[Federal Register Volume 67, Number 82 (Monday, April 29, 2002)]
[Rules and Regulations]
[Pages 20915-20918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-10483]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 679

[Docket No. 010823213-2078-02; 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: Final rule.

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SUMMARY: NMFS issues a final rule to implement Amendment 54 to the 
Fishery Management Plan (FMP) for the Groundfish Fishery of the Bering 
Sea and Aleutian Islands Area, Amendment 54 to the FMP for Groundfish 
of the Gulf of Alaska (Amendments 54/54), and an amendment to the 
Pacific halibut commercial fishery regulations for waters in and off 
Alaska. These amendments make three changes in the Individual Fishing 
Quota (IFQ) Program to: (1) Allow a quota share (QS) holder's indirect 
ownership or affiliation to 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 that explicitly specifies the point 
at which estates holding initial allocations of QS must transfer the QS 
to a qualified individual; and (3) revise sablefish use limits to be 
expressed in QS units rather than as percentages of the QS pool. This 
action is intended to improve the effectiveness of the IFQ Program and 
is 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: DATES: Effective May 29, 2002.

ADDRESSES: Copies of Amendments 54/54, the Regulatory Impact Review and 
the Initial Regulatory Flexibility Analysis (IRFA), and Final 
Regulatory Flexibility Analysis (FRFA) prepared for this final rule may 
be obtained from Sue Salveson, Assistant Regional Administrator for 
Sustainable Fisheries, Alaska Region, NMFS, P.O. Box 21668, Juneau, AK 
99802, Attn: Lori Gravel-Duvall.

FOR FURTHER INFORMATION CONTACT: Glenn Merrill, 907-586-7228 or email 
at [email protected].

SUPPLEMENTARY INFORMATION:

Background

    The IFQ Program, a limited access management system for the fixed 
gear Pacific halibut (Hippoglossus stenolepis) and sablefish 
(Anoplopoma fimbria) fisheries off Alaska, was approved by NMFS in 
January 1993, and fully implemented beginning in March 1995. The IFQ 
Program limits access to the halibut and sablefish fisheries to those 
persons holding QS in specific management regions. The IFQ Program for 
the sablefish fishery is implemented by the FMPs and Federal 
regulations under authority of the Magnuson-Stevens Act. The IFQ 
Program for the halibut fishery is implemented by Federal regulations 
under the authority of the Halibut Act.
    A detailed discussion providing specific examples of the effect of 
this final rule on the IFQ Program may be found in the preamble to the 
proposed rule, published October 12, 2001 (66 FR 52090).

