Fisheries of the Exclusive Economic Zone Off Alaska; Allocating Bering Sea and Aleutian Islands King and Tanner Crab Fishery Resources

Federal RegisterOct 29, 2004

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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Parts 679 and 680

[Docket No. 040831251-4251-01; I.D. 100804A]

RIN 0648-AS47

Fisheries of the Exclusive Economic Zone Off Alaska; Allocating Bering Sea and Aleutian Islands King and Tanner Crab Fishery Resources

AGENCY:

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

ACTION:

Proposed rule; request for comments.

SUMMARY:

NMFS proposes regulations implementing Amendments 18 and 19 to the Fishery Management Plan for Bering Sea/Aleutian Islands (BSAI) King and Tanner Crabs (FMP). Amendments 18 and 19 amend the FMP to include the Voluntary Three‐Pie Cooperative Program (hereinafter referred to as the Crab Rationalization Program (Program)). Congress amended the Magnuson‐Stevens Fishery Conservation and Management Act (Magnuson‐Stevens Act) to require the Secretary of Commerce to approve the Program. The proposed action is necessary to increase resource conservation, improve economic efficiency, and improve safety. This action is intended to promote the goals and objectives of the Magnuson‐Stevens Act, the FMP, and other applicable law.

DATES:

Comments must be received no later than December 13, 2004.

ADDRESSES:

Send comments to Sue Salveson, Assistant Regional Administrator, Sustainable Fisheries Division, Alaska Region, NMFS, Attn: Lori Durall. Comments may be submitted by:

• Mail: P.O. Box 21668, Juneau, AK 99802.

• Hand Delivery to the Federal Building: 709 West 9th Street, Room 420A, Juneau, AK.

• Facsimile: 907‐586‐7557.

• E‐mail:

KTC18-PR-0648-AS47@noaa.gov

. Include in the subject line of the e‐mail the following document identifier: Crab Rationalization RIN 0648-AS47. E‐mail comments, with or without attachments, are limited to 5 megabytes.

• Webform at the Federal eRulemaking Portal:

www.regulations.gov

. Follow the instructions at that site for submitting comments.

Send comments on collection‐of‐information requirements to the same NMFS address and also to the Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC 20503 (Attn: NOAA Desk Officer). Also, send comments to David Rostker, OMB, by e‐mail at

DRostker@omb.eop.gov

or by facsimile to 202‐395‐7285.

Copies of Amendments 18 and 19 and the Environmental Impact Statement (EIS) for this action may be obtained from the NMFS Alaska Region at the address above or from the Alaska Region website at

http://www.fakr.noaa.gov/sustainablefisheries/crab/eis/default.htm

. The EIS contains as appendices the Regulatory Impact Review (RIR), Initial Regulatory Flexibility Analysis (IRFA), and Social Impact Assessment (SIA) prepared for this action.

FOR FURTHER INFORMATION CONTACT:

Susan Salveson, 907‐586‐7228 or

sue.salveson@noaa.gov

SUPPLEMENTARY INFORMATION:

In January 2004, Congress amended section 313 of the Magnuson‐Stevens Act through the Consolidated Appropriations Act of 2004 (Pub. L. 108‐199, section 801), by adding paragraph (j). As amended, section 313(j)(1) requires the Secretary to approve by January 1, 2005, and implement thereafter, the Program as it was adopted by the North Pacific Fishery Management Council (Council). Amendments 18 and 19 amend the FMP to include the Program.

This proposed rule implements Amendments 18 and 19 to the FMP. The Notice of Availability for these amendments was published in the

Federal Register

on September 1, 2004 (69 FR 53397). NMFS solicited public comments on the proposed amendments through November 1, 2004. NMFS published the amendments in September so that the decision date for approval of the amendments will be before the statutory deadline of January 1, 2005.

The Program would allocate BSAI crab resources among harvesters, processors, and coastal communities. The Council developed the Program over a 6‐year period to accommodate the specific dynamics and needs of the BSAI crab fisheries. The Program builds on the Council's experiences with the halibut and sablefish Individual Fishing Quota (IFQ) program and the American Fisheries Act (AFA) cooperative program for Bering Sea pollock. The Program is a limited access system that balances the interests of several groups who depend on these fisheries. The Program would address conservation and management issues associated with the current derby fishery and would reduce bycatch and associated discard mortality. The Program also would increase the safety of crab fishermen by ending the race for fish. Share allocations to harvesters and processors, together with incentives to participate in fishery cooperatives, would increase efficiencies, provide economic stability, and facilitate compensated reduction of excess capacities in the harvesting and processing sectors. Community interests would be protected by Community Development Quota (CDQ) allocations and regional landing and processing requirements, as well as by several community protection measures.

This preamble first provides a Crab Rationalization Program overview that presents a general description of all of the Program components. Subsequent sections focus on the specifics of the following Program components: quota share allocation, processor quota share allocation, IFQ and individual processing quota (IPQ) issuance, quota transfers, use caps, crab harvesting cooperatives, protections for Gulf of Alaska groundfish fisheries, binding arbitration, monitoring, economic data collection, and cost recovery fee collection.

Crab Rationalization Program Overview

The Program would apply to the following BSAI crab fisheries: Bristol Bay red king crab (

Paralithodes camtschaticus

), Western Aleutian Islands (Adak) golden king crab (

Lithodes aequispinus

) ‐ West of 174° W., Eastern Aleutian Islands (Dutch Harbor) golden king crab ‐ East of 174° W., Western Aleutian Islands (Adak) red king crab - West of 179° W., Pribilof Islands blue king crab (

P. platypus

) and red king crab, St. Matthew Island blue king crab, Bering Sea snow crab (

Chionoecetes opilio

), and Bering Sea Tanner crab (

C. bairdi

). Golden king crab is also known as brown king crab. In this document, the phrases “crab fishery” and “crab fisheries” refer to these fisheries, unless otherwise specified.

Several crab fisheries under the FMP would be excluded from the Program, including the Norton Sound red king crab fishery, which is operated under a “superexclusive” permit program intended to protect the interests of local, small‐vessel participants. Also excluded from this Program are the Aleutian Islands Tanner crab fishery, Aleutian Islands red king crab fishery east of 179° W. long., and the Bering Sea golden king crab, scarlet king crab (

L. couesi

), triangle Tanner crab (

C. angulatus

), and

grooved Tanner crab (

C. tanneri

) fisheries.

Harvest Sector

Qualified harvesters would be allocated quota share (QS) in each crab fishery. To receive a QS allocation, a harvester must hold a permanent, fully transferable license limitation program (LLP) license endorsed for that crab fishery. Quota share represents an exclusive but revokable privilege that provides the QS holder with an annual allocation to harvest a specific percentage of the total allowable catch (TAC) from a fishery. IFQs are the annual allocations of pounds of crab for harvest that represent a QS holder's percentage of the TAC. Using LLP licenses for defining eligibility in the Program would maintain current fishery participation. A harvester's allocation of QS for a fishery would be based on the landings made by his or her vessel in that fishery. Specifically, each allocation would be the harvester's average annual portion of the total qualified catch during a specific qualifying period. Qualifying periods were selected to balance historical and recent participation. Different periods were selected for different fisheries to accommodate closures and other circumstances in the fisheries in recent years.

Quota share would be designated as either catcher vessel (CV) shares or catcher/processor (CP) shares, depending on the nature of the LLP license and whether the vessel processed the qualifying harvests on board. Catcher vessel IFQ would be issued in two classes, Class A IFQ and Class B IFQ. Crabs harvested with Class A IFQ would require delivery to a processor holding unused processing quota. Class A IFQ landings also would be subject to a regional delivery requirement. Under this regional requirement, landings would be delivered either in a North or in a South region (in most fisheries). Crabs harvested with Class B IFQ could be delivered to any processor and would not be regionally designated. Landings in excess of IFQ would be forfeited in all cases. Class B IFQs are intended to provide ex‐vessel price negotiating leverage to harvesters. For each region of each fishery, the allocation of Class B IFQ would be 10 percent of the total allocation of IFQ to the CV sector.

Transfer of QS and IFQ, either by sale or lease, would be allowed, subject to limits including caps on the amount of shares a person may hold or use. To be eligible to receive transferred QS or IFQ, a person would have to meet specific eligibility criteria. Initial recipients of QS, CDQ groups, and eligible crab community entities would be exempt from the transfer eligibility criteria.

Separate caps would be imposed to limit the amount of QS and IFQ a person could hold and to limit the use of IFQ on board a vessel. These caps are intended to prevent negative impacts from what can be described as excessive consolidation of shares. Excessive share holdings are prohibited by the Magnuson‐Stevens Act. Different caps were chosen for the different fisheries because fleet characteristics and dependence differ across fisheries. Separate caps on QS holdings would be established for CDQ groups, which represent rural western Alaska communities. Processor holdings of QS would also be limited by caps on vertical integration. Quota share holders could retain and use initial allocations of QS above the caps.

Crew Sector

To protect their interests in the fisheries, qualifying crew would be allocated 3 percent of the initial QS pool. These shares are intended to provide long term benefits to captains and crew. The Council originally intended this provision to apply only to vessel captains. However, NMFS has determined that documentation necessary to allocate Crew QS, called C shares by the Council, would require that these shares be initially issued to individuals who hold a State of Alaska Interim Use Permit. Most likely, this individual would be the captain; however, the State does not require that the holder of the Interim Use Permit be the vessel captain. The allocation to crew would be based on the same qualifying years and computational method used for QS allocations to LLP license holders. Crew (C) QS would be issued as CVC QS and CPC QS, depending on the activity in the qualifying years. To ensure that Crew QS and IFQ benefit at‐sea participants in the fisheries, Crew IFQ could be used only when the IFQ holder is on board the vessel, except when a Crew QS holder joins a cooperative.

To be eligible to receive an allocation, an individual would be required to have historic and recent participation. Historic participation would be demonstrated by at least one landing in each of three of the qualifying years. Recent participation would be demonstrated by at least one landing in two of the three most recent seasons, with some specific exceptions.

