[Federal Register Volume 61, Number 212 (Thursday, October 31, 1996)]
[Notices]
[Pages 56217-56221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27902]


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DEPARTMENT OF COMMERCE
[Docket No. 960412111-6297-04; I.D. 102396C]
RIN 0648-ZA20


West Coast Salmon Fisheries; Northwest Emergency Assistance 
Plan--Washington Salmon License Buy Out

AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and 
Atmospheric Administration (NOAA), Commerce.

ACTION: Final program notice.

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SUMMARY: NMFS issues this notice to describe the final program 
requirements and to respond to comments on proposed bidding options for 
the 1996 Washington Salmon License Buy Out (WSLB). Pursuant to the 
authority under the Interjurisdictional Fisheries Act (IFA), the 
Secretary of Commerce (Secretary) has made funds available to the 
Washington Department of Fish and Wildlife (WDFW) to buy out salmon 
permits. The objectives of the program are to provide financial 
assistance to commercial salmon fishermen adversely impacted by the 
salmon fishery disaster, and to aid the long-term viability of the 
fishery resource.

DATES: Effective upon October 25, 1996.

FOR FURTHER INFORMATION CONTACT: Stephen Freese, (206) 526-6113.

SUPPLEMENTARY INFORMATION: On August 2, 1995, the Secretary declared 
that a fishery resource disaster continued in 1995 for the salmon 
fisheries of the Pacific States of California (north of San Francisco), 
Oregon, and Washington, excluding Puget Sound. Under the authority of 
the IFA of 1986 (16 U.S.C. 4107(d)), as amended, an additional $12.7 
million in Federal financial assistance was made available for affected 
salmon fishermen, of which $5.25 million was set aside for a WSLB 
program. However, the Governor of Washington has requested that $50,000 
be transferred to the Data Collection Jobs Program for use in a troll 
data collection study. If approved, this $50,000 will be taken from the 
funds initially allocated for the purchase of troll licenses, and will 
reduce the 1996 WSLB funds available to $5.2 million. The Secretary 
already provided $4 million for a similar program in 1995, bringing the 
total amount allocated to license buy outs to $9.2 million. (See 
Federal Register notice of October 11, 1994 (59 FR 51419), with 
subsequent amendments published on January 31, 1995 (60 FR 3908), and 
June 22, 1995 (60 FR 32507)).
    On April 23, 1996, NMFS published a Federal Register notice (61 FR 
17879) that provided the public with notice of a proposed WSLB program 
and requested comment on four proposed bidding options. The August 1, 
1996, final notice (61 FR 40197) announced the final description for 
the Northwest Emergency Assistance Plan (NEAP) Habitat Restoration 
Program and the Data Collection Jobs Program, but cited state and local 
concerns and a lack of public consensus as grounds for the agency's 
deferral of the final decision on a buy out program until new bidding 
options were developed and the public was given notice and an 
opportunity to comment.
    NMFS and the State of Washington then worked together to develop 
two new options that were similar to the options presented in the April 
23, 1996, Federal Register notice, but with important differences. One 
difference was that the calculation of uninsured loss was no longer 
necessary under the recently amended IFA. (The IFA was amended during 
the public comment period associated with the April 23, 1996 notice.) 
This calculation was replaced by an analogous calculation, ``salmon 
disaster impact'' (SDI), which is equal to 2.5 times the difference 
between a fisherman's highest gross salmon fishery income derived from 
fishing during any calendar year 1986 through 1991 (base year), and the 
sum of the least amount of gross salmon fishery income derived from 
commercial salmon fishing during any calendar year from 1991 through 
1995 (comparison year). The use of SDI in place of an uninsured loss 
determination puts similar restrictions on new participants as were 
placed on the original participants in the 1995 WSLB. Another 
difference was that the two new options placed lower ceilings on the 
maximum amount a fisherman can receive for his permit.
    The following options were presented for public comment in the 
notice of August 29, 1996 (61 FR 45408).
    Option 1--License holders may offer their licenses for any amount 
up to $40,000 or their SDI, whichever is less. Licenses will be 
purchased starting with the lowest bid. In the event of a tie, 
preference will be given to the fisherman with the highest SDI.
    Option 2--License holders may offer their licenses for any amount 
up to $50,000 or their SDI, whichever is less.