Indirect Vessel Ownership

    The IFQ Program contains a number of provisions designed to promote 
an owner-operator IFQ fishing fleet. An exception to the owner-operator 
provisions allows initial recipients of category B, C, or D (catcher 
vessel) QS (hereafter QS holder) to hire a skipper to fish the IFQ 
derived from the QS, provided the QS holder owns at least 20 percent of 
the vessel on which the IFQ is being used to fish for IFQ species. This 
final rule will allow a QS holder to substitute indirect ownership of a 
vessel through corporate or other ties for direct vessel ownership by 
the QS holder for purposes of hiring a skipper to fish the QS holder's 
IFQ. This final rule also will allow corporate QS holders to employ a 
hired skipper on a vessel owned by a shareholder in the corporation. 
The purpose of this action is to revise IFQ Program regulations to 
explicitly reflect management practices that have been in effect since 
the IFQ Program started in 1995.
    This final rule allows a QS holder to continue to hire a skipper 
through a corporation or partnership provided that certain minimum 
levels of vessel ownership are maintained by an individual QS holder 
who is a shareholder in a corporation or a partner in a partnership. 
Existing regulations require an individual QS holder to maintain a 
minimum of 20-percent ownership interest in the vessel (see 64 FR 
24960, May 10, 1999). These regulations prevent a QS holder from 
employing a hired skipper unless the QS holder directly owns at least 
20 percent of the vessel on which the hired skipper will fish the QS 
holder's IFQ.
    This final rule extends the 20-percent ownership standard to QS 
holders who indirectly own a vessel through a corporation, partnership, 
or other entity. For example, a QS holder who is a shareholder in a 
corporation will be allowed to employ a hired skipper to fish his or 
her IFQ aboard a vessel wholly owned by that corporation provided that 
the QS holder had at least 20- percent ownership in the corporation 
that owns the vessel. This means a QS holder can meet the 20-percent 
minimum ownership standard indirectly as a shareholder of a 
corporation, a partner in a partnership, or a member of another entity. 
However, this final rule prevents a QS holder from employing hired 
skippers through corporations in which they are nominal shareholders.
    Minimum ownership interest is determined by multiplying the 
percentage of ownership that a QS holder has in a corporation, 
partnership, or other entity by the percentage of ownership that a 
corporation, partnership, or other entity has in the vessel on which a 
hired skipper is employed. This final rule codifies the existing 
management policy and methodology currently used by NMFS to determine 
the ownership interest a QS holder has in a vessel. The following are 
two examples of how this final rule will be implemented:
    Example 1: A QS holder owns 20 percent of a corporation and that 
corporation wholly owns a vessel. That QS holder would be allowed to 
employ a hired skipper aboard the vessel owned by the corporation 
because 20-percent ownership interest in the corporation multiplied 
by a 100- percent corporate ownership in the vessel equals a 20-
percent ownership interest by the QS holder in the vessel. (0.2 X 
1.0 = 0.2 or 20 percent)
    Example 2: A QS holder owns 50 percent of a corporation and that 
corporation owns 30 percent of a vessel. That QS holder would

[[Page 20916]]

not be allowed to employ a hired skipper aboard the vessel owned by 
the corporation because 50-percent ownership interest in the 
corporation multiplied by a 30-percent corporate ownership in the 
vessel equals a 15-percent ownership interest by the QS holder in 
the vessel. (0.5 X 0.3 = 0.15 or 15 percent)
    This final rule holds individual QS holders who are indirect 
corporate vessel owners to the same ownership standards as those 
required of direct individual vessel owners. This will allow existing 
business practices to continue since many QS holders own their vessels 
through a corporation to minimize personal liability. Without this 
final rule, QS holders would be unable to meet minimum standards for 
direct vessel ownership while maintaining the advantages that corporate 
vessel ownership provides.
    Likewise, this final rule allows corporations, partnerships, or 
other entities that are QS holders to employ a hired skipper on board a 
vessel owned by a shareholder. This final rule requires the corporate 
QS holder to maintain certain minimum levels of interest, or 
affiliation, with the vessel on which a hired skipper is employed. 
However, this final rule does not require the corporate QS holder to 
maintain an ownership interest in the shareholder's vessel.
    Minimum interest, or affiliation, is determined by multiplying the 
percentage of ownership that a person has in a corporation, 
partnership, or other entity by the percentage of ownership that person 
has in the vessel on which a hired skipper is employed. Again, this 
final rule codifies the existing management policy and methodology used 
by NMFS for this situation. The following are two examples of how this 
final rule will be implemented:
    Example 1: A corporation is a QS holder. A shareholder owns 50 
percent of that corporation and that shareholder owns 50 percent of 
a vessel. The corporate QS holder would be allowed to employ a hired 
skipper aboard the vessel owned by the shareholder because 50 
percent interest in the corporation by the shareholder multiplied by 
a 50-percent ownership in the vessel by the shareholder equals a 25-
percent interest, or affiliation, by the corporate QS holder in the 
shareholder's vessel. (0.5 X 0.5 = 0.25 or 25 percent)
    Example 2: A corporation is a QS holder. A shareholder owns 80 
percent of that corporation and that shareholder owns 10 percent of 
a vessel. The corporate QS holder would not be allowed to employ a 
hired skipper aboard the vessel owned by the shareholder because 80-
percent interest in the corporation by the shareholder multiplied by 
a 10-percent ownership in the vessel by the shareholder equals an 8-
percent interest, or affiliation, by the corporate QS holder in the 
shareholder's vessel. (0.8 X 0.1 = 0.08 or 8 percent)

