[From the U.S. Government Printing Office, www.gpo.gov]
PRIVATE DEVELOPMENT OF ARTIFICIAL REEFS A Thesis by ARTHUR ALLEN BURNS, JRo Submitted to the Graduate College of Texas A&M University in partial fulfillment of the requirement for the degree of MASTER OF SCIENCE 1operty of CSC Library December 1978 Major Subject: Management U. S. DEPARTMENT OF COMMERCE NOAA COASTAL SERVICES CENTER 2234 SOUTH HOBSON AVENUE CHARLESTON, SC 29405-2413 PRIVATE DEVELOPMENT OF ARTIFICIAL REEFS A Thesis by ARTHUR ALLEN BURNS, JR. Approved as to style and content by: I :3:L -A.-, irman of t 1 Committee (Head of the Depr tmnt) (Member) (Member) December 1978 ABSTRACT I ~~~~Private Development of Artificial Reefs. 1 ~~~~~~~~(December 1978) Arthur Allen Burns, Jr. I ~~~~~~B.S., University of Mississippi 3 ~~~~~Chairman of the Advisory Committee: John L. Seymour, LLM This thesis is an examination of the feasibility of I ~~the private development of artificial reefs. Under this development scheme an entrepreneur would have the exclusive right to fish in the waters surrounding an artificial reef I ~~and would charge fishermen for the use of the reef. 3 ~~~~The concerns of a potential investor addressed by this thesis are (1) the effects an artificial reef would I ~~have on the total productivity of coastal fishery resources, 3 ~~(2) the legal consideration associated with the private development of artificial reefs, and (3) the financial I ~~feasibility of the reef development. The geographic area addressed by this thesis is the coastal waters of Texas, Louisianna, Mississippi, Alabama, and northwestern Florida. 3 ~~The conclusions can, however, be applied to any temperate waters with high sedimentation and low wave energy. * ~~~~~~~~~~~~~~~~iv * ~~~Iforomt i o and data for this thesis were obtained fromperonalandtelephone interviews, from appropriate state and federal statutes and cases, and from secondary I ~~sources. The following conclusions are drawn: 1 ~~~~(1) a properly constructed and located artificial reef will increase the productivity of coastal I ~~~~~benthic environments, and will increase the to- tal -numbers of reef dwelling fishes; (2) the private development of artificial reefs can I ~~~~~be conducted in a manner consistent with state 3 ~~~~~and federal law, and consistent with the public trust in which coastal waters and there associat- I ~~~~~ed fisheries are held; and 3 ~~~~(3) the private development of artificial reefs is financially feasible, as evidenced by favorable I ~~~~~calculations of return on equity and -net present 1 ~~~~~value. Although the specific concern of this thesis is the private development of artificial reefs, the conclusion is made that I ~~a market economy would be the most efficient mechanism of allocating many common property resources. I I V I I I DEDICATION I I I I To my Parents, whose love, encouragement and assistance is unfailing, I ~~~~~~~this thesis is dedicated. I I I I I I I I I I I I I ~~~~~~~~~~~~~~~~vi ACKNOWLEDGEMENT S I would like to acknowledge Mr. John L. Seymour who I ~~~served as chairman of my advisory committee and serves as the advisor for the Marine Resources Management program. Without John's guidance, support and patience my graduate I ~~~studies would not have been possible. I would also like 3 ~~~to acknowledge Dr. Clint Phillips and Dr. Rich Noble who served as members of my advisory committee. I am most 3 ~~~grateful to them for their kind assistance. 3 ~~~~Thanks to Priscilla Lee, Scott Davison, Bill Brah and other past and present members of the Marine Resources 3 ~~~Management program at Texas A&M University; and thanks to Norman and Juana Gillis, Travis Roberts, Cherrie Felder and Victor Franckiewicz. I consider their support and 3 ~~~encouragement invaluable and their friendship precious. Finally, special thanks to Gary Cuevas for his help with the illustrations. TABLE OF CONTENTS Page ABSTRACT ..........................iii I ~~~DEDICATION . .........................v 3 ~~~ACKNOWLEDGEMENTS ......................vi LIST OF FIGURES.....................viii I ~~CHAPTER 3 ~~~I. INTRODUCTION ...1................. Review of Literature . ...............3 I ~~~~~Objectives ....................4 * ~~~~~Methodology....................5 II. ARTIFICIAL REEFS AND THE MARINE ENVIRONMENT... . .7 3 ~~~III. ARTIFICIAL REEFS AND THE LEGAL ENVIRONMENT . . ...30 3 ~~~IV. THE FINANCIAL FEASIBILITY OF ARTIFICIAL REEFS ...56 V. CONCLUSION.....................69 3 ~~~REFERENCES .........................72 * ~~~VITA ............................80 I ~~~~~~~~~~~~~~~viii 3 ~~~~~~~~LIST OF FIGURES 3 ~~~Figure Page I The Photosynthetic Process.............10 1 ~~~2 Pyramids of Biomass ................14 1 ~~~3 Dynamics of Fish Populations............37 4 Modular Tire Reef Building.............59 CHAPTER I INTRODUCTION The development of artificial reefs in the coastal I ~~waters of the Gulf of Mexico has become cotrmonplace. The 3 ~~greater part of this development has been conducted by state fish and wildlife departments or by sport fishing 3 ~~associations acting in concert with a state agency or a u ~~local municipality.1 The effect of these reef developments has been to concentrate sport fishery resources for the an- 3 ~~gling -public. The potential of these artificial reefs as exceptional fishing locations can be shown by the increase in numbers of fish caught in these locations and the rela- tionship of angler hours fished over reef sites and nonreef sites. The catch over these new fishing reefs is usually more than ten-fold the catch over the areas surrounding 3 ~~these reefs.2 Although the development of artificial reefs by the public sector has benefited the public as a whole, it can I ~~be argued that the development of artificial reefs will not assure that sport fishery resources will be allocated in an I ~~optimum manner. Public agencies often have limited funds 3 ~~~~The references in this thesis follow the style of the Coastal Zone Management Journal. 2 K ~~for such projects, and lack the profit incentive which mo- 3 ~~tivates suppliers to meet demands for their resources. It can also be argued that the development of artifi- I ~~cial reefs by private parties would be the best means to 3 ~~achieve an optimum allocation of many sport fishery re- sources. Inplicit in this argument is a demand for fishery I ~~resources, as evidenced by the use of public reefs, and the 3 ~~desire for a developer to maximize his profits by locating artificial reefs in the areas of the greatest market demand. U ~~Thus, the market would be used to determine the wants of 3 ~~fisherman for artificial reefs but would provide for the optimal locations since there would be a market for fishery I ~~resources from reefs where the demand was high and no market 3 ~~where the demand was low.3 In order for a private development allocation pro- cess to operate properly, a potential developer would have 3 ~~to be assured of exclusive use of his reef development. 4 Exclusive use of a coastal fishery poses unique legal con- 3 ~~cerns, for coastal fisheries have developed historically as a common property resource. If it could be demonstrated that, as a result of an artificial reef development, the 3 ~~total number of reef dwellings fishes commonly sought by sport fishermen has increased, the exclusive use of an arti- ficial reef and the superadjacent water column by a private developer might proceed in a manner consistent with the com- mon property nature of coastal fisheries, Once a specific * ~~~~~~~~~~~~~~~~~~~~~~3 legal mechanism for the exclusive use of a reef could be formed, a developer would be free to perform the necessary analyses to determine if such a venture would be financially feasible. Review of Literature A wealth of Literature exists concerning the ecology of marine environments. The best introduction to this field is Hedgepeth's Treatise on Marine Ecology and Paleoecology.5 This treatise contains information on submarine daylight and 6 . 7 8 photosynthesis, planktonic organisms, disolved oxygen, disolved carbon dioxide9 and nutrient elements.10 An un- derstanding of these fundamental factors is necessary for an examination of the interaction of an artificial reef with its physical, chemical, and biological environments. Harvey11 has examined the nature of primary and secondary production in the sea off Plymouth, England, and Odum and Odum12 have conducted a similar study on a Pacific atoll. Stone13 has employed many of the same techniques in his examination of the productivity of artificial reefs. Literature also exists concerning the development of the public trust doctrine as that doctrine relates to coastal fisheries.14 There is much case law which address- es and defines the public trust; the most famous American case is perhaps Illinois Central R.R, v. Illinois. 15 In 4 I ~~addition, all states have enacted, to various degrees, leg- * ~~islation which defines and enhances their public trust re- sponsibilities. I ~~~~There is much literature concerning sport fishing activities as a whole, 16but there is less available infor- mation concerning the profitability of specific sport fish- 3 ~~ing industries in the Gulf of Mexico. Two of the best works in this field are Schmeid's analysis of charter boat fish- ig17 and Ditton's examination of charter fishing on the Texas coast. 18 I ~~~~~~~~Obj ectives The objectives of this thesis are: (1) to perform an analysis of the ecological, legal and financial considera- tions associated with the private development of artificial reefs; (2) to prove the feasibility of a new marine indus- try, i.e. the development of artificial reefs by private I ~~parties who have exclusive use of the reef and the superad- jacent water column, and who in turn derive a profit from the fee use of an incidental charter boat operation. 3 ~~~~These objectives necesitate the demonstrations that: (1) artificial reefs do, to at least a modest degree, in- crease the total numbers of those species of reef dwelling I ~~fishes existing in coastal waters of the Gulf of Mexico; I ~~(2) the private development and exclusive use of an arti- ficial reef can be conducted in a manner consistent with the I ~~~~~~~~~~~~~~~~~~~~~~~5 3 ~~public trust in which coastal fisheries are held and con- sistent with state and federal law, and; (3) that the pri- vate development of artificial reefs in concert with a char- ter boat business is a financially feasible operation. For u ~~the purposes of this thesis the definition of "coastal wa- ters" shall be that of the Coastal Zone Management Act of 1972, 19 those waters from the watermark of ordinary high tide to the extent of the three mile territorial sea. Methodology I ~~~~Information and data for this thesis were obtained 3 ~~from personal and telephone interviews, from appropriate state and federal statutes and cases, and from secondary I ~~sources. Scientific and technical literature and personal I ~~interviews with oceanographic and fisheries researchers were used in the analysis of the effects of natural and ar- 3 ~~tificial reefs on marine productivity. 3 ~~~Law review articles and appropriate state and federal statutes and cases were used to develop a mechanism where- U ~~by the private development of artificial reefs could pro- 3 ~~ceed in a manner consistent with the public trust in which coastal fisheries are held. I ~~~~This legal mechanism was, in turn, used to generate 3 ~~operating assumptions for an artificial reef/charter boat business, Data from studies of the Texas charter boat in- I ~~dustry were used with the operating assumptions to deter- I ~~~~~~~~~~~~~~~~~~~~~~~6 I ~~mine the financial feasibility of an artificial reef/charter U ~~boat business. The two financial analyses performed were a return on equity calculation and a net present value calcu- ~~~laion I ~~~~~~~~~~~~~~~~~~~~~~~7 I ~~~~~~~CHAPTER II ARTIFICIAL REEFS AND THE MARINE ENVIRONMENT In order to demonstrate the useful role artificial reefs play in the marine environment, and understanding of 5 ~~the processes which create a thriving reef community, be it natural or artificial, is imperative. The concepts of pri- N ~~mary production, the food chain, and the factors which li- mit production can be used to explain the intricacies of any living community of organisms, either terrestrial or marine. I ~~~~Primary production is the process which transforms 3 ~~visible and invisible solar radiation into the high energy chemical bonding of phosphorus containing organic molecules. I ~~The energy of these phosphate bonds can, in turn, be used to I ~~create chemical bonding of a higher order; this is the mech- anism by which an organism manufactures its food and builds I ~~its physical structure. Those organisms which synthesize 5 ~~their own food from inorganic matter in the presence of sun- light are known as autotrophic, i.e. self-nourishing. All I ~~green chlorophyll-containing plants are autotrops and are the primary producers of the biosphere. It can be more simply stated that autotrophic organisms or primary produc- I ~~ers are those organisms which carry on the process of photo- * ~~~synthesis. I ~~~~Solar radiation is the most fundamental factor in the I ~~marine environment. The degree of availability of this en- ergy directly controls the amount of organic matter synthe- I ~~sized, for, no matter how favorable other factors may be, this amount will be limited by the relatively low efficiency of the photosynthetic process. 