[Federal Register Volume 66, Number 198 (Friday, October 12, 2001)]
[Proposed Rules]
[Pages 52090-52093]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-25716]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 679

[Docket No. 010823213-1213-01; I.D. 071701C]
RIN 0648-AK70


Fisheries of the Exclusive Economic Zone Off Alaska; Individual 
Fishing Quota Program

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

ACTION: Proposed rule; request for comments.

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SUMMARY: NMFS proposes regulations to implement Amendment 54 to the 
Fishery Management Plan (FMP) for the Groundfish Fishery of the Bering 
Sea and Aleutian Islands Area and Amendment 54 to the FMP for 
Groundfish of the Gulf of Alaska (collectively, Amendments 54/54). 
These amendments would make three changes in the Individual Fishing 
Quota (IFQ) Program: (1) allow a quota share (QS) holder's indirect 
ownership of a vessel, through corporate or other collective ties, to 
substitute for vessel ownership in the QS holder's own name for 
purposes of hiring a skipper to fish the QS holder's IFQ; (2) revise 
the definition of ``a change in the corporation or partnership'' to 
include language specific to estates; and (3) revise sablefish use 
limits to be expressed in QS units rather than as percentages of the QS 
pool. These proposed amendments are intended to improve the 
effectiveness of the IFQ Program and are necessary to promote the 
objectives of the Magnuson-Stevens Fishery Conservation and Management 
Act (Magnuson-Stevens Act) and the Northern Pacific Halibut Act of 1982 
(Halibut Act) with respect to the IFQ fisheries.

DATES: Comments on the proposed rule must be received by November 26, 
2001.

ADDRESSES: Comments must be sent to Sue Salveson, Assistant Regional 
Administrator for Sustainable Fisheries, Alaska Region, NMFS, P.O. Box 
21668, Juneau, AK 99802, Attn: Lori Gravel, or delivered to the Federal 
Building, 709 West 9th Street, Juneau, AK. Copies of Amendments 54/54 
and the Regulatory Impact Review/Initial Regulatory Flexibility 
Analysis (RIR/IRFA) prepared for the amendments are available from NMFS 
at the above address.

FOR FURTHER INFORMATION CONTACT: John Lepore, 907-586-7228 or email at 
john.lepore.noaa.gov.

SUPPLEMENTARY INFORMATION:

Background

    The groundfish fisheries in the Exclusive Economic Zone (3 to 200 
nautical miles offshore) of the Bering Sea and Aleutian Islands 
management area (BSAI) and Gulf of Alaska (GOA) are managed under their 
respective FMPs. Both FMPs were prepared by the North Pacific Fishery 
Management Council (Council) under the Magnuson-Stevens Act, Public Law 
94-265, 16 U.S.C. 1801. The GOA and BSAI FMPs were approved by NMFS and 
became effective in 1978 and 1982, respectively. The IFQ Program, a 
limited access management system for the fixed gear Pacific halibut and 
sablefish fisheries off Alaska, was approved by NMFS in January 1993, 
and fully implemented beginning in March 1995. The IFQ Program for the 
sablefish fishery is implemented by the FMPs and Federal regulations 
under 50 CFR part 679, Fisheries of the Exclusive Economic Zone Off 
Alaska, under authority of the Magnuson-Stevens Act. The IFQ Program 
for the halibut fishery is implemented by Federal regulations 
promulgated under the authority of the Halibut Act.

Indirect Vessel Ownership

    The IFQ Program contains a number of provisions designed to promote 
an owner-operator IFQ fishing fleet. For example, one exception to the 
owner-onboard provisions of the IFQ Program allows initial recipients 
of QS in

