Chesapeake Quarterly
The Value Of Crabbing
State attempt to buy back crabbing licenses runs up against traditions, questions

Rachel Dean and her husband Simon have a lively fishing business in Solomons Island, Maryland, switching between striped bass and crabs when they aren't taking tourists on the water and running a seafood company. Dean acquired two commercial licenses to catch blue crabs, one to run her business, and another with the next generation in mind.

She held onto this second license as a kind of family heirloom. Some months, the family used it to catch a few crabs. But Dean wanted to transfer it to her daughters one day so that they could join in the Chesapeake Bay tradition that she loves. This document would allow her oldest daughter, 16, to catch female "peeler" (ready-to-molt) crabs, which a Maryland recreational crabbing license would not. She kept paying the $50 annual fee to renew her license — and her dream.

"Even if my daughters don't go into the profession, " Dean says, "that's the only way that they'll be able to get in the skiffs and go crab the way my family crabs."

Down in Solomons Island, Maryland, Rachel Dean and her husband run a fishing, crabbing, and tour business using the 40-foot boat Roughwater. She wants her two-year-old daughter Jamie (above with her mother in the crab shedding house) to have the option of following in her footsteps — which is why she refused a state offer to buy her crabbing licenses. Credit: Rachel Dean.

So Dean was primed to say no when the state of Maryland asked in 2009 to buy hundreds of commercial crabbing licenses statewide. State managers had become worried that too many people held those licenses but, unlike Dean, weren't using them at all. Between 2004 and 2008, about a third of the 5,700 licensees didn't report catching a single crab. Fishery managers and scientists forecast that if those inactive crabbers went back out on the water, it would drive down profits for all crabbers and slow the nascent recovery of the Chesapeake Bay's crab population.

So the state made an offer it thought many inactive crabbers couldn't refuse: several thousand dollars to sell their licenses back to the state.

The results have been mixed. Hundreds of inactive licensees ended up taking the deal, but even more didn't. The project raises some compelling questions about how people think about Maryland's largest commercial fishery and the jobs that go with it. What are the best ways to make sure the fishery prospers? And can you attach a dollar value to a piece of paper that, for many people, symbolizes tradition and a way of life?

Crabbers Who Don't Crab

For many years, the issue of inactive licenses itself lay dormant. The state capped the number of commercial licenses in the 1980s at a time when blue crabs crawled in greater numbers along the Bay floor. But then the crab population dropped off in the 1990s and into the 2000s. Under those circumstances, inactive crabbers were a good thing, at least from the state's perspective: less pressure on the crab population. But concerns over the inactive licenses grew in 2009, a good year for crabs. The population grew by about 30 percent in 2008, hitting the highest level since 1993 (see graph, Total Abundance of Blue Crabs in Chesapeake Bay).

State officials predicted that this upswing in crab stocks might entice licensees who had been sitting on the sidelines to get back out on the Bay. More crabbers would likely catch more crabs and the effect would be a slower recovery of the resource and less money for those who make a living crabbing.

"That free-for-all was not sustainable and wouldn't let us restore the fishery back to a healthier condition, " says Doug Lipton, an economist at the University of Maryland, College Park who specializes in fisheries. Plus, he says, "you want to have a situation where you can allow these fishermen to earn a decent living fishing."

To manage the risk posed by the inactive licensees, state managers even contemplated reducing the allowable harvest for all crabbers, including those who had worked the water all along.

Instead, the state in 2009 hit on the idea of buying back the licenses of those crabbers-in-waiting to keep them off the water. The hope was that the inactive licensees might be willing to take some cash for a privilege they weren't using anyway. Such exchanges had been tried before with some success in other markets, including the Pacific Northwest's famed salmon and New England's groundfish fisheries. For help in crafting the details of the Chesapeake program, state officials turned to a group of economists led by Lipton, who also directs Maryland Sea Grant's Extension program.

The economists came up with a design to give both the state and the watermen the best deal possible: a "reverse auction." Would-be sellers would submit their desired price in a sealed bid; the state then would buy as many licenses as it could, starting with the lowest bid, until the money ran out. In this case, the state budgeted $3 million in one-time federal funds it received when the blue crab fishery was declared an economic disaster zone in 2008.

The state sought at first to purchase only Limited Crab Catcher licenses. These licenses have a limit of 50 crab pots; the people actively using such licenses fish on a small, financially modest scale, and there were more inactive licensees of this type than of any other commercial crabbing permit (see table, below).

Sitting Out the Bidding

In the end, though, the reverse auction didn't seem like a great idea to either the state or the licensees. The state set a goal of buying 2,000 Limited Crab Catcher licenses; only 494 submitted bids, less than half of the inactive licensees. And those that did name their price asked for a lot: the median bid was about $4,900, a number at the upper end of prices advertised on the open market. So the state instead scrapped the reverse auction and offered a fixed price of $2,360 each — take it or leave it. This time, a total of 683 licensees said yes before the program ended in 2011. But that outcome still left unspent about half of the $3 million that the state had allocated to buy back licenses.

