Atlantic Sea Scallop Fishery: Fishing Year 2022 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 2022 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 2022 compensation rates for Limited Access (LA) vessels are:

• 0.08 per days-at-sea (DAS) fished (the vessel is charged 0.92 DAS for each DAS fished with an observer onboard)
• 200 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 2022 compensation rate for Limited Access General Category (LAGC) individual fishing quota (IFQ) vessels is:

• 200 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 two additional 12-hour increments with each prorated increment receiving an additional 100 lb for a maximum of an additional 24 hours and 200 lb.

The fishing year 2022 compensation rate for Limited Access General Category (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 2022 (see below). 

We calculated all observer compensation rates assuming a daily rate of $700 for the observer, and used an average scallop price of $13.99 per pound for open area trips, $12.96 per pound for access area and LAGC trips, and $13.53 for NGOM trips. We estimate the compensation rates provide the following average buffers over the daily cost of the observer:

• $1,875 per day for LA vessels and per trip for LAGC IFQ vessels assuming trips last a single day
• $915 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 2022, such as scallop price, length of trips, LPUE, and overall rate of observer set-aside usage.

The following explains how we determined the fishing year 2022 compensation rates.

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

* NLAASD=Nantucket Lightship Access Area South Deep, CAIIAA= Closed Area II Access Area, and NGOM=Northern Gulf of Maine 

**Possession limit in the NGOM is 200 lb/trip therefore LPUE is not a factor

Table 2:  Compensation Rate Calculation

* Buffer per DAS = Compensation per DAS minus the daily cost of carrying an observer ($700.00 per day).

**Target Compensation = amount per day necessary to pay for observer and provide a buffer for changes in fishery condition

***Number of sea days cover

Observer Coverage Levels  

The compensation rates above will support observer coverage levels of approximately 29 percent for open areas and 20 percent for each of the access areas. These coverage rates 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 11.5 percent for Georges Bank open area, 5 percent for Mid-Atlantic open area, 8 percent for NLAA-SD, and 12 percent for CAIIAA. Additionally, we are setting the LAGC IFQ coverage rates at 4.5 percent for the open area, 8 percent for CAIAA and NLAA-SD, and 4 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 34 document, which recommends management measures for fishing year 2022. We also considered updated scallop price information based on the average price paid for scallop landings during fishing years 2020 and 2021 to establish updated price estimates for fishing year 2022. 

The following explains the information that we used in our calculation:

Total fishing days per area  

Open area DAS are based the total allocated DAS proposed in Framework 34, including the 174 observer set-aside DAS, because they are a portion of total DAS that could be observed. For access areas, we calculate the number of DAS for each area by dividing the total allocated scallop landings for each area by the predicted LPUE (see below).  LAGC effort is included in these estimates. 

Table 3:  Total DAS by Area

Set-aside allocations  

Table 4 includes the observer set-asides by area. The open area set-aside is specified as DAS, for harvest by both limited access.

Table 4:  2022 Observer Set-Asides

LPUE 

Table 5 provides the estimated LPUE by area. We estimate the average amount of scallops that will be landed per fishing day (lb/day) for each area to determine LPUE. We realize that actual LPUE may be higher or lower, depending on resource conditions and fishery conditions. LAGC vessels generally complete Access Area and NGOM trips in one day and have a daily possession limit of 800 and 200 lb/day respectively. Therefore, LAGC LPUE does not factor into calculating the compensation rate for LAGC vessels.

 Table 5:  LPUE (lb/day)

Observer costs 

The observer cost continues to be $700/day. 

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 $13.99/lb unadjusted price, the adjusted price is $13.91/lb in open areas (see explanation of adjusted price below). Increasing the trip cost to $5,000/day, the adjusted price drops to $13.80/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 to be $13.99/lb for open areas, $12.96/lb in access areas, and $13.53 in the NGOM based on landing information from fishing years 2020 and 2021 and averaging the two years together. The fishing years were averaged because scallop prices for 2021 were significantly higher than they have been in years past and averaging the two years was determined to give a better estimate of what prices are anticipated to average in 2022. We evaluated lower prices of $7.50/lb, $10.00/lb, and higher prices of $16.00/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.