Atlantic Sea Scallop Fishery: Fishing Year 2023 Observer Compensation Rate Calculation Summary

We encourage vessel owners, captains, crews, industry representative groups, and the New England Fishery Management Council to review the calculation.

If you would like to provide feedback on this calculation, please send it to the following:

• By mail to: Michael Pentony, Regional Administrator, Greater Atlantic Regional Fisheries Office, 55 Great Republic Drive, Gloucester, MA, 01930. Please write “Comments on  Fishing Year 2023 Scallop Fishery Observer Compensation Rates”
• By email to: Louis.Forristall@noaa.gov
• By Fax to: (978) 281-9207

Compensation Rates by Fleet

The fishing year 2023 compensation rates for Limited Access (LA) vessels are:

• 0.11 per days-at-sea (DAS) fished (the vessel is charged 0.89 DAS for each DAS fished with an observer onboard).

• 250 lb per day or part of a day for access area trips in addition to the vessel’s possession limit for the trip when carrying an observer.

The fishing year 2023 compensation rate for Limited Access General Category (LAGC) individual fishing quota (IFQ) vessels is:

• 250 lb for the first 24 hours (open and access areas) in addition to the daily possession limit when carrying an observer. For trips that exceed 24 hours, the trip will be prorated into 2 additional 12-hour increments with each prorated increment receiving an additional 125 lb for a maximum of an additional 24 hours and 250 lb.

The fishing year 2023 compensation rate for LAGC Northern Gulf of Maine (NGOM) vessels is:

• 125 lb per trip in addition to the vessel’s possession limit for the trip when carrying an observer.

We selected these compensation rates because they should provide sufficient compensation for the observer fee while also providing sufficient observer coverage based on anticipated coverage levels needed for fishing year 2023. 

We calculated all observer compensation rates assuming a daily rate of $733 for the observer, and used an average scallop price of $14.89 per pound for LA open area trips, $16.65 per pound for LAGC open area trips, $13.36 per pound for LA access area trips, $14.88 per pound for LAGC access area trips, and $19.75 for NGOM trips. We estimate the compensation rates provide the following average buffers over the daily cost of the observer:

• $2,600 per day for LA
• $2,400 per trip for LAGC IFQ vessels assuming trips last a single day
• $1,700 per trip for LAGC IFQ and NGOM vessels fishing on an NGOM trip

We intend for these excess funds to account for variations in the fishery, such as lower scallop price and landings per day fished (also called landings per unit effort (LPUE)), without creating financial incentive to extend an observed trip. 

PLEASE NOTE: We may consider changing the compensation rate as we gather fishery information throughout fishing year 2023, such as scallop price, length of trips, LPUE, and overall rate of observer set-aside usage.

Compensation Rate Calculation

We evaluated a range of compensation rates. Table 1 summarizes the information we used in the calculation (see “Information Used in the Calculation” section below for details). Table 2 summarizes the calculation of the initial rates.

Table 1: Information Used in Compensation Rate Calculation

Table 2: Compensation Rate Calculation – LA Open Area

Table 3: Compensation Rate Calculation – LA Access Area

Table 4: Compensation Rate Calculation - LAGC Open Area

Table 5: Compensation Rate Calculation - LAGC Access Area

Table 6: Compensation Rate Calculation - NGOM

* Buffer per DAS = Compensation per DAS minus the daily cost of carrying an observer ($733.00 per day).

Observer Coverage Levels

The compensation rates above will support coverage rates that are higher than what is needed to cover SBRM and other fishery needs in both open area and all access areas. We are setting the fishing year 2022 coverage rates for the LA fleet at 12.5 percent for the Georges Bank open area, 9 percent for the Mid-Atlantic open area, and 10.5 percent for the Area II Access Area. Additionally, we are setting the LAGC IFQ coverage rates at 17.8 percent for the Georges Bank open area, 4 percent for the Mid-Atlantic Access Area, 19 percent for Access Areas, and 2.7 percent for the NGOM. We try to balance the compensation rates and the associated observer coverage levels to allow for sufficient observer coverage while providing a compensation rate that has a neutral effect on fishing effort. For example, higher compensation rates supporting lower coverage levels provide a buffer between the cost of the observer and the revenue from the compensation that are very high. In turn, excess revenue from the set-aside could change fleet behavior in a way that we cannot predict. We watch this trend as the fishing year proceeds to determine if rate changes are necessary.

Information Used in the Calculation

The information used in in this analysis represents the best available information regarding estimates of the amount of effort, catch, and scallop price. 

We used the information from analyses in the Council’s Framework 36 document, which recommends management measures for fishing year 2023. We also considered updated scallop price information based on the average price paid for scallop landings during fishing year 2022 for price estimates for fishing year 2023. 

Trip costs

We have estimated daily fishing costs to be $2,200/day for limited access DAS vessels and $400/day for LAGC vessels. Although total trip costs may be higher due to increases in fuel and oil price and other increased operating costs, the daily cost of fishing has only a slight impact on the adjusted price (see below). For example, with a $2,200/day trip cost and $14.89/lb unadjusted price, the adjusted price is $14.80/lb in open areas (see explanation of adjusted price below). Increasing the trip cost to $5,000/day, the adjusted price drops to $14.68/lb, which has minimal impact on the compensation and buffer at a given compensation rate.

Scallop price

We estimated the average ex-vessel price of scallops in fishing year 2022 to be $14.89/lb for LA in the open area, $13.36/lb for LA in access areas, 16.65/lb for LAGC in the open area, $14.88 for LAGC in access areas, and $19.75/lb in the NGOM based on landing information from fishing year 2022. We also evaluated the prices of $7.50/lb, $12.00/lb, and $17.00/lb in order to consider how different fishery conditions would impact observer compensation.

Adjusted scallop price

The price of scallops was adjusted downward by approximately one percent to account for the cost of the extra time to catch the scallops or compensation DAS to pay for the observer. We based the adjustment on the estimated daily cost of fishing and the estimated LPUE. We established the adjusted price as a way to generalize the effect of costs when applied to various compensation rates and LPUEs (which affects the amount of time needed to catch the extra scallops or fish the extra days). To calculate the adjusted price, we subtracted the cost of the additional fishing time associated with the compensation from total revenues. We then divided the reduced total revenue by total revenue for the trip, equaling an adjustment factor. We applied this calculation to a range of compensation rates, prices, and LPUEs, resulting in an average of about a one percent reduction.