HD2 - The Economic Potential and Management of Virginia's Seafood Industry

  • Published: 1984
  • Author: Joint Legislative Audit and Review Commission
  • Enabling Authority: House Joint Resolution 59 (Regular Session, 1982)

Executive Summary:
The abundant resources of Virginia's waters and its mid-Atlantic location have contributed to making the Commonwealth a national leader in the commercial harvesting and processing of seafood. In FY 1981, the dockside value of the State's commercial catch exceeded $69,000,000, and the industry employed over 8,000 fishermen and thousands of seasonal workers in processing plants.

Virginia's competitive position, however, has declined in recent years due to several factors, competition from other states, changing consumer demand, fluctuating economic conditions, and legal challenges to residency requirements for fishing licenses.

House Joint Resolution 59 was enacted by the 1982 General Assembly in response to industry and legislative concern that the Commonwealth is not achieving the full economic potential of its marine resources. The resolution directed JLARC to review the nature and scope of the regulation of Virginia's fishing and seafood industries and their economic potential. The Commission was charged with developing policy alternatives to foster the State's competitive position, preserve the socio-economic well-being of those whose livelihood depends on the industry, and enhance State management and regulation.

Generally, JLARC found that the State's fishing and seafood industries appear to have significant economic potential. The outlook varies, however, with the species under consideration. Moreover, several of the policy options developed for enhancing this potential would require expanded management responsibilities for State agencies and concurrent organizational and program improvements. The viability of the industry is also dependent on the industry's commitment to its own development and to resource preservation.

POTENTIAL OF VIRGINIA'S SEAFOOD INDUSTRIES (pp. 15·64)

JLARC worked closely with industry representatives to assess the status and potential of each fishery. Econometric models were developed to simulate the impact of proposed changes on the oyster and hard clam industries.

Oyster Fishery. Virginia was the national leader in oyster production during the early part of this century. The industry has declined since 1960, however, due to a number of marketing and environmental factors.

Without some changes, the industry is likely to become stagnant. Policy options are available, however, to increase total State production of oysters by one-third over current levels by 1990. These options could maintain the viability of both public and private segments of the industry, while generating additional jobs and tax revenues.

Option 1: Maintain the status quo. Under this option, production would be allowed to stabilize at recent levels of about 8 million pounds annually. A continued decline would be predicted in production from public grounds and little growth in private production.

Option 2: Aggressively promote Virginia's oyster products. Increasing promotional efforts could increase consumer demand, raise retail prices, and ultimately stimulate increased production on public and private grounds. Aggressive State efforts in this area could increase the annual harvest by 401,000 pounds by 1990. This would represent an increase of $2.7 million in revenues. Results are not assured, however, because of the State's inability to control consumer demand.

Option 3: Double expenditures for repletion of public oyster grounds. Using the current programmatic approach, doubling the State's repletion expenditures would effect a moderate increase in the annual harvest for watermen using traditional tonging methods. A gain of 500,000 pounds, or $670,000 in revenue, is predicted. Increases in special taxes or general funds might be needed to support the program.

Option 4: Lower the market price for seed oysters. This option would encourage increased private investment in oyster production and reduce public repletion costs. Increases in the annual harvest could range from 1.7 to 3 million pounds, and increases in net revenues could range from $2.3 to over $4 million. This option would require active management of seed beds by VMRC and a departure from traditional methods of hand tonging seed oysters in the James River in order to gain price benefits from more efficient dredging methods.

Option 5: Manage unproductive public grounds by State planting of seed and shell, and allow dredging as a harvesting method. This option would increase production from public grounds and make the industry more reliant on State efforts to maintain oyster production. Annual production from public grounds is predicted to increase by 3.4 million pounds, and revenues by $4.7 million. Legislation would be needed to create additional State management areas. VMRC would have to actively replete these areas and monitor the effects of dredging on production and the bottoms.

Option 6: Lease portions of the public grounds. This option, as compared to Option 5, would stimulate additional private investment in the cultivation and harvesting of oysters. By leasing up to 1,000 acres of public grounds, the State could increase annual oyster production by 3.4 million pounds and revenues by $4.6 million. Legislation would be necessary to redefine the constitutionally-protected natural growing areas in order to allow leasing of currently unproductive bottoms.

