Regulation Impact Statement for the Bass Strait Central Zone Scallop Fishery Management Plan 2002

Regulation Impact Statement for the Bass Strait Central Zone Scallop Fishery Management Plan 2002 September 2002 Australian Fisheries Management Authority

Contents Introduction... 1 The fisheries challenge...1 International developments...2 Developments in fisheries management...2 Input controls...2 Output controls...3 Statutory management plans...3 Environmental impact assessment...3 The Bass Strait Central Zone Scallop Fishery... 4 Problems with the existing access rights...4 Management objective...5 Options for providing access rights to the fishery... 5 Impact of continuing to grant fishing permits annually...5 Impact of granting fishing permits for five years...6 Impact of implementing a statutory management plan and granting SFRs...7 Impact on the environment...10 Impact groups...11 Community...11 Business (fishers)...11 Government...11 Table 1: Summary of impact of options...13 Option 1: Impact of the continuing to grant annual fishing permits...13 Option 2: Impact of granting fishing permits for five years...15 Option 3: Impact of a statutory management plan that provides for the grant of statutory fishing rights (SFRs)...17 Recommended Option...19 Consultation... 19 Implementation and review of preferred option... 21 Acronyms... 22 Attachment 1: Steps in the development of the Bass Strait Central Zone Scallop Fishery Management Plan 2002... 23

Introduction The challenges facing fisheries management in general are outlined below to provide a context for discussion of the problems to be addressed in the Bass Strait Central Zone Scallop Fishery (BSCZSF). Following a detailed description of the problem that the Australian Fisheries Management Authority (AFMA) faces in the management of the BSCZSF, a desired objective is established. Through an analysis of the costs and benefits of the three possible options, the recommended option that is most likely to achieve the desired objective is established. The consultation process for the development of the recommended option (implement a statutory management plan and grant statutory fishing rights (SFRs) is detailed, and the implementation and review of the preferred option is noted. The fisheries challenge Marine fish, including scallops (a mollusc), in the wild are generally regarded, as community owned resources. They have tended to remain in this state because of the difficulty of allocating effective individual rights to a resource that cannot be kept within pre-determined boundaries. For this reason a fish does not become the property of the individual fisher until it is actually caught. The inability to provide effective individual property rights results in what is termed a market failure. Contrary to the normal expectation, total investment in fisheries does not cease at the point where total profits are maximised and as a consequence fisheries tend to become significantly overcapitalised, economically inefficient with increasing pressure on the biological sustainability of the resource. Because the fish does not become the property of the individual fisher until it is caught, each individual has the incentive to catch the maximum amount of fish in the shortest possible time. Each fish caught reduces both the numbers of fish remaining and the overall catch rate. (This is referred to in fisheries management jargon as a decline in the catch per unit of fishing effort.) As a result of this the cost of catching each additional fish increases. If there was only one fisher in a fishery then all costs associated with catching each fish, including the costs associated with declining catch rates, would have to be met by that fisher. Such a fisher would cease fishing when the cost of catching fish equalled the value of the fish caught (eg. when marginal cost equalled marginal revenue). This is also the point where total profit from the fishery would be maximised. However, when there is more than one fisher, each fisher receives the full value of the fish they catch, but the increased cost associated with a reduced catch per unit of fishing effort is spread between all in the fishery. The end result of this is that excessive investment, in the form of additional boats and fishing equipment, tends to be attracted to the fishery and hence profits, that should be available in the form of resource rents, are dissipated. The dissipation of resource rents is not the most obvious result of excess fishing capacity. In most fisheries it is the over-exploitation of the fish resources themselves. Until quite recently the overexploitation of fish resources was regarded only as a biological problem. Its economic dimension was not recognised, or was seen as a secondary consideration only. The approach generally taken to managing fisheries was to introduce restrictions that imposed inefficiencies on fishers (input controls) and, to the extent that they were successful in protecting the resource, succeeded in doing so only by making fishing more expensive and less economically efficient. 1

