[Federal Register Volume 65, Number 213 (Thursday, November 2, 2000)]
[Notices]
[Pages 65841-65845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-28153]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

[I.D. 051500C]


Guidelines for Economic Analysis of Fishery Management Actions

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

ACTION: Notice of availability.

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SUMMARY: The Guidelines for Economic Analysis of Fishery Management 
Actions (Guidelines) provide guidance on meeting the procedural and 
analytical requirements of Executive Order (E.O.) 12866 and the 
Regulatory Flexibility Act(RFA)for regulatory actions of federally 
managed fisheries. Specifically, the guidelines include a general 
framework for conducting economic analyses of regulatory actions; 
recommend that a preliminary regulatory economic evaluation be 
conducted early in the regulatory process to provide information on the 
impacts of proposed measures to the public and decision makers; outline 
the process for doing the regulatory impact

[[Page 65842]]

review for meeting analytical requirements, including information 
requirements, analytical procedures, and methodologies; outline the 
steps for fulfilling the requirements of the RFA; discuss the 
relationship of the RFA to other applicable law; and identify ways of 
involving small entities in the rulemaking process.

FOR FURTHER INFORMATION CONTACT: Theo R. Brainerd, 301-713-2337.

SUPPLEMENTARY INFORMATION:

Background

    The objective of E.O. 12866 (58 FR 51735, October 4, 1993) is to 
improve the Federal regulatory system. NMFS complies with E.O. 12866 by 
preparing a Regulatory Impact Review (RIR) which includes an analysis 
of the economic effects of the proposed action and alternative actions. 
The RIR is intended to assist Councils and the NMFS in selecting the 
regulatory approach that maximizes net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts, and equity issues), unless a statute 
requires another regulatory approach.
    The purpose of the RFA (5 U.S.C. 601 et seq.) is to establish as a 
principle of regulatory issuance that agencies shall endeavor, 
consistent with the objectives of the regulatory action and applicable 
statutes, to fit regulatory and informational requirements to the scale 
of businesses, organizations, and governmental jurisdictions subject to 
the regulation. NMFS conducts a Regulatory Flexibility Act Analysis 
(RFAA) to assess the impacts of the proposed/final rule on small 
entities and describes steps the agency has taken to minimize any 
significant economic impact on small entities while achieving 
regulatory goals.
    In comparison to the previous RIR/RFAA guidelines, these 
guidelines:
    Incorporate the revisions to the RFA made by the Small Business 
Regulatory Enforcement Act;
    Revise the basis the agency will use to certify that a proposed 
regulation will not have a significant economic impact on a substantial 
number of small entities;
    Place greater emphasis on the need for the Regional Fishery 
Management Councils and NMFS to have draft analyses early in the 
Fishery Management Plan (FMP) development process and final analyses 
available prior to a decision on the preferred course of action. These 
analyses would also be a source of information for public comment on 
the expected effects of the alternatives under consideration;
    Provide recommendations concerning key topic areas and organization 
for the regulatory analyst to consider when developing and revising the 
regulatory analysis;
    Based on the growing regulatory emphasis on protected resources and 
habitat, recommend that analysts highlight, where appropriate, the 
effects on the non-consumptive uses of fishery, other living marine 
resources, and the ecological benefits derived from these resources and 
their habitats; and
    Incorporate changes based on comments from the public.

Comments on Draft Guidelines for Economic Analysis of Fishery 
Management Actions

