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Date:07/19/2001
Session:107th Congress (First Session)
Witness(es):Chris Elfring
Credentials:  Director, Polar Research Board, Division on Earth and Life Studies, The National Academies and Study Director, Committee to Review the Community Development Quota Program, Ocean Studies Board, National Research Council
Chamber:House
Committee:Fisheries Conservation, Wildlife, and Oceans Subcommittee, Committee on Resources, U.S. House of Representatives
Subject:Alaska Town Fishing Royalties

THE COMMUNITY DEVELOPMENT QUOTA PROGRAM:
SUMMARY OF A REVIEW BY THE NATIONAL ACADEMIES

Statement of

Chris Elfring
Polar Research Board
Ocean Studies Board
Division on Earth and Life Studies
National Academy of Sciences
The National Academies

before the


Subcommittee on Fisheries Conservation, Wildlife, and Oceans
Committee on Resources
U.S. House of Representatives

July 19, 2001

Good morning Mr. Chairman and members of the Subcommittee. Thank you for this opportunity to speak to you about the Community Development Quota program. My name is Chris Elfring and I am Director of the Polar Research Board at the National Academies. In addition to my role as director of the PRB, I served as the study director (lead staff person) for the National Research Council’s Committee to Review the Community Development Quota Program, which was conducted in under the oversight of the NRC’s Oceans Studies Board. As you know, the National Research Council is the operating arm of the National Academy of Sciences, National Academy of Engineering, and Institute of Medicine, and was chartered by Congress in 1863 to advice the government on matters of science and technology.

In the Magnuson-Stevens Fishery Conservation and Management Act of 1996, Congress mandated that the National Academy of Sciences review the CDQ program in Alaska and evaluate its applicability in the western Pacific. In response, we put together a committee of 10 volunteer experts who spent about 18 months talking with people, gathering data, and deliberating on the strengths and weaknesses of what was then a relatively new program. The committee produced its final report, complete with conclusions and recommendations, in 1999. My testimony today provides an overview of the findings of that study. My written testimony provides additional detail and I’ve also provided staff with copies of the full final report.

STRENGTHS AND WEAKNESSES OF THE CDQ PROGRAM

The Community Development Quota (CDQ) program was implemented in December 1992 by the North Pacific Fishery Management Council. The CDQ program allocates a portion of the annual fish harvest of certain commercial species directly to coalitions of villages, which because of geographic isolation and dependence on subsistence lifestyles have had limited economic opportunities. The program is an innovative attempt to accomplish community development in rural coastal communities in western Alaska, and in many ways it appears to be succeeding. The CDQ program has fostered greater involvement of the residents of western Alaska in the fishing industry and has brought both economic and social benefits. The program is not without its problems, but most can be attributed to the newness of the program and the inexperience of participants. Overall the program appears on track to accomplishing the goals set out in the authorizing legislation: to provide the participating communities with the means to develop ongoing commercial fishing activities, create employment opportunities, attract capital, develop infrastructure, and generally promote positive social and economic conditions.

Because the program was still relatively new at the time of our evaluation (1998-1999), the data necessary for detailed evaluation were limited and it was not yet possible to detect long-term trends. The six CDQ groups, organized from the 56 eligible communities (later expanded to 57), were of varying sizes and took varying approaches to harvesting their quota and allocating the returns generated. Although not all groups have been equally successful, there were significant examples of real benefits accruing to the communities. All six groups saw creation of jobs as an important goal and stressed employment of local residents on the catcher-processor vessels and shoreside processing plants. All incorporated some kind of education and training component for residents, although to different degrees and with different emphases. Another benefit of the program is that the periodic nature of employment in the fishing industry preserves options for the local people to continue some elements of their subsistence lifestyles. The CDQ program generates resources that give local communities greater control of their futures. The State of Alaska also has played its part relatively effectively it was efficient in reviewing the Community Development Plans, monitoring how the communities progressed, and responding to problems. Some of these responses, like reallocating quota share among communities, have been controversial, as might be expected.