Fisheries around the world are characterised by the existence of excess fishing capacity (over capitalisation). In a 1992 report by Food and Agriculture Organisation entitled Marine Fisheries and the Law of the Sea: A Decade of Change, it was estimated that in 1989 global fishing costs were greater than global fishing revenues by US$54 billion. In effect it cost US$124 billion to harvest fisheries resources that were valued at only US$70 billion. Various types of government subsidies made up most of this deficit. In very many instances this has led to the collapse or severe decline of major fisheries. Although Australia has primarily avoided severe depletion of fish stocks, there is substantial excess fishing capacity in virtually all our Fisheries. International developments There have been two major avenues of approach to the development of more effective fisheries management regimes. The first of these has been developments in international law, which have permitted the progressive extension of national jurisdiction over fisheries. In the late 1960s exclusive fishing zones of 12 nautical miles replaced the previous three nautical mile Territorial Sea as the limit of national fisheries jurisdiction. About a decade later developments in the United Nations Convention on the Law of the Sea saw national jurisdiction over fisheries extended to 200 nautical miles. This means that national governments now have much greater authority and responsibility to effectively manage fisheries. Over the same period, developments in fishing gear technology, fishing boat design and in particular in electronic fish finding and boat positioning technology have vastly increased the fishing capacity of fishers (technology creep). Boats are now able to search for fish more effectively at greater depths and further from their homeports. Developments in fisheries management In parallel with this has been the development of fisheries management techniques that allow a more effective approach to both the biological problem of over-fishing and the economic problems of excess fishing capacity and resource rent dissipation. Input controls Since the 1960s limitations on the number of boats permitted to operate in specific fisheries have been progressively introduced into Australian Fisheries. This prevented further increases in fishing capacity through the ever-increasing size of the fishing fleet, but did nothing to restrict the increase in fishing capacity that resulted from the increases in the size of individual boats or developments in fishing technology. To overcome these problems, increasingly sophisticated systems for controlling fishing inputs have been implemented. These have mostly involved some form of units that regulate either the quantity of fishing gear or size of boat that may be used. In some fisheries these units are tradeable so that a fisher may increase the size of his/her operation by buying units from other fishers. While these arrangements provide more flexibility for individual fishers, they neither directly address the problem of existing excess capacity nor prevent the further growth in capacity that results from advances in fishing technology. In some fisheries such arrangements have been supplemented by buy-back schemes (usually funded mainly by fishers) the aim of which is to reduce fishing capacity by buying out some of the excess capacity. The permanent impact of such schemes depends on how readily capacity bought out can be replaced through technological innovations that reduce the effectiveness of the unit system. 2

Output controls While input controls represent a limited form of property right, a more effective form of individual property is provided through the use of individual transferable quotas (ITQs). Under such a system, an annual Total Allowable Catch (TAC) is set for the fishery. The TAC is then apportioned to individual fishers in accordance with the proportion of the catch to which each is entitled. Under such an arrangement, it is predicted that trading in quota will over time result in a flow of quota to the efficient fishers, with the less efficient withdrawing from the fishery. Such a system results in the autonomous adjustment to the size of the fishing fleet so that the problem of excess capacity is removed and over time resource rent dissipation ceases. While output controls in the form of ITQs have significant theoretical advantages over input controls, they have their challenges. For example, where there is considerable and unpredictable variation in the catch of fish available each year. The cost of policing ITQs can also be greater than the comparative cost of input controls. This can reduce the attractiveness of this form of control. In the Commonwealth Government s 1989 policy statement New Directions for Commonwealth Fisheries Management in the 1990s the existence of significant excess fishing capacity was identified as a major impediment to the effective management of Australia s Fisheries. Tradeable rights, in the form of individual transferable quotas were also identified as the preferred method for the management of Commonwealth Fisheries. Statutory management plans The Fisheries Management Act 1991 (the FM Act) specifically provided for the establishment of statutory fishing rights (SFRs) under management plans to provide fishers with stronger ongoing rights. Strong rights contribute to the use of fishery resources in an economically efficient manner and help maximise resource rents. It is also recognised that strong rights contribute to the use of fishery resources in an ecologically sustainable manner by encouraging operators to take a longerterm view and providing disincentives to overfish. The FM Act requires AFMA to pursue five objectives two of which are: maximising economic efficiency in the exploitation of fisheries resources and ensuring that the exploitation of fisheries resources and the carrying of any related activities are conducted in a manner consistent with ecologically sustainable development [ESD] and the exercise of the precautionary principle, in particular the need to have regard to the impact of fishing activities on non target species and the long term sustainabililty of the marine environment. Strong ongoing rights help to pursue both of these objectives. Environmental impact assessment The Environment Protection and Biodiversity Conservation Act 1999 has specific provisions for strategic assessment (environmental impact assessment) of Commonwealth managed fisheries by 2005. Strategic assessment requires that the management arrangements for a fishery provide for: sustainability of stocks sustainable bycatch minimise the risk to protected species minimise the impact on the broader marine environment From 1 December 2003, export approval for scallops will also be contingent on meeting requirements under the Environment Protection and Biodiversity Conservation Act 1999. 3