CV Crew IFQ would be required to be delivered to shore‐based or floating processors for processing. CV Crew IFQ would not be subject to specific delivery requirements until July 1, 2008. After July 1, 2008, CV Crew IFQ would be subject to the Class A IFQ/Class B IFQ distinction with commensurate regional delivery requirements unless the Council determines, after review, not to apply those designations. Before July 1, 2007, the Council would review CV Crew IFQ landing patterns to determine whether the distribution of landings among processors and communities of CV Crew IFQ differs from the distribution of IFQ landings.

CP crew would be allocated CPC QS and IFQ that include a harvesting and on‐board processing privilege. Harvests with CPC IFQ also could be delivered to shore‐based or floating processors.

Crew QS and IFQ could be transferred to eligible individuals. Leasing of Crew IFQ would be permitted before July 1, 2008. After July 1, 2008, leasing would be permitted only in the case of a documented hardship (such as a medical hardship or loss of vessel) for the term of the hardship, subject to a maximum of 2 years over a 10‐year period. Individual Crew QS holdings would be capped.

Processing Sector

A processing privilege, analogous to the harvesting privilege allocated to harvesters, would be allocated to processors. Qualified processors would be allocated processor quota share (PQS) in each crab fishery. PQS represents an exclusive but revocable privilege to receive deliveries of a specific portion of the annual TAC from a fishery. An annual allocation of pounds of crab based on the PQS is IPQ. IPQs would be issued for 90 percent of the IFQ allocated harvesters, equaling the amount of IFQ allocated as Class A IFQ. Processor privileges would not apply to the remaining TAC allocated as Class B IFQ, or for Crew IFQ until July 1, 2008. IPQs would be regionally designated for processing (corresponding to the regional designation of the Class A IFQ).

PQS allocations would be based on processing history during a specified qualifying period for each fishery. A processor's initial allocation of PQS in a fishery would equal its share of all qualified pounds of crab processed in the qualifying period. Processor shares would be transferable, including the leasing of IPQs and the sale of PQS, subject to caps and to community protection measures. IPQs could be used without transfer at any facility or plant operated by a processor. New processors could enter the fishery by purchasing PQS or IPQ or by purchasing crab harvested with Class B IFQ or crab harvested by CDQ groups or the Adak community entity.

A PQS holder would be limited to holding 30 percent of the PQS issued for a fishery, except that initial allocations of shares above this limit could be retained and used. In addition, in the snow crab fishery, no processor would be permitted to use or hold in excess of 60 percent of the IPQs issued for the Northern region.

Catcher/Processor Sector

CPs have a unique position in the Program because they participate in both the harvesting and processing sectors. To be eligible for CP QS, a person would be required to hold a permanent, fully transferable LLP license designated for CP use. In addition, a person must have processed crab on board the CP, whose history gave rise to the LLP license, in either 1998 or 1999. Persons meeting these qualification requirements would be allocated CP QS in accordance with the allocation rules for QS for all qualified catch that was processed on board. These shares would represent a harvest privilege and an on‐board processing privilege. Catcher/Processor QS would not have regional designations.

Regionalization

The regional delivery requirements for QS are intended to preserve the historic geographic distribution of landings in the fisheries. Communities in the Pribilof Islands are the prime beneficiaries of this regionalization provision. Two regional designations would be created in most fisheries. The North region would be all areas in the Bering Sea north of 56°20′ N. latitude. The South region would be all other areas. Catcher vessel QS, Class A IFQ, PQS, and IPQ would be regionally designated. Crab harvested with regionally designated IFQ would be required to be delivered to a processor in the designated region. Likewise, a processor with regionally designated IPQ would be required to accept delivery of and process crab in the designated region. Legal landings in a region in the qualifying years would result in QS and PQS designated for that region.

The Program has two exceptions to the North/South regional designations. In the Western Aleutian Islands golden king crab fishery, 50 percent of the Class A IFQ and IPQ would be designated as west shares to be delivered west of 174° W. longitude. The remaining 50 percent of the Class A IFQ and IPQ would have no regional designation and would not be subject to a regional delivery requirement. The west designation would be applied to all Class A IFQ and IPQ regardless of the historic location of landings in the fishery. A second exception is the Bering Sea Tanner crab fishery, which would have no regional designation. This fishery is anticipated to be conducted primarily as a concurrent fishery with the regionalized Bristol Bay red king crab and Bering Sea snow crab fisheries, making the regional designation of Tanner crab landings unnecessary.

Cooperatives

Harvesters may form voluntary cooperatives in order to collectively manage their IFQ holdings. A minimum membership of four unique QS holders would be required for cooperative formation. Quota share holders who also (1) hold PQS or IPQ, (2) are affiliated with a person who holds PQS or IPQ, (3) process Class B IFQ, or (4) are affiliated with a person that processes Class B IFQ, would be prohibited from joining a crab harvesting cooperative. A cooperative would be required to apply for a cooperative IFQ permit. The cooperative IFQ permit would display the aggregate amount of IFQ in each crab fishery that would be yielded by the collective QS holdings of the members. IFQ could be transferred between cooperatives, subject to NMFS' approval. Cooperative members would be allowed to leave a cooperative or change cooperatives on an annual basis prior to the July 1 deadline for the annual cooperative IFQ permit application. Vessels that are used exclusively to harvest cooperative IFQ would not be subject to use caps. Cooperatives are free to associate with one or more processors to the extent allowed by antitrust law.

Community Protection Measures

The Program includes several provisions intended to protect communities from adverse impacts that could result from the Program. Communities eligible for the community protection measures would be those with 3 percent or more of the qualified landings in any crab fishery included in the Program. Based on these criteria, NMFS has preliminarily determined that the following crab communities meet this criteria: Adak, Akutan, Dutch Harbor, Kodiak, King Cove, False Pass, St. George, St. Paul, and Port Moller. All of these communities are identified as eligible crab communities (ECCs) for purposes of community protection measures.

“Cooling off” provision.

Until July 1, 2007, PQS and IPQ based on processing history from the ECCs could not be transferred from those communities. The use of IPQ outside the community during this period would be limited to 20 percent of the IPQ and for specific hardships. PQS and IPQ from three crab fisheries would be exempt from the cooling off provision: Tanner crab, Western Aleutian Islands red king crab, and Western Aleutian Islands golden king crab.

Individual processing quota caps.

IPQ caps would be established to limit the annual issuance of IPQs in seasons when the Bristol Bay red king crab or snow crab TAC exceeds a threshold amount. Under these circumstances, Class A IFQ issued in excess of these thresholds would not be subject to the IPQ landing requirements but would be subject to the regional delivery requirements.

Sea time waiver.

Sea time eligibility requirements for the purchase of QS would be waived for CDQ groups and community entities in ECCs, allowing those communities to build and maintain local interests in harvesting. CDQ groups and ECCs would be eligible to purchase PQS but would not be permitted to purchase Crew QS.

Right of first refusal (ROFR).

ECCs, except for Adak, would have a ROFR on the transfer of PQS and IPQ originating from processing history in the community if the transfer would result in relocation of the shares outside the community. Adak would not be eligible for the ROFR provision because Adak would receive a direct allocation of Western Aleutian Islands golden king crab. In addition, the City of Kodiak and the Kodiak Island Borough in the Gulf of Alaska (GOA) would have a ROFR on the transfer of PQS and IPQ from communities in the GOA north of 56°20′ N. latitude.

Community Development Quota Program and Community Allocations

Community Development Quota Program.

The CDQ Program would be expanded to include the Eastern Aleutian Islands golden king crab fishery and the Western Aleutian Islands red king crab fishery. In addition, the CDQ allocations in all crab fisheries covered by the Program would be increased from 7.5 to 10 percent of the TAC. The increase would not apply to the CDQ allocation of Norton Sound red king crab because this fishery is excluded from the Program. The crab CDQ fisheries would be managed as separate commercial fisheries by the State under authority deferred to it under the FMP. The State would establish observer coverage requirements, State permitting requirements, and transfer provisions among the CDQ groups. It also would monitor catch to determine when quotas had been reached, enforce any penalties

associated with quota overages, and monitor compliance with the requirement that CDQ groups must deliver at least 25 percent of their allocation to shore‐based processors.

Crab harvested under the CDQ allocations (except Norton Sound red king crab) would be subject to some of the Federal requirements that apply to all crab fisheries under the Program including permitting, recordkeeping and reporting, a vessel monitoring system, and the cost recovery fees. The specifics of these requirements are discussed in more detail in later sections.

The CDQ groups could participate in the crab fisheries as holders of both QS and PQS. Some CDQ groups would be initial recipients of QS because they hold LLP licenses and the appropriate catch history. In addition, the CDQ groups would be exempt from the transfer eligibility requirement related to sea time so they would be eligible to obtain QS by transfer, subject to QS use caps for CDQ groups. The CDQ groups also would be able to obtain PQS by transfer because there are no transfer restrictions on PQS. While harvesting crab with IFQ, the CDQ groups would be subject to the same regulations as apply to other IFQ holders. The purchase and holding of QS and PQS by the CDQ groups would be subject to the administrative regulations for the CDQ Program at 50 CFR part 679. These regulations include information, reporting, prior approval, and use requirements for all CDQ investments, which include QS and PQS.

Adak allocation.

An allocation of 10 percent of the TAC of Western Aleutian Islands golden king crab would be made to the community of Adak. The allocation to Adak would be made to a nonprofit entity representing the community, with a board of directors elected by the community. As an alternative and in the interim, the allocation and funds derived from it could be held in trust by the Aleut Enterprise Corporation for a period not to exceed 2 years, if the Adak community non‐profit entity is not formed prior to implementation of the Program. Oversight of the use of the allocation for “fisheries related purposes” would be deferred to the State under the FMP. NMFS would have no direct role in oversight of the use of this allocation. The State would provide an implementation review to the Council to ensure that the benefits derived from the allocation accrue to the community and achieve the goals of the fisheries development plan. The Adak allocation would be managed as a separate commercial fishery by the State in a manner similar to management of the crab CDQ fisheries. As with the CDQ allocations, crab harvested under the Adak allocation would be subject to several requirements that apply to all crab fisheries under the Program including permitting, recordkeeping and reporting, a vessel monitoring system, and the cost recovery fees.