[[Page 56218]]

Bids will be ranked according to the offer ratio. The offer ratio is 
the division of the offer amount by the SDI. Licenses will be ranked 
and purchased starting with those bids that have the lowest offer 
ratios. In the event of a tie between identical offer ratios, the 
lowest offer will be given preference. Successful participants cannot 
purchase or operate another Washington State commercial salmon troll, 
salmon delivery, Gray's Harbor-Columbia River salmon gillnet, Willapa 
Bay-Columbia River salmon gillnet, or salmon charter license for 10 
years beginning January 1, 1997, unless the license was owned or 
operated by that person in 1995.

Comments and Responses

    In response to the August 29, 1996, notice of proposed program, 
NMFS received 17 comment letters, two from fishing associations and 15 
from fishermen, covering 15 comments.
    Comment 1: The definition of ``fishing income'' should be revised 
to include only fishing income from Washington deliveries because 
including income from Oregon and California deliveries is unfair for 
fishermen who only have a Washington license. If Oregon or California 
implement buy out programs, only landings in those states should count 
for fishing income. Furthermore, the commenter felt that successful 
bidders to the 1995 and 1996 buy out programs should not be able to 
qualify for future programs.
    Response 1: Redefinition of ``fishing income'' as income from 
Washington deliveries would affect those fishermen who have also 
invested in licenses from other states. The resource conditions 
underlying the Secretary's two disaster declarations in Northern 
California, Oregon, and Washington have also affected these investments 
in other states. Furthermore, both NMFS and the State of Washington 
agree that the current definition of ``fishing income'' should be 
maintained in order to expand participation in the 1996 WSLB, maintain 
consistency with the 1995 WSLB and with the other NEAP programs, 
minimize the paperwork burden on fishermen, and avoid further delay in 
implementing the 1996 WSLB. The design and implementation of future buy 
out programs will depend on the relevant state and Federal regulations, 
funding sources, public needs, and state and Federal policy concerns.
    Comment 2: The base years should be changed to the years 1975 to 
1980 and the comparison years should be changed to the years 1981 to 
1996 to reflect the sharp decline in the Washington troll fishery that 
occurred in 1981-82.
    Response 2: The Secretary's 1995 declaration limits the disaster 
period, or comparison years, to the years 1991 through 1995. Using 
years prior to 1986 for the ``good'' years, or base years, especially 
the years 1975 to 1980, would not be representative of the potential 
earnings fishermen would normally expect to earn, absent the disaster. 
Prices, general stock levels, fisheries management practices, user 
group allocations and the number of participants for the 1986-91 period 
differed greatly from the 1975-80 period. Furthermore, after numerous 
consultations with affected fishermen, a general consensus developed 
around using 1986-90 as the base years for calculation of losses due to 
the salmon resource disaster. A review of pertinent fishing data also 
supports using these years for comparison with the disaster years 
outlined in the prior NEAP-related Federal Register notices.
    Comment 3: Six commenters opposed Option 2's ten-year license 
purchase exclusion, especially since fishermen who participated in the 
1995 WSLB were allowed to purchase new Washington permits. Two 
commenters supported the exclusion provision, and one commenter stated 
that such an exclusion should have been imposed from the beginning of 
the program.
    Response 3: The 1995 License Buy Out Program was intended to 
achieve two goals: (1) To compensate commercial fishermen for uninsured 
lost income, and (2) to aid the long-term viability of the fishery 
resource. Each salmon license has the same potential capacity for 
producing effort because licenses are transferable among fishermen and 
vessels. Given the high number of slightly active permit holders, the 
1995 WSLB was predicated on removing the maximum number of permits in 
order to have the greatest effect on capacity. This reflected a concern 
that, if high prices were paid for licenses, many productive fishermen 
would participate in the program and then return to the fishery by 
purchasing a low-priced permit from a marginal producer. This concern 
was countered, however, by numerous industry comments that the 1995 
program focused only on the marginal producer. Therefore, Option 2 is 
designed to enhance the participation of more productive fishermen, who 
arguably have been most impacted by the resource disaster. The 10-year 
license ownership and operation prohibition has two purposes: (1) To 
achieve the NEAP goal of capacity reduction and prevent capacity 
recycling, since less capacity, in the form of fewer permits, is likely 
to exit the fishery due to the higher prices and limited government 
funds; and (2) to provide an adequate and reasonable counterbalance to 
those who may submit and receive higher offers. While the 1996 WSLB 
enhances the competitiveness of high offers, which some members of the 
public believe will disadvantage smaller bidders, this enhanced 
competitiveness is offset by the 10-year license purchase or operation 
prohibition.
    Comment 4: Long term relief for unsuccessful bidders should be 
better defined.
    Response 4: Implementation of the 1996 WSLB will exhaust all 
available funds under the NEAP and the IFA and future Federal programs 
will depend on additional appropriations. However, a long-term benefit 
does accrue to unsuccessful bidders, regardless of future funding. The 
fishermen who remain in the fishery will face decreased competition as 
a result of the buy out, and the decreased capacity should also 
accelerate stock recovery.
    Comment 5: Option 1 provides the greatest benefits to the greatest 
number of fishermen.
    Response 5: Offers submitted under Option 1 would probably be 
lower, thereby enabling the government to retire more permits and 
compensate a greater number of fishermen. Conversely, higher prices 
would be paid under Option 2, leading to fewer licenses being 
purchased. Option 2 intended to counterbalance concerns that purchasing 
the maximum number of permits effectively excludes from competition 
many of those who suffered the greatest losses. However, under either 
option, all eligible fishermen may participate and ultimately, the 
competition among bidders will determine who benefits and to what 
extent. Likewise, under either option, the WSLB may directly benefit 
those who exit the fishery, but will also indirectly benefit those 
remaining fishermen who will face fewer competitors on the fishing 
grounds and in the marketplace.
    Comment 6: Commenters both supported and opposed a lower maximum 
offer limit for the 1996 WSLB. Four commenters complained that the 
maximum offer limits were too low, arguing that they are offering up a 
lifetime fishing career, and some will be using NEAP funds for 
retirement purposes. One commenter stated that, under Option 2, if the 
1996 WSLB maximum amounts equal the maximum amount paid under the 1995 
program, 1996 participants would make a greater sacrifice, because they 
would be excluded from the fishery for 10 years but would receive no 
greater