The Bass Strait Central Zone Scallop Fishery The principal target species in the fishery is known as the commercial scallop (Pecten fumatus). The principal harvest method is by a scallop harvester (or dredge). The main markets for scallops are France, Hong Kong, USA and the domestic market. The Australian Fisheries Management Authority currently manages the BSCZSF using a system of administrative fishing permits under the Fisheries Management Act 1991. A limited number of tradeable annual fishing permits are granted that allow the taking of a specific quantity of scallops per permit per season. Catch limits have been specified on scallop permits since 1991. Conditions on fishing permits specify a minimum size limit for scallops that can be landed (which allow scallops to achieve at least two major spawnings), and provide for a seasonal closure (that allows juvenile scallops to become established on the seabed without disturbance). AFMA also uses conditions on fishing permits to implement closures to ensure a minimum spawning stock is protected each year and closures to protect beds with a high proportion of juveniles. But the effective use of permit conditions to implement closures is limited to those cases where the area to be closed is known prior to the grant of the fishing permit so that it can be excluded from the area to which access is granted. The current management arrangements only partially achieve the Government s policy objectives and do not provide for strong ongoing rights. Problems with the existing access rights The catch allocation to a fishing permit is a relatively weak form of access right. Although very rarely used, AFMA has power to vary management arrangements implemented through fishing permit conditions without the consultation process required for management plans under the FM Act. It is also possible that AFMA might not renew fishing permits each year. AFMA may also exercise its discretion under section 32 of the FM Act over the granting of permits and allocation of catch limits to fishing permits each year. Without guaranteed access, the current administrative arrangements could lead to a lack of confidence by the fishing industry in the management regime. In these circumstances industry might feel less ownership of management decisions and exert less stewardship over the long-term sustainability of the fishery. In addition, the current arrangements could also lead to a lack of confidence by investors (for example, banks or others with 'third party' interest) in the value and security of an operator's assets (including fishing concessions and catch entitlements). A significant limitation on the pursuit of management consistent with ecologically sustainable development and the exercise of the precautionary principle, as required by AFMA s legislative objectives, is the inability to close areas of the fishery during the fishing season where this is necessary to prevent recruitment overfishing or growth overfishing. Under the administrative system currently being used, AFMA is unable to vary the area to which access has been granted during the life of the fishing permit. A further problem is that conditions on an individual's fishing permit are subject to internal review and appeals processes each year a fishing permit is granted. As a result the fishery can be destabilised by ligation and uncertainty. 4

Management objective The overall objective for the fishery is to ensure that management is consistent with the objectives of the Fisheries Management Act 1991 and Government policy. The desired objective in relation to the statutory management plan is to improve the fishing industry s confidence in management arrangements and in taking responsibility for the long-term sustainability of the BSCZSF. Options for providing access rights to the fishery This statement considers three options for providing access rights for the fishery: Continue of the current administrative system for the fishery and grant fishing permits annually. Continue of the current administrative system for the fishery, but grant fishing permits for up to five years. AFMA would continue to have discretion over the annual allocation of catch limits, regardless of the length of time the fishing permit was in effect. Implement a statutory management plan under the Fisheries Management Act 1991 that would provide for the grant of boat SFRs and quota SFRs in place of fishing permits and a specified catch limit. A total allowable catch (TAC) for the BSCZSF would be allocated among quota SFRs. Quota SFRs will be granted for the life of the management plan with the boat SFRs expiring in 2007. Impact of continuing to grant fishing permits annually The current system using annual fishing permits may cause a lack of confidence by fishing operators, investors and third party interests in the value and security of fishing concessions. Short term access to the fishery would be granted by AFMA every year, with the Authority having the power to exercise discretion over the granting of fishing permits and the allocation of a specified catch limit. AFMA could change its management arrangements, affecting the rights of individuals in the fishery without having to undergo a statutory consultation process. AFMA could not implement area closures during the life of a fishing permit. Section 32(1) of the FM Act provides for AFMA to grant a fishing permit for a specified period in a specified area or a specified fishery subject to certain conditions. The area of access is fundamental to the permit and as such is not a condition that can be amended during the life of a fishing permit under section 32(8). Area closures necessary to prevent recruitment overfishing or growth overfishing could only be implemented when fishing permits were re-granted at the commencement of the following fishing year. In the meantime, significant fishing could occur on the beds that either were suitable for protection as a broodstock for the future or where undersize scallops were greater that 20% of the stock. Research findings by Young et al. (1991), suggest that when significant fishing occurs on a bed of scallops, direct and indirect fishing induced mortality will account for much of the remaining stock that is not taken. 5

