Investigation reveals private equity firms dominate the New Bedford fishing industry
A debate is raging in the local scallop industry about whether fishermen should be allowed to lease their permits. Supporters say the proposal could help fishermen with a small catch share, or those who can’t get out to sea, stay in the business, because they could lease their permit to another captain.
Opponents worry it would allow big companies to consolidate the industry and push small fishermen out — similar to what has happened in the groundfishing industry.
CAI's Kathryn Eident talked with Will Sennott, a reporter with the New Bedford Light, about his investigation into permit leasing in the groundfishing industry, and how he found that some of the biggest winners are multinational private equity firms — not small fishermen.
Eident So Will, let's review quickly how the system works for someone who wants to fish for a groundfish like haddock or cod. They need to have a permit which dictates how much fish of a certain species they can take, which on its face sounds pretty simple, but it's not because these permits can be leased or sold, which makes things murky pretty quickly.
Sennott Yeah, it certainly does. And the genesis of this system goes back about ten years in a regulatory shift called Catch Shares, which transitioned what is called Days At Sea, to having essentially rights owned in perpetuity of a certain percentage of what federal scientists deem to be a sustainable level of catch.
So, when this started, there was thousands of fishermen with small percentages. And over time we've seen large companies, even mid-sized companies here in New Bedford, gain more and more share. I've heard numbers as small as 20, 30 boats that are actually fishing in the groundfish industry today.
Eident There's a loophole there because it allows big companies to come in and scoop up a bunch of these small leases to make a bigger share of the total amount of catch.
Sennott Yeah, it's a really complex scenario, especially for small independent fishermen who, yeah, maybe were grandfathered in or tried to get in and bought one permit with a small allocation a long time ago. As the total amount that's allowed to be caught each year was reduced to prevent overfishing, those percentages translated into fewer pounds of fish. And on an individual level, most of the permits are rendered essentially economically, not viable.
So, it's a tough scenario because this leasing market can really offer independent fishermen a decent income, maybe $20,000, $30,000, maybe up to $50,000 a year. But the leasing rate, like fish, is a market rate. And the companies that are able to operate at scale can afford to essentially outbid smaller fishermen. And yeah, it really does, what we've seen, lead to excessive cornering essentially of the market.
Eident You heard from some fishermen about this one company, Blue Harvest, that they weren't treating their fishermen very well. What did they tell you about working conditions and other things?
Sennott I've covered the fishing industry, we've been to public hearings and the specter of private equity, Manhattan, Wall Street ownership kind of looms large over the waterfront here in New Bedford. It is a big money port, you know, generating some $11 billion each year. And that number is always kind of baffling to people who are in the industry here. And Blue Harvest quickly fell into our sights because it is growing very quickly. In the last year, they've added over 27 permits and 12 boats and also because they were very unfamiliar to a lot of people in the port.
Eident Tell us what you learned about this company.
Sennott So on the surface level, it really does look like any other private equity-backed structure. That is capital being injected into acquisitions and restructuring or reinvestment in an industry, and that is good in a lot of ways.
We found, however, that it's essentially the investment arm of a firm that is owned wholly by one very, very wealthy family in the Netherlands called Brenninkmeijer family. Bregal Partners is essentially a subsidiary of their firm. It is really hard to break down the extent of it, but it really jumped out at us when we looked at the permit data and saw that Blue Harvest holds permits for as much as 21% of some species of fish. They stay below the anti-trust limit by owning smaller shares of fish they don't really target. But they are the single largest holder in the groundfish industry today.
Eident So for companies like Blue Harvest, it's not just owning or leasing these permits that's making the money. The permits are expensive, they're like half a million dollars, and they're passing the costs of these permits in these leases directly to fishermen.
Sennott Yeah, I mean, it's a high-operating cost industry. What we saw just by looking at settlement sheets really volunteered to us by fishermen who work on their vessels is that the way they're essentially able to eliminate a lot of their costs is by passing it on to their crews, the people work for them. We had one fisherman telling us that it seemed like every trip they're taking more and more out of the crew's share.
The origins of this payment structure in the fishing industry, especially in New Bedford and also the Cape, really goes back to the whaling days. Fishermen, whalers back then, were paid a share of the vessel's catch. If the industry is thriving, that means the people in it, the people working it, and the whole port really does thrive. But we've seen the contracting structures for a firm like Blue Harvest is they lock themselves into lower price contracts, and they're able to move fish more quickly at lower prices. So that really cuts into the crew's share.
And then we see these expenses. You know, they're charged for things like docking the company-owned vessel at the company-owned dock. That's a $400 charge per trip. There are charges for maintenance and gear and, you know, charges that people say they're not very familiar with in the industry. And there's a charge for leasing that's charged as much as $3,000 per trip that is passed on to the crews.
And that is the structure of the lease arrangements that are enabling this company to really expand its control over the industry.
Eident And Will, now this idea of leasing permits is being discussed in the scallop fishery. Where do we stand with that?
Sennott Yep. That is what's under consideration right now by federal regulators. The scallop industry is the most lucrative, profitable industry in the US. I mean, it's most of the reason why the Port of New Bedford is such a valuable port. There are going to be a series of reductions in the coming years. And yeah, this leasing proposal is a way for the larger companies, especially to be more flexible and to kind of be able to bend a bit in this series of reductions that are coming.
However, what the mayor, and what the legislators, and fishermen here say is that it really does open the floodgates to the same kind of opaque consolidation that we've seen in the groundfish industry, where there really is only one big company left fishing.
Each step, whether it's more regulation or less regulation, is a decision. And this is a big one for the fate of the Port of New Bedford.
Eident And finally, Will, this was a long investigation, many months, and it was done between the New Bedford Light and ProPublica. Talk about that partnership a little bit.
Sennott Yeah, they gave us a lot of time to really look into a trend that we only had really heard about. And it was a hard feat, understanding the scope of this industry, the ownership of it. There's a lot that goes into making this industry as little transparent as possible. We had heard everything from private equity firms, to even at one point, that Lady Gaga owns a fishing boat.
You know, the truth of what we found was quite shocking. And that is just the extent of private equity control in the Port of New Bedford that doesn't seem to be going away anytime soon.
Eident Will Senate reporter with the New Bedford Light. Thank you so much.
Sennott Thank you, Kathryn.
Read the story in the New Bedford Light here.
This interview was lightly edited for grammar and clarity.