[[Page 56219]]

compensation than the 1995 participants. On the other hand, another 
commenter stated that, in order to attract the major producers, the 
maximum offer amount should be at least $100,000. Many fishermen did 
not participate in the 1995 WSLB because the $100,000 limit was below 
the value of their business.
    Response 6: The NEAP is a voluntary program, and as with the other 
NEAP programs, the WSLB is not designed to be an entitlement or 
retirement program. However, after consideration of the public 
comments, input from state and local officials, and analysis of the 
1995 WSLB program, both NMFS and the State of Washington agree that a 
maximum offer limit of $75,000 is appropriate. This represents a 
compromise between the proposed $50,000 limit and the 1995 limit--the 
lower of $100,000 or 75 percent of the fisherman's uninsured loss. 
Raising Option 2's maximum offer limit to $75,000 may increase the 
number of participants who suffered greater impacts from the salmon 
fishery disaster, and better offsets their exclusion from the fishery 
for 10 years. On the other hand, a $75,000 maximum offer limit may also 
lead to higher offers, thereby increasing the competitiveness of offers 
made by participants with lower salmon disaster impacts.
    Comment 7: Several commenters discussed Option 2. One commenter 
criticized Option 2, arguing that for many vessels, the comparison year 
income will be zero due to fishery closures. Therefore, the commenter 
claimed that Option 2 is biased in favor of larger boats that were 
better able to generate high base year income and consequently higher 
SDIs. Another commenter supported Option 2, stating that full-time 
fishermen deserve to be bought out.
    Response 7: Developing a ranking system acceptable to all groups is 
difficult, especially given the polarization of the industry into two 
groups--those with high SDIs and those with low SDIs. NMFS recognizes 
that most successful bidders under the 1995 WSLB suffered relatively 
low uninsured losses. NMFS proposed Option 2 in response to public 
comments that those with greater losses, and who are arguably most 
dependent on the fishery, deserve a better chance to participate in the 
program. Option 2 allows all eligible fishermen to participate but also 
factors in the impacts of the resource disaster upon each participant.
    Comment 8: One commenter felt that exceptions should be made to 
Option 2's qualifying criteria, which base offers upon earnings 
history, to allow new license holders to use the past earnings history 
of previous owners of the license.
    Response 8: The IFA limits assistance to commercial fishermen who 
are affected by the fishery resource disaster. Fishermen who have 
entered the fishery during the disaster period through the purchase of 
permits and vessels are presumed to have been relatively unaffected by 
the disaster, since they were not fishing when the disaster period 
occurred, and did not watch their long-term investment decline.
    Comment 9: One commenter thought that the unsuccessful bidders to 
the 1995 WSLB should be given preference.
    Response 9: As discussed in the Federal Register notice of August 
29, 1996 (61 FR 45408), neither the 1995 WSLB notice nor any other 
notice stated that fishermen who failed to participate in the 1995 
program would be excluded or disadvantaged in future programs. 
Furthermore, NMFS has the discretion to create new grant programs with 
the same or different terms, limitations, and conditions, even with 
related funding sources and similar program goals.
    Comment 10: The NEAP funding should be audited.
    Response 10: All government financial assistance programs are 