Fishing permits for the BSCZSF are granted under section 32 of the FMA Act. Sections 32 (7) (a) and (b) state that conditions may be specified on a fishing permit, including the species of fish and the quantity of fish that may be taken. Under section 165 of the FMA Act conditions on fishing permits are reviewable by AFMA and the Administrative Appeals Tribunal (AAT) and then, if there are grounds on points of law, the Federal Court. This means that each year fishing permits are regranted, the catch limits allocated, minimum sizes and area or seasonal closures are appealable. Appeals and reviews are based on the individual circumstances. Each year, if a concession holder in the BSCZSF is unhappy with a previous decision handed down by AFMA, the AAT (or the Federal Court), that concession holder can appeal again. This causes uncertainty and destabilisation of the industry, which discourages autonomous (market based) adjustments in the fishery, and hence does not allow the government s fisheries management objectives to be achieved. Without autonomous adjustment in the fishery, resource rents will continue be dissipated further and each year government funds may be spent in litigation. Scallops from the BSCZSF would continue to be supplied to domestic and export markets in the short term. However, concession holders lack of ownership of fisheries management decisions and their lack of longer term access rights may contribute to their taking a short term view in exploiting fish stocks and therefore failure to take responsibility for the long term sustainability of the fishery. This can lead to non-cooperation with the management regime. Such non-cooperation could lead to over exploitation of scallop stocks and hence a reduction in the supply of these species for current and future generations of the community in the medium to long term. Further, if stocks are over exploited this would lead to reduced financial returns from BSCZSF species for current and future generations of fishers in the medium to long term. Scallops caught through non-compliance (by operators who take a short-term view to scallop resources in the fishery) end up in the same markets as legitimately caught scallops which reduces the prices brought for scallops caught by BSCZSF operators who comply with the management arrangements. Maintaining the status quo does not comply with Government policy to develop and implement management plans and provide longer-term on-going access rights in accordance with AFMA's legislative objectives. Impact of granting fishing permits for five years Under the FMA Act a fishing permit may be granted for a period up to five years. This option would achieve a measure of security in terms of the length of time a fishing permit is in effect. However, five years may still be considered short term in the context of the fishery, where investment in capital equipment and stock sustainability are considered over far longer time horizons. Compared with annual granting of one year fishing permits, granting five-year fishing permits would not significantly improve the confidence of fishing operators, investors or third party interest in the value and security of fishing concessions. AFMA would have discretionary powers over the initial granting of fishing permits and the quantity of a specified catch limit allocated. 6

Catch limits would be allocated on an annual basis to individual fishing permit holders as conditions of the permit under sections 32 (7) (a) and (b) of the FM Act. Decisions made under section 32 are reviewable and it may be more difficult to vary area and seasonal closures under a five-year fishing permit, compared to an annual fishing permit. In particular, AFMA could not implement area closures where these were necessary to prevent recruitment overfishing or growth overfishing until fishing permits were re-granted at the end of the five-year period. The area of access is fundamental to a permit granted under section 32(1) of the FM Act and as such is not a condition that can be amended during the life of a fishing permit under section 32(8). This could greatly increase the likelihood of not meeting AFMA s legislative objective with regard to ecologically sustainable development and the exercise of the precautionary principle. BSCZSF scallop species would continue to be supplied to the market in the short term. However, supply of these species for current and future generations of the community in the medium to long term could be compromised by possible over exploitation of stocks related to AFMA s inability to effect appropriate area closures or to non-compliance related to relatively weak access rights. Scallops caught through non-compliance (by operators who take a short-term view to scallop resources in the fishery) end up in the same markets as legitimately caught scallops which reduces the price for scallops caught by BSCZSF operators who comply with the management arrangements. Impact of implementing a statutory management plan and granting SFRs Fishing operators would be granted property rights in the form of long term secure access rights to the BSCZSF via SFRs under a statutory management plan. SFRs formally recognise the ongoing nature of fishing rights in existing developed fisheries. SFRs may take many forms under section 21 of the FM Act. However, individual transferable quotas allocated as proportions of a total allowable catch are the Government's preferred management tool because this form of control allow autonomous adjustment of fishing fleets (Commonwealth of Australia, 1989). It is expected that long term secure access rights will engender the confidence of the fishing industry to exercise greater stewardship of the resource by taking responsibility for the long term sustainability of the fishery and to have a much greater involvement in and ownership of management decisions. Indeed, this was the intention of the government and the reason for including the provisions relating to statutory management plans in the FM Act. As has been shown by Annala (1996) in his description of New Zealand's ITQ system, moving to a stronger form of property right increased industry responsibility with respect to resource management. He cites the following examples: the establishment by scallop quota holders of a company to fully fund an enhancement program for New Zealand's largest scallop fishery that quota holders in one of the paua [abalone] stocks (another shellfish) asked for and took a voluntary 10% reduction in TAC because of their concern about the status of the stock that quota holders in the west coast hoki fishery (a deepwater fish) developed a voluntary code of practice which successfully reduced bycatch of other commercial species 7