Community purchase.

Any non‐CDQ community in which 3 percent or more of any crab fishery was processed could form a non‐profit entity to receive QS, IFQ, PQ and IPQ transfers on behalf of the community. The non‐profit entity would be called an eligible crab community organization (ECCO).

Protections for Participants in Other Fisheries

The Program would greatly increase the flexibility for crab fishermen to chose when and where to fish for their IFQ, and this increased flexibility would provide crab fishermen with increased opportunity to participate in other fisheries. Restrictions on the participants in other fisheries, also called sideboards, would restrict a vessel's harvests to its historical landings in all GOA groundfish fisheries (except the sablefish fishery). Vessels with less than 100,000 pounds (45,359 kg) of total snow crab landings and more than 500 metric tons (mt) (1,102,311 lb) of total Pacific cod landings in the GOA during the qualifying years would be exempt from the restrictions. In addition, vessels with less than 50 mt (110,231 lb) of total groundfish landings in the GOA during the qualifying period would be prohibited from harvesting Pacific cod from the GOA. Restrictions would be applied to vessels but would also restrict landings made using a groundfish LLP license derived from the history of a vessel so restricted, even if that LLP license is used on another vessel. Groundfish sideboards in the GOA would be managed by NMFS through fleet‐wide sideboard directed fishing closures in Federal waters and for the parallel fishery in state waters.

Arbitration System

BSAI crab fisheries have a history of contentious price negotiations. Harvesters have often acted collectively to negotiate an ex‐vessel price with processors, which at times delayed fishing. The Arbitration System was developed to compensate for complications arising from the creation of QS/IFQ and PQS/IPQ. The complications include price negotiations that could continue indefinitely and result in costly delays and the “last person standing” problem where the last Class A IFQ holder to contract deliveries would have a single IPQ holder to contract with, effectively limiting any ability to use other processor markets for negotiating leverage. To ensure fair price negotiations, the Arbitration System includes a provision for open negotiations among IPQ and IFQ holders as well as various negotiation approaches, including: (a) a share matching approach where IPQ holders make known to unaffiliated IFQ holders that have uncommitted IFQ available the amount of uncommitted IPQ they have available so the IFQ holder can match up its uncommitted IFQ by indicating an intent to deliver its catch to that IPQ holder; (b) a lengthy season approach that allows parties to postpone binding arbitration until sometime during the season; and (c) a binding arbitration procedure to resolve price disputes between an IPQ holder and eligible IFQ holders.

The arbitration process would begin preseason with a market report for each fishery prepared by an independent market analyst selected by the PQS and QS holders and the establishment of a non‐binding fleet wide benchmark price by an arbitrator who has consulted with fleet representatives and processors. Information provided by the sectors would be historical in nature and at least 3 months old. This non‐binding price would guide the above described negotiations. Information sharing among IPQ and IFQ holders, collective negotiations, and release of arbitration results would be limited to minimize the antitrust risks of participants in the Program.

The binding arbitration procedure in a last best (or final) offer format. The IPQ holder, each IFQ holder, and each crab harvesting cooperative could submit an offer. For each IFQ holder or cooperative, the arbitrator would select between the IFQ holder's (or cooperative's) offer and the IPQ holder's offer. After an arbitration decision is rendered, an eligible IFQ holder with uncommited IFQ could opt‐in to the completed contract by accepting all terms of the arbitration decision as long as the IPQ holder held sufficient uncommitted IPQ.

Monitoring and Enforcement

NMFS and the State of Alaska would coordinate monitoring and enforcement of the crab fisheries. Harvesting and processing activity would need to be monitored for compliance with the implementing regulations. Methods for catch accounting and catch monitoring plans would generate data to provide accurate and reliable round weight accounting of the total catch and landings to manage quota share

accounts, prevent overages of IFQ and IPQ, and determine regionalization requirements and fee liability. Monitoring measures would include landed catch weight and species composition, bycatch, and deadloss to estimate total fishery removals.

Economic Data Collection

The Program includes a comprehensive economic data collection program to aid the Council and NMFS in assessing the success of the Program and developing amendments necessary to mitigate any unintended consequences. An Economic Data Report (EDR), containing cost, revenue, ownership, and employment data, would be collected on a periodic basis from the harvesting and processing sectors. The data would be used to study the economic impacts of the Program on harvesters, processors, and communities. Participation in the data collection program would be mandatory for all participants in the crab fisheries.

Cost Recovery and Fee Collection

NMFS would establish a cost recovery fee system, required by section 304(d)(2) of the Magnuson‐Stevens Act, to recover actual costs directly related to the management and enforcement of the Program. The crab cost recovery fee would be paid in equal shares by the harvesting and processing sectors and would be based on the ex‐vessel value of all crab harvested under the Program, including CDQ crab and Adak crab. NMFS also would enter into a cooperative agreement with the State of Alaska to use IFQ cost recovery funds in State management and observer programs for BSAI crab fisheries. The crab cost recovery fee is prohibited from exceeding 3 percent of the annual ex‐vessel value. Within this limit, the collection of up to 133 percent of the actual costs of management and enforcement under the Program would be authorized, which would provide for fuller reimbursement of management costs after allocation of 25 percent of the cost recovery fees to the crew loan program.

Crew Loan Program

To aid captains and crew in purchasing QS, a low interest loan program (similar to the loan program under the halibut and sablefish IFQ program) would be created. This program would be funded by 25 percent of the cost recovery fees as required by the Magnuson‐Stevens Act. Loan money would be accessible only to active participants and could be used to purchase either QS or Crew QS. Quota share purchased with loan money would be subject to all use and leasing restrictions applicable to Crew QS for the term of the loan. This proposed rule does not contain proposed regulations to implement the crew loan program. Those proposed regulations will be developed by NMFS Financial Services.

Annual Reports and Program Review

NMFS, in conjunction with the State of Alaska, would produce annual reports on the Program. Before July 1, 2007, the Council would review the PQS, binding arbitration, and C share components of the Program. After July 1, 2008, the Council would conduct a preliminary review of the Program. A full review of the entire Program would be undertaken in 2010. Additional reviews would be conducted every 5 years. These reviews are intended to objectively measure the success of the Program in achieving the goals and objectives specified in the Council's problem statement and the Magnuson‐Stevens Act. These reviews would examine the impacts of the Program on vessel owners, captains, crew, processors, and communities, and include an assessment of options to mitigate negative impacts.

The following sections provide more detail on the key components of the Program.

Quota Share Allocation

This section identifies those who would be eligible to receive QS in the initial allocation and describes the four QS sectors. The following sections discuss the application process and the proposed mechanism for deriving QS and IFQ in each sector. Qualified harvesters would be allocated QS in each crab fishery. To receive an initial QS allocation, a person must either: (1) hold a permanent, fully transferable LLP license endorsed for that crab fishery; or (2) have made a landing under the authority of a State of Alaska Interim Use Permit issued to crew members by the State of Alaska. Quota share would represent an exclusive but revokable privilege that provides the QS holder with an annual allocation to harvest a specific percentage of the TAC from a fishery. The annual allocations to QS holders of TAC, in pounds, are referred to as IFQ.

QS Sectors

The sector of QS issued would be based on eligibility and fishing activity during the qualified period. These distinctions yield four sectors of QS, as follows:

(1) Catcher Vessel Owner (CVO) QS would be issued to an LLP license holder who harvested and delivered unprocessed crab to a processor.

(2) Catcher/Processor Owner (CPO) QS would be issued to a CP LLP license holder for crab harvested and processed crab on board the same vessel or under that LLP license.

(3) Catcher Vessel Crew (CVC) QS would be issued to a crew member who held a State of Alaska Interim Use Permit and signed a fish ticket for the delivery of crab during the qualifying period.

(4) Catcher/Processor Crew (CPC) QS would be issued to a crew member who held a State of Alaska Interim Use Permit and signed a fish ticket for crab processed at‐sea on the vessel that harvested that crab.

Official Crab Rationalization Record

Prior to issuing any QS, NMFS would compile an official record that contains the best available information on the harvesting and processing activities in the crab fisheries. This record would be the basis for determining QS allocations. In order to facilitate the timely issuance of QS, NMFS would require any claims that are contrary to the official record to be substantiated before changing the official record.

NMFS would establish certain operational standards about the use of landings in the official record to facilitate timely issuance of QS. First, NMFS would not issue CPO or CVO QS to any person other than to the applicant who holds the LLP license at the time of application. The Council clearly established that the basis for recognizing and allocating QS is the possession of an LLP license endorsed for the crab fishery, the associated legal landings that were made on the vessel that resulted in the issuance of the LLP license and endorsement, and any landings that were made under the authority of that LLP license.

Second, NMFS would assume any of the legal landings recorded on State of Alaska fish tickets to be correct. An applicant who has information to suggest the fish ticket records are inaccurate would have the burden of proving that to be the case.

Third, NMFS would assume the LLP license issued based on the landings made on a vessel continued to be used on that same vessel, unless the applicant shows, with written documentation, that the LLP license was transferred and used on another vessel. NMFS would make this assumption because, during the years 2000 and 2001, NMFS did not track the vessel on which the LLP license was used. Thus, NMFS would require an applicant to inform NMFS if the LLP license was

used on a vessel other than the vessel for which the LLP license was originally issued. Written documentation establishes a clear record of any transfer of LLP license use prior to tracking by NMFS.

Fourth, if more than one person is claiming legal landings or legal processing activities during the same time at the same processing facility or on board the same vessel, then each person eligible to receive QS or PQS based on those legal landings or legal processing activities would receive any QS or PQS issued divided in equal proportion among all eligible recipients for that time period. This pro rata division of QS would occur unless the applicants can provide written documentation establishing an alternative means for distributing the QS or PQS resulting from the activities during that time period.

Catcher Vessel Owner ‐ CVO QS Sector

Eligibility to receive QS at initial allocation would be limited to U.S. citizens who hold a permanent, fully transferable LLP license at the time of application. This means any corporation applying to receive CVO QS must also be incorporated as a U.S. corporation.