[[Page 52091]]

categories B, C, or D (catcher vessel QS) to employ hired skippers to 
fish their IFQ, provided that the QS holder owns the vessel on which 
the IFQ species are being fished. This exception was created to allow 
IFQ fishermen who had operated their fishing businesses in this manner 
before implementation of the IFQ Program to continue such business 
practices. While the IFQ Program prohibits leasing of IFQ derived from 
catcher vessel QS, this exception allows initial recipients of catcher 
vessel QS to remain ashore while having their IFQ harvested by a hired 
skipper. Corporations, partnerships, and other collective entities that 
hold initial allocations of QS must designate a hired skipper, the 
individual who will actually fish the IFQ derived from the collective's 
QS.
    Since implementing the IFQ Program in 1995, NMFS has broadly 
interpreted the regulations' vessel ownership provision to allow a 
person holding an initial allocation of QS to hire a skipper to fish 
the QS holder's IFQ on a vessel owned by another ``person,'' provided 
that the QS holder can show an association to the owner of the vessel 
through corporate or other collective ties. For example, the QS holder 
may be a shareholder or partner in the corporation or partnership that 
owns the vessel or a collective QS holder may have the individual owner 
of the vessel as a shareholder or partner in the collective.
    At the beginning of the 1997 IFQ season, NMFS announced to the IFQ 
fleet that this policy of broadly interpreting the hired skipper 
provision's vessel ownership requirement would continue in effect for 
the 1997 season, or until the Council determined whether the policy 
comports with its original intention. In September 1997, the Council 
requested an analysis of alternatives for this issue and, in October 
1998, recommended that the regulations be revised to provide explicitly 
for this policy. This proposed action would allow a QS holder's 
association to a collective entity to substitute for the QS holder's 
vessel ownership in his or her own name for purposes of hiring a 
skipper to fish the QS holder's IFQ.
    The hired skipper provisions define ``vessel ownership'' as a 
minimum of 20 percent interest in the vessel to prevent persons from 
acquiring minimal or nominal vessel ownership interest simply to 
exploit the hired skipper provision in ways not intended by the Council 
(see 64 FR 24960, May 10, 1999). To maintain the intent of the 
requirement for minimum ownership interest in a vessel, a QS holder 
would have to hold the same 20 percent minimum interest in the 
collective that he or she otherwise would have to hold in a vessel to 
hire a skipper to fish his or her IFQ. For example, an individual 
wishing to hire a skipper to fish his or her IFQ on a vessel owned by a 
corporation in which he or she is a shareholder must hold a minimum of 
20 percent interest in the corporation. Likewise, a corporation may 
hire a skipper to fish its collectively held IFQ on a vessel owned by a 
shareholder in the corporation only if that shareholder holds a minimum 
of 20 percent interest in the vessel, either indirectly through an 
interest in the corporation or through direct ownership of the vessel 
or through a combination of both indirect and direct ownership of the 
vessel.

Revising the Definition of a Change in Corporation or Partnership

    To prevent excessive consolidation of QS and promote an owner-
operator IFQ fleet, the IFQ Program provides a means for determining 
corporations, partnerships, and other collective entities to be 
qualified to hold catcher vessel QS. The regulations pertaining to 
collective QS holdings provide that upon any ``change'' in a collective 
entity, any collectively held QS will cease to generate annual IFQ for 
harvesting IFQ species until the QS is transferred to a qualified 
individual. The regulations define a ``change'' in the collective 
entity to mean the addition of a shareholder or partner to the 
collective entity. By thus defining such a ``change,'' the Council 
clearly expressed its intent to prevent collective entities from 
holding catcher vessel QS and using the resulting IFQ indefinitely.
    The current IFQ regulations do not address changes in estates 
holding QS. Under the current rules, an estate may be issued an initial 
allocation of catcher vessel QS based on the qualifications of a 
deceased fisherman. However, because an estate is not a ``collective'' 
with the potential to acquire additional members, the present 
definition of a ``change in the corporation or partnership'' provides 
no way of determining at which point an estate's QS holdings will cease 
to generate annual IFQ. This allows an estate to hold QS and fish the 
resulting IFQ indefinitely.
    To assure that catcher vessel QS held by estates eventually 
transfer into the possession of qualified individuals, these proposed 
amendments would revise the definition of ``a change in the corporation 
or partnership'' to state that for estates holding QS a ``change'' 
occurs upon a legal order for final distribution of the estate. At the 
point that an estate's holdings are legally distributed, the estate is 
effectively dissolved. Allowing an estate to continue holding catcher 
vessel QS and fishing the resulting IFQ beyond that point would 
compromise the Council's intent to ensure that catcher vessel QS 
eventually transfer to qualified individuals. Therefore, when an estate 
``changes'' in this manner, its QS would be restricted from generating 
annual IFQ until the QS is transferred to a qualified individual. This 
requirement would prevent estates from holding QS and fishing the 
resulting IFQ indefinitely. Upon a legal order for the final 
distribution of an estate, the estate's QS holdings would become 
restricted in the same way QS held by a corporation or partnership 
becomes restricted when the corporation or partnership adds a 
shareholder or partner.