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 restricts the extent to which 
corporations, partnerships, and other collective entities can hold 
catcher vessel QS. The regulations pertaining to collective QS holdings 
provide that any ``change'' in a corporation, partnership, or other 
entity, will cause the QS to cease generating annual IFQ for harvesting 
IFQ halibut or sablefish until the QS is transferred to a qualified 
individual (see 50 CFR 679.42(j)). The regulations define a ``change'' 
in a corporation, partnership, or other collective entity to mean the 
addition of a shareholder or partner to the collective entity. By 
defining such a ``change,'' the Council clearly expressed its intent to 
limit the ability of collective entities to hold catcher vessel QS and 
use indefinitely the resulting IFQ.
    This final rule revises the definition of ``a change in the 
corporation or partnership'' to state that for estates holding QS, a 
``change'' occurs with the final or summary distribution of the estate. 
The effective date of that change is the date of determination of a 
legal heir, if the previous QS holder died intestate, or the date of 
the order for distribution of the estate, if the previous QS holder had 
testamentary documents. Under this final rule, the estate is required 
to transfer any estate-held QS to a qualified individual upon a change 
in the estate. This final rule limits the ability of estates to hold QS 
and fish the resulting IFQ indefinitely and thereby meets the intent of 
the IFQ Program and the Council to maintain an owner-operator fleet in 
the fixed gear fisheries for Pacific halibut and sablefish.

Sablefish Use Limits

    The IFQ Program limits the amount of QS a person may use to harvest 
IFQ species. 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 is used as a basis 
for the annual determination of IFQ for each QS holder. Because the 
size of the QS pool may vary from year to year, a use limit expressed 
as a percentage of the QS pool results in a variable use limit. 
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. In 1997, 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). The revised halibut use 
limits provide a fixed limit that does not change according to the size 
of the QS pool.
    This final rule standardizes the application of use limits for 
halibut and sablefish. This provides sablefish QS holders with the same 
benefit of a stable use limit so that they can manage their fishing 
businesses in a more rational manner. This final rule revises the 
sablefish use limit percentages to 3,229,721 units of sablefish QS, and 
the IFQ regulatory area SE sablefish use limit percentages to 688,485 
units of sablefish QS.
    This final rule does not change the amount of QS that a person 
could use. It simply sets those limits in QS units, instead of as a 
percentage of the QS pool.

Changes From the Proposed Rule

    NMFS invited public comment on the proposed rule implementing 
Amendments 54/54 from October 12, 2001, through November 26, 2001 (66 
FR 52090, October 12, 2001). No comments were received.
    During the course of preparing this final rule, several corrections 
were made to the final rule to better reflect the original intent of 
Amendments 54/54. The changes made in this final rule correctly reflect 
the intent of the Council and previous regulatory action approved by 
NMFS. These changes also reflect the current management practices used 
by NMFS when determining the level of indirect ownership or corporate 
affiliation that must exist between the QS holder and the vessel on 
which a hired skipper is employed. These changes correct the 
mathematical methodology used to determine the level of indirect 
ownership or affiliation and do not affect the nature of the proposed 
rule or the intent of the Council.
    The first change in the final rule regulatory language concerns the 
determination of ownership interest for purposes of meeting the 20-
percent minimum ownership interest requirement. The regulatory language 
in the proposed rule (66 FR 52090, October 12, 2001) for 50 CFR 
679.42(i)(3) did not adhere to the Council's intent to require that 
initial recipients of category B, C, or D quota share must maintain a 
minimum of a 20-percent ownership interest in the vessel that employs a 
hired skipper. The proposed rule regulatory language did not use a 
multiplicative approach for purposes of determining the level of 
indirect