20Light energy comes in dis- I ~~crete or quanta "packets"? known as photons. The various wavelengths of sunlight which play a role in the photosyn- thetic process range from the infrared to the ultraviolet; I ~~when a photon of the appropriate wavelength strikes a chlo- 1 ~~rophyll molecule and is absorbed, its energy is apparently transferred in some manner to an electron of the chlorophyll. * ~~This electron is raised from its normal level to a higher energy level,.21 It is the unique capability of chlorophyll to absorb light energy and act as a donor of high energy electrons that is critical for photosynthesis. in one of the photosynthetic processes, chlorophyll acts both as an electron donor and as the ultimate electron 3 ~~acceptor, donating an excited electron and eventually ac- cepting the electron in a low energy state. 22Because the same electrons can be carried round and round the system, 3 ~~and no outside source of electrons is needed, this method of synthesizing the high energy phospate bonded compound I ~~known as adenosine triphospate (ATP) is called cyclic photo- I ~~phosphorylation. Noncyclic photophosphorylation is also intiated when 9 light strikes the chlorophyll molecule and raises an elec- tron to a high energy state, however, this electron is not returned to the chlorophyll molecule but is used to form hydrogen ions from water. The water molecules are split into hydrogen ions and free oxygen; it is in the formation of oxygen that an electron from the water molecule is re- turned to the chlorophyll molecule so the process can be- gin again. Noncyclic photophosphorylation is the process which forms oxygen and hydrogen ions. These hydrogen ions are in turn used to manufacture carbohydrates from atmo- spheric carbon dioxide. The overall process of photosynthesis can be written I ~~~as: 6C02 + 12H20 + light .... 602 + C6H1206 + 6H20 (see Figure 1 for a more detailed diagram of the photosyn- thetic process). The food chain represents the flow of energy through a living community. Plants are the primary sources of en- ergy for all animals. Plants are eaten by herbivorous an- imals, which are eaten by carnivorous animals, which are eaten by other carnivores, and so on. Each step in the food chain is called a trophic level; the feeding relation- ships of organisms impart a trophic structure to the comm- unity through which energy flows in only one direction.23 Most of the energy assimilated by a trophic level is dis- sipated as heat; it is not incorporated into growth and re- I i 10 1LIGHT (KJf\ 440 ADP CHLOROPHYLL j 5 @ | ATP Cyclic Photophosphorylation LIGHT ( 2 I~I ~ I CHLOROPHYLL ADP ? ATP Noncyclic Photophosphorylation I C(H20) + H20 7I- CO GLUCOSE ATP ADP Synthesis of Carbohydrates Figure 1 - The Photosynthetic Process I ~~production, and is therefore not available to the next high- I ~~er trophic level. One of the most useful generalizations in ecology, sometimes called "the 10 percent law," simply I ~~states that in nature some fraction of the energy entering I ~~any population is available for transfer to the populations that feed on it without serious disruptions of either. I ~~The actual amount of energy transferred probably varies 3 ~~widely. It seems fair to assume that in the grazing chain perhaps 10 to 20 percent of the energy fixed by the plant I ~~community can be transferred to herbivores, 10 to 20 per- 5 ~~cent of the energy entering the herbivore community can be transferred to the first level of carnivores, and so on. I ~~In this way what is called a mature community may support three or four levels of animal populations, each related to its food supply quantitatively on the basis of energy 3 ~~~fixation. 24 The relations between the producers and the consumers are clarified by two simple formulas. Consider the growth 1 ~~~of a single green plant, an autotroph that is capable of i ~~fixing its own solar energy. Some of the energy it fixes is stored in organic matter that accumulates as new tissue. 5 ~~~The amount of the new tissue, measured as dry weight, is the net production. This does not, however, represent all of the energy fixed. Some energy is required just to sup- I ~~port the living tissues of the plant. This is energy used in respiration. 25 12 I ~~~~The total energy fixed, then, is partitioned immedi- 1 ~~~ately within the plant according to the equation GP - Rs A NP. This is what happens as an ecosystem matures: consum- er populations increase substantially, adding to the re- 5 ~~spiration of the plants the respiration of the heterotrophs (RsH), the organisms that obtain their energy from the photosynthesizing plants. For an ecosystem (the total biota of any unit of the earth's surface) NEP equals GP - (RsA + RsH). NEP is the net ecosystem production, the net increase in energy stored within the system. Rs A + RsH is I ~~the total respiration of the ecosystem. 26 Clearly the a- mount of living tissue that can be supported in any eco- I ~~system depends on the amount of net production. Net pro- I ~~duction, however, is coupled to both photosynthesis and respiration, both of which can be affected by many factors. I ~~Photosynthesis is sensitive to light intensity and duration, I ~~to the availability of water and mineral nutrients and to temperature. It is also sensitive to the concentration of 5 ~~carbon dioxide; on a worldwide basis the amount of carbon 3 ~~~dioxide in the atmosphere may exert a major control over the rates of net production. 27 3 ~~~~The distribution of energy within a community can be represented by a pyramid, with the first trophic level (producers) at the base and the last consumer trophic level at the apex. 28This pyramid of energy is a necessary con- � ~~~sequence of physical law and is thus characteristic of all 13 ecosystems. Other attributes of ecosystems sometimes fit a pyramid model because they are related to the flow of energy through the system. One example is the pyramid of biomass (see Figure 2). In general, the decrease of en- ergy at each successive trophic level means that less bio- mass can be supported at each level. The following are illustrative of pyramids of bio- mass. In 1950 Harvey made an attempt to measure total bio- mass in waters near Plymouth.29 He estimated herbivore efficiency at 70 percent, as compared with an efficiency of 10 to 11 percent of carnivores. The yield per 100 g of vegetable matter assimilated was: 70 g of herbivorous short-lived zooplankton 11 g of herbivorous well-grown long- lived bivalves or worms 4 to 7 g (6 to 7 percent of 70 g) of pelagic fish feeding on herbivorous zooplankton 1 g (6 to 10 percent of 11 g) of demersal fish feeding on well-grown bivalves 0.3 g of carnivore feeding on carnivore, as fish on fish; or more if both are small and short lived Odom and Odom30 (1955) analysed the primary producers on a coral reef at Eniwetok Atoll and found zooxanthellae and filamentous algae in coral polyps and other animals, en- crusting and bushy algae particularly on the dead parts of the reef, small filamentous algae in and on broken-off coral fragments, and a sometimes dense mat of filamentous 14 0.3 GRAMS LARGE FISH 7 GRAMS SMALL FISH 70 GRAMS ZOOPLANKTON 100 GRAMS VEGETABLE MATTER Marine Community off Plymouth, from Harvey (1950) 11 GRAMS CARNIVORES 132 GRAMS HERBIVORES 703 GRAMS RIMARY PRODUCERS Pacific Coral Reef Community, from Odom and Odom (1955) Figure 2 - Pyramids of Biomass 15 I ~~algae, particularly inside the coral skeletons. For each 3 ~~of their sample areas of 43.56 square meters they calcu- lated the following: 1 ~~~~703 g of primary producers 1 ~~~~132 g (19 percent of producers) of herbivores 11 g (8 percent of herbivores) of carnivores I ~~It can be seen from these studies that more energy can be 3 ~~obtained by feeding at lower trophic levels, or toward the base of the pyramid of biomass. 1 ~~~~It has been mentioned that the attenuation of light 3 ~~in water limits photosynthesis in aquatic environments. The quantity of light that penetrates water decreases sub- 'I ~~stantially with depth. For this reason, primary producers 3 ~~are restricted to a fairly narrow zone close to the sur- face of the water, its depth depending on the transpar- I ~~ency of the water. The depth to which photosynthesis ex- ceeds plant respiration delimits the euphotic zone. 3 The lower limit of the euphotic zone, where respiration and photosynthesis just balance each other, is referred 3 ~~to as the compensation point. In some exceptionally clear marine waters, the compensation point may be a hundred meters below the surface, but this is a relatively rare 3 ~~condition. In turbid natural waters, the euphotic zone may be as shallow as one meter; and in some polluted areas little light penetrates beyond a few centimeters. 3 3 ~~~~Because light is necessary for plant growth, the 16 occurrence of large bentic (bottom-dwelling) algae is lim- ited to areas near the edges of the continents where the depth of the water does not exceed a hundred meters at the most. In the vast open reaches of the ocean, as well as in the shallower coastal waters, the one-celled plants which make up the phytoplankton occur abundantly in the euphotic zone. The small animals (zooplankton) that prey upon the phytoplankton are also restricted primarily to this re- gion where their food is found.33 There is abundant indirect evidence pointing to coastal waters as the greatest areas of greatest organic production. Conspicuous among such evidence is the yellow or brown color of coastal waters as contrasted to the blue of the open sea away from the influence of coastal currents, and the preponderance of benthic and pelagic animal life in coastal waters as compared with that of the open ocean or of abyssal depths.34 This greater coastal production of phytoplankton and the resulting zooplankton is reflected in the richness of organic carbon in coastal marine sediments. So, it is shown that factors other than the avail- ability of light serve to limit the net production of marine ecosystems. In general, factors which limit production can be placed in two categories--limiting factors of a physical nature, and limiting factors of a chemical nature. Examples of physical limiting factors in the marine environment are as follows: the intensity and duration and character of 1 ~~~~~~~~~~~~~~~~~17 I ~~~solar radiation, the temperature of the ocean waters, and 3 ~~~the amount of suitable hard substrate on which benthic or- ganisms may attach. Examples of chemical limiting factors I ~~in the marine environment are as follows: oxygen, carbon 3 ~~~dioxide, phosphorus, nitrogen, and silicon. Photosynthesis is relatively insensitive to tempera- 1 ~~~ture at low light levels, but it increases by a factor of two to five times for each ten degree Celsius increase in temperature at moderate light intensity. Like most phys- 3 ~~~iological functions, photosynthesis has an optimum tempera- g ~~~ture range, above which the rate of primary production de- creases rapidly. As one would expect, the optimum tempera- 5 ~~~ture for photosynthesis varies with the environment, from about 160C in some arctic species, to 300C in many temper- ate species, and as high as 380C in some tropical species. 3 5 ~~~Another physical factor which limits productivity in coast- a ~~~al waters is the absence of hard substrate within the eu- photic zone. The absence of suitable substrate does not 3 ~~~allow for the establishment of colonies of the larger ma- rine plants such as the kelps, and the eel, turtle, and manatee grasses, which are amoung the most productive communities on Earth, The absence of suitable hard sub- strate does not, of course, limit the production of those I ~~~marine plants that are suspended in the water column. I ~~~~Of those limiting factors of a chemical nature, dis- solved oxygen is the most basic. Both autotrophic and 3 ~~heterotrophic organisms require dissolved oxygen for cel- lular respiration. Oxygen can be added to the sea only in the upper layers, by absorption of air and in a layer 3 ~~strictly limited by the depth of light penetration, by 3 ~~photosynthesis. At the surface, oxygen can be lost from the sea by exchanges with the atmosphere, but at all depths I ~~it is consumed by the respriation of plants and animals, I ~~including the decomposition of organic material by bacte- ria. The respiratory processes of practically all organi- I ~~sins require the oxidation of organic compounds which are 3 ~~formed only in the upper layers, and so consumption of ox- ygen al all depths is limited by processes which have oc- I ~~curred in the upper euphotic zone. Since the rate of mole- 3 ~~cular diffusion through water is too small to be effective in carrying dissolved matter great distances, replenishment I ~~of oxygen to the deeper parts of the ocean can take place 3 ~~only by circulation with waters oxygenated at the surface layers. 