The landings that would be considered as the basis for a QS allocation for a crab fishery would be those made on the vessel used to qualify for the LLP license and species endorsement for that fishery or were made by the vessel on which that LLP license was used. NMFS would initially allocate QS only to the person holding that LLP license at the time of application. Any subsequent transfer of QS after initial issuance by the qualified LLP license holder would be subject to the QS transfer provisions described later in this preamble. NMFS would establish that the landings made under the authority of an LLP license are non‐severable from that license. In other words, “catch history” that has been separated from an LLP license would not be considered for initial allocation of QS.

The proposed definition of persons eligible to receive an initial allocation of CVO QS and the qualifying periods used to determine the allocation of QS are described in the following table:

Table 1—Eligibility to Receive Catcher Vessel Owner (CVO) and Catcher Processor Owner (CPO) Quota Share (QS) and Associated Qualifying Year Periods

Eligible Person to Receive QS

Crab Fisheries

Qualifying Year Periods for Determining QS Allocation

General:

A citizen of the United States at the time of application for QS, and is...

CVO QS:

The holder of a permanent, fully transferable LLP license endorsed for that crab fishery at the time of application to receive QS and who is a citizen of the United States at the time of application for QS; or

Eastern Aleutian Island golden king crab (EAG)

5 years of the 5-year base period beginning on September 1, 1996, and ending on September 24, 2000.

CPO QS:

(1) The holder of a permanent, fully transferable LLP license endorsed for that crab fishery and endorsed for CP activities at the time of application to receive QS; and (2) Harvested and processed at-sea any crab species in any BSAI crab fishery during the years 1998 or 1999.

Western Aleutian Island golden king crab (WAG)

5 years of the 5-year base period beginning on September 1, 1996, and ending on March 30, 2001.

Bering Sea Tanner crab (BST)

4 years of the 6-year period beginning on November 15, 1992, through November 27, 1996.

Bering Sea snow crab (BSS)

4 years of the 5-year period beginning on January 15, 1996, and ending on April 8, 2000.

Bristol Bay red king crab (BBR)

4 years of the 5-year base period beginning on November 1, 1996, and ending on October 20, 2000.

Pribilof Islands red and blue king crab (PIK)

4 years of the 5-year period beginning on September 15, 1994, and ending on September 28, 1998.

St. Matthew blue king crab (SMB)

4 years of the 5-year period beginning on September 15, 1994, and ending on September 26, 1998.

Western Aleutian Islands red king crab (WAI)

3 years of the 4-year period beginning on November 1, 1992, and ending on February 13, 1996.

Catcher Processor Owner ‐ CPO QS Sector

The eligibility to receive a CPO QS is essentially the same as for CVO QS. In order to receive CPO QS, a person would have to be a U.S. citizen who holds a permanent, fully transferable LLP license at the time of application. The LLP license would have to be endorsed for the fisheries for which the QS would be issued and would have to be endorsed to allow the person to harvest and process crab as a CP. Only landings harvested and processed on board the vessel during the qualifying years would be used toward CPO QS. The qualifying periods and number of qualifying years used in CPO QS initial issuance calculations would be the same as those in Table 1. In addition, any person who applies to receive CPO QS would have to have made crab landings that were processed at‐sea in either 1998 or 1999. These provisions are intended to ensure that LLP licenses with a history of harvesting and processing at‐sea have continued to do so recently, in order to reduce the amount of QS that would be issued for use on vessels that are no longer active in the fishery.

Catcher Vessel Crew ‐ CVC QS Sector

CVC QS would be issued based on different eligibility criteria. Table 2 summarizes the persons who would be eligible to receive an initial allocation of CVC QS, the qualifying years used, and the number of years that could be selected for initial allocation of QS. Individuals would be qualified to receive QS if they are designated on a State of Alaska Interim Use Permit and had historic and recent participation. NMFS would determine participation based on signed State of Alaska fish tickets because the State of Alaska requires individuals who sign a fish ticket to hold a State of Alaska Interim Use Permit.

Historic participation would be demonstrated by at least one landing in each of three of the qualifying years. Recent participation would be demonstrated by at least one landing in two of the three most recent seasons before June 10, 2002, except for the fisheries that were closed in this period. For these fisheries, Western Aleutian Islands red king crab, the Pribilof Islands red and blue king crab, the St. Matthew Island blue king crab, and Tanner crab, recent participation would be demonstrated by at least one landing in two of the three most recent seasons preceding June 10, 2002, in the snow crab, Bristol Bay red king crab, or one of the Aleutian Islands golden king crab fisheries. The recent participation requirement would be waived for captains who died in fishing‐related incidents if the captain's estate applies for QS. See the following table for details:

Table 2—Eligibility to Receive Catcher Vessel Crew (CVC) Quota Share (QS) and Qualifying Year Periods

Eligible Person to Receive QS

Crab Fisheries

Number of Qualifying Year Periods for Determining QS Initial Allocation

Qualifying Seasons for Determining Recent Participation

An individual who:

(1) is a citizen of the United States, or his or her successor-in-interest if that individual is deceased;

(2) has historical participation in the fishery demonstrated by being the individual named on a State of Alaska Interim Use Permit who made at least one legal landing per year for any 3 qualifying years under that permit based on data from fish tickets maintained by the State of Alaska; and

(3) has recent participation in the fishery demonstrated by being the individual named on a State of Alaska Interim Use Permit who made at least one legal landing under that permit in any 2 of 3 seasons based on data from fish tickets maintained by the State of Alaska.

Eastern Aleutian golden king crab (EAG)

3 years of the 5-year base period beginning on September 1, 1996, and ending on September 24, 2000.

(1) September 1, 1999, through October 25, 1999.

(2) August 15, 2000, through September 24, 2000.

(3) August 15, 2001, through September 10, 2001.

Western Aleutian golden king crab (WAG)

3 years of the 5-year base period beginning on September 1, 1996, and ending on March 30, 2001.

(1) September 1, 1999, through August 14, 2000.

(2) August 15, 2000, through March 28, 2001.

(3) August 15, 2001, through March 30, 2002.

Bering Sea Tanner crab (BST)

3 years of the 6-year period beginning on November 15, 1992, through November 27, 1996.

any 2 of the last 3 seasons prior to June 10, 2002 in the Eastern Aleutian Island golden king crab, Western Aleutian Island golden king crab, Bering Sea snow crab, or Bristol Bay red king crab fisheries.

Bering Sea snow crab (BSS)

3 years of the 5-year period beginning on January 15, 1996, and ending on April 8, 2000.

(1) April 1, 2000, through April 8, 2000.

(2) January 15, 2001, through February 14, 2001.

(3) January 15, 2002, through February 8, 2002.

Bristol Bay red king crab (BBR)

3 years of the 5-year base period beginning on November 1, 1996, and ending on October 20, 2000.

(1) October 16, 2000, through October 20, 2000.

(2) October 15, 2001, through October 18, 2001.

(3) October 15, 2002, through October 18, 2002.

Pribilof Islands red and blue king crab (PIK)

3 years of the 5-year period beginning on September 15, 1994, and ending on September 28, 1998.

any 2 of the last 3 seasons prior to June 10, 2002, in the Eastern Aleutian Island golden king crab, Western Aleutian Island golden king crab, Bering Sea snow crab, or Bristol Bay red king crab fisheries, except that persons applying for an allocation to receive QS based on legal landings made aboard a vessel less than 60′ LOA at the time of harvest are exempt from this requirement.

St. Matthew blue king crab (SMB)

3 years of the 5-year period beginning on September 15, 1994, and ending on September 26, 1998.

Western Aleutian Islands red king crab (WAI)

3 years of the 4-year period beginning on November 1, 1992, and ending on February 13, 1996.

In addition, the Program exempts crew members who participated in small vessels (under 60 feet in length) from seasonal requirements in the Pribilof Islands red and blue king crab fisheries. Such small vessels have traditionally participated in the fishery, but have been limited in recent years due to hazardous weather conditions.

This exemption for small vessels would allow crew serving in the fishery to be considered for initial allocation.

Catcher Processor Crew ‐ CPC QS Sector

Catcher/Processor crew would be allocated CPC QS that include a harvesting and on‐board processing privilege. Harvests with CPC QS also may be delivered to shore‐based or floating processors. The definition of an eligible person, the qualifying years, and the seasonal recent participation requirements for the CPC QS sector would be the same as those for the CVC QS sector described in Table 2 above. The allocation to the CPC QS sector would be based on an individual landing under the authority of a State of Alaska Interim Use Permit and processing the catch on board the vessel that made the landing.

Regional Designations of QS

In addition to the four QS sectors issued in each of the eight crab fisheries, QS would have regional delivery requirements. Regional delivery requirements are based on the specific geographic location in which the crab were landed during the qualifying years. Any QS that is subject to regional landing requirements must be delivered to a Registered Crab Receiver (RCR) operating in that region. Regional designations would apply to: (1) QS initially issued to the CVO QS sector, (2) CPO QS subsequently transferred for use as CVO QS under the transfer provisions, or (3) after July 1, 2008, QS initially issued for the CVC QS sector. Regional designations would not apply to CPO QS or to CPC QS. Any QS not subject to regional designation would be issued as an “Undesignated” region. The regional designations for each of the fisheries are summarized in the following table:

Table 3—Regional Designations of Quota Share (QS) and Processor Quota Share (PQS)

Crab Fishery

North Region, North of 56°20′ N. lat.

South Region, South of 56°20′ N. lat.

West Region, West of 174° W. long.

Undesignated

EAG - Eastern Aleutian golden king crab

WAG - Western Aleutian golden king crab

BST - Bering Sea Tanner crab

BSS - Bering Sea snow crab

BBR - Bristol Bay red king crab

PIK - Pribilof Islands red and blue king crab

SMB - St. Matthew blue king crab

WAI - Western Aleutian Islands red king crab

The North Region would include all landings made in that crab fishery North of a line at 56°20′ N. latitude in the Bering Sea subarea of the EEZ. The South Region would include all landings made in the EEZ south of that line. The West Region would apply only to the Western Aleutian Islands golden king crab fishery. Under this regional designation, 50 percent of the CVO QS issued in the fishery would be designated as West Region and would be limited for delivery West of a line at 174° W. longitude. Undesignated QS may be delivered in any region.