subject to audit. Currently, Commerce's Office of Inspector General is 
reviewing the NEAP.
    Comment 11: NMFS should offer a set buy back offer of $5,000 to 
$8,000 for those that do not have much of a history in the fishery.
    Response 11: The recommendation may have merit in terms of reducing 
the number of latent permits outstanding and assisting new entrants to 
the fishery. However, as stated in previous Federal Register notices, 
NMFS believes that assistance under the NEAP should be closely linked 
with individual's loss or SDI.
    Comment 12: One commenter claimed that the Puget Sound Gillnet 
fishery needs a fishing capacity reduction program and questioned why 
the Puget Sound Gillnet fishery was the only Washington State 
commercial salmon fishery excluded from the program.
    Response 12: Puget Sound was excluded because the factors 
underlying the fishery resource disaster declared by the Secretary on 
May 26, 1994, were not deemed to have extended to Puget Sound. Coastal 
and Columbia River salmon fisheries suffered the greatest declines 
during the 1991-95 disaster period. In contrast, Puget Sound 
gillnetters recorded substantial landings in 1994 and no sufficient 
data indicate a natural resource disaster in Puget Sound in 1995.
    Comment 13: One commenter charged that Washington State is 
siphoning off money under the guise of administrative costs.
    Response 13: One of the primary objectives of NEAP has been to hold 
down administrative costs. NMFS believes that the State of Washington 
has performed its administrative duties with a minimal degree of 
overhead costs. Under the 1995 WSLB, NMFS allocated $300,000 to WDFW 
for administrative costs. WDFW spent only 3 percent, or $119,000, of 
the $4 million grant award on administrative costs, and used the 
balance to purchase additional permits. The 1996 WSLB provides $250,000 
for administrative costs, with the remaining $5 million for license buy 
out payments for fishermen. If NMFS approves the Governor of 
Washington's request to transfer $50,000 from the WSLB to the Data 
Collection Jobs Program, WDFW will have $4.95 million available for 
license buyouts.
    Comment 14: Two commenters wanted the offer ranking system to take 
into account the number of years a fisherman has held and operated a 
Washington license, because long-time fishermen have suffered more due 
to the salmon resource disaster. Furthermore, they argued that older 
fishermen have fewer career options or may have not been able to 
generate as high an SDI as younger fishermen.
    Response 14: The emphasis of the WSLB is on compensating losses, 
not seniority. The program strives to achieve the maximum degree of 
fairness with respect to the losses suffered.
    Comment 15: One commenter claimed that the NEAP fails to account 
for the economic damage caused to salmon markets and to trade 
associations--two top priority areas that need to be addressed.
    Response 15: NMFS and the State of Washington are aware that the 
salmon resource disaster has affected other salmon-related businesses. 
However, the NEAP was funded under the IFA, which authorizes assistance 
to persons engaged in commercial fisheries, which the Secretary has 
limited to commercial fishermen only.
Final 1996 WSLB Description
    The 1996 WSLB has two goals: (1) To compensate commercial fishermen 
for harm suffered from the salmon resource disaster, and (2) to aid the 
long-term viability of the fishery resource. In establishing the 1996 
WSLB, NMFS has considered comments from state officials and the public, 
the results of the 1995 program, and the constraints of the legal 
authority under which the program operates.