Perhaps the greatest weakness of the CDQ program as implemented is a lack of open, consistent communication between the CDQ groups and the communities they represent, particularly a lack of mechanisms for substantial input from the communities into the governance structures. There has also been a lack of outreach by the state to the communities to help ensure that the communities and their residents are aware of the program and how to participate. For the CDQ program to be effective there must be a clear, well-established governance structure that fosters exchange of information among the groups' decisionmakers, the communities they represent, and the state and federal personnel involved in program oversight.

Some debate has centered on uncertainty about the intended beneficiaries of the program. It is unclear whether the program is intended primarily for the Native Alaskan residents of the participating communities or, if not, whether the governance structures should be modified to ensure that non-Native participation is possible. Similarly, there has been dissatisfaction among segments of the fishing industry that are not involved, either directly or as partners of CDQ groups, who believe that the program unfairly targets a particular population for benefits. This conflict is inevitable, given that the CDQ program is designed to provide opportunities for economic and social growth specifically to rural western Alaska. This policy choice specifically defines those to be included and cannot help but exclude others.

Although it is logical to require initially that all reinvestment of profits be in fishery-related activities because the initial objective of the CDQ program is to help the participating communities to establish a viable presence in this capital intensive industry, over time there should be more flexibility in the rules governing allocation of benefits perhaps still requiring most benefits to be reinvested in fishing and fisheries-related activities but allowing some portion to go to other community development activities. This will better suit the long-term goal of the program, which is development of opportunities for communities in western Alaska.

The main goal of the CDQ program community development is by definition a long-term goal. Thus there is a need for a set and dependable program duration and the certainty that brings to oversight and management. This will allow CDQ group decisionmakers to develop sound business plans and will reduce pressures to seek only short-term results. However, calling for the program to be long-term does not mean it must go on indefinitely nor that it must never change. Periodic reviews should be conducted, and changes made to adapt rules and procedures as necessary. There can be a balance between certainty and flexibility if the program is assured to exist for some reasonable time (e.g., ten years) and if major changes in requirements are announced in advance with adequate time to phase in new approaches (e.g., five years). The appropriate time scales will of course vary with the nature of the change, with minor changes requiring little notice and major changes requiring enough time for decisionmakers and communities to plan and adjust.

Another long-term issue is environmental stewardship. The CDQ program as currently structured is, in large part, about economic development, but economic sustainability is dependent upon long-term assurance of a sound resource base the fisheries. Thus, to be successful over the long-term the CDQ program will need to give more emphasis to environmental considerations. While this report reviews the CDQ program in a broad way, there remains a need for periodic, detailed review of the program over the long term (perhaps every five years), most likely conducted by the State of Alaska. Such a review should look in detail at what each group has accomplished the nature and extent of the benefits and how all funds were used. For a program like this, care must be taken not to use strictly financial evaluations of success. Annual profits gained from harvest and numbers of local people trained are valuable measures, but they must be seen within the full context of the program. It is a program that addresses far less tangible elements of "sustainability," including a sense of place and optimism for the future.

LESSONS FOR OTHER REGIONS

What emerges from a review of the western Alaska CDQ program is an appreciation that this program is an example of a broad concept adapted to very particular circumstances. In Alaska, where there were clearly definable communities, the fishery was already managed by quota with a portion of the quota held in reserve, and the communities had previous experience working within corporate-like structures. Others interested in the application of CDQ-style programs are likely to have different aspirations and different contexts. Wholesale importation of the Alaska CDQ program to other locales is likely to be unsuccessful unless the local context and goals are similar.

One region where the expansion of the CDQ concept has been considered is in the western Pacific, but such an expansion would need to be approached cautiously because the setting and communities are very different.

The major differences between the fisheries and communities of the two regions are: the general lack of management by quota or total allowable catch (TAC) in the western Pacific; the pelagic nature of the valuable fisheries in the region; and the lack of clear, geographically definable "native" communities in most parts of the region. Application of the CDQ program to the western Pacific would require the Western Pacific Regional Fishery Management Council to define realistic goals that fit within council purposes and plans. Definitions of eligible communities would need to be crafted carefully so the potential benefits accrue in an equitable fashion to native fishermen.