Calculation of QS Issuance

The amount of QS that would initially be issued to any one person would be based on the amount of legal landings made by that person as a percentage of the total legal landings made by all persons eligible to receive QS. NMFS would build the official crab rationalization record, which would contain the total legal landings for each fishery based on the best available information using the State of Alaska fish ticket database. The official record would be established for the CVO and CPO QS sectors based on the total legal landings during the qualifying years that resulted in the issuance of LLP licenses or that were made under the authority of an LLP license. The official record for the CVC and CPC QS sectors would be based on the total legal landings made under the authority of State of Alaska Interim Use Permits during the qualifying years. The official record is presumed to be correct unless an applicant provides information indicating a correction is necessary.

The computation process for CVO and CPO QS and the computation process for CVC and CPC are the same. The process for determining initial allocation of CVO and CPO QS is detailed first. The following steps would be used to calculate QS for an applicant.

Establish harvest denominator.

The official crab rationalization record would result in a harvest denominator for all LLP licenses that would be used in calculating QS. The harvest denominator represents the total legal landings made in each year for each crab fishery.

The use of a harvest denominator allows NMFS to calculate the relative percentage of the legal landings made by a person applying to receive QS without having to adjust the relative percentage of all other applicants if additional applications are approved after appeal. The harvest denominator would remain fixed for all applicants. One harvest denominator would be established for the CVO and CPO QS sectors, and one for the CVC and CPC QS sectors because the number of qualifying years used differ.

Computation of initial issuance of CVO and CPO QS.

In order to facilitate understanding of the computation, a hypothetical example is used to illustrate the process. This example does not use data or persons from existing crab fisheries and is intended for illustrative purposes only. In our example, there are only two participants in the fishery, LLP A and LLP B, each with different landing patterns. The total legal landings, the region in which those landings were made, the amount of the landings harvested on board the vessel and processed at‐sea, and the computation process using two LLPs (A and B) are described in the following table:

Table 4—Hypothetical Crab Fishery - Best 3 of 4 Years Used - Calculation of Catcher Vessel Owner (CVO) and Catcher Processor Crew (CPO) Quota Share (QS) Initial Issuance for LLPs

Year 1

Year 2

Year 3

Year 4

Total of Years Used

1. Harvest Denominator in Fishery (Legal Landings)

1,000 lb

500 lb

3,000 lb

1,333 lb

5,833 lb

2. Total Legal Landings of LLP A

500 lb

200 lb

1,000 lb

2,700 lb

3. Percentage of Harvest Denominator for LLP A (year used)

50 %% (Used)

40 %% (Used)

33.3 %%

75 %% (Used)

55.0 %%

(3A) Total Landings Landed Onshore for LLP A

500

100

500

200

800 lb

(3B) Total Landings Processed At-sea for LLP A

100

500

800

900 lb

(3C) Percentage of Landings Landed on Shore for LLP A = (800 / (800 + 900)) = 47.06 %%

(3D) Percentage of Landings Processed At-sea for LLP A = (900 / (800 + 900)) = 52.94 %%

(3E) Total Onshore Landings in the North Region for LLP A

500

100

200

800

(3F) Total Onshore Landings in the South Region for LLP A

500

(3G) Percentage of Landings in the North Region for LLP A = (800 / (800 + 0)) = 100 %%

(3H) Percentage of Landings in the South Region for LLP A = (0/ (800 + 0)) = 0 %%

4. Total Legal Landings of LLP B

500 lb

300 lb

2,000 lb

333 lb

3,800 lb

5. Percentage of Harvest Denominator for LLP B

50 %% (Used)

60 %% (Used)

66.6 %% (Used)

25 %%

58.9 %%

(5A) Total Landings Landed Onshore for LLP B

500

300

1,500

200

2,300

(5B) Total Landings Processed At-sea for LLP B

500

800

500

(5C) Percentage of Landings Landed on Shore for LLP B = (2,300 / (2,300 + 500)) = 82.14 %%

(5D) Percentage of Landings Processed At-sea for LLP B = (500 / (2,300 + 500)) = 17.86 %%

(5E) Total Onshore Landings in the North Region for LLP B

500

300

500

1,300

(5F) Total Onshore Landings in the South Region for LLP B

1,000

200

1,000

(5G) Percentage of Landings in the North Region for LLP B = (1,300 / (1,300 + 1,000)) = 56.52 %%

(5H) Percentage of Landings in the South Region for LLP B = (1,000 / (1,300 + 1,000)) = 43.48 %%

6. Sum of Total Percentages of Harvest Denominators for All LLPs = LLP A 55 (Line 3) + LLP B 58.9 (Line 5) = 113.9 %%

7. Percentage of the Sum of the Percentage of the Harvest Denominator for LLP A = (0.550/1.139) = 0.4829 or 48.29 %%

8. Percentage of the Sum of the Percentage of the Harvest Denominator for LLP B = (0.589/1.139) = 0.5171 or 51.71 %%

9. Initial QS Pool = 9,000 Units

10. Unadjusted Initial QS Allocation for LLP A = 48.29 %% × 9,000 = 4,346 QS Units

11. Unadjusted Initial QS Allocation for LLP B = 51.71 %% × 9,000 = 4,654 Units

12. Initial QS Allocation for LLP A = 4,346 QS Units × (0.97) = 4,216 QS Units

13. Initial QS Allocation for LLP B = 4,654 QS Units × (0.97) = 4,514 QS Units

14. Percentage of LLP A QS Allocation as CVO QS = 4,216 × 0.4706 (Line 3C) = 1,984 CVO QS Units

15. Percentage of LLP A QS Allocation as CPO QS = 4,216 × 0.5294 (Line 3D) = 2,232 CPO QS Units

16. Percentage of LLP B QS Allocation as CVO QS = 4,514 × 0.8214(Line 5C) = 3,708 CVO QS Units

17. Percentage of LLP B QS Allocation as CPO QS = 4,514 × 0.1786 (Line 5D) = 806 CPO QS Units

Determine the total legal landings for each applicant.

First, NMFS would sum the total legal landings for each LLP license, in each of the crab fisheries for which the LLP is endorsed, for each of the qualifying years. If there were no legal landings in a qualifying year, then the amount would be zero for that year. If a person is applying to receive QS using multiple licenses, the total legal landings would be summed for each license separately. In our hypothetical example this corresponds to Line 2 in Table 4 for LLP A and Line 4 for LLP B.

Determine the percentage of the harvest denominator in each year.

NMFS would divide the total legal landings for that person by the harvest denominator for each year. This yields the percentage of the harvest denominator. For LLP A, this corresponds to Line 3 in Table 4. For LLP B, this corresponds to Line 5.

Determine the qualifying years to be used.

Most of the crab fisheries have a “best of” provision in which only a select number of the qualifying years are actually used in the QS computation. NMFS would determine which years are used for each initial QS allocation by determining the years that represent the highest percentage of the harvest denominator. In our hypothetical example, 3 of the 4 years representing the greatest percentage of the harvest denominator in each year would be used. This method ensures that a person applying to receive QS would receive a QS allocation based on the highest percentage of the total landings in each year. For LLP A, this corresponds to the italicized years noted as “(Used)” in Line 3 of Table 4. For LLP B, this corresponds to Line 5. If a person has insufficient years of landings, one or more “0 lb” years would be “(Used).”

Sum the percentages of the harvest denominator for each LLP license.

The next step is to sum the percentages for the years used for each LLP license held by the applicant. Then, that amount is divided by the total number of years used for that crab fishery. In our hypothetical example, for LLP A, this would be the sum of the italicized percentages in Line 3 of Table 4 divided by three, or (50 percent + 40 percent + 75 percent)/3 = 55.0 percent. The same computation is provided for LLP B in Line 5 of Table 4, and is equal to 58.9 percent.

Sum the average percent of the harvest denominator.

In our example, the percentage of the harvest denominator is 55.0 percent (for LLP A) and 58.9 percent (for LLP B). The sum of the percentages of all LLP licenses is 113.9 percent. This computation is shown in Line 6 of Table 4. The reason that the amount is greater than 100 percent is that NMFS uses the best years of each LLP license to determine the percentage of the harvest denominator that the landings represent.

Divide each LLP license's percentage by the sum of the percentages of the harvest denominator.

In order to properly scale the landings so each LLP license is receiving a percentage of the harvest denominator, each LLP license's percentage of the harvest denominator must be divided by the sum of all percentages for all LLP licenses. This total is the percentage of the sum of the harvest denominators for each LLP license. This computation is shown in Line 7 for LLP A and in Line 8 for LLP B in Table 4.

Multiply the percentage of the sum of the percentages of the harvest denominator by the initial QS pool.

The amounts calculated in Lines 7 and 8 are multiplied by the Initial QS Pool; in our example 9,000 QS Units. In the crab fisheries, NMFS would establish an initial QS pool as a fixed amount. This fixed initial QS pool would be used to initially distribute QS to recipients. If appeals are adjudicated, then additional QS may be added to the QS pool, but the process for determining how much QS a person would receive would be established using the same procedure detailed in our example.

Establish the initial QS and PQS pools.