    By the final date (June 21, 2000) for receiving comments on the 
draft guidelines, 36 comments were received.
    Comment 1: The NMFS guidelines failed to follow the letter and 
spirit of the RFA and E.O. 12866.
    Response: The guidelines addressed all applicable requirements of 
the RFA and E.O. 12866. The requirements are outlined in detail, and a 
stepwise approach to meeting those requirements is provided in the 
guidelines. Most of the comments received indicated that the guidelines 
provide clear and concise guidance to analysts and set the stage for 
improving the quality of economic analyses of regulatory actions. The 
Office of Advocacy at the U. S. Small Business Administration (SBA) 
reviewed the draft guidelines and provided comments. Those comments 
were incorporated into the final version of the revised guidelines.
    Comment 2: Two commenters expressed concern that the effects of 
fishery regulations on the recreational sector will not be given 
adequate attention.
    Response: The guidelines state the importance of considering the 
impacts of management measures on all sectors of the industry, 
including recreational and non-consumptive users to the extent that 
available data permit. All sectors affected are considered to be 
equally important in terms of conducting the economic impact analysis. 
NMFS is constantly working to improve its data and analytical methods 
for each sector so that future analyses of management actions can be 
enhanced.
    Comment 3: Small entities affected must include all participants, 
not only those of the commercial fishing sector but also those of the 
recreational fishing sector. The guidelines take the position that only 
economic effects on the commercial sector must be included in economic 
analysis (RFAA) to comply with the RFA.
    Response: The guidelines refer to small entities as defined by the 
SBA. These include all small entities whether commercial, recreational, 
or otherwise. RFA analyses of management actions will encompass all the 
small entities to which the rule will apply.
    Comment 4: The statement: ``The RFAA need only analyze the economic 
impacts on small entities to which the proposed rule will apply'' is 
not true.
    Response: Section 603(b)(3) of the RFA (5 U.S.C. 601 et seq.) 
refers to the small entities to which the rule will apply. However, 
other analyses will examine a rule's effects on other entities outside 
the ambit of the RFA. The analysis of the economic impacts on small 
entities whether they are directly affected, or indirectly affected by 
the proposed rule are to be analyzed.
    Comment 5: Two commenters agreed with the approach to provide 
preliminary economic analyses of the impacts of proposed actions early 
in the process, but stress that such analyses should be available to 
the public in sufficient time to provide comments. This could enable 
resolution of weaknesses in the analyses due to missing or incomplete 
data among other things.
    Response: NMFS encourages early presentation of economic analyses 
so that weaknesses and missing or incomplete data can be identified. In 
so doing, NMFS hopes that efforts can be made early in the process to 
address those issues. The guidelines recommend that the preliminary 
economic analyses should be included in the public hearing document. 
The public hearing process provides the public with its first 
opportunity to review the alternatives and to submit comments on the 
analyses of those alternatives. In addition, the public has opportunity 
to comment during public comment period at Council meetings before 
final actions are taken, and during comment period when the proposed 
rules are published in the Federal Register. In certain instances, the 
Councils may request public comment during the development of the 
public hearing document.
    Comment 6: Although annual gross sales (revenues) could appear 
large, net revenues could be much less compared to similar size 
businesses in other industries. Analyses should focus on net revenues.
    Response: NMFS agrees with this suggestion. Analyses usually 
attempt to calculate and consider net revenues when cost and revenue 
data are available. However, cost data are not available for most 
fisheries. NMFS is taking steps to collect cost data for

[[Page 65843]]