Any new program, especially one with the complex goal of community development, should be expected to have a start-up period marked by some problems. During this early phase, special attention should be given to working out clear goals, defining eligible participants and intended benefits, setting appropriate duration, and establishing rules for participation. There should be real efforts to communicate the nature and scope of the program to the residents of any participating communities, and to bring state and national managers to the villages to facilitate a two-way flow of information. In addition to these operational concerns, those involved the residents and their representatives must develop a long-term vision and coherent sense of purpose to guide their activities.

CONCLUSIONS AND RECOMMENDATIONS

Here are the detailed conclusions and recommendations as presented in the committee’s final report, "The Community Development Quota Program in Alaska" (National Research Council, 1999).

Conclusion 1: Community Development Strategies

Although the Community Development Plans developed by the different CDQ groups are similar in some important respects, the specific elements included vary considerably. Each CDQ group derives income from the large-scale pollock fishery through royalties and employment, and each seeks to develop nearshore fisheries using smaller vessels. The diversity of infrastructural investments, training programs, and financial strategies adopted by the CDQ group does, in our judgment, appropriately reflect varying circumstances and reasoned approaches to diverse problems. To some extent the development plans were shaped by uncertainty about the duration of the CDQ program and by the restriction that the CDQ plans must focus on fishery development. For example, the uncertainty may have encouraged at least one CDQ group to seek a quick financial gain through sale of their processing quota rights in perpetuity. We found this permanent conveyance to be inconsistent with the philosophy and intent of the CDQ program. Finally, the economic and cultural development of these communities may at times be advanced through non-fishery employment or investments. Hence, we found no strong reason to require communities to use funds generated from their CDQs to invest only in fisheries.

Recommendations

• We recommend that the State of Alaska prohibit permanent conveyance of community development quotas into the hands of commercial enterprises outside the communities. An important aspect of the community development sought in western Alaska is the continuing and direct involvement of local people in fisheries of the Bering Sea. Sale of the CDQs to commercial interests outside the communities will create an inappropriate separation of the people from the regional resources.

• We recommend that the restriction that CDQ revenues to be invested only in fishery-related activities should be removed, at least for some portion of the revenues. Many of the communities will find that fishery investments are still the ones they wish to undertake. However, since community development is broader than fishery development, funds should also be available for other activities that will enhance community infrastructure or land-based economic activity. This broadening of the allowed investments would also remove uncertainty about whether particular investments are indeed "fishery related" and thus allowable under current rules.

Conclusion 2: Participation and Benefits

The CDQ program has had an important positive economic impact on western Alaskan communities. Significant revenues have been generated and employment has been enhanced, especially for the mobile members of the community. In addition, the general educational and training programs have been as beneficial as specific fisheries employment.

Recommendations

• The Community Development Plans (CDPs) should be careful to balance the mix of local fishing with wage-earning opportunities with fishing partners. This is important because local fishery development can occupy less mobile village residents, while wage-earning opportunities in the industrial fleet are especially important for younger adults. A focus on local fisheries opportunities, where they exist, for permanent village residents will more closely tie the CDQ program to the village economics.

• To improve the effectiveness of developing a well-trained workforce, the CDQ groups need a strategic plan for education and training programs. This would include internships and technical training for direct employment with the industrial fishing partners of the CDQ groups, formal university education in fields pertinent to the development goals of native residents, and training of administrators and board members of CDQ organizations. The ultimate objectives would be to develop both the business acumen and labor productivity of village residents.

Conclusion 3: Governance and Decision-Making

The CDQ groups were given a unique governance structure that includes elements of both State and federal oversight, which is appropriate given the goals of the program. But the extensive and variable criteria used by the State and federal governments in allocating quota among the groups causes decisionmaking to be inconsistent and difficult to evaluate. That the lists of evaluation criteria are not entirely consistent with one another in either content or order of listing presents additional opportunity for confusion among the CDQ groups and the public in evaluating the logic and fairness of the decisions made by the governor and ratified by the Secretary of Commerce.