The initial QS pool that would be established in each of the eight crab fisheries is an amount large enough so that, on initial issuance, a single unit of QS would yield an annual amount of IFQ less than the average weight of one crab. To achieve this, the initial QS pool for the eight crab QS fisheries would be set at an amount of units equal to three times the highest historical fishery harvest rounded to the nearest 10,000,000 units. The Initial PQS pools are set at the same level as the initial QS pools for ease of computation and to ensure that a single unit of PQS would yield an annual amount of IPQ less than the average weight of one crab. The Initial QS pools for all the crab fisheries using this method are shown in the following table:

Table 5—Initial QS and PQS Pool for Each Crab Fishery

Initial QS Pool

Initial PQS Pool

EAG - Eastern Aleutian Islands golden king crab

10,000,000

WAG - Western Aleutian Islands golden king crab

40,000,000

BST - Bering Sea Tanner crab

200,000,000

BSS - Bering Sea Snow Crab

1,000,000,000

BBR - Bristol Bay red king crab

400,000,000

PIK - Pribilof Islands red and blue king crab

30,000,000

SMB - St. Matthew blue king crab

30,000,000

WAI - Western Aleutian Islands red king crab

60,000,000

The initial QS pools would be used for all four QS sectors. The amount of QS initially issued as CVO and CPO QS sectors would be 97 percent of the total amount of QS, and the amount of QS initially issued to the CVC and CPC QS sectors in any one fishery would be 3 percent of the initial QS pools. NMFS would implement this provision by multiplying the amount of QS initially issued by either 97 percent for the CVO and CPO QS sectors, or 3 percent for the CVC and CPC QS sectors. The calculation showing the unadjusted allocation for LLP A is shown in Line 10 of Table 4, and the adjusted amount for the CVO and CPO QS sectors is shown in Line 12. The same

calculations for LLP B are shown in Lines 11 and 13.

Determine the amount of QS issued as CVO or CPO QS.

The amount of QS issued as CVO QS to each LLP license holder would be equal to the percentage of landings delivered unprocessed, to a shorebased or stationary floating processor. In our hypothetical example, the onshore landings made by LLP A in each year are shown in Line 3A of Table 4. The landings processed at‐sea in each year are shown in Line 3B. The italicized numbers are the years used in the initial QS calculations because they represent the years with the highest percentage of the total harvest denominator the best years for that LLP license. The total shown in the last column of Line 3A and Line 3B is the total of onshore landings for the best years only. In this case, Year 3 is not used for LLP A. In order to calculate the percentage of QS that would be issued as CVO QS for LLP A, NMFS would determine the percentage of the landings that were landed on shore for each LLP license applying to receive QS. In our example, for LLP A, the percentage of landings delivered onshore is calculated in Line 3C. The percentage calculated in Line 3C is then multiplied by the amount of QS initially issued to LLP A, which is shown in Line 12. This calculation is provided in Line 14 for LLP A. The amount of QS issued as CVO QS for LLP B is determined by using the same methodology. Lines 5A, 5B, 5C, and Line 16 show the same calculation for LLP B. Only landings that were processed at‐sea and that gave rise to an LLP license endorsed for CP activity would be allocated CPO QS.

Determination of Regional Designation

Regional designation applies to most of the crab fisheries (see Table 3 for regional designations). Regional designation does not apply to QS initially issued to the CPO QS sector, but can apply to the CVO QS sector. In our example, we assume there are two regions in the hypothetical fishery: a North region and a South region. The percentage of landings made in each region in each year under LLP A is shown in Lines 3E and 3F. The percentages for LLP B are shown in Lines 5E and 5F. In order to calculate the amount of the CVO QS allocated to each region, several additional steps must be taken depending on specific conditions applicable to each LLP license holder.

LLP license holders with landings in only one region.

If an LLP license holder made landings in only one region, then all of the QS issued would be for that region. That is the case for LLP A in our hypothetical fishery example. As shown in Lines 3E and 3F, the amount of landings that occurred in each region are shown in italics. Note the landings processed at‐sea are not assigned to a region. As shown in the calculations Line 3G and 3H, 100 percent of the onshore landings subject to regional designation for the years used were in the North region.

LLP license holders with landings in more than one region.

If an LLP license holder received QS based on landings made in more than one region, then a one-time additional adjustment in the designation of the QS would be required to account for the issuance of PQS so the amount of QS issued in a region is equal to the amount of PQS in that region. In our hypothetical example, LLP B has qualified landings that would result in QS for both the North and the South Region. Before that QS could be issued, the relative distribution of PQS would need to be determined. The initial issuance of QS for LLP B in the hypothetical example will be explained after the processing sector initial allocation has been discussed.

Other Provisions of Initial QS Issuance

Additional provisions would pertain to the issuance of QS: two provisions for determining QS issuance to vessels that sank, and a provision to allow a person to receive QS for landings made by a vessel not used to qualify for a permanent, fully transferable LLP license endorsed for that fishery.

Sunken vessels.

Two provisions would apply to vessels that have sunk. First, a person would receive 50 percent of their average legal landings for the qualifying years unaffected by the sinking after the time of sinking until that vessel was replaced under the provisions established for vessel replacement under the LLP, at 50 CFR 679.4(k)(5)(v). This provision would apply if a person who owned a vessel that sank, replaced that vessel under the LLP qualification rules or after satisfying the LLP qualification requirements. This provision also requires the owner of the vessel to replace the vessel and begin fishing within a specified time period. As an example, if, due to a sinking, a person's vessel was not operational in two of the four qualifying years, that person would receive QS equal to 50 percent of the average of the 2 years during which that vessel was operational to be applied toward the 2 years the vessel was not operational. This provision allows some compensation to LLP holders for some qualifying years in which the LLP holder was prevented from participating due to sinking.

The second sunken vessel provision would apply under circumstances in which a person applying to receive an initial issuance of QS: (1) was denied a request to replace the vessel under the provisions of Public Law 106‐554 (Consolidated Appropriations Act of 2001); (2) replaced the vessel with a newly constructed vessel that began construction by June 10, 2002; and (3) participated in any Bering Sea crab fishery by October 31, 2002, with the replacement vessel. A newly constructed vessel would be defined as one the keel of which was laid by June 10, 2002. This provision is intended to accommodate a specific circumstance in which a person delayed construction of a vessel based on Public Law 106‐554. Public Law 106‐554 was in effect for less than a year during late 2000 and part of 2001. Although the law was in effect for less than a year, it may have hindered the ability of a vessel owner to replace a vessel to participate in crab fisheries and to make qualifying landings. This provision would allow a person to receive QS equal to 50 percent of the average of the years unaffected by the sinking.

For both of these provisions, the calculation methods for determining the actual amount of QS issued would follow the same methods shown earlier. The adjustment for sunken vessels would be made when determining the amount of landings that would be attributed to the LLP license used on board a vessel.

Interim LLP license history exemption.

A key component of this program is that QS is awarded based on the legal landing made on a vessel that qualified for a permanent, fully transferable LLP license. The Council recommended a limited provision that would allow a person to apply to receive QS based on legal landings that were not used to qualify for a permanent, fully transferable LLP license. Under this provision, a person who applies to receive QS with an LLP license endorsed for a fishery could choose to receive the QS based either on the landings made by the vessel that was used to qualify for that LLP license or on the landings made on another vessel. The intent of this provision is to allow a vessel owner who had participated in a fishery to use historical landings as long as a permanent, fully transferable LLP license was transferred for use on that vessel after the qualifying period.

An applicant for CVO or CPO QS who deployed a vessel in a crab fishery under the authority of an interim LLP license and later transferred a permanent, fully transferable LLP

license before January 1, 2002, for use in that crab fishery, to insure that the vessel would remain authorized to participate in the fishery following the invalidation of the interim LLP license, may choose to use either: (1) the legal landings made on the vessel that gave rise to the interim LLP license for that crab fishery prior to the transfer of the permanent, fully transferable LLP license for use on that vessel; or (2) the legal landings made on the vessel that gave rise to the permanent, fully transferable LLP license and the legal landings made under the authority of that LLP license in that crab fishery prior to January 1, 2002. This exemption is meant to address a specific circumstance in which a person may have participated in a fishery legally, but required a permanent, fully transferable LLP license to continue participating in the fishery. It is not intended to address transfers of LLP licenses among persons that are undertaken for other reasons. NMFS intends that this provision provide a limited exemption and not a general opportunity to allow persons who voluntarily transferred LLP licenses to choose a specific catch history that is severable from the LLP license under which a person is applying to receive QS. NMFS specifically requests public comment on this approach relative to Council objectives (see

ADDRESSES

Computation of Initial Issuance of CVC and CPC QS

The method for calculating CVC and CPC QS is essentially the same as the CPO and CVO QS, with some key differences. The first difference is that, for these sectors, the harvest denominator would represent the legal landings made by individuals under the authority of a State of Alaska Interim Use Permit who met the recent participation eligibility requirements. Second, the regional designations would be noted on the QS, but would not be applied to the CVC QS until after July 1, 2008. The regional designations are not shown in this example but would be calculated in the same manner as that used for the CVO and CPO QS.

For illustration purposes, we will demonstrate the initial issuance using the same hypothetical fishery. The issuance process is shown in the following table (Table 6). As with the other example, we will assume there are two crewmembers who are qualified to receive an initial issuance of QS. The specific calculations are not detailed in this example because they are the same as those described under the CVO and CPO QS example. Note the total landings in Line 1 of Table 6 differ from those in Table 4 (CVO and CPO QS) because the recency requirements would exclude certain landings and, under the CVC and CPC QS calculations, landings made legally on a vessel would be considered even if those landings did not result in the issuance of an LLP license for those landings. Additionally, the amount of QS issued to the CVC and the CPC QS sectors is shown in Lines 12 and 13. The QS issued to these sectors is equal to 3 percent of the QS pool.