State managers had no better luck when they offered a second buy-back in 2010, this one targeting Tidal Fish Licenses. Of the licensees in this more-intensive category, 350 were inactive, and nearly 500 weren't breaking even at fishing, the economists estimated. A good number of potential takers, they thought. But only 99 accepted the offer.

"So then it became interesting, " Lipton says. Why, he wondered, were so many people who never fished paying to renew the licenses? "It surprised us when we got such low participation, especially during a recessionary period."

To find out what people were thinking, the economists and graduate student Geret DePiper surveyed holders of both kinds of licenses. More than 2,000 people responded, and their answers revealed a lot about how people view the struggling profession of watermen and the future of the crab fishery in the Bay. Plenty of watermen vented their suspicion of government regulators, says Jorge Holzer, a Maryland Sea Grant Extension fisheries economics specialist. Many saw the buy-backs as simply a step by the state toward scaling down all commercial fishing.

"Quite a few said, 'I will never sell my license, ' " Holzer says. " 'Don't send me any more offers.' " The fishermen expressed other doubts about the buy-back program. Why the emphasis on commercial crabbers, they wondered, but not recreational ones, whose effect on the Chesapeake Bay crab stock is poorly understood? Many commercial crabbers were also skeptical about the underlying rationale for the buy-back program, that inactive or "latent" fishing licenses were a threat to the blue crab population.

"Latent effort just doesn't scare me, it just doesn't, " says Rachel Dean, who is secretary of the Calvert County Watermen's Association. "All [the buy-back] did was get rid of the people who were never going to use the license. ...[Crabbing] is not as easy as it looks. It's not just 'Go throw the pot, just pull the trotline.' "

Maryland's Buy-Back of Commercial Crab Licenses: By the Numbers
 
License type Maximum allowed
crab pots
Total licenses
before buy-back
Number
inactive
Number
purchased
Amount
paid
 
Limited Crab Catcher (LCC) 50 3,767 1,046 248 active
435 inactive
$2,260 each
 
Tidal Fish License (TFL) 900* 2,064 ~350 99 (about half inactive) $7,000 to $12,000 each*
* depending on license type
Source: Maryland Department 0f Natural Resources
In it for the Long Haul

Aside from those reservations, respondents indicated that their motivations mainly concerned their own wallets — but they were thinking of future, not present, gain. Only six of the Tidal Fish License holders said that the state's offered price was too low; 70 percent said they expected the license would appreciate in value over time. After all, some noted, the state's buy-back program was eliminating some of their potential competition. Or perhaps their optimism simply represented a vote of confidence in the prospects for a continuing comeback of the blue crab population in the Chesapeake.

Other survey respondents said they were holding onto their licenses because they wanted a fallback in case they became unemployed — a reasonable fear in this tough economy, Holzer says. There were respondents who wanted to hold onto the licenses as a possible nest egg to sell when they retired, another understandable concern for an occupation that typically doesn't offer pension plans.

"We learned a lot about why it's harder than it looks to buy out effort, " Lipton says. For example, the state could have done more to persuade at least some of the doubters to participate in the initial reverse auction, Lipton says. Ever the economist, he notes that even if a license is attached to a dream, it is also attached to a dollar sign — its market value and the prospect of future earnings. The survey results indicated that a number of prospective bidders lacked information on how much they stood to gain and so concluded, "I'll just hold onto it because I don't know what it's worth, " Lipton says.

But Dean says she had tracked those market rates. She just didn't consider the state's prices high enough. "You'd have to offer me enough for me to say, 'Hey, I'm not going to make that amount of money [by continuing to crab.]' This wasn't it."

"[Nevertheless], we made a pretty good dent in lowering the number of unused licenses, " says Lynn Fegley, a fisheries official at the Maryland Department of Natural Resources who oversaw the buy-back. "[That] helps us to manage to maximize the economic value of the fishery for everyone because it's that many fewer people we have to account for when we set harvest limits."

Even today, the buy-back idea is not completely inactive. Her agency remains willing to buy back more of the Tidal Fish Licenses, and it may again offer to purchase the Limited Crab Catcher licenses, Fegley says.

Lipton adds that other steps will be needed to make sure the crab's tenuous comeback lasts: "Everything we did in Maryland was really designed to get the low-hanging fruit off the vine, so we could worry about the harder part down the road with other kinds of approaches."

The future of the Maryland crab industry may depend in part on whether real Maryland crab makes it onto the menu at your local restaurant. That's the idea behind the "True Blue" campaign, a new marketing effort by the state of Maryland celebrating local restaurants that offer Chesapeake-caught crab.  more . . .

To work on those next steps, state managers have met monthly with a committee of watermen for more than a year. The panel, the Blue Crab Industry Design Team, is discussing new ideas for ensuring that the Bay's blue crab fishery remains sustainable. For example, it's important to know just how much crab is harvested each season and when. So the state and watermen jointly came up with a new approach for commercial crabbers to report their harvests. It uses smart phones and tablets, tools that may improve the accuracy and timeliness of harvest reports. Volunteers will test it this summer on the Bay.

At the very least, this experiment won't wind up on the inactive list. More than 80 watermen volunteered to participate, filling all slots.

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