Recommendations

• State and federal criteria for the allocation of quota based on performance and plans should be less complicated than they are and should also be consistent with one another. We recommend that changes be made to simplify the criteria, in consultation with the CDQ groups.

• The committee notes that the criteria currently are used for two purposes: to allocate quota equitably and to encourage good management. One way to clarify some of the confusion created by using the criteria in this way would be to separate these two purposes into two allocations of quota. A "foundation quota" would address issues of equity and a "performance quota" would address issues of performance. The foundation quota (likely more than half of the allocation) would be allocated on measures of population, income, employment, and proximity to the fishery being allocated. The performance quota (the remainder) would be allocated based on clearly defined performance measures such as accomplishments of the CDP goals, compliance with fishing regulations (e.g., regarding bycatch), quality of community development plans, and so forth.

• One way to improve responsiveness of the CDQ groups’ managers to the communities would be to improve communication. Although the idea of locating the headquarters of the CDQ groups near potential business partners and the State government may have made sense in the early years of the program, as it matures and the management proves its business capability, relocation of the headquarters to the communities may have significant benefits in terms of responsiveness to the desires of the community members.

• Communication would be further improved if the confidentiality rules and the rules for making information available to constituents were improved. NMFS and the state needs to collaborate to resolve any potential conflicts between state laws regarding the confidentiality of financial data and the evaluation of the CDQ program objectives. Information on the number of people employed by the program and the earnings in each of the communities should be provided.

• Although some of the CDQ groups have created newsletters, a requirement that newsletters to communicate with constituents, town meetings, or other forms of communication appropriate to reach community members might be a helpful step in improving communication in the communities.

Conclusion 4: Development of Human Resources

Education, training, and other activities to develop human resources in the participating communities are an explicit part of the CDQ program mandate and a key element in ensuring the program’s success because stable, healthy communities depend as much on people as on economics.

Recommendations

• To be truly effective, the CDQ groups must have education and training elements. These elements should not be haphazard, but carefully planned and coordinated so they meet community needs. Both vocational training and support for higher education will help members of the community acquire the skills and knowledge needed for more advanced technical and managerial positions. The number of people receiving education and training should be provided.

• CDQ groups need to do a better job disseminating information that describes the educational and training opportunities open to the use of program funds. They also need to improve their recordkeeping of education and training initiatives so the results can be monitored over time. A common framework for recording and reporting their efforts would be useful.

Conclusion 5: Program Duration

The CDQ program must be a long-term program because it deals with a long-term issue: development of healthy, sustainable communities in coastal Alaska. Long-term economic development requires stability in the underlying policy base so decision-makers can make choices that balance current and future needs.

Recommendations

• The original CDQ program was a three-year trial. It was subsequently extended and then made a more permanent part of the fishery management system with the passage of the Magnuson-Stevens Fishery Conservation Act reauthorization in 1996. This program has been successful in bolstering community development in western Alaska. It has passed a crucial point in its evolution and we should expect the allocation of harvests to the CDQ groups to become a long-standing, if not permanent, feature of the federal fishery management system in the North Pacific.

• The committee recommends that the CDQ program should be reviewed on a periodic basis to determine if the preliminary trends observed by the committee continue in the future. Reviewing the CDQ program in another five years may provide important additional information on the effects of the program and provide valuable suggestions for its management.

Conclusion 6: Economic Sustainability and Environmental Stewardship

Economic sustainability implies programs and policies that offer the greatest assurance of economic options over the long-term to a population that chooses to remain in specific locations. That is, given alternative economic futures for a people (or for a community), economic sustainability would entail choosing that future with the lowest probability of inducing economic decline as measured by a range of indicators. Economic sustainability is but one part of the larger problem of ecological and socio-cultural sustainability. Clearly, communities that squander their local environmental resources (or that fail to maintain cultural and social processes and structures) will be incapable of economic sustainability. Large-scale commercial fishing activities can have negative impacts on ecosystems, either independently or through interaction with natural fluctuations. Because the CDQ program is designed specifically to increase participation in fisheries activities and at the same time improve the long-term economic conditions of the participating communities, greater emphasis should be given to environmental stewardship.