3 Very large quantities of calcium and carbon dioxide 3 ~~have passed through the ocean and the atmosphere and now exist in marine sediments. The partition of carbon among I ~~the geospheres depends on a complex mechanism. Among the variables are the temperature and chiorinity of the ocean, the solubility of calcium carbonate and carbon dioxide in sea water, the rate of production of carbon dioxide by 3 ~~volcanoes; the rate of passage of carbon dioxide across the 1 ~~~~~~~~~~~~~~~~~~19 I ~~~air sea boundary; the rates of weathering of carbonate 5 ~~sediments and noncarbonate rocks; and the rate and char- acter of the various organic processes, including photo- I ~~synthesis, respiration, building of calcareous skeletons, I ~~decomposition of dead organic matter, man' s consumption of fossil fuels, and his transformation of the land's sur- I ~~~face. 37 5 ~~~~The annual consumption of atmospheric carbon dioxide by terrestrial plants is estimated at three precent, while I ~~the annual photosynthetic consumption, by marine plants, of carbon dioxide dissolved in ocean water, is estimated at only .036 percent. 38It is apparent, that, under these I ~~conditions, carbon dioxide would never become a limiting factor in marine waters. Phosphorus plays a very important role in the life 5 ~~processes of the marine environment. The original in- a ~~~organic phosphor-us is built -up into a variety of organic phosphorus compounds. In almost all organic phosphorus 5 ~~compounds, the phosphorus is present as a phosphoric acid residue.3 Although a rapid return of inorganic phos- phorus to the upper waters of the sea may take place as a result of the decomposition of the simple excretory pro- ducts of marine organisms, in general, autolytic or bac- terial decomposition of organic debris is usually consid- ered to be necessary for the return of most organic phos- phorus. 40 1 ~~~~~~~~~~~~~~~~~~20 3 ~~~~Early studies of lakes have shown that algal blooms, i.e. periods of great productivity, occur only when the concentration of phosphorus is greater than 0.01 milligrams 3 ~~per liter. 41 In the productive surface layers of marine waters the phosphorus content fluctuates seasonally; it may fall to nil in the summer but it reaches a maximum in 3 ~~late winter. The disappearance of phosphorus in summer is 3 ~~due to its combination in organic compounds. 42 Surface water which remains a long time without an intake of phos- 3 ~~phate must gradually become impoverished, because any phos- phate left tends to move downward. This kind of surface water is found, for example, in the Sargasso Sea, where the I ~~content of plankton is therefore always low. 43 This evi- 3 ~~dence suggests that phosphorus is the most common limiting factor in aquatic environments. I ~~~~In general, the concentration of nitrate follows the 3 ~~concentration of phosphorus. Nitrate concentrations have been shown to decline rapidly during the algal blooms of the I ~~summer months. Bacterial action is considered necessary 3 ~~for both nitrogen and phosphorus regeneration; but since the regeneration of nitrogen occurs at a slower pace than I ~~that of phosphorus, 44nitrogen is likely to be the factor * ~~that limits marine production in waters where phosphorus is not limiting. I ~~~~Silica is also an important nutrient element in the 3 ~~marine environment. During algal blooms, diatoms incorpor- 1 ~~~~~~~~~~~~~~~~~~21 I ~~ate great quantitites of silicon in their skeletal cases; 3 ~~but since the supply of silica is regenerated very quickly, silica is not usually considered a limiting factor. I ~~~~With an understanding of the variety and nature of I ~~limiting factors, conclusions concerning the relative pro- ductivity of various naturally occuring communities can be I ~~made. Generally speaking, the ocean appears unproductive I ~~when compared with terestrial ecosystems. Recent studies at Woods Hole Oceanographic Institution emphasized that the 3 ~~oceans are far from an unlimited resource. The net pro- duction of the open ocean is about 50 grams of fixed car- bon per square meter per year. Areas of very high produc- 5 ~~tivity, including coastal areas and areas of upwelling where S ~~nutrients are abundant, do not average more than 300 grams of fixed carbon per square meter per year. The mean pro- 3 ~~ductivity of the oceans, according to this analysis would be about 55 grams of carbon per square meter per year, equivalent to between 120 and 150 grams of dry organic 3 ~~~matter. 45 The available evidence suggests that, in spite of the I ~~much larger area of the oceans, by far the greater amount 3 ~~of energy is fixed on land. The oceans, even if their pro- ductivity can be preserved do not represent a vast source of energy for support of larger human populations. They are currently being exploited at close to the maximum sus- tainable rate. 46 1 ~~~~~~~~~~~~~~~~~~22 I ~~~~Although the average productivity of the oceans does * ~~not compare favorably with the average productivity of the terrestrial environments, there are some marine communities I ~~which represent "hot spots"t or areas of extremely high pro- ft ~~ductivity. The following are examples of productive marine communities compared with terrestrial communities: (1) I ~~~shallow coastal regions are about as productive as forests, 3 ~~moist grassland, land under ordinary cultivation, but are only 20 percent as productive as land under intensive cul- I ~~~tivation; 47(2) coral reefs are about four times as produc- 3 ~~~tive as forests, moist grasslands, land under ordinary cul- tivation, but only 80 percent as productive as land under I ~~~intensive cultivation; 48(3) estuaries can be five times 5 ~~as productive as forests, moist grasslands, land under or- dinary cultivation, and equally productive as land under U ~~~intensive cultivation; 49and (4) man-made tropical reefs are three to eight times as productive as natural reefs. This implies that man-made tropical reefs are from 12 to 32 3 ~~~times as productive as land under normal cultivation and two to six times as productive as land under intensive cultivation. 50 3 ~~~~With this understanding of physical and chemical fac- tors and how they become limiting factors in natural en- vironments, the argument can be made that the artifical 3 ~~~introduction of a physicial or chemical factor can increase the productivity of a natural system, provided, however, 3 ~~~~~~~~~~~~~~~~~23 the introduced factor is the factor in shortest supply, 3 ~~i.e. the limiting factor. An example of an artificial introduction of a limiting factor precipitating an increase in the production is the introduction of phosphorus into 3 ~~lakes through sewage wastes and agricultural ru-noff. It has been demonstrated that the widespread use of home laun- I ~~dry detergents containing phosphates has been responsible 3 ~~~for algal blooms. A fundamental ecological concept relates the diver- I ~~sity of a natural system to the stability of the physical 3 ~~environment and the length of time that the physical en- vironment has remained stable. Generally speaking, the I ~~more diverse a natural system is, diversity being defined 3 ~~~as the number of species interrelating in a natural system, the more efficient and productive that system is. Eco- I ~~logical communities can be divided into two groups, those 5 ~~~in which physical factors structure the composition of a community and those in which biological competition struc- I ~~tures the community. In higher latitudes the abiotic fac- tors will have a greater decimating action, whereas in warmer areas biological competition will be more effec- 3 ~~~tive. 51 An example of two extreme cases would be the 3 ~~~structure and productivity of an arctic tundra and that of a tropical coral reef. I ~~~~A study of artificial reefs in all oceanic environ- ments would be much too broad a topic to address. This 24 3 ~~study will be limited generally to effects of artificial 5 ~~reefs in temperate waters and specifically to the waters off the coasts of Texas, Louisianna, Mississippi, and 3 ~~Alabama. This section of the Guld of Mexico can be char- I ~~acterized as a region of significant sedimentation due to the influence of major river systems draining the central I ~~portion of the North American continent; in addition the 3 ~~predominant coastal currents create a series of barrier is- lands which form sounds or lagoons between the coast line I ~~and the open gulf. This is an area which supports major 3 ~~~commercial and sport fisheries, and is an area where art- ificial structures have enhanced already existing fisheries. 3 ~~~~The continental shelf of the Gulf of Mexico is an 3 ~~expanse of shallow ocean bottom, and is the area inhabited by the majority of the commercially valuable reef fishes. 3 ~~Much of the shelf area, however, is relatively barren, con- sisting of a flat, sand, or mud bottom which slopes gently offshore, with little hard irregular substrate. 52Areas 3 ~~~of rough hard bottom are necessary for encrusting organisms g ~~~such as barnacles, hydroids, corals, and mussels, vital organisms in the food chain, to settle and complete their 3 ~~~life cycles and are used as protective areas, food sources, spawning grounds, and visual reference points for many fishes. It is well known by fishermen that coral reefs, rock ledges, wrecks, and other areas of relief on the continental shelf are productive fishing grounds. 53 25 I ~~~The evidence suggests that the lack of hard bottom sub- 3 ~~~strate is the single factor which limits the benthic pro- ductivity in many of the coastal waters of the Gulf of I ~~Mexico. 54 It can also be demonstrated that once substrate 5 ~~~is introduced in the form of artificial reefs, i.e. the limiting factor which is of a physical nature being now 1 ~~~present, a highly productive biologically accomodative 3 ~~community can develop. This fact has been demonstrated time and time again by the rapid development of productive I ~~~fisheries around new shipwrecks. I ~~~~The Japanese have used artificial reefs in their coastal waters for almost 200 years. 55The inhabitants of I ~~~the Manzai and Toshi villages had, by the year 1795, be- 3 ~~~come accustomed to unusally large catches of fishes when they set their -nets close to a recently sunken ship. When 3 ~~~the wooden ship deteriorated after seven or eight years 5 ~~a-ad fish stopped thronging around the wreck, the villagers replaced the wreck with large wooded and bamboo frames I ~~weighted with sandbags. About 100 days later during the g ~~~summer in the neighborhood of the new structures, the fish- ermen netted a far greater number of fish than they had 3 ~~been accustomed to catching around the sunken ship. In the ten year period that followed, the villagers sank sev- eralhunredmor arifiialstructures. 56 In recent years 3 ~~~the Japanese government has encouraged and assisted in the construction of artificial reefs, and by the year 1966 the 26 number of artificial reefs off the Japanese coast totaled 721,065. 5 The value of artificial reefs in the coastal waters off the Gulf of Mexico has been demonstrated by the acciden- tal sinking of the V. A. Fogg which went down off Freeport, Texas, in 1972.58 This wreck proved to be a productive fishery within a year. As a result of this and similar expericnces, the State of Texas has sunk 12 liberty ships in its coastal waters. Significant numbers of red snapper (Lutjanus campechanus), jewfish (Epinephelus itajava), and sand tigers (Odontapis taurus) have been taken on the new Texas reefs.59 From these examples it is demonstrated that in waters like the Gulf of Mexico where there is a high rate of sed- imentation and sufficient inorganic nutrients, the absence of substrate is the factor which limits the productivity of the coastal waters. This fact is confirmed by the in- troduction of substrate artificially into waters with ben- thic environments of unconsolidated sediment. Without ex- ception, fish will be feeding regularly in the new environ- ment in a matter of months. This phenomenon is observable on a small scale even when the artificial reef is as in- significant as an accidentally discarded outboard motor or starter battery. On a large scale, such as the multitude of offshore drilling platforms paralleling the Texas and Louisiana coasts, very significant fisheries have 27 resulted. 60 3 ~~~~Although significant fisheries develop around artifi- cial reefs, it could be argued that these fisheries do not I ~~represent an actual increase in the total productivity of 5 ~~coastal waters. Many species of fishes exhibit a form of behavior known as thigmotropism. These fish will associate I ~~with solid objects as a visual reference or as a demarca- 3 ~~tion of territory. It has been stated that as a result of this behavioral tendency, artificial reefs serve only to I ~~~concentrate fishery resources and do not increase the total 3 ~~productivity of the fishery, i.e. fishes vacate less desir- able habitat in order to fulfill their instinctive drive to I ~~associate themselves with solid objects. While there is 3 ~~~some evidence that this might occur as a short termed phe- nome-non, experimental evidence does not support this pre- I ~~sumption. In 1973 and 1974 and experiment was conducted in 3 ~~Alantic waters off the Florida coast. An artificial reef made of discarded automobile tires was built adjacent to a 5 ~~natural coral patch reef. Both reefs were approximately the same size, and at the end of the experimental period, both reefs were poisoned out and the biomass was calculated. 