[[Page 20917]]

ownership. Currently, NMFS uses a multiplicative rule for determining 
the level of interest or corporate affiliation that must exist between 
the QS holder and the vessel on which a hired skipper is employed. The 
final rule language has been changed to adhere to the existing 
management practices that Amendments 54/54 were intended to codify.
    The second change in the final rule regulatory language changes the 
numbering of a new paragraph at 50 CFR 679.42(j)(6) to 50 CFR 
679.42(j)(7). The Code of Federal Regulations was amended recently to 
include a paragraph (j)(6), and the new paragraph in the final rule is 
added at (j)(7) of Sec.  679.42.
    The third change in the final rule regulatory language concerns the 
use of a hired skipper aboard a vessel that is owned by an individual 
that has an affiliation with a corporate QS holder through membership 
in a corporation, partnership, or other entity. The regulatory language 
in the proposed rule (66 FR 52090, October 12, 2001) for 50 CFR 
679.42(j)(6) (now (j)(7)) did not adhere to the Council's intent to 
require that initial recipients of category B, C, or D QS must maintain 
a minimum 20- percent interest in the vessel before those initial QS 
recipients could hire a skipper to fish their IFQ on that vessel. The 
proposed rule regulatory language did not use a multiplicative approach 
for purposes of determining the level of indirect ownership. Currently, 
NMFS uses a multiplicative rule for determining the level of interest 
or corporate affiliation that must exist between the QS holder and the 
vessel on which a hired skipper is employed. The final rule language 
has been changed to adhere to the existing management practices that 
Amendments 54/54 were intended to codify.
    The fourth change clarifies that the effective date of a change for 
purposes of transferring estate-held QS to a qualified individual 
includes situations when a person dies intestate (date of determination 
of a legal heir) and when a person dies with testamentary documents 
(date of the order for distribution of the estate). Regulatory text was 
added to Sec.  679.42(j)(3) to reflect that clarification.
    All the changes in the regulatory language from the proposed rule 
are consistent with Council intent. Failing to make these changes would 
frustrate Council intent to maintain an owner-operator component to the 
IFQ fishery and maintain more than a nominal relationship between the 
QS holder and the vessel on which a hired skipper is employed. These 
changes are corrections to the regulatory language describing the 
methodology used to determine interest in a vessel. These 
clarifications do not represent new policy and are necessary to reflect 
the current management practices used by NMFS to determine the level of 
indirect ownership or corporate affiliation that must exist between the 
QS holder and the vessel on which a hired skipper is employed.