Further evidence of the fishing industry exercising greater stewardship over resources is provided by Ackroyd and Hide (1991) where they suggest that providing divers with stronger property rights to the abalone resource of the Chatham Islands encouraged them to become "custodians rather than plunderers of the resource". Economists believe that stronger access rights lead to more economically rational exploitation of fisheries. SFRs under a management plan are likely to result in the industry taking a longer-term view of exploitation of the fishery and enhance cooperation with catch limits and management arrangements. In turn this would result in the sustainable use of a community owned resource and ensure continuity of supply of BSCZSF species to markets for current and future generations of consumers. Greater Government spending on enforcement, recovered in part from participants in the fishery, would likely be necessary where weaker access rights did not provide the same economic incentives for participants to comply with economically efficient exploitation regimes. For example, if operators lacked confidence that they would be allowed to take scallops in the future, they might be tempted to fish areas with a high proportion of juveniles even though these were closed to fishing. AFMA would require more resources to monitor the movements of all vessels in the fleet more closely to ensure there were no violations of the closures. Similarly, AFMA requires observers be carried on some trips to the fishery to verify information recorded by skippers in their catch and effort logbooks about the proportion of juveniles on newly discovered patches of scallops. Concession holders who lacked confidence that they would have access to these areas in the future might be less inclined to fulfil their legal obligations to record accurate information in their logbooks about scallops found when searching if it was likely to result in short-term closures of those areas. AFMA would have to require more observer trips to the fishery at considerable cost to the levybase for the fishery if it lacked confidence in the accuracy of the reports in catch and effort logbooks. It is considered more cost effective to provide stronger rights to the BSCZSF than simply providing more funds to enforce management arrangements. Long term secure access rights to the BSCZSF will also engender the confidence of the industry, investors and third party interests in the value and security of their assets. Fishing permits and seasonal allocations will be replaced with boat and quota SFRs. A formal register of SFRs improves the documentation available to fishermen seeking to use those rights as security. As the quota SFRs will be a stronger form of right than current seasonal allocations in the BSCZSF and will be tradeable, it is expected that over time autonomous adjustment in the fishery will increase. As a result, economic efficiency in the fishery is expected to improve and hence, resource rents will be less dissipated than at present. The number of vessels in the fleet will be capped by requiring boat SFRs be held by fishers until 2007. Industry operators requested that all operators should be required to hold a boat SFR in this period to constrain the fleet size while the market for tradeable quota SFRs becomes established. Under a proportional quota SFR management system (such as the BSCZSF), fishing rights do not confer on quota holders the right to an absolute tonnage of fish, but rather to a clearly defined proportion of each annual TAC. The management plan sets out a process for determining annual Total Allowable Catches (TACs) involving consultation between scientists, managers, industry and other stakeholders, using the latest available biological and economic data, as well as the input of fishing operators. 8

Under the management plan for the fishery conditions regarding eligibility for and allocation of SFRs are specified. AFMA must grant SFRs to any person who meets the conditions set out in the management plan. AFMA will grant a boat SFR and 3500 quota SFRs for each species of scallop, to the holder of each BSCZSF fishing permit on 1 March 2001. Government policy, as set out in New Directions for Commonwealth Fisheries Management in the 1990s, indicates that while competitive bidding may be an efficient and equitable way of allocating access rights in developing fisheries, it is inappropriate in developed fisheries. In the BSCZSF a form of access right already exists under the administrative system currently used comprising a limited number of fishing permits and catch limit allocations for the primary species taken. Operators in the BSCZSF have already invested in boats, equipment and fishing permits in the expectation that access will be ongoing. It is therefore not appropriate to auction SFRs under the management plan. It is not current Government policy to return part or all resource rents captured from the exploitation of fisheries to the community, to the extent that these are not dissipated they are therefore directed to the fishing industry. Both types of SFR will be fully transferable, thus new entrants may enter the fishery by acquiring SFRs. The system of SFRs under the management plan is complemented by input controls such as area and seasonal closures, and size limits. These input controls are the management measures used to prevent recruitment overfishing, growth overfishing and promote sustainability. Research findings by McLoughlin et al. (1991) suggest that when significant fishing occurs on a bed of scallops, direct and indirect fishing induced mortality will account for much of the remaining stock that is not taken. Therefore, once fishing commences it is prudent to fully utilise the scallop resources in that bed, before a majority of the scallops in the bed die out, and rely on re-seeding of the heavily fished bed from protected beds in the same region An alternative management regime would be to manage the fishery solely through the introduction of quota SFRs. However, if fishing occurred on all beds, direct and indirect fishing induced mortality might account for much of the remaining stock. In this scenario, quota SFRs alone would not achieve sustainability and input controls, such as area closures to prevent fishing on some of the beds, would be necessary. One of the input controls used to manage the fishery under the plan is a direction that SFR holders must not fish in the fishery or in certain areas of the fishery. The management plan sets out a process for making a direction involving consultation between scientists, managers, industry and other stakeholders, using the latest available biological data, as well as the input of fishing operators. AFMA must give right holders seven days notice of a direction unless it is made in an emergency. The capacity to close areas of the fishery during the fishing season will significantly improve AFMA s ability to prevent recruitment and growth overfishing of the scallop stock. For example, in order to minimise incidental mortality to small scallops AFMA may close a bed where undersize scallops are greater that 20% of the stock before significant fishing has occurred that might otherwise result in direct and indirect fishing induced mortality accounting for the remaining stock. The need for administrative flexibility is incorporated into the management plan for the fishery by way of section 20 of the FM Act. This provides that AFMA may amend a management plan, but sets out the legislative requirement for the same consultation process undergone when determining the original plan. Further flexibility is available through the use of conditions on SFRs, where AFMA may vary certain arrangements, such as prior reporting requirements or where a Vessel Monitoring System must be used. Any amendments to the nature or amount of SFRs must, however, go through a defined legislative process, thereby providing security of access to operators and a stronger form of ongoing right than currently exists. 9