3 ~~~While the natural reef had a supported biomass which was normal for a reef its size, the adjacent artificial reef 6 supported a biomass 2� times as great as the natural reef.6 3 ~~~~An analysis of the reefs showed more settled orga- nisms, mostly algae and sponges, on the artificial reef. 28 1 ~~This was undoubtedly the reason for the higher production 3 ~~~of the artificial reef.62 This is clearly an example of a reef which increased the total numbers of benthic organisms and reef dwelling 3 ~~fishes. Since the population of the natural reef was nor- mal after a year, the evidence demonstrates that any initi- U ~~~al loss of migrants to the artificial reef was rapidly re- 5 ~~~covered from the overall increase in benthic productivity. It was demonstrated that each habitat will support popula- I ~~~tions proportional to the carrying capacity of that habitat; 3 ~~~and since the introduction of a very productive habitat in- to an area of moderate or low natural production does not I ~~~decrease the carrying capacity of adjacent areas of lower 3 ~~~production, the populations or biomass of the adjacent areas are not reduced. The original productivity of a I ~~~benthic environment with the additional production of an * ~~~artificial reef results in a significant increase in the total productivity of the benthic environment. * ~~~~The case can be restated that hard substrate is the 3 ~~~needed factor in shortest supply in most benthic environ- ments of the Gulf of Mexico and many other coastal waters; 3 ~~~and when this factor is introduced in the form of artifici- 3 ~~~al reefs, the productivity of coastal waters is directed in such a way that there is a net increase in the numbers of 3 ~~~benthic organisms and -reef dwelling fishers. This conclu- * ~~~sion can be expanded to demonstrate that when substrate is * ~~~~~~~~~~~~~~~~~~29 1 ~~~introduced in the form of artificial reefs, it is no longer 3 ~~~the limiting factor and the factor in shortest supply would probably be inorganic phosphorus or nitrate. If these es- sential nutrients were added to an established artificial 3 ~~reef environment, another significant increase in production might be expected. Production would be limited finally by the amount and quality of incident solar radiation and the 5 ~~~efficiency of the photosynthetic process. 1 ~~~~~~~~~~~~~~~~~30 3 ~~~~~~~~CHAPTER III ARTIFICIAL REEFS AND THE LEGAL ENVIRONMENT It has been demontrated that artificial reefs can I ~~~increase the productivity of benthic environments, and as 3 ~~~a result of this increase in productivity, artificial reefs can be used as a tool for the effective management of I ~~coastal fishery resources. Artificial reefs exist off the 3 ~~~coasts of most of the United States of America and many foreign nations. For the most part, these reefs have been * ~~~constructed by coastal states or public corporations for I .~~the benefit of the general public. Although these reefs have benefited the public as a whole, it is possible that 3 ~~~the development of artificial reefs by private corporations or persons might prove to be the optimum method of obtain- ing a sustained yield sport fishery species from coastal 3 ~~waters. The private development of artificial reefs might g ~~~also be conducted in a way in which the public trust na- ture of coastal fisheries would be preserved. * ~~~~In order to understand the legal environment in which the private development of artificial reefs must operate, a survey of the development of the public trust doctrine, 3 ~~~as it is applied today, is necessary. The rule that coast- al fisheries are a public resource to be held in trust by 31 I ~~the state is rooted in the law of the Romans. 3 ~~~~Roman jurisprudence, developed in a society with heavy commerce, with important urban concentrarions, and I ~~with a legal heritage from the sea-dependent Greeks; held I ~~that by the most basic "natural law"' the "air, running water, the sea, and consequently the seashore"1 were "common I ~~to all. ,63 The following is a quotation from the Institutes I ~~Jus tinian: No one therefore is forbidden access to the seashore provided that he abstains from in- jury to improvements.... All rivers and har- bours are public, so that all persons have a right to fish therein..,everyone is entitled to bring his vessel to the bank of a river, and fasten cables to the trees growing there and use it as a resting place for cargo, as freely as he may navigate the river itself. But the owneship of the bank is in the owner of the adjoining land, and consequently so too is the ownership of the trees which grow upon it. Again, the public use of the sea- shore, as of the sea itself, is part of the law of nations; consequently everyone is free to build a cottage upon it for the purpose I ~~~~of retreat, as well as to dry his nets and haul them up from the sea. But they can not be said to belong to anyone as private pro- I ~~~~perty, but rather are subject to the same law as the sea itself, with the soil or sand which lies beneath it. This imperial law is the original foundation from which the 3 ~~common law developed.64 As is well known, with the decline of the Roman Em- I ~~pire, Europe retrogressed in terms of commerce, navigation, 3 ~~and effective governmental administration. Public owner- ship of waterways and tidal areas frequently gave way to I ~~owneship by local powers and feudatories. Many continent- 32 I ~~~al princes, for example, came to claim that the right to fish was their personal right and required that all their fishermen be licensed for a fee. In the British Isles, I ~~~then a thinly populated frontier, this process of decen- 3 ~~~tralized control was far advanced by the time of William the Conqueror. The English King's jurisdictional and soy- I ~~~erign claims to tidal areas became confused with a person- 3 ~~al private property claim. The King claimed a private in- terest in tidal and riverbed soil, and consequently the I ~~~private right to whatever could be found on or under the 3 ~~soil. He also claimed the right to "several fishery" (an exclusive private right to fish) in these areas. Since 3 ~~private ownership always entails the right to alienate, and 3 ~~~since the King could not easily enjoy these interests everywhere directly, Saxon grants, confirmed and extended 3 ~~by the Norman kings, vested the largest portion of the English foreshore in particular subjects. In theory, the crown had the exclusive right to certain types of fish, and it retained the right to take a net down many of the kingdom' s rivers several times a year through all private fisheries. Between what the King claimed for himself and * ~~what the lords received by grant or took by prescription, the old common ownership in the public provided for in I ~~~Roman law was seriously if unevenly eroded. 65 3 ~~~~This process of proliferating private ownership and control of tidal areas led to increasing public inconven- * ~~~~~~~~~~~~~~~~~33 I ~~ience. The Magna Carta, in part a reaction to these in- conveniences, can be seen as a salient point at which the doctrinal trend began to shift back in the direction of pro- tecting the public's interest, especially in the areas of navigation and fishery rights. The steps taken in this per- iod, however, were insignificant when compared with those 3 ~~which have since been attribuited to it. In the process of developing ("interpreting") the contract made at Runnymede, the courts, while never abandoning the original Roman con- I ~~ception of a general common ownership in all the people, began to speak in terms of particular guaranteed rights. 6 The resulting doctrinal ambiguity continues to this day.6 I ~~Chapter 33 of the Magna Carta guarantees the public right 3 ~~of unimpeded navigation, and Chapter 47 guarantees public access to fisheries. The question remains, however, as I ~~to whether those common law rights not expressed in the 3 N~~agna Carta have the same force of law as those rights guaranteed by the Magna Carta? As modern law developed, * ~~the King became the trustee for these public rights, 5 ~~guaranteed by the Magna Carta, but he could not appropriate these rights for his own use. I ~~~~The public trust doctrine was later brought to the 3 ~~test by the development of laissez-faire capitalism. Whereas both Roman law and the public trust doctrine called I ~~for the state to act as a trustee for the public interest, 3 ~~laissez-faire theorists wished to do away with feudal en- 1 ~~~~~~~~~~~~~~~~~34 3 ~~cumbrances and to rely instead upon private ownership and 3 ~~the invisible hand. There was a greater perceived need for doing way with irrational feudal regulation and for I ~~widening assured access to tidal resources than for regu- I ~~lating the proposed multiple use. This historical movement, coming as it did at a period of especially rapid growth in I ~~the public trust doctrine, strongly reinforced the doc- 3 ~~trine's existing tendency to develop in the framework of a series of public easements imposed on a largely private I ~~fee ownership system rather than that of public ownership I ~~through the state (a model subsequently followed in many socialist societies). 67 I ~~~~By the subsequent development of democratic govern- 3 ~~ments and the addition of public easements along with the reinterpretation of the extent of existing public ease- I ~~ments, the common law became to resemble more and more the 1 ~~Roman concept of public ownership held in trust by the sovereign. Even though the law was often forced to re- cognize that the shore had been acquired by grant, pre- 3 ~~scription, or a combination of the two, both courts and academic writers continued to hold that ownership was prm facie in the crown. The crown's interest, moreover, I ~~was widely perceived to be the people's. In a close con- sideration of conflicting interests in the Brighton sea- shore, for example, Mr. Justice Baily held that to the ex- 3 ~~tent that tidal areas are the King's they are held in trust 35 for the public. 68With the American Revolution, this sov- ereign representative proprietorship passed to the citizens of each state. I ~~~~For when the Revolution took place, the people of each state became themselves sovereign; and in that character hold I ~~~~the absolute right to all their navig- able waters and the soils under them for their own common use, subject only to the rights since surrendered by the 6 Constitution to the general government.9 I ~~~In the United States the public trust doctrine has devel- oped to the effect that "the state can no more abdicate its trust over property in which the whole people are interest- ed. .. than it can abdicate its police power...." 70 3 ~~~~At least ten different categories of interest in tidal areas have been claimed at one time or another to be * ~~protected for the people under the public trust theory. They are: navigation; ports; free passage; commerce; fishing; sand and stones; seaweed and shells; bathing (re- I ~~~creation); conservation and aesthetics; and the "public 3 ~~interest." Public trust theory characterizes a given right as being fully protected or not protected at all. 71 The right to fish is a public right subject to pri- vate invasion, primarily by prescription alt-hough initially in early England also in large degree by grant. In case 3 ~~~of conflict with the right of navigation., the latter is paramount. 72 The status of the right to fishery has long been one * ~~~of the most uncertain areas of the public trust theory. 36 3 ~~In large part this has been due to the ambiguity regarding the relationship between the right to fish and the owner- ship of the underwater soil. The questions are whether the 3 ~~right is an easement or a profit of the soil; or, whether the existence of the right does raise a presumption of the ownership of the soil and vice versa? 73 3 ~~~~These questions of ownership do not arise, however, when the right to fishery is limited to coastal waters. For fisheries which exist superadjacent to submerged lands I ~~held in trust by a state for the benefit of the public, the 3 ~~public right of fishery is recognized. Coastal states have recognized by statute the public trust nature of coastal I ~~fisheries, and have adopted management techniques by which 3 ~~they intend to maximize benefits accruing from coastal fisheries. I ~~~~Achieving a maximum sustainable yield is one method 3 ~~used to maximize these benefits. Briefly stated, maximum sustainable yield is the highest level at which a fishery I ~~may be exploited on a perpetual basis. The population 3 ~~dynamics of a fishery can be described by four character- istics: recruitment, growth, natural mortality and I ~~catch.74 If fishing effort is at a level above maximum 3 ~~sutainable yield, the natural productive capacity (the principal part of the recruitment factor) of the remaining I ~~population will not be sufficient to re-establish the fish- 3 ~~ery at is previous numbers. If carried to the extreme, an 37 * __ a __ H ~ A a b W X "X" axis represents Total Catch in One Season "W'" axis represents Total Population the Following Season "a" to "b" represents Under Exploitation "b" represents Maximum Sustainable Yield "b" to "c" represents Over Exploitation e Y I~~~~~~ 7 "Y" axis represents Total Catch "Z" axis represents Fishing Effort "d" to "e" represents Under Exploitation "ee represents Maximum Sustainable Yield 3"e" to "f" represents Over Exploitation Figure 3 - Dynamics of Fish Populations U ~~~~~~~~~~~~~~~~~~38 I ~~~effort at this level will result in the eventual collapse of the fishery (see figure 3). On the other hand, if fish- ing effort is at a level below maximum sustainable yield, * ~~growth and natural mortality will limit any increases in the population of the fishery. At an exploitation rate below maximum sustainable yield, part of the natural productive I ~~~capacity of the fishery is, in effect, being wasted. Traditionally the only method used by coastal states in limiting the exploitation of their fishery resources has been the limiting of catch by regulation. These regulations * ~~~have taken one or more of the following forms: (1) the seasonal opening and closing of fisheries; (2) the limiting the number or weight of fish any one person or vessel can take or land, i.e. the estab- 1 ~~~~~lishing of quotas; 3)the establishing of minimum or maximum size limitations on in- dividuals of species which can * ~~~~~be caught or kept; and (4) the restricting of technology persons may employ in exploiting a fishery; e.g. mesh size of nets, type and size of vessels, etc.75 I ~~~~For the most part, the management of fishery re- sources by regulating catch has proven to be ineffective. Many states have not established a maximum sustainable I ~~~yield due to a lack of basic biological data on which to * ~~~base regulations and an inability to enforce these fishing regulations. 