Sablefish Use Limits

    The IFQ Program limits the amount of QS an individual may use to 
harvest IFQ species. Such use limits were created to address the 
concern that an unrestricted market for QS could result in a few 
powerful interests controlling most of the landings. They were also 
created to address the possibility of excessive decreases in the number 
and demographic distribution of vessels and fishermen participating in 
the IFQ Program. In the original implementing regulations for the IFQ 
Program (58 FR 59375, November 9, 1993), use limits are expressed as 
percentages of the QS pool, the total amount of QS available in a given 
year.
    In 1997, in an action that increased the halibut use limits in IFQ 
regulatory area 4, all halibut use limits were revised to be expressed 
in numbers of QS units based on the 1996 QS pool (62 FR 7947, February 
21, 1997). A use limit expressed as a percentage of the QS pool 
provides a variable use limit, because the size of the QS pool may vary 
from year to year. Consequently, a fisherman's QS holdings that have 
reached the limit in one year may actually exceed the limit in a 
subsequent year without the fisherman having acquired any additional 
QS. To allow QS holders the means to gauge more accurately the position 
of their holdings in relation to the use limits and thus to manage 
their fishing businesses in a more rational manner, NMFS, in 
consultation with the Council, revised the halibut use limits to 
provide a fixed limit that does not change according to the size of the 
QS pool. This revision of the halibut use limits was accomplished with 
a regulatory amendment, because the halibut provisions of the IFQ 
Program are implemented under authority of the

[[Page 52092]]

Halibut Act, and no halibut fishery management plan exists.
    The sablefish use limits are set in the FMPs and can be revised 
only through the FMP amendment process specified at section 304 of the 
Magnuson-Stevens Act. If approved, proposed Amendments 54/54 would 
standarize the application of use limits for halibut and sablefish by 
providing sablefish QS holders with the same benefit of a stable use 
limit by which to manage their fishing businesses more rationally.
    Current regulations at 50 CFR 679.42 (e) restrict sablefish QS use, 
so that (1) no person, individually or collectively, may use an amount 
of sablefish QS greater than 1 percent of the combined total sablefish 
QS for the GOA and BSAI IFQ regulatory areas, unless the amount in 
excess of 1 percent was received in the initial allocation of QS; and 
(2) in the IFQ regulatory area east of 140 deg. W. long., no person, 
individually or collectively, may use more than 1 percent of the total 
amount of QS for this area, unless the amount in excess of 1 percent 
was received in the initial allocation of QS. This action would revise 
the sablefish use limit percentages to 3,229,721 units of sablefish QS; 
and (2) for the IFQ regulatory area 2C: 688,485 units of sablefish QS.
    The 1996 regulatory amendment that changed halibut use limits to QS 
units based the limit on that year's QS pool (62 FR 7947, February 21, 
1997). In that action, NMFS implied that sablefish use limits would be 
similarly changed. For the sake of consistency and to meet expectations 
raised by NMFS in the former action, the sablefish use limits would be 
based also on the 1996 QS pool. NMFS is particularly interested in 
receiving public comments on this aspect of the proposed amendments.
    This alternative would not change the amount of QS that an 
individual could use. It simply proposes to set those limits in QS 
units, instead of as a percentage of the QS pool.