The six policy options proposed for the oyster fishery are ranked in terms of the degree of State involvement and the amount of change required. Options 1-3 are extensions of current management activities, while options 4-6 constitute new management initiatives. None of the options, however, would restore production to pre-1960 levels. It is also important to note that the proposed policies are not mutually exclusive.

Hard Clam Industry. Despite increases in prices and the number of harvesters, Virginia's share of Atlantic Seaboard production of hard clams declined from ten percent in 1970 to five percent in 1980. Without changes in the management of the fishery, further declines are likely. Policy options are available, however, to increase annual revenues more than 2-1/2 times over the levels otherwise predicted.

Option 1: Maintain the status quo. On the basis of recent trends, the industry will experience a moderate decline and stabilize at an annual harvest of 587,500 pounds.

Option 2: Sustain the harvest from naturally productive hard clam grounds. The downward trend in clam production may be due either to stock reduction or to the high level of harvesting effort. Moreover, the exact number of licenses required to maximize revenues would be difficult to determine because of imprecise methods of measuring effort. Current clam stock may need to be protected until a study can be conducted to determine actual conditions.

Option 3: Cultivate new clam growing areas and allow the use of hydraulic escalator dredges year-round. The use of up to 20 of these dredges could be allowed on grounds managed or leased by the State. If dredging were allowed during the entire year, annual revenues could increase more than 2-1/2 times over the levels otherwise predicted. The application of this option would depend on the success of a current VIMS project to cultivate hard clams in commercial quantities.

Option 4: Cultivate new clam growing areas and allow the use of hydraulic escalator dredges during the summer months only. Under summer-only operation, peak harvesting periods would coincide with peak demand. This would enable Virginia to take advantage of increased supply with the least impact on prices paid to watermen. Total revenues could increase more than 2-1/2 times over the levels otherwise predicted.

Option 5: Cultivate new clam growing areas and allow the use of hydraulic escalator dredges during winter months only. By concentrating dredging efforts in the winter, Virginia could increase its share of national clam production at a time when cold water temperatures prohibit harvesting in many other states. Although prices would decline more than under Options 3 and 4, total revenues would increase nearly 2-1/2 times over the levels otherwise predicted.

Options 1 and 2 emphasize protection and utilization of current hard clam grounds. Options 3-5 call for the creation of new growing areas and the use of hydraulic escalator dredges, which are currently prohibited in Virginia. Analysis has shown that the use of dredges would not have significant negative impacts on clam growing bottoms or on the incomes of watermen.

Blue Crab Industry. The abundance of crabs in the Chesapeake Bay, combined with high consumer demand and new processing techniques, makes the potential of Virginia's blue crab industry favorable. However, recent court decisions have nullified Virginia's residency requirements, allowing unrestricted access into the lucrative winter dredging of crabs. Some industry members fear that their incomes and the future potential of the fishery may be threatened. Further assessment is necessary to determine the impact of these concerns.

Finfish Industry. The State's finfish industry has the potential for considerable growth due to several factors, the nutritional value of fish and the relatively low cost per pound; the accessibility of major seafood ports within the State; new product forms; and new markets. The development of cooperatives or seafood industrial parks may enable processors and harvestors to take advantage of greater efficiencies.

Recommendation: The General Assembly may wish to consider adopting a resolution which requests the Secretary of Commerce and Resources to report on the steps and considerations necessary to implement, in full or on a pilot basis, the economic and administrative policy options presented in this study and to clearly state the administration's point of view on both the adverse and beneficial consequences of each of the various policy options.

Recommendation: After considering the report of the Secretary of Commerce and Resources, the General Assembly may wish to implement one or more policy options contained in this study on a limited, pilot basis to permit evaluation of the actual impacts on biological, social, and economic conditions.

Recommendation: Prior to any increase of harvesting effort in current hard clam growing areas, VMRC and VIMS should conduct a joint study to determine whether the downward trend in clam production is actually due to stock reduction or the level of harvesting effort. On the basis of this study, the State may wish to consider methods of restraining entry or catch, or methods for developing a replenishment program.

Recommendation: Econometric modeling has been shown to be a useful tool for assessing management alternatives and monitoring results in the oyster and clam fisheries. Building on the techniques used in this study, VMRC should take the lead in refining these techniques, giving them broader application, and utilizing them to make fisheries management decisions. In expanding these techniques, VMRC should utilize the fisheries and economics expertise at VIMS and VPI&SU.