[[Page 56220]]

    Based on the above considerations, NMFS has selected Option 2 as 
the model on which to base the 1996 WSLB. Option 2 provides greater 
opportunity for more productive fishermen to exit the fishery, and 
prevents the removed fishing capacity from cycling back into the 
fishery for 10 years. Furthermore, as mentioned above, the 1996 WSLB 
differs from the 1995 WSLB in important aspects. The 1996 WSLB will be 
based on a fisherman's SDI, which is equal to 2.5 times the difference 
between a fisherman's highest gross salmon fishery income derived from 
fishing during any calendar year 1986 through 1991 (base year), and the 
sum of the least amount of salmon fishery income derived from 
commercial salmon fishing during any calendar year from 1991 through 
1995 (comparison year). Fishermen can use the same information they 
developed for the 1995 WSLB to determine their SDI. In addition, a 
competitive offer ranking system will be used, and participants who 
receive buy outs will be prohibited from purchasing or operating a 
commercial salmon license for 10 years, unless the participant owned 
that license in 1995.

Eligibility Criteria

    To be eligible, the applicant must fulfill the following 
requirements:
    1. Must have possessed or was eligible to possess one of the 
following Washington State commercial salmon fishery licenses in 1994 
and possessed the same license in 1995:
    a. Salmon troll license;
    b. Salmon delivery license;
    c. Salmon gill net--Grays Harbor-Columbia River;
    d. Salmon gill net--Willapa Bay-Columbia River; or
    e. Salmon charter.
    2. Must demonstrate an SDI greater than $0.
    3. Must not have earned more than $2,000,000 in net revenues 
annually from commercial fishing for the period between 1991 and 1994.

Bidding Procedure

    License holders may offer their licenses for any amount up to 
$75,000 or their SDI, whichever is less. Offers will be ranked 
according to the offer ratio. The offer ratio is the division of the 
offer amount by the SDI. Licenses will be ranked and purchased starting 
with those offers that have the lowest offer ratios. In the event of a 
tie between identical offer ratios, the lowest offer will be given 
preference. Successful participants cannot purchase or operate another 
Washington State commercial salmon troll, salmon delivery, Gray's 
Harbor-Columbia River salmon gillnet, Willapa Bay-Columbia River salmon 
gillnet, or salmon charter license for 10 years beginning January 1, 
1997, unless the license was owned or operated by that person in 1995.
Additional Terms, Limitations, and Conditions
    A license holder may offer more than one license, but income used 
in the calculation of an offer that is accepted may not be used in the 
calculation of any other offer. Licenses will be purchased in order of 
ranking until funds are exhausted. The State of Washington, in 
consultation with NMFS, will reserve the right to reject any and all 
offers if it is determined by NMFS that such action is in the best 
interests of the program or if revisions to the program are warranted 
in the future. Proprietary information submitted by applicants will 
only be disclosed to state and Federal officials who are responsible 
for the NEAP, or otherwise when required by court order or other 
applicable law. This information is subject to the Freedom of 
Information Act.