76 Those states which have established a max- I ~~~~~~~~~~~~~~~~~~~39 U ~~imum sustainable yield have done so only by diseconomic methods, as evidenced by the seasonal unemployment of per- sons engaged in fishing or in fishing support a-ad process- ing industries, by the presence of unreasonably large fish- ing fleets, and by the presence of bizarre fishing vessels and equipment resulting from restrictions on technology.77 I ~~~The problem of effectively managing a fishery resource 'IS * ~~~compounded by the very nature of the resource; fish live in a fluid environment and are not respectors of political I ~~boundaries. If a state were to establish a biologically I ~~~and economically sound fisheries management scheme, its efforts could be frustrated by the implementation of an I ~~~equally well intentioned but incompatible management plan * ~~~by one of its -neighbors. 7 It is paradoxical that the management of coastal I ~~~fisheries as a common property resource has come into con- flict with the public trust which was established to pro- tect the common property nature of coastal fisheries. For I ~~~destruction of a coastal fishery, or the exploitation of a fishery in a manner which results in grave social and econ- omic costs, is clearly not in accord with the public inter- * ~~~est. * ~~~~The error which created a doctrine with conflicting method and purpose was the perception of fisheries as an unlimited or infinite resource. Coastal fisheries are a * ~~~living and thus a renewable resource; and when a renewable * ~~~~~~~~~~~~~~~~~40 U ~~resource is taken at a rate in which reproduction and * ~~growth re-establishes that portion of the resource which has been taken, i.e. the resource is being exploited at a rate below maximum sustainable yield, the resource does in- deed behave as if it were unlimited. The common property nature of coastal fisheries developed as a legal doctrine I ~~during the Imperial Roman, feudal, and laissez-faire periods of world history. These are periods in which competition for coastal fishery resources did not result in the exploi- I ~~tation of coastal fisheries at a level beyond maximum sus- tainable yield. It has only been in the last century and a half that technological innovations, increasing human pop- I ~~ulation, and the resulting increased competition for coast- 5 ~~al fishery resources has demonstrated that coastal fisher- ies can be overexploited; and the collapse of many coastal I ~~fisheries in modern times attest to the fact that coastal * ~~~fisheries do not represent an infinite resource. 7 It is proposed that the public trust would be better 5 ~~~served by methods other than the management of coastal fish- 5 ~~~eries as a common property resource to which everyone has unlimited access. All states recognize that it is some- 3 ~~~times in the public interest to lease public resources to * ~~~private persons or corporations for the economic and social benefit of its citizens, and several states have statutes I ~~~authorizing the leasing of both living and non-living coast- i ~~~al resources. I ~~~~~~~~~~~~~~~~~41 I ~~~~In its 1968 Session, the Mississippi Legislature 3 ~~extended the powers of the Mississippi Mineral Lease Commission by authorizing the Commission to employ competent I ~~engineering personnel to survey the territorial waters of 3 ~~the State of Mississippi in the Mississippi Sound and in the Gulf of Mexico and to prepare a map or plat of such I ~~territorial waters divided into blocks of not more than 6,000 acres each. The Mineral Lease Commission was author- ized to adopt such survey, plat, or map for leasing of I ~~submerged lands for mineral development.0 The authority * ~~of the Director of Conservation of Alabama is in general terms. He is merely directed to lease submerged lands in I ~~~the Gulf of Mexico upon such terms as he may approve. 8 The Louisiana State Mineral Board is a body corporate, with its domicile at the state capitol, possessing, in addition to the powers conferred on it by statute, all power to sue and be sued. The courts have recognized, however, that despite its corporate entity, it is nevertheless an agency 1 ~~or arm of the State of Louisiana, for the purpose of grant- ing and supervising mineral leases. Lands under the juris- I ~~diction of the Board and capable of being leased by it are defined as any lands belonging to the state, or the title to which is in the public, including road beds, I ~~water bottoms, and lands adjudicated to the state at tax 3 ~~~sales. 82 a ~~~~~~~~~~~~~~~~~42 U ~~~~The Mississippi Mineral Lease Commission is given 3 ~~wide discretion in setting the terms and conditions of the lease, the statute merely specifying that the commis- I ~~sion shall lease for such consideration and upon such terms I ~~and conditions as said commission shall deem just and proper. Its only restriction is that the working interest I ~~shall not be for more than 7/8 and the royalty to the state I ~~shall be at least 1/8. Primary term, delay rentals and bonus are all left to the discretion of the Commission. I ~~No restriction is placed on acreage that may be leased.83 The Alabama statutes are also silent on the specific terms of the lease, the only provision being that no tract of land containing more than 5,200 acres shall be leased or advertised for lease. It has been held by the Supreme Court of Alabama, however, that the State I ~~Director of Conservation, in appraising the respective values of royalty proposals contained in bids for oil and gas leases, is authorized to use his best judgement; and I ~~that the consideration for a sale of oil and gas leases on state lands to the highest bidder is threefold: (1) I ~~the so-called bonus, which is the amount of cash presently 5 ~~paid; (2) the so-called annual rental; and (3) the royalty, each of which forms an integral part of the consideration I ~~~or price of the rights sold. 84 5 ~~~~The Louisiana statutes fix certain minimum require- ments which limit the State Mineral Board in accepting I ~~~~~~~~~~~~~~~~~~43 I ~~bids. For example, the maximum area that may be included 3 ~~~in a single lease is 5,000 acres. The statutes fix the minimum royalty at 1/8 on oil and gas, but the policy I ~~~of the Board is not to consider a 1/8 royalty bid on oil 3 ~~~and gas except on rank wildcat areas and in extra- ordinary circumstances. The statutes require that if a I ~~~bonus is stipulated, the annual rent must not be for less I ~~~than one-half the amount of the bonus. The statutes do not fix a primary period for the lease. Nevertheless, the U ~~~policy of the Board has been to grant leases for a term 5 ~~~of five years on offshore leases. 85 An oil and gas lease issued by the Secretary of the I ~~~Interior pursuant to the Outer Continental Shelf Lands 5 ~~~Act is limited to an area not exceeding 5,760 acres, and shall be for a period of five years and as long * ~~~thereafter as oil and gas may be produced from the area in paying quantities, or drilling or well reworking operations, as approved by the Secretary, are conducted thereon. An annual rental shall be paid and royalty is g ~~~fixed at not less than 12-1,% in the amount removed, or sold from the lease. Either the royalty or the bonus j ~~~is fixed by the Secretary, if the bonus is fixed the bidding is on the royalty and if the royalty is fixed the bidding is on the bonus. 86 1 ~~~~~~~~~~~~~~~~44 From these statutes, it is shown that it is indeed 3 ~~~in the public interest to lease publicly owned submerged lands to private parties for the purpose of oil and gas U ~~~development, if these leases are issued on a competitive 5 ~~~bid basis and provided that the governmental entity which is acting in the role of a public trustee received * ~~~reasonable compensation in one or more of the following forms: (1) a royalty of at least 12-17o; (2) an annual rent; and (3) a bonus. These principles which guide the 1 ~~~leasing of nonliving public resources can be applied to 3 ~~~the leasing of publicly owned living resources. In fact, many states have statutes which provide for the leasing I ~~~of public trust living resources. The Board of Trustees of the Florida Internal Improvement Trust Fund may, to the extent it is 'not I ~~~contrary to the public interest, lease submerged lands to which it has title for the conduct of aquaculture activities and may grant exclusive use of the bottom and 5 ~~~water column to the extent required by such activities. 87 The maximum initial term of the lease shall be ten years.8 The lease terms shall also fix a rental to be paid 3 ~~~throughout the term of the lease which will be supple- mented with royalties after the productivity of the aquaculture enterprise has been established. 89 The 5 ~~~lease is to be marked and fenced in a manner not to 1 ~~~~~~~~~~~~~~~~~45 I ~~interfere with navigation and other traditional uses of 3 ~~the surface, and the lessee is to provide reasonable ingress and egress to the public for the capture of I ~~those species of marine organisms not being cultivated I ~~under the terms of the lease contract.90 The Commissioner of Wildlife and Fisheries of the * ~~State of Louisiana may lease bedding grounds for the 3 ~~cultivation and propagation of oysters within any waters within the territorial jurisdiction of the state. 91 I ~~The Commissioner shallI require the bottoms of water areas 3 ~~leased to be as compact as possible and shall fix an annual rental of not less than one dollar or more than I ~~five dollars per acre leased. 92 Lessees enjoy the 3 ~~exclusive use of the water bottoms leased and of all oysters, shells, and cultch grown or placed thereon. 93 I ~~Leases are for a term of 15 years and are renewable for a period of not more than 10 years, 94and no one person may lease more than 1,000 acres of waterbottoms. 9 * ~~~The Mississippi Marine Conservation Commission has 3 ~~the authority to lease submerged waterbottoms for the purpose of cultivating oysters. 96No individual, corporation or partnership may lease less than five acres 3 ~~or more than 100 acres. 97The Commission shall issue leases on a competitive bid basis, and the lease shall be for a term of one year, renewable up to 25 years. 9 46 I ~~The Commission shall fix a ground rental of not less 3 ~~than one dollar per acre.99 It can be seen from these statutes that coastal I ~~states have indeed recognized that it can be within the 3 ~~public trust to lease publicly owned living resources to private parties if certain conditions are met. Artificial 3 ~~reefs increase the productivity of coastal waters, and I ~~the private development of artificial reefs on leased public trust submerged waterbottoms does not represent 1 ~~the leasing of publicly owned living resources, but I ~~rather the leasing of the potential, but presently wasted, productivity of publicly owned submerged water- I ~~bottoms and their superadjacent waters. However, the 5 ~~conditions in which the leasing of submerged water- bottoms and a water column for the private development 5 ~~of artificial reefs would be in accord with the public 5 ~~trust in which these resources are held, would be very similar to the conditions applied to the leasing of 5 ~~~publicly owned living resources. It is proposed that the leasing of submerged water- bottoms and their superadjacent water columns would be in I ~~accord with the public trust in which coastal resources are held, if the following conditions are met: I (1) ~~~no one person or corporation could lease more than 500 acres of sub- 5 ~~~~~merged waterbottoms and their superadjacent water columns; U ~~~~~~~~~~~~~~~~~47 (2) the initial lease period would be 15 years renewable for an additional 10 years for a total lease period no greater than 25 years; 3 ~~~~~(3) there would be a $5.00 per acre annual rent; 1 ~~~~~(4) there would be a royalty on the income derived from the lease to be determined after the reef had I ~~~~~~established its productivity; (5) the reef would be built on naturally I ~~~~~~unproductive submerged waterbottoms; (6) leases would be issued on a competitive bid basis, the bid being based on a cash bonus; and (7) the reef would be constructed in such a way as to not representa hazard or a hinderance to navigation. I ~~~In return for these considerations the lessee would 3 ~~~receive exclusive use of the submerged waterbottoms and all uses of the water column which would not interfere I ~~~with navigation. A person or corporation wishing to develop an artificial reef in coastal waters would, in addition I ~~~to making application to the state agency or agencies 3 ~~~responsible for the leasing of living resources and public lands, be required to obtain a number of federal I ~~~permits. The agencies which would be most directly 3 ~~~involved are the U.S. Army Corps of Engineers, the U.S. Coast Guard, the Environmental Protection Agency, and the I ~~~National Oceanic and Atmospheric Administration. 