Classification

    At this time, NMFS has not determined that the FMP amendments that 
this proposed rule would implement are consistent with the national 
standards of the Magnuson-Stevens Act and the provisions of the Halibut 
Act and other applicable laws. NMFS, in making that determination, will 
take into account the data, views, and comments received during the 
comment period.
    The proposed rule has been determined to be not significant for the 
purposes of Executive Order 12866.
    This action proposes to make changes to the IFQ program that are 
necessary to ensure the program continues to be managed in a manner 
intended by the Council. The proposed changes would: (1) Specify the 
vessel ownership level for purposes of hiring a skipper, (2) clarify 
when estates must distribute QS being held, and (3) revise sablefish QS 
limit to be expressed as a specific number rather than as a percentage.
    The proposed rule would allow a QS holder's indirect ownership of a 
vessel, through corporate or other ties, to substitute for vessel 
ownership in the QS holder's own name for purposes of hiring a skipper 
to fish the QS holder's QS. This action merely modifies NMFS' 
regulations to more explicitly reflect current NMFS' policy of allowing 
QS holders to substitute a corporate link to vessel ownership for 
purposes of hiring a skipper.
    Another alternative considered was to prohibit a corporation or 
partnership from hiring a skipper to fish its collectively held QS on a 
vessel owned by an individual, even if that individual is a member of 
the corporation or partnership. Under such an alternative, an 
individual would not be allowed to hire a skipper to fish his or her 
individually held QS on a vessel owned by a corporation or partnership, 
even if that individual is a shareholder or partner in the collective 
that owns the vessel. This could result in considerable disruptions to 
small entities, as it would deviate from current NMFS practice and 
could prevent collective entities from fishing the QS of their 
shareholders or partners. Such collective entities would suffer 
considerable adverse impacts if they were unable to use their vessels 
to catch IFQ fish.
    Although the proposed action may cause individual partners or 
shareholders to incur costs associated with meeting the proposed 
ownership requirements, this proposed action is unlikely to have 
adverse effects on the small entities themselves, as corporations or 
partnerships will not incur significant new costs and their net values 
will remain unchanged.
    The proposed rule would also revise the definition of a ``change in 
corporation or partnership'' to include language specific to estates. 
NMFS proposes that upon a legal order for final distribution of the 
estate the estate would lose its eligibility to hold QS. Upon such 
legal order for the final distribution, the estate's QS holdings would 
become restricted in the same way QS held by a corporation or 
partnership becomes restricted when the corporation or partnership adds 
a shareholder or partner and would accordingly be required to transfer 
any estate-held QS to a qualified individual. It is the intent of the 
IFQ Program to promote an owner-operator fleet in the fixed gear 
fisheries for Pacific halibut and sablefish.
    This alternative should make more QS available on the open market 
for qualified individuals. Market prices for QS could go down, thereby 
making it easier for qualified small entities to acquire and use QS. 
Under the other alternative, keeping the status quo, QS held by an 
estate does not automatically transfer. Such estates could continue to 
receive annual allocations of QS, thereby limiting the supply of QS 
available. This could raise the price of such shares such that it could 
prevent others who desire to fish and are otherwise qualified from 
purchasing those shares. Such an occurrence would frustrate the intent 
of the IFQ Program to promote an owner-operator fleet.
    The proposed rule would revise sablefish use limits to be expressed 
in QS units, rather than as a percentage of the QS pool. In 1996, the 
Council recommended that halibut use limits be expressed as fixed 
numbers of QS units, rather than percentage. This change was 
implemented by NMFS and provided halibut QS holders with a more stable 
reference for measuring their halibut QS holdings against area use 
limits. Amendment 54/54 would change the calculation of sablefish use 
limits to a fixed number of QS units, based on the 1996 QS pools, for 
consistency with the halibut fishery and eliminate operational problems 
resulting from differing QS systems in the IFQ fishery.
    This proposed rule would eliminate year-to-year fluctuations in the 
user limit and facilitate the ability of sablefish IFQ fishermen to 
stay within the user limit for sablefish QS. Under the no action 
alternative to the proposed action, sablefish fishing capacity, 
measured in terms of QS, may fluctuate each year as the TAC changes. 
This uncertainty may impose a burden on fishermen close to, or at, the 
user limit. They may be forced to adjust their holdings each year to 
stay within the user limit for sablefish. As individual fishermen are 
likely to catch the same amount of sablefish under either system, the 
proposed action mostly likely reduces impacts on small entities as it 
eases compliance with sablefish user limits and sablefish fixed gear 
fishermen, who also catch halibut, would no longer have to operate 
under two different use limit systems. Because the halibut fixed gear 
fishery is operating successfully under the fixed QS number system, the 
most feasible alternative is to use the fixed number

[[Page 52093]]