federally managed fisheries. As more cost data become available, more 
of the analyses will focus on computing net revenues.
    Comment 7: Differential impacts on subsets within the fishing 
industry should be considered even when a subset does not comprise a 
significant number.
    Response: NMFS agrees with this suggestion. The guidelines 
recommend creation of separate classes of entities for doing the 
analysis when a regulatory action is expected to have differential 
impacts based on the sizes of entities and other characteristics. The 
guidelines recommend that tiering by size or by other appropriate 
characteristics be done when differential impacts are expected on 
subgroups of affected small entities.
    Comment 8: The certification process (certifying that proposed 
action would not result in significant economic impact on a substantial 
number of small entities) tends to mask the cumulative effects of 
regulatory actions on a large segment of the fishing industry. 
Cumulative effects should be analyzed where possible. There are some 
routine management actions that could be considered as good candidates 
for certification.
    Response: The guidelines recommend that conceptual and empirical 
analyses should explicitly account for the management history in a 
fishery by reviewing past regulatory activities and trends. It is 
expected that this approach would incorporate cumulative effects of 
management measures. Also, the guidelines recommend that certification 
only be done when the economic analysis of the proposed action provides 
adequate information on the expected impacts.
    Comment 9: Pareto criteria and Hicksian Compensation criteria are 
strictly efficiency-based and do not attempt to make equity or 
distributional judgements, but merely indicate if the overall pie is 
getting bigger or not, regardless of who wins or losses. The footnote 
on Page 10, Section IV.1 of the draft guidelines is inappropriate 
within the context that distribution is being raised in the text. One 
needs to point out that distributive implications of alternatives can 
and should be determined. These distributive implications can then be 
weighed along with the net benefit results by the regulatory 
authorities.
    Response: The guidelines have been revised to better reflect that 
economic analysis should provide a quantitative or qualitative estimate 
of changes in net benefits expressed in monetary terms. The guidelines 
indicate that it is desirable to show how the benefits and costs may be 
distributed among the various impacted sectors / entities if the 
appropriate data and analytical methods are available. Presentation of 
other measures of distributional effects such as changes in shares of 
harvest or revenues are encouraged.
    Comment 10: There is need to provide more guidance on conducting 
analyses involving non-use values. It would be useful to include an 
addendum to the guidelines that addresses both methodological and 
application considerations especially with regard to Essential Fish 
Habitat and MPA related actions, as a temporary solution.
    Response: Section IV of the guidelines provides recommendations for 
computing non-use values and includes three techniques (travel cost, 
stated preference, and hedonic pricing) for computing non-use values 
even though it is indicated in section III that the guidelines do not 
prescribe methods. Also, the list of references at the end of the 
guidelines includes references on non-use valuation techniques.
    Comment 11: Willingness to Accept (WTA) can be used instead of 
Willingness To Pay. For example, WTA compensation for a loss of a 
fishing permit.
    Response: The concept of WTA has been included in the revised 
guidelines to reflect that WTA may be preferable in certain situations 
when valuing market or non-market goods.
    Comment 12: The agency should consider existence value for 
endangered/threatened species.
    Response: Existence value is discussed under non-market value in 
section IV. Where appropriate, existence value may be considered for 
species, including those covered under the Endangered Species Act 
(ESA).
    Comment 13: The guidelines should mention IMPLAN as a useful 
package for doing input-output analyses.
    Response: There are a number of software packages available for 
doing input-output analysis. Analysts can utilize any package they are 
familiar with. It is not the agency's policy to promote a particular 
brand of product.
    Comment 14: In addition to inter-generational equity and fairness 
issues, irreversibility needs to be addressed. The following sentence 
should be included: ``In addition, discounting of actions intended to 
prevent irreversible impacts, such as habitat damage, might also 
include applying techniques that escalate the future value of an 
environmental asset over time.''
    Response: The revised guidelines provide a discussion on the issue 
of irreversibility.
    Comment 15: NMFS should use focus groups to obtain real world 
perspective when data is lacking and when the analysis is mainly 
qualitative.
    Response: NMFS notes the comment. NMFS and the Councils may use 
focus groups when appropriate.
    Comment 16: Most of NMFS regulations are reactive to crisis 
situations. They do not allow for well documented use of analytical 
methods to indicate impacts. NMFS can become more pro-active.
    Response: The purpose of the guidelines is not to discuss the 
reasons for proposing regulations, but to provide guidance on how to 
conduct economic analyses to meet the requirements of the RFA and E.O. 
12866; i.e., to analyze the expected impacts of the proposed 
regulations.
    Comment 17: The guidelines should emphasize the distinction between 
the RIR and RFAA and should address the issues under each decisional 
rubric.
    Response: The guidelines clearly indicate where the requirements of 
the RFA and E.O. 12866 overlap and where they differ. For each of the 
requirements under the RFA and E.O. 12866, specific guidance is 
provided on how to conduct economic analyses to meet those 
requirements.
    Comment 18: The weight given to non-consumptive uses could 
overshadow impacts on fishermen. The guidelines should emphasize that 
the public derives important benefit from being able to purchase 
seafood at stores and that there is a separate existence value for the 
U.S. seafood industry.
    Response: The guidelines support the use of existence value when it 
is appropriate to address the issue. Also, the guidelines recommend 
computing producer and consumer surpluses to capture all costs and 
benefits for traded goods. Consumer surplus captures the value 
consumers put on the availability of seafood products. As noted in 
Comment 2, all sectors affected should be considered in a complete, 
objective, and balanced way when conducting economic impact analyses.
    Comment 19: Information requirements should include consideration 
of the cumulative economic and social effects of regulations.
    Response: The guidelines stress the need for considering cumulative 
impacts and include suggestions on how to assess cumulative impacts.
    Comment 20: The analyst could ``back fill'' a framework adjustment 
measure with economic and social justifications, rather than conduct a 
full and fair analysis during the actual decision-making process.