100 48 I ~~~The National Environmental Policy Act requires the 3 ~~preparation of environmental impact statements from federal agencies permitting or licensing any activity U ~~likely to have a significant impact on the environment. I I~~~here the Corps of Engineers is permitting construction in navigable waters, they will determine whether a state- I ~~ment is required. Environmental impact statements may 3 ~~need to address such questions as whether these reefs will lead to increased numbers of those species the I ~~presence of which might upset the natural balance. Reefs 3 ~~to be built near the shore would require an assessment of the reefs impact on the shoreline and possible changes I ~~in the shoreline resulting from alteration of circulation 3 ~~patterns, the littoral transport of sediments, the refraction or reflection of wave energy, and the effects I ~~any of these coastal processes might have on the erosion 1 ~~or accretion of coastal lands. 101 The protection of fisheries resources has been given greater attention since the passage of the Fish and Wildlife Coordination Act. Numerous activities which affect fish in navigable waters are being scrutinized to determine whether there will be any adverse consequences 3 ~~to them. Permits from federal agencies may be denied where the federal or state authorities have reviewed applications and decided that there would be detrimental 1 ~~~~~~~~~~~~~~~~~~49 5 ~~effects. Therefore, permit applications for building 3 ~~~reefs may be denied where the proposed reef would affect the ecology of nearby marine communities, e.g. natural reefs, grass beds, or certain rock outcroppings.10 I ~~~~Two provisions of the Marine Protection, Research, and Sanctuaries Act concern the construction of artificial reefs. Section 3(f) clearly states that ocean dumping, 3 ~~~which is prohibited under the Act, "does not mean the construction of any fixed structure or artificial island U ~~~nor the intentional placement of any device in ocean 3 ~~~waters or on or in the submerged land beneath such waters, for a purpose other than disposal.103 In describing I ~~~the materials which are prohibited from being dumped in 5 ~~~the ocean without a permit from the Environmental Protection Agency, nearly every material which is used I ~~~for the construction of artificial reefs is specifically I ~~~mentioned. 104 The section on sanctuaries in the Marine Protection, I ~~~Research, and Sanctuaries Act might also concern artifi- 3 ~~~cial reefs. The National Oceanic and Atmospheric Administration administers this portion of the Act, and I ~~~is responsible for designating marine sanctuaries in I ~~~coastal waters out to the edge of the continental shelf.105 That agency is also responsible for issuing regulations 5 ~~~concerning activities within the sanctuary. It can be assumed that NOAA will carefully scrutinize activities 50 which would affect these marine preserves. Restoration 5 ~~~of areas as well as preservation is one of the purposes of this Act. Thus, the placing of artificially created reefs within sanctuaries may be a method used to restore those areas for conservation and recreational purposes.10 When installing and operating an artificial reef, care should be taken to comply with all state and 3 ~~federal water quality legislation. Section 318 of the Federal Water Pollution Control Act 107 may have a I ~~~significant impact on the operation of a reef if attempts * ~~~are made to increase the production of the reef by introducting foods or chemicals to the artificial reef I ~~~site. This section entitled "Aquaculture", is to 5 ~~~authorize controlled discharges into navigable waters which would otherwise be prohibited by the Act. 108 I ~~~This section does not mention artificial reefs, per se, I ~~~as being within the operation of the Act; however, reef construction may be interpreted by the Environmental I ~~~Protection Agency to be included. 109 3 ~~~~When planning to build an aritificial reef, one should first request a permit from the U.S. Army Corps I ~~~of Engineers. A permit from the Corps will be required for construction of an artificial reef under requirements of Section 10 of the River and Harbors Act of 1899 110 5 ~~~and Section 4(f) of the Outer Continental Shelf Lands 5 ~~~Act'of 1953.11 51 The River and Harbors Act prohibits any unauthorized 3 ~~~activities or construction in navigable waters of the United States which would be an obstruction or an alteration in those waters. Only those plans for con- 3 ~~~struction in navigable waters recommnended by the Chief of Engineers and authorized by the Secretary of the Army are allowed to be undertaken. 12This same authority is 3 ~~~extended to artificial islands and fixed structures to be built on outer continental shelf lands.113 I ~~~~The Corps of Engineers has apparently developed some 3 ~~~general (albeit unofficial) criteria which it uses to determine whether or not an artificial reef will inter- I ~~fere with navigation. Those criteria include: (1) that no artificial reefs should be constructed in navigational channels or fairways; that 1 ~~~~~(2) artificial reefs should be placed in depths of water to allow 50 feet between the top of the reef I ~~~~~~and the waters surface where the depth in the water generally 3 ~~~~~~exceed this depth; that (3) if an artificial reef is to be located near a large shoal, then I ~~~~~~the depth of the water over the reef should not be less than the least depth of the shoal; that (4) heavy, nonfloatable materials are to be used in construction of a reef; and that 5 ~~~~~(5) reefs are to be marked as required by the U.S. Coast Guard. 5 2 I ~~~With the exception of the last one, these criteria are 3 ~~~only unofficial guidelines and are not necessarily hard and fast rules. It should be pointed out, however, that U ~~~compliance with these criteria should enhance the 3 ~~probabilities of success in obtaining a permit. It can be assumed, for instance, that a reef in a recognized I ~~~shipping lane will simply not be approved. The 50 feet I ~~~minimum clearance criterion does not necessarily exclude the possibilities of placing reefs in areas where the 5 ~~~water depths are generally shallow. 114 3 N~~~~here fixed and floating aids to navigation are to accompany the construction of a reef in navigable 3 ~~~waters, they must also be permitted by the Corps of I ~~~Engineers in accordance with the River and Harbors Act. Any permits granted for the building of a reef will 3 ~~~include a condition that the person seeking the permit will comply with Coast Guard requirements for marking and lighting these aids. 115 3 ~~~~The work accomplished under the terms of a lease should be completed with precision under the provisions of the permits. At least one case has been reported to 3 ~~~the Environmental Protection Agency that the construction material for an artificial reef was dumped five miles from the location specified in the permit. This could present a hidden navigation hazard, and liability to the permitee may attach should an accident occur.16 1 ~~~~~~~~~~~~~~~~~53 I ~~~Marking artificial reefs with buoys or other devices 3 ~~is desirable for easy location. Protection of other interests such as navigation may also require that I ~~reefs be properly marked. No aids to navigation may be I ~~established, erected, or maintained without U.S. Coast Guard permission. That agency is also responsible for U ~~prescribing regulations for lights and signals in order to 3 ~~maintain a uniform system for navigation. Proper marking of any sunken material or other obstruction to navigation I ~~is the responsibility of the owner. It is necessary for 3 ~~the owner to properly maintain a marker, including making sure that lighted markers have the lights working, and I ~~to make-sure that markers remain in the proper location. 3 ~~After Coast Guard permission has been granted, private aids to navigation are installed and maintained at the owners I ~~expense. The type of marker and the number of buoys and 3 ~~other aids will depend on many factors considered by the Coast Guard. No single set of aids have been established I ~~for the marking of artificial reefs. 117 3 T~~~~n addtion to the public trust and regulatory environments in which a person or corporation wishing I ~~to develop an aritificial reef in coastal waters must 3 ~~operate, there are other legal considerations. The * ~~questions of liability arising from the construction or operation of a reef will generally follow the legal 1 ~~~~~~~~~~~~~~~~54 I ~~doctrines of tort and admiralty. Some novel questions 3 ~~may be the subject of litigation arising out of accidents. Such a venture where the private reef builder I ~~~and operator rents scuba diving equipment for use in 3 ~~~diving at the reef site would naturally require special care to avoid liability from harm to the divers. While I ~~~contributory negligence or assumption of the risk might I ~~~be a defense to a negligence action, it would be wise for an operator to obtain full written releases of liability I ~~~from the divers.118 I ~~~~The law of admiralty will apply for navigational accidents occurring as a result of the reefs placement. 3 ~~~When ships are sunk with the intention that they be used I ~~~as artificial reefs, it is assumed that these sunken vessels would not be susceptible to general salvage. j ~~~Where shipwrecks have occurred within numerous state's boundaries, the state is the owner and is entitled to the vessels.119 3 ~~~~Numerous state and federal laws will apply to the operation of an artificial reef. If the facility is within a state's boundaries, then the state may apply 3 ~~~its criminal and civil jurisdiction over it. If it is within county or city jurisdiction, the county or the I ~~~city can exercise their police powers as that authority related to events associated with the reefs.120 1 ~~~~~~~~~~~~~~~~~~55 3 ~~~~It has been shown that the private development of 3 ~~artificial reefs in coastal waters can Droceed in a manner consistent with the public trust in which coastal I ~~waters and submerged waterbottoms are held. Although I ~~~the legal and regulatory issues which relate to the development of aritificial reefs are complex, a private I ~~~developer should, by no means, find them insurmountable. 3 ~~~Indeed, it is in the interests of coastal states to expedite the construction of artificial reefs by the I ~~most biologically and economically sound methods. The 3 ~~~development of artificial reefs by private persons or corporations will avoid the "tragedy of the cormmons", * ~~~for private ownership will encourage that these fishery 3 ~~resources will be managed at an optimum sustainable yield. The leasing of these coastal resources to private * ~~~parties will increase to total productivity of coastal 3 ~~~benthic environments and their associated fisheries and combine the virtues of the equity achieved by some I ~~modern socialist systems and the incentives inherent in 3 ~~~traditional market economies. 3 ~~~~~~~~~~~~~~~~~~56 3 ~~~~~~~~~CHAPTER IV THE FINANCIAL FEASIBLITY OF ARTIFICIAL REEFS In 1970, according to the U.S. Department of the 3 ~~Interior, there existed 9,460,000 habitual salt water anglers. 121 This salt water fishing generated 1.2 billion dollars of related business, or 129 dollars per angler for the 1970 year. 12These salt water anglers spent a total of 114 million man days on the water. 123 A very large charter boat industry has developed to accomodate 3 ~~this tremendous demand, and it is the purpose of this chapter to examine the financial feasibility of the development of private artificial reefs by charter boat 3 ~~~operators. The development of an artificial reef by a charter I ~~boat operator would create an exclusive fishing zone for 3 ~~the operator, would enable the operator to manage his exclusive zone at an optimum level, and would increase I ~~the fishing success and thus the satisfaction of his clients. 