QS system for sablefish, rather than devise a completely different 
system for both fisheries.
    At the end of 2000, NMFS determined that 4,546 entities hold QS 
(3,649 unique persons hold halibut QS and 897 unique persons hold 
sablefish QS). Given the average price levels for halibut and sablefish 
and the maximum amount of QS for both species that could be held by any 
unique entity, the maximum amount of annual revenue would not exceed 3 
million dollars (implied maximum of $1,400,000). Therefore, all these 
entities would be treated as small entities for purposes of the 
Regulatory Flexibility Act (RFA). However, this likely overestimates 
the number of small entities that may be affected by this action 
because it does not take into account income these entities may derive 
from other fisheries and assumes that all QS holders would be affected 
by these changes.
    No additional recordkeeping and reporting requirements are 
associated with this action, nor is NMFS aware of any other Federal 
rules that would duplicate, overlap, or conflict with this proposed 
action. At present, the data necessary to determine the full extent of 
impact to small entities is not available to NMFS (i.e., operational 
cost data). Therefore, NMFS is unable to conclude that this action has 
no impact on small entities as defined by the RFA. A copy of the IRFA 
is available from NMFS (see ADDRESSES). NMFS specifically requests 
comments on any additional alternatives to these proposed actions that 
may achieve the stated goals and reduce impacts to small entities.

List of Subjects in 50 CFR Part 679

    Alaska, Fisheries, Recordkeeping and reporting requirements.

    Dated: October 5, 2001.
William T. Hogarth,
Assistant Administrator for Fisheries, National Marine Fisheries 
Service.

    For the reasons set out in the preamble, 50 CFR part 679 is 
proposed to be amended as follows:

PART 679--FISHERIES OF THE EXCLUSIVE ECONOMIC ZONE OFF ALASKA

    1. The authority citation for 50 CFR part 679 continues to read as 
follows:

    Authority: 16 U.S.C. 773 et seq, 1801 et seq., and 3631 et seq.

    2. In Sec. 679.42, paragraphs (e), (j)(2), and (j)(3) are revised, 
and paragraphs (i)(3) and (j)(6) are added to read as follows.


Sec. 679.42  Limitations on use of QS and IFQ.

* * * * *
    (e) Sablefish QS use. (1) No person, individually or collectively, 
may use more than 3,229,721 units of sablefish QS, except if the amount 
of a person's initial allocation of sablefish QS is greater than 
3,229,721 units, in which case that person may not use more than the 
amount of the initial allocation.
    (2) In the IFQ regulatory area east of 140 deg. W. long., no 
person, individually or collectively, may use more than 688,485 units 
of sablefish QS for this area, except if the amount of a person's 
initial allocation of sablefish QS is greater than 688,485 units, in 
which case that person may not use more than the amount of the initial 
allocation.
* * * * *
    (i) * * *
    (3) The exemption provided in paragraph (i)(1) of this section may 
be exercised by an individual on a vessel owned by a corporation, 
partnership, or other entity in which the individual is a shareholder, 
partner, or member with a minimum of 20 percent interest, provided that 
the corporation, partnership, or other entity owns a minimum of 20 
percent interest in the vessel.
* * * * *
    (j) * * *
    (2) For purposes of this paragraph (j), ``a change'' means:
    (i) For corporations and partnerships, the addition of any new 
shareholder(s) or partner(s), except that a court appointed trustee to 
act on behalf of a shareholder or partner who becomes incapacitated is 
not a change in the corporation or partnership; or
    (ii) For estates, the final or summary distribution of the estate.
    (3) The Regional Administrator must be notified of a change in the 
corporation, partnership, or other entity as defined in this paragraph 
(j) within 15 days of the effective date of the change. The effective 
date of change, for purposes of this paragraph (j), is the date on 
which the new shareholder(s) or partner(s) may realize any corporate 
liabilities or benefits of the corporation or partnership or, for 
estates, the date of the determination of a legal heir to the estate.
* * * * *
    (6) The exemption provided in paragraph (j) of this section may be 
exercised by a corporation, partnership, or other entity on a vessel 
owned by a person who holds a minimum of 20 percent interest in the 
corporation, partnership, or other entity, provided that the person who 
owns the vessel possesses a minimum of 20 percent interest in the 
vessel.
* * * * *
[FR Doc. 01-25716 Filed 10-11-01; 8:45 am]
BILLING CODE 3510-22-S