FISHERIES MANAGEMENT BY THE VIRGINIA MARINE RESOURCES COMMISSION (pp. 85-115)

The Commonwealth's lead fisheries agency, the Virginia Marine Resources Commission, is responsible for protecting the State's marine resources, promoting the general welfare of the seafood industry, and enforcing all fisheries laws. However, it has not sufficiently used its existing authority. Despite some changes, two of the agency's major functions-oyster ground management and enforcement-continue to suffer from deficiencies identified in earlier management reports.

Agency Structure and Management Capacity. No organizational unit is responsible for managing all fisheries-related responsibilities or for systematic description, evaluation, and monitoring of fisheries conditions. Currently six units with fisheries responsibilities report directly to the Commissioner, who must then synthesize the technical information. The agency's effectiveness could be significantly enhanced by the creation of an all-inclusive fisheries management unit, headed by an individual with strong organizational skills and a background in fisheries management. Further, empowering the Commissioner to appoint all personnel would ensure clarity in reporting relationships and authority.

VMRC does not have a systematic means for meeting its data processing needs or for collecting fisheries information. Although large quantities of data are collected by various VMRC units, most of this data is manually maintained and is not regularly integrated for management purposes. The agency has not developed the species-specific management plans necessary for quick response to economic and biological threats to each fishery. The lack of such plans has, in part, prevented VMRC from exercising its full authority in recently designated management areas. The agency does not actively plan for the fisheries, monitor conditions, or evaluate the impact of regulatory or management actions in these areas.

Currently, all fisheries management parameters (e.g., seasonal restrictions, administrative procedures, fees) are specified in statute. This situation limits VMRC's ability to respond quickly to changing fisheries conditions. Transferring these parameters from statutory provision to administrative regulation would enhance the agency's management capabilities.

Oyster Ground Management. Several problems have been identified with VMRC's programs for repletion and oyster ground leasing. Many of these problems were also identified in JLARC's 1977 study. Although some corrective action has been taken, the problems have not been fully addressed.

The repletion program for public grounds receives general funds and special fund revenues. JLARC found a sizeable balance of special funds averaging $602,460 - from January 1979 to October 1982. This balance and spending patterns in recent years indicate that general funds are being spent first, and are being supplemented with special funds. This practice appears contrary to legislative intent.

In addition, the agency's accounting practices need revision to ensure that special funds are expended according to statutory provisions.

VMRC continues to have a substantial backlog of applications for oyster ground leases. The agency needs to develop a strategy for reducing this backlog, as well as a strategy for identifying inappropriately used grounds.

Marine Enforcement. Problems relating to the role of the district inspector and patrol activities continue to impede the division's effectiveness. VMRC needs to assess and revise job classifications and patrolling procedures to ensure that the best use is made of enforcement staff and equipment.

Recommendation: VMRC should create a fisheries management unit, to include the statistics section, liaison officer, repletion department, and engineering and survey division.

Recommendation: The General Assembly may wish to amend the Code of Virginia to give the Commissioner exclusive authority to appoint Commission employees.

Recommendation: VMRC should continue its efforts to develop a comprehensive data processing system. The agency should also improve the quality and completeness of its statistical information by methods such as those suggested in this report.

Recommendation: VMRC should develop fishery-specific management plans for species within the Bay and assess the relevancy of interstate plans to Virginia's needs.

Recommendation: The General Assembly may wish to consider amending the Code of Virginia to transfer the details of gear and seasonal restrictions, enforcement methods, and licensure fees to administrative regulation. Consideration might be given to granting VMRC regulatory guidelines similar to those granted the Commission of Game and Inland Fisheries.

Recommendation: VMRC should improve its fiscal planning, allocation, and accounting processes to ensure that special repletion funds are used for the purposes intended. In addition, the General Assembly may wish to clarify how the funds may be used for "administration" of the program and for repletion purposes.

Recommendation: VMRC should consider instituting the procedures specified in this report to improve its tax collection efforts while reducing the involvement of enforcement personnel.

Recommendation: VMRC should take steps to ensure that procedures for handling the processing of lease applications are in compliance with Code requirements. Further, the agency should take the steps specified in this report for expediting the application process.

Recommendation: The General Assembly may wish to consider raising the rent on oyster leases and requiring more frequent evidence of appropriate use to discourage non-productive holding of private leases.