Appeal rights are specified under the management plan and the FM Act. There will be one appeal process, which is split into two parts. The first part of the appeal process relates to AFMA s registration of individuals as eligible for the grant of a SFR. If a person is not registered as eligible, that person may request an internal review by AFMA and then may appeal to the AAT. Once all appeals are heard and resolved, a final register of eligible persons is produced by AFMA. Based on this register AFMA then grants provisional SFRs to eligible persons. The second part of the appeal process involves appealing to the Statutory Fishing Rights Allocation Review Panel (SFRARP) about the quantity and type of SFRs to be granted. Everyone who has received a provisional grant of SFRs is a party to every appeal and may give evidence to the panel. The impact of each appeal (if successful) must be considered in the context of all other parties. Once this process is complete (including appeals on points of law to the Federal Court), AFMA will grant SFRs. There are no further avenues of appeal. The result is a better use of government resources in the pursuit of cost effective and efficient fisheries management than under one or five -year fishing permits. Impact on the environment Scallop stocks in the Bass Strait Central Zone Scallop Fishery have been overfished, leading to the closure of the fishery in 1999 and limited area access in 2000-2001 to enable the stocks to recover. The statutory management plan and associated policies have been developed by AFMA and stakeholders to provide a responsible framework for rebuilding stocks in the fishery and to address ecosystem impacts of the fishery. Section 148 of the Environment Protection and Biodiversity Conservation Act 1999 requires that AFMA must, before determining a plan of management under the FM Act, make an agreement with the Minister for the Environment and Heritage for assessment of the relevant impacts of actions under the plan. AFMA has prepared an assessment report in accordance with the Terms of Reference for the Strategic Assessment of the Bass Strait Central Zone Scallop Fishery. It provides an overview of the fishery and an assessment of the management arrangements for the fishery against the Commonwealth s Guidelines for assessing the ecologically sustainable management of fisheries. A draft of the assessment report was made available for public comment for a period of 60 days. At the conclusion of this period, AFMA, and the Bass Strait Central Zone Scallop Fishery Management Advisory Committee (ScallopMAC) reviewed the report in light of comments received. The amended assessment report for the Bass Strait Central Zone Scallop Fishery was approved by the AFMA Board and provided to the Minister for the Environment and Heritage. The Minister for the Environment and Heritage has given notice of his intent to accredit the plan under the Environment Protection and Biodiversity & Conservation Act 1991. This notice will be tabled with the plan, regulations and this regulation impact statement. Members can oppose the accreditation within the 15 days it sits in Parliament. A copy of the assessment report is available from AFMA. In summary, the assessment report explains that input controls are the primary means of addressing sustainability issues in the fishery, including preventing recruitment and growth overfishing. The key controls include: closure of two scallop beds each season to enable spawning to occur undisturbed (one in the east and one in the west of the fishery) by the making of a direction under the plan seasonal closures to protect juvenile scallops during early development by limiting fishing to a season stated in regulations for the fishery maintaining a minimum size limit such that 2 major spawnings are likely to have occurred closure of beds where juvenile scallops account for more than 20% of the catch by the making of a direction under the plan 10

The output controls total allowable catch and quota SFRs - will be the means of promoting economic efficiency in the fishery. Existing data indicates there are low levels of bycatch in the fishery and that there is a low risk of interaction with endangered, threatened and protected species. ScallopMAC has instigated a longterm data collection and monitoring and assessment strategy for the fishery. The bycatch action plan for the fishery contains a number of strategies and actions to further reduce bycatch including a trigger for implementing actions to reduce bycatch where concerns about sustainability are identified by the independent data collection, monitoring and assessment strategy. Since the bycatch action plan was developed, the logbook for the fishery has been amended to allow bycatch information to be recorded. AFMA is also working with Environment Australia to develop a generic protected species logbook. While information is lacking in some cases to address the Guidelines fully, in AFMA's professional judgement, the management arrangements in place are sufficiently precautionary to justify continued fishing under strict management controls. Impact groups Community The community is considered to be the Australian general public. As scallops in the wild are generally regarded as community owned resources, the community has an interest in this marine resource. Accountability for the impact on the environment that is achieved through the extensive process of consultation on the assessment report culminating in the accreditation of the management plan under the Environment Protection and Biodiversity Conservation Act 1999. The community also has an interest as the consumer of the product. Business (fishers) Access to the fishery is currently limited to the 154 fishing permit holders in the BSCZSF. As the fishery is primarily a winter fishery many fishers target squid and rock lobster during the summer months. The permit holders may have skippers or may conduct fishing operations themselves. AFMA does not have information on the numbers of holders that fish or have skippers. The scallop industry has been a valuable Commonwealth fishery, but the value of the fishery fluctuates widely depending on the status of the stocks. For example, the Australian Bureau of Agricultural and Resource Economics (ABARE, 1997) reported that the scallop fishery was worth approximately $14 million in 1995-96 and in 1996-97 (the first years for which separate data for the Fishery is available). Catches have declined since that time, but there is a potential for the fishery to be very productive, when recovery of the depleted Central Zone scallop stocks occurs. Government AFMA is the Commonwealth statutory authority responsible for ensuring the sustainable use and efficient management of Commonwealth fishery resources on behalf of the Australian community and key stakeholders. AFMA manages fisheries within the 200 nautical mile Australian Fishing Zone and, in some cases, by agreement with the Australian States to the low water mark. In doing so, AFMA provides management, advisory, compliance and licensing services and implements appropriate fisheries management arrangements. AFMA was established under the Fisheries Administration Act 1991 and manages fisheries under the Fisheries Management Act 1991. 11