Example of Bidding Procedure

    Step 1: Determine SDI
    Step 1A: Base Year Selection:
    Select the highest year of gross income during the base period 1986 
through 1991. For Fisherman A, this is $38,000. For Fisherman B, this 
is $8,000.
    Step 1B: Comparison Year Selection:
    Select the lowest year of gross income during the comparison year 
of 1991 though 1995. For fisherman A, this is $3,000. For Fisherman B, 
this is $0.
    Step 1C: Subtraction
    Subtract the selected comparison year gross income from the 
selected base year income. For Fisherman A, this is $38,000 minus 
$3,000, or $35,000. For Fisherman B, this is $8,000 minus $0, or 
$8,000.
    Step 1D: Multiplication
    Multiply the difference between the comparison year and base year 
gross income by 2.5. For Fisherman A, this is $35,000 multiplied by 
2.5, or $87,500. For Fisherman B, this is $8,000 multiplied by 2.5, or 
$20,000.
    Step 1E: SDI Determination
    SDI is the result of steps 1A through 1D. Fisherman A's SDI is 
$87,500 (($38,000-$3,000) x 2.5=$87,500). Fisherman B's SDI is $20,000 
(($8,000-$0) x 2.5=$20,000).
    Step 2: Determine Maximum Offer Amount
    The maximum offer amount is $75,000 or the fisherman's SDI, 
whichever is less. Fisherman A's SDI is $87,500, which is greater than 
$75,000. Therefore, Fisherman A's maximum bid is limited to $75,000 
because $75,000 is the maximum any fisherman can receive. Fisherman B's 
maximum bid is $20,000 because his SDI is less than $75,000.
    Step 3: Determine Bid
    Fishermen can choose to submit an offer that ranges from $1 up to 
their maximum offer limit. Fisherman A's range is from $1 to $75,000. 
Fisherman B's range is from $1 to $20,000.

Ranking of Bids

    If both Fisherman A and Fisherman B elected to submit their 
respective maximum offers, Fisherman A's offer would be the first 
accepted because the 0.857 ($75,000/$87,500) offer ratio is less than 
1.0. If Fisherman B elected to submit an offer of $11,000, then 
Fisherman B's offer ratio would be 0.550 ($11,000/$20,000). Because 
Fisherman B's offer ratio is lower than Fisherman A's offer ratio, 
Fisherman B's offer would be accepted first. In the event of a tie with 
identical offer ratios, preference will be given to the fishermen with 
the lowest offer amount. If Fisherman A submits an offer of $75,000 
(ratio=.857) and Fisherman B submits an offer of $17,140 (ratio=.857), 
Fisherman B's offer would be accepted first because it is less than 
Fisherman A's offer.

Catalogue of Federal Domestic Assistance

    The program is listed in the Catalogue of Federal Domestic 
Assistance under No. 11.452, Unallied Industry Projects.

Classification

    This action has been determined to be not significant for purposes 
of E.O. 12866. The Assistant General Counsel for Legislation and 
Regulation of the Department of Commerce certified to the Chief Counsel 
for Advocacy of the Small Business Administration that this notice 
would not have a significant economic impact on a substantial number of 
small entities because only a small portion of West Coast salmon 
fishermen will be directly affected. NMFS estimates that only 
approximately 3.6 percent of the industry will receive financial 
assistance through the WSLB. Therefore, the impacts of the notice are 
not significant within the meaning of the Regulatory Flexibility Act. 
They are not likely to lead to a reduction in the annual gross revenues 
by more than 5 percent or an increase in total costs of production by 
more than 5 percent, nor would this action result in any greater 
compliance costs.

[[Page 56221]]

    This program involves a collection-of-information requirement 
subject to the Paperwork Reduction Act (PRA). The collection of this 
information has been approved by the Office of Management and Budget 
(OMB), under OMB control number 0648-0288. Notwithstanding any other 
provision of law, no person is required to respond to, nor shall a 
person be subject to a penalty for failure to comply with, a collection 
of information subject to the requirements of the PRA unless that 
collection of information displays a currently valid OMB control 
number.

    Authority: Public Law 99-659 (16 U.S.C. 4107 et seq.); Public 
Law 102-396.

    Dated: October 24, 1996.
Nancy Foster,
Acting Assistant Administrator for Fisheries, National Marine Fisheries 
Service.
[FR Doc. 96-27902 Filed 10-25-96; 4:48 pm]
BILLING CODE 3510-22-W