature, anywhere from 1.00% to as little as 0.01% (a hundredfold difference). The value selected for the most probable scenario is 0.1% (i.e. 99.9% of larvae die before getting to the Stage-4 benthic stage). The most probable survival rate used for lobsters during the first and second year of their life is 98%. The survival rate takes a significant dive in year three as lobsters start to leave the safe shelter provided by weed beds and look for permanent shelter (rocks, boulders, etc.). During that year, the most probable survival rate used is 75%, which corresponds to 10% per molt (x 2) during that year, plus a 5% natural mortality rate.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 35

For year 4 and year 5, the survival rate is 85% per year. Afterward (year 6 and beyond), as the lobster has grown to become dominant in its environment, the most probable survival rate used is 95% per year when the lobster does not molt and 90% per year when the lobster does molt. After 120 mm, male lobsters molt once every second year while female lobsters will molt only once every three years. 2. Growth Rates Growth rates apply to the size of the lobsters, in millimetres (mm). Three growth rates are used in the model. The first one is for male lobsters that grow, on average by 16.8% per molt starting in year seven. The two other rates are for females: non-sexually mature ones grow 15.2% per molt while sexually mature ones grow by only 12.0% per molt. These growth rates do not apply for years when lobsters do not molt. At about 115-120 mm, and lobsters will molt once every three years. Larges individuals (older than 22 years) will molt once every four years. 3. Weight per Size A logistic formula is used to calculate the weight of lobsters (there is a formula for males and one for female lobsters) according to their size. 4. Fertility The fertility is calculated using a logistic formula based on the size of the female lobsters. Fertility is measured by the number of eggs per female of a given size, in mm. For example, a female of 70 mm will produce about 4,800 eggs while one 100 mm will produce 16,200 eggs and one of 130 mm will produce as many as 39,600. Figure A-1 provides the number of eggs produced (vertical axis) per female size. FIGURE A-1 Fertility of female lobsters, eggs produced by size! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 36

Source: DFO 5. Maturity Rates Female lobsters reach sexual maturity over a five-year period. But since approximately 97% of all females reach sexual maturity between the age of six and eight years old, the time period can be cropped from five to three years in order to simplify the model. In this LH model, females reach maturity over a three-year period: year six, seven and eight. On average, about 14% of females will reach sexual maturity in year six, 52% in year seven and 34% in year eight. 6. Exploitation Rate Exploitation rate is the percentage of lobsters of legal size caught per year in the fishery. Hence, an exploitation rate of 70% means that only 30% of lobsters at or above the minimum legal size will survive the fishery. This percentage has been used as the most probable value for lobsters from minimum size to 99 mm. Afterward, the exploitation rate decreases as size increases to reflect the fact that larger lobsters tend to exhibit more of a behaviour commonly called trap shy whereby they seem to avoid lobster traps and also the obvious fact that large lobsters can not physically get into traps. The other most probable exploitation rates used in the model are: 20% between 100 and 113 mm, 15% between 114 and 130 mm, 10% between 131 and 142 mm, 5% between 143 and 159 mm and zero for lobsters 160 mm and above.! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 37

For the Summer fishery, the exploitation rate is modified with a series of weights designed to reproduce the actual distribution of landings on a week by week basis. For example, 26%, 17% and 12% of all landings for the Summer fishery take place during the first three weeks of the fishing season. 7. Larvae Release Larval release starts during the second week of July. Of all females that will release larvae during a given year, about 17% will release them during the second week of July. By the end of the month, 25% of females will have released the larvae. By the third week of August, all larvae have been released. The last week of that period is the one with the most important release activity: it is estimated that 50% of females will release during that period. 8. Management Measures Management measures is a broad term that covers all important measures put in place by the department of Fisheries and Oceans (DFO) to ensure a sustainable lobster fishery. Three management measures are included in the model:! Egg-bearing females must be released if caught. In the Summer fishery, egg bearing females start to appear during the third week of July in the South of the Northumberland Strait and one week earlier in the North of the strait. Over an eight weeks period, the number of egg bearing females will increase until they reach 100% of the population scheduled to extrude eggs that year;! Minimum size: smaller lobsters must be release if caught. This minimum size varies between different Lobster Fishing Areas (LFA). For example, the minimum size is currently 70 mm in the Lobster Fishing Area (LFA) 23.! Windows: some areas have a size window measure in place to protect femeales of a certain size. In some areas, females between the size of 115 and 129 mm inclusively must be released if caught, regardless of them being berried or not.! Maximum size: in some LFAs, there is a maximum size measure in place for females. For example, in LFA 25 (northern area of the Northumberland Strait) the maximum size for females is 114 mm. Any females over that size must be released. 9. Statistical Distribution! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 38

Lobsters do not grow at the same pace. Within a given year class (stage 4 lobsters hatched the same year), the population will fairly quickly adopt a distribution which, based on observations, looks like a rather flat normal distribution. Figure A-2 shows the distribution used in the LH model based on observations made in 2008 in the Gulf area. Each year, the number of lobsters in the model is divided into ten size classes according to this distribution. The vertical axis represents shares of the total population for a given age group. For example, if lobsters of a given age class are between 61 and 70 mm, the t group of lobsters at 72 mm would contain about 6% of the total population for that age class and the ones 74 mm in length would make about 15% of that age class. FIGURE A-2 Distribution of lobsters of a given age class, by size Source: DFO! EcoTec Consultants, 5300 boul.des Galeries,Bureau 460-F,Québec,G2K 2A2,418-627-9870,March 2011 39