AFMA s governing legislation gives it the responsibility for managing Commonwealth fisheries on behalf of the Commonwealth Government. While not involved in AFMA s day-to-day operations, the Minister for Forestry and Conservation and the Minister for Agriculture Fisheries and Forestry oversights AFMA s activities through key accountability provisions of the legislation. The impact of the options on community, business and government is summarised in Table 1. 12

Table 1: Summary of impact of options Option 1: Impact of the continuing to grant annual fishing permits Community Business (fishers) Government Benefits Costs Over exploitation of BSCZSF scallop stocks and hence reduced supply of these species from this fishery for current and future generations of consumers in medium and long term. (Possible) Poor use of a community owned natural resource in consequence of possibly less sustainable management of fishing under this option than compared to option 3. (Possible) Short term access to the BSCZSF granted. No long-term secure access rights to the fishery. (Certain) AFMA has discretionary powers over the granting of fishing permits and allocations of catch limits resulting in uncertainty (Certain) to the fishing industry. Dissipation of resource rents reflected in marginal operator profits. (Likely) Lack of confidence by fishers, investors and third party interests in the value and security (Possible) of fishing concessions. Reduced financial returns from BSCZSF species for current and future generations of fishers in medium and long term if stocks are over exploited. (Possible) AFMA has not implemented Government policy to develop and implement management plans for AFMA managed fisheries. (Certain) Appeals can be made every time a permit condition is changed. AFMA can exercise discretionary powers over the granting of fishing permits and changes to permit conditions. Government funds spent in possibly repetitive litigation. (Certain) Variations of area and seasonal closures are difficult to effect until fishing permits are regranted. This could increase the likelihood of not meeting AFMA s objectives with regard to its ESD objective. (Possible) Increased compliance costs compared to option 3, shared 50% by AFMA and the fishing industry because fishers having shortterm view of the fishery. (Possible)

Catch limits and area closures, etc are appealable every year, at least each time a new fishing permit is granted or conditions are amended causing destabilisation. (Possible) AFMA has discretionary powers over the granting of fishing permits and allocations of catch limits. (Certain) Incentive to engage in non-compliance with catch limits because fishers do not have ownership of decisions and do not take responsibility for the health of the resources due to short-term horizon of fishers resulting from annual permits. Fisher s pay 50% of the compliance cost through levy. (Possible) Scallops caught through noncompliance enter markets and reduce the price for scallops caught by other BSCZSF fishers who comply with the management arrangements. (Possible) 14

Option 2: Impact of granting fishing permits for five years Community Business (fishers) Government Benefits Costs Over exploitation of BSCZSF scallop stocks and hence reduced supply of species from this fishery for current and future generations of consumers in medium and long term. (Note any benefits resulting from slightly more secure access rights than under single year fishing permits are likely to be more than offset by AFMA s inability to effect area closures when needed to prevent recruitment and growth overfishing). (Likely) Poor use of a community owned natural resource. (Likely) No long-term secure access rights to the fishery, as access to the BSCZSF would only be granted every five years. (Certain) AFMA has discretionary powers over granting of fishing permits and allocation of a specified catch limit. (Certain) Catch and area closures etc are appealable at least every five years each time a permit condition is amended causing destabilisation. (Likely) Dissipation of resource rents reflected in marginal operator profits.(likely) Lack of confidence by fishers, investors and third party interest in the value and security of fishing concessions. (Likely) Incentive to engage in non-compliance with catch limits because fishers do not have ownership of decisions and do not take responsibility for the health of the resources due to relatively short term AFMA has not implemented Government policy to develop and implement management plans for AFMA managed fisheries.(certain) More difficult to vary area and seasonal closures under a five-year fishing permit, compared to an annual fishing permit. This could increase the likelihood of not meeting AFMA s objectives with regard to its ESD objective. (Likely) Increased compliance costs compared to option 3, shared 50% by AFMA and the fishing industry because fishers having shortterm view of the fishery.(possible) AFMA can exercise its discretionary powers over the granting of fishing permits and allocations of catch limits. Government funds spent in possibly repetitive litigation every time a fishing permit condition varied. (Possible) 15