[[Page 65844]]

    Response: The guidelines outline the steps for doing the economic 
analyses before NMFS or the Councils take final actions. The guidelines 
specifically address framework measures and the need to ensure that 
regulatory actions under a framework are adequately analyzed.
    Comment 21: The statement that the RFA does not contain any 
decisional criterion is untrue.
    Response: This statement refers to the fact that the RFA does not 
require that the least costly alternative or the alternative with the 
highest benefits be selected. The RFA requires that the agency 
considers a range of suitable alternatives, and if a rejected 
alternative would have a lower impact on small entities than the chosen 
alternative, justify why it chose that alternative over the rejected 
alternative.
    Comment 22: NMFS must find a way to obtain reliable cost 
information if it expects to do rigorous profitability analyses.
    Response: The purpose of the guidelines is not to design methods 
for collecting data, but to give guidance on how to utilize data to do 
the economic analyses. However, NMFS is currently collecting cost data 
for some fisheries and is making effort to expand cost data collection 
to include more federally managed fisheries.
    Comment 23: NMFS must explore innovative alternatives to minimize 
impact on small entities while meeting the goals and objectives of 
management.
    Response: The analyst does not decide on the alternatives to be 
included in the regulatory document. As such, the guidelines make no 
suggestion on what should be suitable alternatives, except that the no 
action alternative must be considered and should be the baseline from 
which other alternatives are assessed. However, the Councils and NMFS 
are required to explore a range of alternatives that are consistent 
with the goals and objectives of the FMP, and select alternatives that 
minimize impacts on small entities. The guidelines provide four 
examples of the types of alternatives that could be used to minimize 
impact on small entities while meeting the goals and objectives of 
management.
    Comment 24: The contents of the Final Regulatory Flexibility 
Analysis (FRFA) need to be expanded to include an explanation of why 
NMFS chose a particular alternative and should include additional 
consideration of economic, social and regulatory impacts discovered in 
public comment on the Initial Regulatory Flexibility Analysis.
    Response: The FRFA section of the RFAA is structured to meet the 
requirements of Section 604 of the RFA (5 U.S.C. 601 et seq.). The 
guidelines for preparing the FRFA address all the suggestions made by 
the commenter.
    Comment 25: The current form of the guidelines is likely too 
general to be useful for practitioners.
    Response: The guidelines are primarily written for analysts to aid 
them in performing economic analyses of regulatory actions while taking 
into account the wide array of actions for different fisheries under 
management. It is also written so that it is intelligible to managers, 
policy makers and to the public in general.
    Comment 26: ``Efficiency'' should be explained in the context of 
fishery management.
    Response: Section IV of the guidelines emphasizes estimating the 
changes in benefits and costs associated with each alternative to the 
status quo. This incremental or marginal approach is intended to 
capture differences in efficiency among the alternatives. However, 
because increased efficiency is not the sole objective of management 
actions, the guidelines do not emphasize the conditions necessary for 
an efficient allocation of resources. The guidelines include references 
to the relevant literature on benefit-cost analysis and efficiency.
    Comment 27: Appendix C of Office of Management and Budget (OMB) 
Circular No. A-94 (revised January 2000) states that OMB officially 
recommends the use of real discount rates in the range of 3.8 - 4.2 
percent. The guidelines should state clearly that analysts should refer 
to OMB Circular for the current rate schedule and future adjustments to 
the schedule.
    Response: The guidelines indicate that the OMB has provided 
``Guidelines and Discount Rates for Benefit-Cost Analysis of Federal 
Programs'' in Circular No. A-94 distributed by Transmittal Memorandum 
No. 64 (October 29, 1992). This Circular specifies certain discount 
