Two months before the Environmental Defense Fund achieved a political policy triumph with the vote last week to transform the New England groundfishery from a commonly held resource into negotiable commodities, a bullish EDF executive was urging institutional investors to buy these catch shares.

EDF vice president David Festa's projection was a 400 percent return on the investment, based on what he said was recent experiences with the imposition of catch shares in other fisheries.

A consultant to EDF spoke of returns of 10 or even 20 times investment.

"It's not telecom money, but it's real money," Festa advised a small but influential private audience of mutual and hedge fund managers and ENGO — or environmental non-government organization — officials at an April 28 panel on "Innovative Funding for Sustainable Fisheries and Oceans."

The panel was part of the 2009 Milken Institute Global Conference in Los Angeles, "the largest gathering of capital markets in North America," according to Jennifer Manfrî, communications director for the non-profit, think tank. The institute is a public-private partnership created by Michael Milken, the financial innovator who helped create junk bonds in the 1970s, that directs private capital into investments that serve the advisors' sense of the public interest.

Investor interest in the New England groundfishery was noticeably and recently on the uptick even before the New England Fishery Management Council last week voted nearly unanimously for an industrial re-engineering that would cap total fish catch and divide the total allowable catch into shares to be distributed to permits that are aggregated into business cooperatives known as sectors.

But, unlike the 90-minute analysis of investment opportunities in new catch share fisheries before the influentials in Los Angeles in April, the four-day meeting in Portland that ratified the catch share system produced not a peep about the capital investment implications of what Festa called a "paradigm shift" in the approach to managing the bounty of the sea.

"Why would you tell people the value of the property was higher than they thought?" noted one broker.

Council member Sally McGee, the Environmental Defense Fund's Ocean Program director, limited her comments and motions to the regulatory format changes for the industry, and a desire to end "overfishing." Neither she nor Festa returned phone calls seeking comment for this story.

Under the catch share program approved in Portland, the fishermen who elect to carry on as independents will continue to be governed by increasingly draconian effort controls — fewer days at sea and areas that will be closed to them but not the sectors, as well as a total allowable catch.

And the total allowable catch for next year — the catch share and sector system begins on May 1 — is expected to be conservative because of approaching deadlines to end "overfishing" outlined in the 2006 reauthorization of the Magnuson Act. So the immediate effect will be to make permits less valuable to fishermen across the board.

Permit value is variable based on the catch history attached to it from 1996 to 2006 for most permits.

But a number of permitholders have told the Times they've been solicited by outside capital interests looking to acquire their shares. Council member Rodney Avila, who has interests in two permits and New Bedford draggers, said one would-be buyer was a small fishing cooperative in Maine that has become a partner of and proxy for the Pew Environment Group. Others said they were contacted by intermediaries.

Milken panel moderator Larry Band, who put in many years at Lehman Brothers, the investment bank that went down during the banking catastrophe, and now advises the Environmental Defense Fund, explained to the panel at the Milken conference that the "trick" in executing the correct investment action involved a "little bit of a chicken and egg. The money needs to come in ahead of the catch shares coming in," said Band.

But done right, Band said investors might achieve returns of 1,000 and 2,000 percent — far more than Festa projected.

By converting the wild harvest in the New England groundfishery into negotiable catch shares, the council was opening the floodgate to outside capital, according to broad consensus of regional industry business figures interviewed by the Times.

In effect, the conversion to catch shares controlled by sectors created a fish futures commodity market.

But unlike most commodity future markets where price is subject to guesses, this one will have supply — and thus price — controlled by the federal government, which will decide on the total allowable catch for the year that will be subdivided into catch shares. All indications are that the first total allowable catch will be smaller than the size of the catch from this, the previous year.

Vito Giacalone, the Gloucester-based industry innovator, said the process of inviting capital into the market "always begins with artificially depressing the price."

The allocation of catch share to each aggregated permit will be made next fall, based on data gathered and analyzed the Science and Statistical Center of the National Oceanic and Atmospheric Administration.

NOAA's national chief, Jane Lubchenco used the bully pulpit in early April to prod the council, an industry related legislative body, to complete the long-planned transition from effort controls to catch shares used by the sectors.

The government's ardor for catch shares was matched by the enthusiasm for the approach of the ENGOs — especially the EDF and the Pew Environment Group, an arm of the Pew Charitable Trusts, a $4 billion philanthropy created and controlled by descendants of the founder of the Sun Oil Co.

One industry financier predicted that fishing catch share format — and commodities market — would succeed in attracting capital into the New England groundfishery.

"People will come in with a lot of money as the new thing" said a financier. "Maybe the fishermen aren't going to stay in, once the ante is raised."

"It's the worst thing that could happen," said Giacalone, a founder and leader of the Northeast Seafood Coalition. He also organized the community permit bank that, over the past two years, bought out fishermen and created a non-profit leasing business for surviving boats with $13 million in mitigation funds from the construction of an off-Cape Ann liquified natural gas platform.

"It's a conversion to share-cropping," Giacalone said. "It sets up a Wall Street approach. Now you handicap the product in the market place because people are skimming and renting a public resource.

"This is being orchestrated by people at the very highest level of government and business," he said, adding that the decision of the coalition to organize 13 sectors was made out of fear that the plan was to isolate only a few permits in the existing two sectors on Cape Cod, which are subsidized by Pew and other ENGOs and create a vulnerable mass of permit-owners struggling against tighter restrictions.

In a presentation to the city last spring, Giacalone noted that the industry was subjected to a vast government authorized overcapitalization in the late '70s and '80s following the exiling of foreign factory boats. He predicted the groundfish landings could double "in the near term" with better management.

David Goethel, a New Hampshire fisherman and council member who has studied and visited world fisheries, predicted the capital market would unfold in brutal Darwinian terms.

"A commodified fishery?", he pondered. "If you could be present at the detonation of an atom bomb at the moment the atoms collide — no country has been able to control the economic forces that are unleashed," Goethel said.

He was the only vote against the conversion of the New England groundfishery to catch shares.

Festa explained to the investors at the Milken conference that the plan to create catch shares and open the door for outside capitalization has been longstanding.

"The Bush administration was good allies of ours," said Festa. "It laid the groundwork for us."

He also cited a "high level task force," with an "all-star" cast that proposed to "redefine fisheries through catch shares. Jane Lubchenco was on the panel."

The panel was sponsored by the EDF, but also included Lubchenco and other scientists who, like her, had been patronized by Pew, which funded a 2003 study by academic scientists R.A. Myers and B. Worm, that the alpha predators could be gone by mid-century.

Festa was referring to the Oceans of Abundance report, described as an "action agenda" for the nation's fisheries triggered by the fear that fishing was "fundamentally altering" the ecosystem which "is increasingly likely to yield massive swarms of jellyfish rather than food fish."

The jellyfish study has been widely disputed and discredited by non-Pew related scientists. And even Lubchenco, before President Obama chose her to head NOAA, was quoted as saying she thought the jellyfish scare was overblown.

Richard Gaines can be reached at rgaines@gloucestertimes.com