Classification

    The Administrator, Alaska Region, NMFS, has determined that these 
FMP amendments for sablefish and regulatory amendments for Pacific 
halibut are necessary for the conservation and management of the 
Pacific halibut and sablefish fixed-gear IFQ fishery and that they are 
consistent with the Magnuson-Stevens Act, Halibut Act, and other 
applicable laws.
    NMFS prepared a FRFA that describes the impact this final rule 
would have on small entities. A copy of this analysis is available from 
NMFS (see ADDRESSES).
    This final rule makes three changes to the IFQ program that are 
necessary to ensure the program continues to be managed in a manner 
intended by the Council. These changes (1) specify the vessel ownership 
level 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 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 overall impact of these amendments on small entities 
is as follows: First, the indirect ownership provisions, while 
conceivably keeping some QS off the open market, will provide fishermen 
who hold initial allocations of catcher vessel QS an additional option 
for using their QS; second, the change in the definition of a ``change 
in the corporation or partnership'' to include language specific to 
estates will benefit small entities by placing more QS on the market 
than would otherwise occur when estates, as with all non-individual 
non-corporate entities, eventually divest themselves of QS; and 
finally, the revision of the sablefish QS use limits will allow QS 
holders to manage their QS holdings more efficiently by providing a 
stable use limit that does not change with changes in the QS pool.
    These actions would potentially affect all holders of initially 
allocated QS in categories B, C, or D in the IFQ Program. The maximum 
number of affected fishermen could be approximately 3,900 persons, both 
individual and collective entities, who, as of January 2001, hold 
category B, C, or D category QS and, by virtue of having received 
initial allocations, are eligible to hire skippers. The impact of this 
action would be to create explicit regulatory authority for current 
NMFS policy. This would give QS holders, whether collective entities or 
individuals who are partners or shareholders in collectively owned 
vessels, an additional option to use the hired skipper provisions of 
the IFQ Program. At present, NMFS has no reliable data indicating how 
many individual QS holders may be shareholders or partners in 
collective entities or how many collective entities may have individual 
members who own fishing vessels. These data are not currently collected 
as they are not required for managing the existing program. Also, at 
present, NMFS does not have available the full data necessary to 
determine the extent to which this action may impact small entities.
    The IRFA considered alternatives that would have maintained the 
status quo or adopted the changes described in this action and analyzed 
the effect of those alternatives on small entities. The alternatives 
considered in the IRFA were developed in response to public comments 
and participation in the Council process. The changes described in this 
final rule are the same as the alternative developed in the IRFA. NMFS 
is not aware of any alternatives in addition to those considered in 
this action that would accomplish the objectives of the Magnuson-
Stevens Act and other applicable statutes while further minimizing the 
economic impact of the rule on small entities.
    No public comments were received during the comment period on the 
IRFA or the economic impact of the rule generally and, therefore, no 
changes were made to the analysis based on public comment.
    No new reporting, recordkeeping, or compliance requirements are 
imposed by this final rule.
    This final rule has been determined to be not significant for the 
purposes of Executive Order 12866.

List of Subjects in 50 CFR Part 679

    Alaska, Fisheries, Recordkeeping and reporting requirements.

    Dated: April 23, 2002.
John Oliver,
Deputy Assistant Administrator for Operations, National Marine 
Fisheries Service.

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

[[Page 20918]]

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., 3631 et seq,, 
Title II of Division C, Pub. L. 105-277; Sec. 3027, Pub. L. 106-31, 
113 Stat. 57; 16 U.S.C. 1540(f).

    2. In Sec.  679.42, paragraphs (e), (j)(2), (j)(3), and (j)(4) are 
revised, and paragraphs (i)(3) and (j)(7) 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, provided that the individual maintains a minimum 20 
percent interest in the vessel owned by the corporation, partnership, 
or other entity. For purposes of this paragraph, interest in a vessel 
is determined as the percentage ownership of a corporation, 
partnership, or other entity by that individual multiplied by the 
percentage of ownership of the vessel by the corporation, partnership, 
or other entity.
    (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, 
or the date of the order for distribution of the estate.
    (4) QS assigned to vessel categories B, C, or D and IFQ resulting 
from that QS held in the name of a corporation, partnership, or other 
entity that changes, as defined in this paragraph, must be transferred 
to an individual, as prescribed in Sec.  679.41 of this part, before it 
may be used at any time after the effective date of the change.
* * * * *
    (7) 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 is a shareholder in the corporation, partnership, 
or other entity, provided that the corporation, partnership, or other 
entity maintains a minimum of 20 percent interest in the vessel. For 
purposes of this paragraph, interest in a vessel is determined as the 
percentage of ownership in the corporation, partnership, or other 
entity by that person who is a shareholder in the corporation, 
partnership, or other entity, multiplied by the percentage of ownership 
in the vessel by that person who is a shareholder in the corporation, 
partnership, or other entity.
* * * * *
[FR Doc. 02-10483 Filed 4-26-02; 8:45 am]
BILLING CODE 3510-22-S