Recommendation: VMRC should reclassify its enforcement positions and reassess current practices for the deployment of personnel and equipment to ensure that the best use of resources is made.

PROMOTION, ADVISORY SERVICES, AND INSPECTIONS (pp 105-136)

In addition to the VMRC, several other State agencies provide essential support to the Commonwealth's seafood industry. Promotion is the primary goal of the Marine Products Commission, while research and advisory services are the mission of the Virginia Institute of Marine Science (VIMS).

Other agencies involved in research and providing advisory services include Virginia Polytechnic Institute and State University (VPI&SU), Old Dominion University, and the University of Virginia. Responsibility for inspecting shellfish and finfish processing facilities is divided between two agencies, The Bureau of Shellfish Sanitation within the State Department of Health (SDH) and the Department of Agriculture and Consumer Services (DACS).

Although each of these agencies makes a significant contribution within its particular area, there is a general need for better coordination of activities, a more intense focus on industry problems, and clearer avenues of communication. For example, the current sharing of inspection responsibilities between SDH and DACS results in duplication. Moreover, with funding cuts anticipated, VIMS will need to carefully consider its research priorities.

Recommendation: The Marine Products Commission should aggressively pursue new markets and support the industry in developing the capacity to use new opportunities. The agency should work with representatives of VPI&SU, VIMS, and DACS to establish more formal coordination and planning of the State's seafood promotional activities. In addition, the Commission should take steps to ensure that all Seafood processing firms are aware of its services.

Recommendation: As part of its research planning process, VIMS should establish a formal mechanism for soliciting the advice of industry and marine agencies.

Recommendation: The General Assembly may wish to create one advisory committee, representative of all major segments of the industry and marine agencies, to advise and comment on the research activities of Sea Grant, VPI&SU, and VIMS.

Recommendation: The Bureau of Shellfish Sanitation should take steps to formalize and standardize its policies regarding plant certification, inspection procedures, and repeat violations.

Recommendation: To ensure inspection of all finfish processing facilities, the General Assembly may wish to amend current statutes to require registration or certification. In addition, the General Assembly may wish to provide DACS with interim sanctions to enforce compliance with standards.

Recommendation: DACS should develop, where applicable, more specific standards and a checklist for inspections of finfish processing facilities. Further, the agency should develop guidelines for use by regional supervisors in classifying facilities for official action.

Recommendation: The General Assembly may wish to clarify the statutory authority for conducting seafood plant inspections. The Assembly may also wish to consider centralizing this function into one agency.

POLICY AND MANAGEMENT FRAMEWORK (pp. 137-148)

Virginia does not have a clearly stated policy for comprehensive fisheries management. As a result, there has been little consistency in the State's management approach, and different goals have been favored at different times. This report has identified agency- and fishery-specific improvements to strengthen the management and increase the potential of the industry. Broader actions are also possible, however, to address the framework within which the State's fisheries-related activities are carried out.

Major elements for a State fisheries policy have been suggested by the Council of State Governments and in the federal fisheries management act. They include, ensuring the continued existence of species; supporting recreational and commercial usage; and managing on the basis of scientific information, with the objective of optimum utilization.

In addition, because so many agencies carry out activities relating to the seafood industry, coordinative mechanisms are needed to ensure that those activities are not duplicative or conflicting and are placed within the broader context of natural resource management. A coordinating committee composed of agency and industry representatives could be formed by the Secretary of Commerce and Resources to foster communication, establish priorities, and clarify roles. Consideration could also be given to establishing a position of Assistant Secretary for Natural Resources within the Office of the Secretary of Commerce and Resources. The Assistant Secretary could provide a focus for resource issues within the overall span of responsibility assigned to the Secretary.

Another option which has been considered in Virginia is the creation of a unified Department of Natural Resources, to include a Division of Fisheries Management. This organizational structure is used, in somewhat different forms, in Maryland and North Carolina.

Recommendation: The Secretary of Commerce and Resources should be requested to draft for consideration by the 1984 General Assembly a statement of a specific fisheries policy, as outlined in Chapter V of this report, which can serve as a guide to resource managers in their decision-making and facilitate a management approach consistent with long-term State goals and objectives.

Recommendation: The Governor and the General Assembly may wish to consider structural changes to enhance coordination among marine resource agencies and to place marine resources within a broader natural resource context.