horizon of fishers resulting from permits issued for five years. Fisher s pay 50% of the compliance cost through the levy. (Possible) Scallops caught through noncompliance enter markets and reduce the price of scallops by other BSCZSF fishers who comply with the management arrangements. (Possible) Reduced financial returns from BSCZSF species for current and future generations of fishers in medium and long term if stocks are over exploited. (Possible) 16

Option 3: Impact of a statutory management plan that provides for the grant of statutory fishing rights (SFRs) Community Business (fishers) Government Benefits Sustainable use of a community owned resource. (Likely) Sustainable exploitation of BSCZSF scallop stocks and hence more secure supply of species from this fishery for current and future generations of community in medium and long term. (Likely) Accreditation under the Environment Protection Biodiversity & Conservation Act 1991. (Certain) AFMA must grant SFRs to those who meet the conditions of eligibility and allocation. Long term secure access rights to the fishery.(certain) Confidence of fishers, investors and third party interests in the value and security of fishing concessions because of the more secure assess right.(likely) One appeal process when SFR s are initially granted under the management plan reducing the possible ligation incurred. (Certain) Eligibility and allocation of SFR provisions set out in the plan.(certain) One appeals process administered by Statutory Fishing Right Allocation Review Panel considers all appeals regarding SFR allocation at the outset of the plan and litigation is restricted to this initial period. No further appeals are possible once SFRs are allocated. This reduces the costs associated with appeals and litigation. (Certain) AFMA implements Government policy to develop and implement management plans in AFMA managed fisheries.(certain) Increased stability of management arrangements. (Certain) Greater industry flexibility allowing natural restructuring. (Certain) Continuity in stream of financial returns from harvesting BSCZSF species for current and future generations of fishers. (Possible). Create resource security and marketing advantage. (Possible) 17

Resource rents to be dissipated less than under other two options. (Likely) BSCZSF operators have greater ownership of decisions and exercise stewardship over the resources, taking responsibility for the health of the fishery - leading to improved compliance outcomes. (Likely) Fewer scallops caught through noncompliance entering the marketplace and competing with legitimately caught scallops. (Possible) Meets sustainability guidelines under Environment Protection and Biodiversity Conservation Act 1999 and therefore export markets remain open. (Certain) Costs Government funds used for the development of the management plan (to replace the plan under the Fisheries Management Act 1952). (Certain) 18

Recommended Option Implementing a statutory management plan that provides for the grant of SFRs will assist AFMA in achieving the desired objective. Maintaining the one year fishing permits option will not assist AFMA in achieving the desired objective. Introducing five-year fishing permits will only partially meet the desired objective. Consultation AFMA s management philosophy (as foreshadowed in its governing legislation) involves a partnership approach to the management of marine resources under its jurisdiction. Cooperation with relevant stakeholders, such as the fishing industry, government agencies, the community and others with an interest in the sustainable management of the Commonwealth s fisheries resources, is a vital part of this approach. This approach provides opportunities for stakeholders to have input into the management process through, in the case of the BSCZSF, the Bass Strait Central Zone Scallop Fishery Management Advisory Committees (ScallopMAC). In August 1997 AFMA released a discussion paper titled Future Management of the Bass Strait Central Zone Scallop Fishery as the first step in the process of developing a statutory management plan for the fishery. The paper developed by the now defunct Bass Strait Scallop Consultative Committee (BSSCC) detailed the wide range of future management options examined by the Committee. It was distributed to all BSCZSF fishing permit holders, State fisheries agencies and Environment Australia for comment. Whilst it indicated that the BSSCC favoured the introduction of individual transferable quotas (ITQs) coupled with a number of input controls, alternative suggestions were invited and it was made clear that no decision had been made as to how quotas would be allocated if an ITQ system were to be adopted. Port visits were made by AFMA officers during September and October 1997 to gather industry views on the management options proposed in the paper. Meetings were held in Melbourne, Lakes Entrance, Queenscliff, Launceston and Hobart. Those who attended the meetings supported the preferred approach of the BSSCC detailed in the discussion paper. A number of written submissions on the paper were also received. In December 1997 the AFMA Board approved the long term management arrangements for the Bass Strait Central Zone Scallop Fishery proposed by the Bass Strait Scallop Consultative Committee as follows: limited entry appropriate area/seasonal closures minimum size limit of 80 mm or greater at the widest diameter and a less than 20% discard rate individual transferable quotas (ITQs) 19