Recommendations

• Concern for the long-term health of the Bering Sea ecosystem needs to feature more prominently in the CDQ program. Local concerns about environmental stewardship need to be able to be expressed in a meaningful way throughout the program’s management structure, beginning with effective communication of local concerns to the CDQ group management and continuing on up through the Council process. The quota allocation process can be used to increase the emphasis on environmental stewardship.

• Economic sustainability is dependent upon sound environmental stewardship. In order for the CDQ program to help build a sustainable economy in the region, it is imperative that the underlying resource base—the fisheries—be used in ways that are sustainable over the long-term. This will require explicit, in-depth, continuing analysis of the condition or health of the fishery resource and management that can respond and adapt to changes in this condition.

Conclusion 7: Relevance of the CDQ Experience to the Western Pacific

The CDQ program was designed specifically to address the issues and environment of western Alaska and thus is not appropriate, in its current form, for the Western Pacific Region. If similar goals such as inclusion of native communities in fisheries are desired in the region, a program could be tailored to the conditions of the western Pacific, although fisheries in the region are not now generally managed by quota. There should be real efforts to communicate the nature and scope of the program to the residents of the participating villages to facilitate a two-way flow of information. In addition, geographic criteria for eligibility would be difficult to apply because the communities are widely dispersed. As the Western Pacific Regional Fishery Management Council considers the Alaskan CDQ experience and the differential performance of the CDQ groups, it should recognize that CDQs constitute only one possible model for community-development in fisheries. But if CDQ-type programs are seriously considered for the western Pacific the committee recommends:

• CDQ-type programs in the western Pacific would need to define realistic goals that fit within Council purposes and plans, and definitions of eligible communities would need to be crafted carefully.

• To assist in the design of such programs, lessons can be learned from detailed study of the Alaskan experience related to program structure, costs, oversight, performance evaluation, and other administration issues.

FINAL THOUGHTS

What emerges from a review of the western Alaska CDQ program is an appreciation that the program is an example of a broad concept adapted to very particular circumstances. Other interested in the application of CDQ-style programs are likely to have different aspirations and different contexts. Wholesale importation of the Alaskan CDQ program to other locales is likely to be unsuccessful unless the local context and goals are similar.

Any new program, especially one with the complex goal of community development, should be expected to have a start-up period marked by some problems. During this early phase, special attention needs to be given to work out clear goals, define eligible participants and intended benefits, set appropriate duration, and establish rules for participation. In addition to these operational concerns, those involved--the residents and their representatives--must develop a long-term vision and coherent sense of purpose to guide their activities.

For the CDQ program to be effective there must be a clear, well-established governance structure that fosters exchange of information among the groups’ decision-makers, the communities they represent, and the state and federal personnel involved in program oversight. Greater openness of information is critical, as is regular detailed review.

Although it is logical to require initially that all reinvestment of profits be only in fishery-related activities because the initial objective of the CDQ program is to help the participating communities establish a viable presence in this capital-intensive industry, over time there should be more flexibility in the rules governing allocation of benefits--perhaps still requiring most benefits to be reinvested in fishing and fisheries-related activities but allowing some portion to go to other community development activities. This will better suit the long-term goal of the program, which is development of opportunities for communities in western Alaska.

The main goal of the CDQ program--community development--is by definition a long-term goal. Thus, there is a need for a set and dependable program duration and the certainty that it brings to oversight and management. This will allow CDQ group decision-makers to develop sound business plans and reduce pressures to seek only short-term results. However, calling for the program to be long-term does not mean it must go on indefinitely nor that it must never change. Periodic reviews should be conducted, and changes made to adapt rules and procedures as necessary. There can be a balance between certainty and flexibility if the program is assured to exist for some reasonable time and if major changes in requirements are announced in advance with adequate time to phase in new approaches. The appropriate time scales will of course vary with the nature of the change, with minor changes requiring little notice and major changes requiring enough time for decision-makers and communities to plan and adjust.

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