3 ~~~~Solid articles of all types have been used in the construction of artificial reefs. It has long been known I ~~that the areas around old shipwrecks provide good fishing 3 ~~prospects. Oil platforms have also become known as productive areas for sport fishing. Everything from 3~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 57 N ~~sinking ships to deposits of building rubble has been used in the construction of artificial reefs. Included as items used have been junk cars, old streetcars, worn tires, bathroom fixtures, concrete drainpipes, stoves, 3 ~~refrigerators, quarry rock, and prefabricated concrete shelters built expressly to be used as part of an I ~~~artificial reef. 124 3 ~~~~Some of these materials have been found to be quite satisfactory while others have proven to be less than I ~~ideal. Abandoned or junk automobiles for instance were 3 ~~used to build reefs in the late 1950's and early 1960's. It appeared at that time that this might prove to be a I ~~solution to the problem of disposing of old cars. It was 3 ~~not long until it was discovered that car bodies corrode and disintegrate after a few years with the consequent U ~~loss of their usefulness as a reef. 125 5 ~~~~Ships and watercraft of various types have been successfully employed as artificial reefs. The federal 3 ~~government initiated a program in 1972, whereby surplus Liberty ships were obtained by the states for use as artificial reefs. 126 3 ~~~~The most essential characteristic of artificial reef 3 ~~building material is that it resist deterioration. For this reason, scrap automobile tires have proven to be a 3 ~~good construction material. The relatively inert chemical nature of tires, which makes tires a serious solid waste 1 ~~disposal problem, enables tire reefs to resist the 3 ~~destructive effects of sea water. Indeed, a developer wishing to construct a tire reef might well make a profit collecting his reef material. In Houston, Texas, 3 ~~individuals are paid 25 cents a piece to haul away and dispose of scrap automobile tires. 17It is possible I ~~that the profit made from disposing of old tires might 3 ~~cover the cost of transportation to the reef site, for a truck load of 800 tires will bring a reef developer a U ~~collection fee of 200 dollars. 128 * ~~~~One of the biggest problems in using tires as building material for artificial reefs is that tires will 3 ~~trap air and float. This problem can be overcome in two 3 ~~ways.; the tires may be punched with venting holes or the tires may be slit circumferentially (see figure 4). Of I ~~the two methods, the circumferential slitting of tires is superior, for slit tires are easier to handle, transport, store and package for sinking.12 * ~~~~Scrap tires are presently being slit for use in 3 ~~rubber reclaim plants and landfill operations. Slit tires cost about 17 cents per tire, as compared to about 3 ~~12 cents per tire for whole scrap tires, delivered to the 3 ~~site. Therefore, the additional cost of using slit tires would amount to about five cents per tire. This would 3 ~~amount to about a three percent increase in the total materials cost of a scrap tire reef. This additional slight 59 section view, Circumferentially Slit and Doubled Tires, from Candle and Fisher (1977.) 7 I~~~~~~~~~~~~~~~~~~~~~~~~ 36 'Li-re Modular Building Unit, from Cand le and Fisher (1977) Figure 4 - Modular Tire Reef Building 60 increase in cost could easily be compensated for by the elimination of the existing venting process.130 The following is an exact cost break-down of a 6700 slit tire modular artificial reef: (1) 6700 slit scrap tires, cost $1005; (2) 10,320 feet � inch open link special chain, cost $8,050; (3) 14 handmade 500 pound concrete anchors, cost $420; (4) 14 handmade 250 pound concrete anchors, cost $210; (5) 2,800 feet mooring chain � inch open link, cost $2,184; and (6) 688 man hours labor to bundle, build and install the reef, cost $3,784.132 The total cost for such a reef would be $15,658.132 It has been estimated that 500 to 1,000 tires would be the minimum size reef necessary to support one charter or party boat, so it can be seen that a charter or party boat operator could supplement his existing investment with a modest cash outlay.133 For the operator to judge -he attractiveness of this additional investment he would need to consider three elements; the investment, the operating benefits, and the time period over which these benefits are expected to prevail.134 Two standard financial analysis techniques can be used to address these considerations; they are the calculation of return on equity and the determination of the projects present value.135 The return on equity 61 ratio is used to measure the relationship of net profit to investment at the end of the first year of operation, and net present value analysis is used to evaluate the trade-off between investment outlays and future benefits, in terms of time adjusted present value of dollars.136 Characteristically, charter boats range from 18 feet to 32 feet in length. They are powered by two 871 General Motors diesel engines which have a fuel consumption of 12 to 15 gallons per hour; fuel costs range from 41 cents to 50 cents per gallon. Charters usually stay out overnight and fish from 30 to 40 miles offshore. Charter boats carry six persons; four fishermen, the captain, and one crewman. Fishermen pay $75 to $100 each for an over- night charter.137 Gulf charter boat captains indicate that the most sought after (and caught) species of fish are red snapper (Lutjanus campechanus), king mackerel (Scomberomorus cavalla), spanish mackerel (Scomberomorus maculatus), ling (Rachycentron canadum), shark (Char- charhinus, Carcharodon, Sphyrna, and Odontaspis species), barracuda (Sphyraena barracuda), spade (Chaetodipteus faber), dolphin (Coryphaena hippurus), warsaw (Epinephelus nigritus), and groupers (Epinephelus species).138 It has been estimated that the average charter boat operator in Texas had a gross income of $70,666 for the year 1974.139 The average operator realized a net profit of $18,891, or approximately 26.73 percent of his gross 62 I ~~income revenue. 140 Out of this profit the owner must pay 3 ~~all notes and interest on his bank loan and/or mortgages which were obtained to finance investments (averaging $114,076 per business). 11The average operator is left with a final net income of approximately $10,000 per year.14 Charter operators in other states do not fare as well as I ~~the Texas operators; Lake Michigan operators receive an 3 ~~average annual net income of $4,500 and Florida charter boat operators receive an annual net income of $8,500.l143 I ~~~The cost of capital or the opportunity cost for a * ~~charter boat operator is calculated to be an 8.8 percent annual return on an investment. It should be mentioned I ~~that there is a social factor or an "externality" which 3 ~~plays an important role in charter boat industry. If charter boat operators valued their business only in terms I ~~of the return on their investment most operators would 3 ~~leave the industry. However, Texas operators and other operators explain that they receive additional incentives I ~~and benefits from being able to be their own boss, and most importantly, for being paid to do what they enjoy the most, i.e. to fish. 144 * ~~~The feasibility of the private development of 3 ~~artificial reefs by charter boat operators will be determined by the comparison of the return on equity and 3 ~~the net present value of a charter operation with an exclusive artificial reef and fishing zone, with the 63 I ~~return on equity and the net present value of a charter 3 ~~operation without an artificial reef. For the purpose of the calculations the following assumptions have been I ~~made: (1) the operator has leased 25 acres of sub- I ~~~~~merged water bottoms and the superadjacent water column for an annual rental of five I ~~~~~dollars per acre; (2) the investor has spent $1,169 to construct and put in place a 500 tire modular arti- ficial reef; (3) the cost of the reef is being depreciated on a line basis over the lease period of 1 ~~~~(4) the operator is paying a royalty of 12.5 percent of his gross income; I ~~~~(5) the operator has located the artificial reef 1/3 closer to his base than the naturally occurring fishing "hot spots", and as a result of the reef's location has reduced his fuel expenses by 66 percent * ~~~~~on a per trip basis; (6) the artificial reef has increased the pro- I ~~~~~ductivity of the exclusive fishing zone by a factor of four, and the operator is managing the reef zone at maximum sustain- able yield; and (7) the operator is making two charter trips a day and charges the same fee as a full day charter to a fishing area without an * ~~~~~~exclusive artificial reef;- (8) the satisfaction of the clients of the operator with an artificial reef has I ~~~~~increased because, as a result of the increased productivity, they are catching twice as many fish on an average per I ~~~~~trip basis, and because less time is spent in transit to the fishing area and the actual time spent fishing is 60 percent to 70 percent of the actual fishing time of 64 a full day charter to a more distant site. The return on equity analysis is indicative of the relationship of annual net profit to the owners invest- I ~~~~145 ment. The following data were collected for a return on investment analysis for a charter boat operator with- out an exclusive fishing zone and artificial reef.146 Income $14,251.46 Expenses Insurance 757.32 Advertising 148.21 Dock Fees 547.21 Office Rent 98.21 Local Taxes 14.82 Depreciation 1,240.86 Repairs 1,439.43 Fuel 2,055.32 Wages 2,366.00 Bait 515.39 Tackle 384.39 Ice 113.39 Other Variables 278.57 Total Expenses $9,986.37 If one takes this income and subtracts the total expenses this leaves a figure of $4,265.09. This figure divided by the boat investment of $25,554.00 gives a return on equity of 16.7 percent. The following data were generated for a charter boat operator with an exclusive artificial reef and fishing zone; they are based on the previous data, but factored in are the artificial reef operation assumptions. Income $28,502.92 Expenses Insurance 757.32 1 ~~~~~~~~~~~~~~~~~~65 Advertising 148.21 Dock Fees 574.21 Office Rent 98.21 Local Taxes 14.82 Depreciation 1,318.76 Lease Rent 125.00 Royalties 3,562.87 Repairs 2,878.86 Fuel 1,370.21 Wages 4,732.00 Bait 2,061.56 Tackle 769.28 Ice 226.78 Other Variable 557.14 Total Expenses $19,195.23 If one takes this income and subtracts the total I ~~expenses this leaves a figure of $9,307.69. This figure * ~~divided by the investment of the boat and the artificial reef of $26,723.00 gives a return on equity of 34.8 percent. I ~~This calculation clearly indicates that the development of an artificial reef by a charter or a party boat operator could increase the operator's net profits more than two I ~~fold and this increase represents a return on equity nearly double that of an operation without an artificial reef. I ~~~~While the return on equity analysis measures the * ~~relationship of net profit to equity for a past or a current period, the net present value concept considers I ~~the investment over a future period of time. 17The U ~~present value method discounts future cash flows back to the present to reflect the time-adjusted present value I ~~of money. 18This enables one to measure the excess of * ~~~~~~~~~~~~~~~~~~66 U ~~discounted net cash inflow over cash outflow and deter- mine the net present value of the investment. 19There are four general steps entailed in the calculation of net present value. 150 * ~~1) An appropriate discount rate must be ascertained. The discount rate should reflect the rate of return one H ~~might expect to derive from an alternative investment of equal risk. 151 2) Once the discount rate has been determined, one must I ~~compute the present value of the expected net inflows resulting from the investment. The present value of the net inflows determines the amount a person can invest I ~~without incurring a financial loss.152 3) In addition, the present value of the cash outflows must be calculated. Generally, however, most capital I ~~outlays associated with investments are incurred initial- ly. In this case, the present value of a current out- flow is the same as the amount of outflowing cash. 153 I ~~4) Finally, the present value of outlay of cash is subtracted from the present value of net income. The difference is the net present value of the project for I ~~the considered time period. To determine the total value of the investment, estimate the expected life of the facility and sum the net present value of the net cash flows. The resulting figures represent the actual worth * ~~of the investment in terms of present dollars. 67 Using the data for a gulf charter boat operator with- out an artificial reef and exclusive fishing zone, and an eight percent discount rate (this represents a present value of an ordinary annuity of one dollar discounted over a period of 15 years of 8.559), the net present value can be calculated. The operator's boat is valued at $25,554.00. The net cash flow is $5,505.95. The calculation is preformed before interest and taxes. Net Present Value = ($5,505.95 x 8.559) - $25,554.00 $21,571.43 Since the net present value is a positive amount, this indicates that charter boat operating is a good investment. Using the data generated for a gulf charter boat operator with an artificial reef and an exclusive fishing zone, and an eight percent discount rate, and using the reef operation assumptions, the net present value can be calculated. The operator's boat is valued at $25,554.00 and the artificial reef is valued at $1,169.00. The net cash flow is $9,887.54. The calculation is preformed before interest and taxes. Net Present Value = ($9,887.54 x 8.559) - $26,723.00 = $57,904.45 Since this figure is more than twice the figure calculated for an operation without an artificial reef, and since it only represents an investment of an additional $1,169, the 1 ~~~~~~~~~~~~~~~~~~68 charter operation with an artificial reef is a much more I ~~~attractive investment than a similar operation without an artificial reef. These calculations demonstrate that it is financially feasible for private persons or ii ~~corporations to develop artificial reefs. * ~~~~~~~~~~~~~~~~~~69 3 ~~~~~~~~CHAPTER V I ~~~~~~~~~CONCLUS ION The private development of artificial reefs has been examined in the light of the ecological, legal, and econom- ic factors which concern such a development. In order for an artificial reef development to prove feasible, each one I ~~~of these factors must prove to be feasible in itself. 