Table 6—Hypothetical Crab Fishery - Best 3 of 4 Years Used - Calculation of Catcher Vessel Crew (CVC) and Catcher Processor Crew (CPC) Quota Share (QS) Initial Issuance for State of Alaska Interim Use Permit Holders

Year 1

Year 2

Year 3

Year 4

Total for Years Used

(1) Harvest Denominator in Fishery (Legal Landings)

1,000 lb

200 lb

1,000 lb

3,200 lb

(2) Total Legal Landings of Crew A

500 lb

20 lb

300 lb

500 lb

1,320 lb

(3) Percentage of Harvest Denominator for Crew A

50 %% (Used)

10 %%

30 %% (Used)

50 %% (Used)

43.3 %% (Used)

(3A) Total Landings Landed Onshore for Crew A

500

200

300

1,000

(3B) Total Landings Processed At-sea for Crew A

100

200

300

(3C) Percentage of Landings Landed on Shore for Crew A = (1,000 / (1,000 + 300)) = 76.92 %%

(3D) Percentage of Landings Processed At-sea for Crew A = (300 / (1,000 + 300)) = 23.08 %%

(4) Total Legal Landings of Crew B

500 lb

180 lb

700 lb

500 lb

1,880 lb

(5) Percentage of Harvest Denominator for Crew B

50 %%

90 %% (Used)

70 %% (Used)

50 %% (Used)

70 %% (Used)

(5A) Total Landings Landed Onshore for Crew B

500

100

200

500

800

(5B) Total Landings Processed At-sea for Crew B

500

580

(5C) Percentage of Landings Landed Onshore for Crew B = (800 / (800 + 580)) = 57.97 %%

(5D) Percentage of Landings Processed At-sea for Crew B = (580 / (800 + 580)) = 42.03 %%

(6) Sum of Percentage of Harvest Denominators for All Crew = Crew A 0.433 (Line 3) + Crew B 0.700 (Line 5) = 1.133 or 113.3 %%

(7) Percentage of the Sum of the Percentage of the Harvest Denominator for Crew A = (0.433/1.133) = 0.3822 or 38.22 %%

(8) Percentage of the Sum of the Percentage of the Harvest Denominator for Crew B = (0.700/1.133) = 0.6178 or 61.78 %%

(9) Initial QS Pool = 9,000 Units

(10) Unadjusted Initial QS Allocation for Crew A = 38.22 %% × 9,000 = 3,440 QS Units

(11) Unadjusted Initial QS Allocation for Crew B = 61.78 %% × 9,000 = 5,560 Units

(12) Initial QS Allocation for Crew A = 3,440 QS Units × (0.03) = 103 QS Units

(13) Initial QS Allocation for Crew B = 5,560 QS Units × (0.03) = 167 QS Units

(14) Percentage of Crew A QS Allocation as CVC QS = 103 × 0.7692 (Line 3C) = 79 CVC QS Units

(15) Percentage of Crew A QS Allocation as CPC QS = 103 × 0.2308 (Line 3D) = 24 CPC QS Units

(16) Percentage of Crew B QS Allocation as CVC QS = 167 × 0.5797 (Line 5C) = 97 CVC QS Units

(17) Percentage of Crew B QS Allocation as CPC QS = 167 × 0.4203 (Line 5D) = 70 CPC QS Units

Under our example, if the QS issued to the CVO, CPO, CVC, and CPC QS sectors is summed, then the total QS issued for all of the QS recipients is equal to 9,000 units the initial QS pool (sum the total from Lines 14 through 17 in both Table 4 and Table 6). The initial QS pool would be issued to all successful applicants. Additional QS would be issued to applicants who have a successful appeal of an initially denied application. However, it is the initial QS pool that would be used to determine the caps that apply to QS use. Those caps are discussed below.

Processor Quota Share Allocation

A processing privilege, analogous to the harvest privilege allocated to harvesters, would be allocated to processors. Qualified processors would be allocated PQS in each crab fishery. PQS represents an exclusive but revocable privilege to receive deliveries of a specific portion of the annual TAC from a fishery.

PQS allocations would be based on processing history during a specified qualifying period for each fishery. A processor's allocation in a fishery would equal its share of all qualified pounds of crab processed in the qualifying period (i.e., pounds processed by the processor divided by a denominator that represents pounds processed by all qualified processors). Unlike the QS allocation process, PQS is not allocated using a “best of” years provision.

A person would be eligible to receive PQS if they are a: (1) U.S. citizen, corporation, or partnership at the time of application; and (2) legally processed any crab QS species during either 1998 or 1999. In addition, the Council provided an exemption to this eligibility requirement to accommodate long term participants in the fishery who did not participate in 1998 or 1999. An applicant may receive QS if that person had processed Bering Sea snow crab during each season from 1988 through 1997 and invested at least $1,000,000 in processing equipment and facilities during the period from January 1, 1995, through June 10, 2002. NMFS has interpreted this requirement to apply from the period of January 1, 1995, through June 10, 2002, the time of final Council action on this provision. This would limit the ability of additional persons to claim eligibility under this provision. The date of final Council action would provide a suitable period of time during which to measure fiscal expenditures.

Under this proposed rule, a person who has acquired or retained legal processing history through transfer by the express terms of a written contract that clearly and unambiguously provides that the legal processing history and rights, may apply for and receive PQS based on that legal processing history. This provision would allow for the transfer or retention of legal processing history prior to the implementation of this program. This provision would apply only if the person applying for PQS either: (1) legally processed any crab during 1998 or 1999 as demonstrated on the official crab rationalization record; or (2) provides documentation of a contractual agreement for the transfer or retention of the legal crab processing history for any amount of any crab during 1998 or 1999, as demonstrated in the official crab rationalization record.

This provision differs from the requirements established for QS holders who must either have an LLP license or be named on a State of Alaska Interim Use Permit in order to apply and receive QS. There is not a licensing requirement that allows for the tracking of processing history to specific persons. State of Alaska revenue codes, port codes, and other identifying elements do not necessarily establish the identity of a processor. Additionally, the Council recognized that custom processing, in which one firm paid another to process crab at a specific facility, or allowed the lease of its facility, did occur and permitted those crab buyers to claim legal processing history and the rights to apply for PQS in cases where documentation indicated that the legal processing that occurred at a facility was conducted by someone other than the buyer of the crab at the time.

Additionally, the Council's motion establishing a qualified person could be interpreted to strictly limit the ability to apply for and receive PQS only if the person who processed crab in 1998 or 1999, or Bering Sea snow crab under the provisions provided above, applies, even if the processing facility, history, and other rights have been transferred to another person. This interpretation appears to narrowly limit the Council's overall recommendation that PQS and IPQ are access rights that may be acquired by a wide range of persons.

This interpretation of Council intent also appears to be consistent with the ability to trade legal landings in the CVO and CPO QS sectors prior to the initial issuance of QS. Legal landings, and the right to apply for and receive CVO or CPO QS may be acquired by

persons who purchase the LLP license and the rights that transfer with that LLP license prior to submitting an application for QS. This provision would require that if legal processing history has been transferred and retained that the basic qualification for eligibility established by the Council, processing of any BSAI crab species in 1998 or 1999, must still be met.

In addition, these regulations would establish that if a person applies to receive PQS, that person or that person's successor‐in‐interest must exist at the time of application for PQS. A former partner of a dissolved partnership or a former shareholder of a dissolved corporation who would otherwise qualify as a person may apply for PQS in proportion to his or her ownership interest in the dissolved partnership or corporation. Documentation of ownership interest in a dissolved partnership or corporation, association, or other entity would be limited to corporate documents (e.g., articles of incorporation) or notarized statements signed by each former partner, shareholder or director, and specifying their proportions of interest. These requirements are similar to those used in the halibut and sablefish IFQ Program to establish who may apply to receive QS under the Program. The provisions in this proposed rule require that the person who received the crab and processed that crab, or their successor‐in‐intererst, is a person who is eligible to receive PQS.

The amount of PQS allocated to a person would be based on a record of receiving and processing crab based on State of Alaska fish ticket data during the qualifying years. Data from the State of Alaska fish tickets concerning legal processing of crab would be presumed to be correct unless other documentation is provided by the applicant. However, allocations can be made to a buyer not recorded on a fish ticket if the applicant can demonstrate that the entity that should receive an allocation is someone other than the entity named on the fish ticket. Proof of this eligibility can include data from the State of Alaska Commercial Operators Annual Report, fish tax records, or other documentation of direct payments to fishermen. This provision is intended to address the custom processing arrangements. The following table establishes the eligibility and qualifying years for receiving PQS.

Table 7—PQS Eligibility and Qualifying Years

Eligible Person to Receive PQS

Crab Fisheries

Qualifying Year Periods for Determining PQS Allocation

The person who legally processed the crab during the qualifying years and;

(1) is a US Citizen, corporation, or partnership; and

(2) processed crab in 1998 or 1999; or

(3) processed Bering Sea snow crab during 1988 through 1997 and invested at least $1,000,000 in processing equipment and facilities during the period from January 1, 1995, through June 10, 2002.

Eastern Aleutian Island golden king crab (EAG)

4 years of the 4-year base period beginning on:

(1) September 1, 1996, through December 25, 1996;

(2) September 1, 1997, though November 24, 1997;

(3) September 1, 1998, through November 7, 1998;

(4) September 1, 1999, through October 25, 1999.

Western Aleutian Island golden king crab (WAG)

4 years of the 4-year base period beginning on:

(1) September 1, 1996, through August 31, 1997;

(2) September 1, 1997, though August 31, 1998;

(3) September 1, 1998, through August 31, 1999;

(4) September 1, 1999, through August 14, 2000.

Bering Sea Tanner crab (BST)

Equivalent to 50 percent of the total legally processed crab in the Bering Sea

C. opilio

fishery during the qualifying years established for the QS fishery; and 50 percent of the totally legally processed crab in the Bristol Bay red king crab fishery during the qualifying years established for that crab QS fishery.

Bering Sea snow crab (BSS)

3 years of the 3-year period beginning on:

(1) January 15, 1997, through March 21, 1997;

(2) January 15, 1998, through March 21, 1998; and

(3) January 15, 1999, through March 22, 1999.

Bristol Bay red king crab (BBR)

3 years of the 3-year QS base period beginning on:

(1) November 1, 1997, through November 5, 1997;

(2) November 1, 1998, through November 6, 1998; and

(3) October 15, 1999, through October 20, 1999.

Pribilof Islands red and blue king crab (PIK)

3 years of the 3-year period beginning on:

(1) September 15, 1996, through September 26, 1996;

(2) September 15, 1997, through September 29, 1997; and

(3) September 15, 1998, through September 28, 1998.

St. Matthew blue king crab (SMB)

3 years of the 3-year period beginning on:

(1) September 15, 1996, through September 23, 1996;

(2) September 15, 1997, through September 22, 1997; and

(3) September 15, 1998, through September 26, 1998.