rates that will be updated annually when the interest rate and 
inflation assumptions in the budget are changed. It also specifies 
(section 8.b.1) a real discount rate of 7.0 percent for computing net 
present value when doing constant-dollar benefit-cost analyses of 
proposed investments and regulations. The rates presented in appendix C 
of OMB Circular No. A-94 do not apply to regulatory analysis or 
benefit-cost analysis of public investment. They are to be used for 
lease-purchase and cost-effectiveness analysis, as specified in the 
Circular. This information about appendix C is provided in: 
``Memorandum for the Heads of Departments and Agencies''of February 9, 
2000 (M-00-06, 2000 Discount Rates for OMB Circular No. A-94) and can 
be obtained at: http://www.whitehouse.gov/OMB/memoranda/m00-06.html
    Comment 28: Analyses should take cost effects into consideration.
    Response: Under ``Changes in the distribution of benefits and 
costs'' in section IV.1 of the Guidelines, details are provided on how 
to account for changes in benefits and costs in the analyses. Also, 
under ``Information Requirements'' in section IV.3, 14 factors are 
listed for which information should be collected to do the required 
analyses when relevant. Three of these factors are: expected changes in 
harvesting costs, processing costs, and benefits or costs incurred by 
specific user groups.
    Comment 29: The section on ``Net benefits within a benefit cost 
framework'' is confusing and should include a graph illustrating the 
different surplus measures.
    Response: This section has been revised and now provides clear 
guidance on how to measure benefits and costs within a benefit-cost 
framework.
    Comment 30: There needs to be more guidance for conducting 
sensitivity analysis.
    Response: The guidelines describe three fundamental types of 
analyses the analysts could employ, if appropriate, to deal with risk 
and uncertainty. They are: (1) a qualitative description of the areas 
of risk and uncertainty when reliable data or analytical models are 
unavailable; (2) a formal sensitivity analysis in which the important 
parameters are systematically varied and the impact on expected 
economic effects evaluated; and (3) a formal risk analysis through 
techniques such as Monte Carlo simulation.
    Comment 31: The ``Summary of Expected Economic Effects'' section 
should include a sample schedule that illustrates how this might look 
in a particular policy assessment (e.g. quota level) to further aid the 
analyst.
    Response: This section only presents a summary (as a checklist) of 
how the results of the analysis should be presented. The sample 
schedule referred to would be appropriate in a practitioners manual 
which could be developed at a later date.
    Comment 32: The section on ``Period of Analysis'' is 
unsatisfactory. It should include more examples on how various factors, 
such as the reproductive rate of fish stock and capital mobility and 
malleability, affect the relevant time frame of the analysis.

[[Page 65845]]

    Response: Specific guidance on the period of analysis is not 
appropriate because of the vast differences in the characteristics of 
fisheries and the variety of management measures. A thorough knowledge 
of the particular fishery under consideration, and the nature of the 
proposed management measures and other relevant factors (as stated in 
the guidelines), must be considered before determining the appropriate 
period for the analysis.
    Comment 33: The current section on ``Risk and Uncertainty'' does 
not emphasize the importance of providing a range of benefit-cost 
estimates as opposed to point estimates to the Councils.
    Response: In addition to identifying three types of analyses to 
deal with risk and uncertainty, the guidelines state that the use of 
conservative or best estimates, or the use of a risk premium added to 
the social discount rate is not recommended.

Electronic Access

    A copy of the revised guidelines is available through the internet 
at: http://www.nmfs.gov/sfa/ under ``Proposed & Final Rules, and 
Documents for Public Comment.''

    Dated: October 27, 2000.
Clarence Pautzke,
Director, Office of Sustainable Fisheries, National Marine Fisheries 
Service.
[FR Doc. 00-28153 Filed 11-01-00; 8:45 am]
BILLING CODE 3510-22-S