3 ~~~~The most basic factor concerns the physical, chemical, and biological processes which establish a reef commnunity. I ~~~It has been shown that naturally occurring coral reefs are I ~~~one of the most productive communities in the marine envi- ronment, it has also been shown that artificial reefs lo- I ~~~cated in coastal waters can be as productive or more pro- 3 ~~~ductive than natural reefs. An artificial reef located in the coastal waters of the northern or the northwestern Gulf I ~~~of Mexico could be expected to increase benthic biological 3 ~~~productivity, and could be expected to increase the pro- duction of reef dwelling fishes by 400 percent. Although 3 ~~~the question of whether an artificial reef can increase the biological productivity of an entire ocean system remains unanswered, it has been demonstrated that a properly con- 3 ~~~structed and located artificial reef will increase the total numbers of reef dwelling fishes available for fishermen. 1 ~~~~~~~~~~~~~~~~~~70 I ~~~The primary legal consideration is the public trust doctrine as this doctrine concerns coastal resources. Since it has been show~n that the private development of I ~~artificial reefs increases the total number of fishes I ~~available for sportsmen, the exclusive use of a reef devel- opment does not represent an appropriation of a common pro- I ~~perty resource but rather an enhancement of a coastal re- source. This development is, in fact, very similar to the private development of other coastal resources, e.g. off- I ~~shore oil & gas, oysters, mariculture, etc. A mechanism has been proposed, involving leasing and royalties, which would allow the private development of artificial reefs to I ~~proceed in a manner consistent with the public trust in * ~~which coastal fisheries are held. Other legal considerations concern the regulatory I ~~environment in which a developer would operate. Any poten- tial developer of artificial reefs must be conscious of federal and state agencies' responsibilities concerning nay- I ~~igation, safety, pollution, wetlands protection, etc. Al- though an artificial reef development might require a wealth of state and federal permits, the regulatory pro- K ~~cesses are not so complex as to become a serious impediment * ~~to the development of these reefs. Since biological and legal considerations do not pre- vent the development of artificial reefs. A potential de- veloper can make a feasibility determination by the use of 3~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 71 financial calculations. Using the assumptions of increased I ~~~productivity, exclusive use, lower operating costs and mar- ket demand for exclusive fishing developments, calculations were used to compare the profitability of a charter boat operation with and without an associated exclusive artifi- cial reef development. It was shown that a modest invest- ment of $1,169.00 for an artificial reef could nearly dou- ble the profitability of a charter boat operation (from a 16.77% return on investment to a 34.8% return on investment). It was also shown that the net present value of a charter 3 ~~~boat operation would be increased by the addition of an ar- tificial reef (from $21,571.43 to $57,904.45). The return N ~~~on equity and net present value calculations show the pri- vate development of artificial reefs to be not only feasi- ble but highly desirable. I ~~~~Coastal states can take advantage of this incentive * ~~~of private developers to maximize their profits to achieve an optimum allocation of sport fisheries resources. The I ~~~lease/private development scheme has been used to develop 5 ~~~offshore oil and gas fields and to develop mariculture operations. indeed, any comprehensive plan for the man- I ~~~agement of coastal resources should consider the private * ~~~development of artificial reefs as an effective management tool. 72 REFERENCES Robert B. Ditton, John L. Seymour, and Gerald C. Swanson, Coastal Resources Management (Lexington, Massachu- setts: D. C. Health and Company, 1977), p. 56. 2Ibid. Ibid. 3Ibid. 4Ibid. p. 57. J. W. Hedgepeth, ed., Treatise on Marine Ecology and Paleoecology, Vol. 1: Ecology (Boulder, Colorado: The Geological Society of America Memoir 67, 1957), pp. 109, 186, 241, 304, 445. 6Robert W. Holmes, "Solar Radiation, Submarine Day- light and Photosynthesis," in Treatise on Marine Ecology, p. 109. Martin W. Johnson, "Plankton," in Treatise on Marine Ecology, p. 445. 8 F. A. Richards, "Oxygen in the Ocean," in Treatise on Marine Ecology, p. 186. Roger Revell, and Rhodes Fairbridge, "Carbonates and Carbon Dioxide," in Treatise on Marine Ecology, p. 241. 10 H. Barnes, "Nutrient Elements," in Treatise on Marine Ecology, p. 304. 11 H. W. Harvey, "On the Production of Living Matter in the Sea off Plymouth," Journal of the Marine Biology Asso- ciation (Vol. 29, 1950), p. 97. 12 Howard T. Odum, and Eugene P. Odum, "Trophic Struc- ture and Productivity of a Windward Coral Reef Community on Eniwetok Atoll," Ecological Monographs (July, 1955), p. 269. 13 Richard B. Stone, Chester C. Buchanan, and Frank W. Steimle, Jr., Scrap Tires as Artificial Reefs, (Washington, D.C.: Environmental Protection Agency Publication SW-119, 1974). 73 14 For example see, "The Public Trust in Tidal Areas: A Sometime Submerged Traditional Doctrine," The Yale Law Journal (Vol. 79, 1970), pp. 763-770. 15 Illinois Central R. R. v. Illinois, 146 U.S. 387. 16 For example see, Harold F. Larson, "Economic Impediments and Incentives-the Role of Government," (Commit- tee Print, the Committee on Commerce, United States Senate, 1973), pp. 138-139. 17 Ronald L. Schmeid, "An Emploratory Analysis of the Texas Charter and Party Boat Fishing Industry," (Profession- al paper, Department of Recreation and Parks, Texas A&M University, 1977), pp 24-27. 18 Robert B. Ditton, Richard N. Jarman, Thomas J. Mertens, Martin P. Schwartz, and Steve A. Woods, "Charter Fishing on the Texas Gulf Coast," Manuscript submitted to the Center for Marine Resources, College Station, Texas. 19 Coastal Zone Management Act of 1972, P.L. 92-583. 20 Holmes, "Solar Radiation, Submarine Daylight and Photosynthesis," p. 109. 21 William T. Keeton, Elements of Biological Science (New York: W. W. Norton and Company, Inc., 1969), p. 74. 22 Ibid., p. 82 23 Robert E. Ricklefs, Ecology (Portland, Oregon: Chiron Press, 1973), p. 643. 24 George M. Woodwell, "The Energy Cycle of the Bio- sphere," in The Biosphere (San Francisco: W. H. Freeman and Company, 1970), p. 29. 25 Ibid., p. 31. 26 Ibid. 27 Ibid., p. 34. 28 Keeton, Elements of Biological Science, p. 402. 29 Harvey, "On the Production of Living Matter in the Sea off Plymouth," p. 97. Odum and Odum, "Trophic Structure and Productivity of a Windward Coral Reef," p. 269. 74 31 31 Ricklefs, Ecology, p. 101. 32 Ibid. 33 Ibid. 34 Johnson, "Plankton," p. 445. 35 Ricklefs, Ecology, p. 633. 36 Richards, "Oxygen in the Ocean," p. 186. 37 Revelle and Fairbridge, "Carbonates and Carbon Dioxide,"' p. 241. 38 Ibid., p. 242. 39 Barnes, "Nutrient Elements," p. 304. 40 Ibid. 41 Ricklefs, Ecology, p. 691. 42 Herman Friedrick, Marine Biology, trans. Gwynne Vevers (Seattle: The University of Washington Press, 1969), p. 87. 43 Ibid., p. 88. 44 Barnes, "Nutrient Elements," p. 313. 45 Woodwell, "The Energy Cycle of the Biosphere," p. 33. 46 Ibid. 47 Peter P. Prantis, Jr. and G. H. McKay, "The Prantis Reef System," promotional brochure, Houston, Texas, October, 1975, p. 2. 48 Ibid. Ibid. 50 Ibid. 51 Friedrick, Marine Biology, p. 375. 52 Stone, et al., Scrap Tires as Artificial Reefs, p. 1. 75 53 Ibid. 54 Willis E. Pequegnat, interview held Department of Oceanography, Texas A&M University, College Station, Texas, 5 April 1976. 55 Takaski Ino, "Historical Review of Artificial Reef Activities in Japan," in Proceedings of an International Conference on Artificial Reefs, ed. Laura Colunga, and Richard Stone (College Station, Texas: Texas A&N Univer- sity, Sea Grant Publication 74-103, 1974), p. 21. 56 Ibid. 57 Ibid. 58 Edward L. Bechman, "The V. A. Fogg--An Unplanned Artificial Reef," in Proceedings of an International Con- ference on Artificial Reefs, p. 118. 59 Howard Lee, interview held Texas Council on Marine Related Affairs, Austin, Texas, 4 May 1976. 60 Eugene A. Shinn, "Oil Structures as Artificial Reefs," in Proceedings of an International Conference on Artificial Reefs, p. 91. 61 Richard Stone, interview by telephone, National Oceanic and Atmospheric Administration, Washington, D. C., 8 July 1977. 62 Ibid. 63 "The Public Trust in Tidal Areas: A Sometime Submerged Traditional Doctrine," p. 763. 64 Ibid., p. 764. 65 Ibid., p. 765. 66 Ibid., p. 766. 67 Ibid., p. 770. 68 Dickens v. Shaw, K. B. 1822. 69 Martin v. Waddel, 41 U. S. 367. 70 Illinois Central R. R. v. Illinois, 146 U. S. 387. 76 71 "The Public Trust in Tidal Areas: A Sometime Submerged Traditional Doctrine," p. 778. 72 bid, p. 783 73 Ibid., p. 783. 1 Ibid., ~~~~p. 784. 74 Lee G. Anderson, The Economics of Fisheries Manage- ment (Baltimore: The Johns Hopkins University Press, 1977), p. 23. 75 Ibid., pp. 154, 156, 166, 169. 76 76 Ibid., p. 183. 77 Ibid. p. 151. 78 Ibid., p. 185. 79 For example, the redfish in Texas, Georges Bank Haddock, many oyster reefs in the Gulf of Mexico and the Atlantic, etc. 80 Jean R. Richey, "A Comparison of Oil and Gas Leas- ing Authorities in the Gulf of Mexico (States of Alabama, Mississippi, and Louisiana, and the Federal Governement), and the Jurisdictional Conflict Over the Boundry Between State and Federal Authority in the Gulf of Mexico," Mississippi Law Journal (Vol. 40, 1969), p. 358. 81 Ibid. 82 Ibid., p. 359. 83 Ibid., p. 361. 84 Ibid., p. 362. 85 Ibid., p. 363. 86 Ibid., p. 366. 87 Title 17, Chapter 253, Sec. 253.68, Florida Code. 88 Ibid., Sec. 253.71. 89 Ibid. 90 Ibid., Sec. 253.72. 91 Chapter 1, Title 56, Sec. 422, Louisiana Revised Statutes. 77 92 92 Ibid., Sec. 425. 93 Ibid. 94 Ibid., Sec. 426. 95 Ibid., Sec. 427. 96 Title 49, Chapter 15, Sec. 27, Mississippi Code of 1972. 97 Ibid. 98 Ibid. Ibid. 99 Ibid. 100 John L. Seymour, "Preliminary Legal Considerations in Developing Artificial Reefs," Coastal Zone Management Journal (Vol. 2, 1975), p. 156. 101 101 Ibid. 102 Ibid. 103 Marine Protection, Research, and Santuaries Act of 1972, 16 USC 1402(f). 104 Seymour, "Artificial Reefs," p. 157. 105 16 USC 1432. 106 Seymour, "Artificial Reefs," p. 157. 107 Federal Water Pollution Control Act, 33 USC 1328. 108 Ibid. 109 Seymour, "Artificial Reefs," p. 157. 110 Rivers and Harbors Act of 1899, 33 USC 403. IIl Outer Continental Shelf Lands Act of 1953, 43 USC 1333. 112 33 USC 403. 113 43 USC 1333. 114 Seymour, "Artificial Reefs," p. 158. 78 115 Ibid. 116 Ibid. 117 Ibid., pp. 158-159. 118 Ibid., p. 154. 119 Ibid. 120 Ibid., p. 155. 121 Larson, "Economic Impediments and Incentives," pp. 138-139. 122 Ibid. 123 Ibid. 124 Seymour, "Artificial Reefs," p. 150. 125 Ibid. 126 46 USC 1220. 127 Caroline White, interview held Omega Salvage Co., Houston, Texas, 17 June, 1977. 128 Ibid. 129 Richard D. Candel and William J. Fisher, "Scrap Tire Shore Protection Structures," The Goodyear Tire and Rubber Co., Akron, Ohio 44316, 21 March, 1977, p. 34. 130 Ibid., p. 35. 131 Ibid., p. 17. 132 Ibid. 133 Stone, interview. 134 Frank J. Lawlor III, "A Preliminary Technology Assessment of Alternative Uses for Offshore Petruleum Plat- forms," (Masters Thesis, Texas A&M University, 1976). p. 77. 135 Robert J. Williams, "Economic Feasibility of Commercial Shrimp Farming in Texas," (Masters Thesis, Texas A&M University, 1973), p. 7. 136 Ibid. 79 137 Gary Grahm, interview held Marine Extension Ser- vice, Angleton, Texas, 12 July, 1977. 138 Schmeid, "Texas Charter and Party Boat Fishing," p. 24. 139 Ibid., p. 25. 140 Ibid. 141 Ibid. 142 Ibid. 143 Ibid., p. 27. 144 Ibid. 145 Williams, "Economic Feasibility," p. 23. 146 Ditton, et al., "Charter Fishing on the Texas Gulf Coast," 147 Williams, "Economic Feasibility," p. 23. 148 Ibid., p. 28. 149 Ibid. 150 Ibid. 151 Ibid. 152 Ibid. 153 Ibid., p. 29. VITA ARTHUR ALLEN BURNS, JR. Date of Birth: November 18, 1952 Place of Birth: Jackson, Mississippi Permanent Address: 4293 Berlin Dr.., Jackson, MS 39211 Parents: Brig. Gen. & Mrs. Arthur A. Burns Martial Status: Single Height: 5'10 Weight: 158 lbs. B.S., University of Mississippi, Biology, 1974 Deputy Director, Governor's Office of Natural Resources and Technology, Jackson, Mississippi, 1977-1978. Professional Consultant, Mississippi Marine Resources Council, Long Beach, Mississippi, 1978. The typist for this thesis was Mrs. Larry Wiginton.