Western Aleutian Islands red king crab (WAI)

Equivalent to the total legally processed crab in the Western Aleutian Islands golden king crab fishery during the qualifying years established for that crab QS fishery.

In the Bering Sea Tanner crab fishery, the issuance of PQS would be based on the processing history in the Bering Sea snow crab fishery. The Bering Sea Tanner crab fishery has not been open in recent years and, in the past, both Bering Sea snow crab and Bering Sea Tanner crab were harvested together. In the Western Aleutian Islands red king crab, the issuance of PQS would be based on the processing history in the Western Aleutian golden king crab fishery. This provision recognizes the fact there has been limited processing in these fisheries in recent years and much of the participation is sporadic and conducted by processing entities who have also been involved in the Western Aleutian Islands red king crab fishery.

Computation of Initial Issuance of PQS

The amount of PQS that would initially be issued to any one person would be based on the amount of legal processing by the person as a percentage of a denominator that represents the total legal processing by all persons eligible to receive PQS. The following steps would be used to calculate PQS for an applicant.

NMFS would build the official crab rationalization record, which would contain the total legal processing for all of the crab fisheries based on the best available information by using the State of Alaska fish ticket database. The official record is presumed to be correct unless an applicant provides information that indicates a correction is necessary. The total legal processing amount is the total processing denominator (TPD).

In order to clearly explain the computation, the hypothetical example used previously for the QS issuance is repeated here. This example does not use data or persons from existing crab fisheries and is intended for illustrative purposes only. In our example, there are only two processors in the fishery: Processor A and Processor B, each with different landings patterns. The total legal processing, the region in which that processing occurred, and the amount of the processing are shown in Table 8. The computation process using two processors (A and B) is described in the table. Note this hypothetical fishery also assumes all applicable years are used to determine an initial issuance of PQS. As with all crab fisheries, the years used for selecting processing history differ from those used to determine legal landings for allocating QS. Because all years are used, the total processing denominator is not divided by the sum of the percentage of the processing denominator of all persons receiving PQS.

The percentage of the TPD for each person is multiplied by the initial PQS pool, although the initial PQS pool does not need to be set at the same number as the initial QS pool. NMFS would set both pools at the same number for each crab fishery to facilitate ease of computation for use limitations. In our hypothetical example, this means there would be an initial QS pool of 9,000 units and an initial PQS pool of 9,000 units. Although the amount of IFQ a unit of QS yields and the amount of IPQ a unit of PQS may yield would differ, the initial pools of quota would be the same. See the following table for details:

Table 8—Hypothetical Crab Fishery - Four Years Used - Calculation of PQS Initial Issuance

Year 1

Year 2

Year 3

Year 4

Total

(1) Total Processing Denominator in Fishery (Legal Processing)

1,800 lb

400 lb

1,000 lb

4,200 lb

(2) Total Legal Processing of Processor A

600 lb

200 lb

300 lb

500 lb

1,600 lb

(3) Percentage of Total Harvest Denominator for Processor A

33.3 %% (Used)

50 %% (Used)

30 %% (Used)

50 %% (Used)

40.8 %% (Used)

(3A) Total Landings in the North Region for Processor A

100

200

400

(3B) Total Landings in the South Region for Processor A

500

200

300

1,200

(3C) Percentage of Processing in the North Region for Processor A = (400 / (400 + 1,200)) = 25.00 %%

(3D) Percentage of Processing in the South Region for Processor A = (1,200 / (400 + 1,200)) = 75.00 %%

(4) Total Legal Processing of Processor B

1,200 lb

200 lb

700 lb

500 lb

2,600 lb

(5) Percentage of Total Processing Denominator for Processor B

66.7 %% (Used)

50 %% (Used)

70 %% (Used)

50 %% (Used)

59.2 %%

(5A) Total Processing in the North Region for Processor A

900

100

500

1,500

(5B) Total Landings in the South Region for Processor B

300

100

200

500

1,100

(5C) Percentage of Processing in the North Region for Processor B = (1,500 / (1,500 + 1,100)) = 57.69 %%

(5D) Percentage of Processing in the South Region for Processor B = (1,100 / (1,500 + 1,100)) = 42.31 %%

(6) Sum of Percentage of Total Processing Denominators for All Processors = Processor A 0.408 ( Line 3) + Processor B 0.592 (Line 5) = 1.00 or 100 %%—NO SCALING FACTOR REQUIRED

(7) Initial PQS Pool = 9,000 Units

(8) Initial PQS Allocation for Processor A = 9,000 PQS Units × 0.408 (Line 3) = 3,672 PQS Units

(9) Initial PQS Allocation for Processor B = 9,000 PQS Units × 0.592 (Line 5) = 5,328 PQS Units

(10) Percentage of Processor A PQS allocation as North Region PQS = 3,672 × 0.2500 (Line 3C) = 918 PQS Units

(11) Percentage of Processor A PQS allocation as South Region PQS = 3,672 × 0.7500 (Line 3D) = 2,754 PQS Units

(12) Percentage of Processor B PQS allocation as North Region PQS = 5,328 × 0.5769 (Line 5C) = 3,074 PQS Units

(13) Percentage of Processor A PQS allocation as South Region PQS = 5,328 × 0.4231 (Line 5D) = 2,254 PQS Units

Regional Designations of PQS

PQS is issued with the same regional designations as those of QS as described in Table 3.

Regional Adjustment for North and South Designations.

North and South PQS regional designation is based on the location of the legal processing that is used as the basis for PQS allocation, as shown in Table 8. Once PQS is issued with regional designation, the issuance of QS would be adjusted so that the regional designations for QS would match the regional designations for PQS in each crab fishery. The adjustment would be made to the QS issued because the processing facilities are typically fixed shorebased plants. The adjustments to establish the same regional designation ratios is necessary to ensure matches in the amounts of IPQ and IFQ that are harvested and delivered in any one region.

This adjustment process would be made prior to the issuance of the QS and PQS. The ratio between the regions should be the same even if the number of QS units differs. Using our hypothetical fishery example, we illustrate this process by showing how each LLP license holder's QS allocation would be adjusted at initial allocation. Drawing on information from Table 4 and Table 6, the calculation is shown in the following table:

Table 9—Adjustment for North and South Regional Designation for QS

(1) Percentage of Landings in the North Region for LLP A = 100 %% (Line 3G of Table 4) of 1,984 QS Units (Line 14 of Table 4) = 1,984 QS Units

(2) Percentage of Landings in the South Region for LLP A = 0 %% (Line 3H of Table 4) of 1,984 QS Units (Line 14 of Table 4) = 0 QS Units

(3) Percentage of Landings in the North Region for LLP B = 56.52 %% (Line 5G of Table 4) of 3,708 QS Units (Line 16 of Table 4) = 2,096 QS Units

(4) Percentage of Landings in the South Region for LLP B = 43.48 %% (Line 5H of Table 4) of 3,708 QS Units (Line 16 of Table 4) = 1,612 QS Units

(5) Total QS (Sum of Lines 1-4) = 5,692 Units

(6) Total QS in North Region (Sum Lines 1 and 3) = 4,080 Units

(7) Total QS in South Region (Sum Lines 2 and 4) = 1,612 Units

(8) Percentage of North QS to South QS = 4,080/5,692 = 71.68 %% North 1,612/5,692 = 28.32 %% South

(9) QS issued as North Region only = 1,984 Units (Line 1)

(10) QS as both North and South Region = (Line 5 − Line 1) = 3,708 Units

(11) Percentage of Processing in the North Region for Processor A = 25.00 %% (Line 3C of Table 8) of 3,672 Units (Line 8 of Table 8) = 918 Units

(12) Percentage of Processing in the South Region for Processor A = 75.00 %% (Line 3D of Table 8) of 3,672 Units (Line 8 of Table 8) = 2,754 Units

(13) Percentage of Processing in the North Region for Processor B = 57.69 %% (Line 5C of Table 8) of 5,328 Units (Line 9 of Table 8) = 3,074 Units

(14) Percentage of Processing in the South Region for Processor B = 42.31 %% (Line 5D of Table 8) of 5,328 Units (Line 9 of Table 8) = 2,254 Units

(15) Total PQS in North Region = 3,992 Units (Sum of Line 11 and 13)

(16) Total PQS in South Region = 5,008 Units (Sum of Line 12 and 14)

(17) Ratio of North PQS : South PQS = 44.36%% North, 55.64 %% South

Calculations:

(a) QS North Region = Total QS 5,692 (Line 5) x 44.38%% (Line 17) = 2,525 Units

(b) QS South Region = Total QS 5,692 (Line 5) × 55.64 %% (Line 17) = 3,167 Units

(c) QS North Region for all persons holding North Region and South Region QS = QS North Region − North Region only QS 2,525 Units − 1,984 (Line 9) Units = 541 Units

(d) QS South Region for all persons holding North Region and South Region QS = QS South Region − South Region only QS 3,167 Units − 0 Units = 3,167 Units

(e) North Region QS issued to LLP A = 1,984 QS Units

(f) North Region QS issued to LLP B = Total QS held by LLP B (3,708) ×

541 Units

3,708 Units

= 541 North Region QS Units

(g) South Region QS issued to LLP B = Total QS held by LLP B (3,708) − 541 North Region QS Units = 3,167 South Region QS Units

In this example, only one of the LLP license holders holds QS that would require adjustment. Although CVC QS is not subject to regional delivery requirements until after July 1, 2008, NMFS would compute the amount of QS designated for each region prior to the issuance of the CVC QS. This would allow a holder of CVC QS to know the regional designation of the QS prior to the application of that designation. The ratio of North and South regional designation would be the same for both the CVO and CVC QS.

The adjustment for regional designation would need to occur once appeals are decided and those readjustments in regional designation would be made prior to fishing to minimize disruptions in the fishery. A person who would receive QS with more than one regional designation for that crab fishery would have his or her QS holdings regionally adjusted on a pro rata basis according to the following process:

(1) Determine the ratio of the initial PQS pool in the North and South regions.

(2) Multiply Initial QS pool by the ratio of North and South PQS. This would yield the target North QS pool and the target South QS pool.

(3) Sum the QS for all persons who are eligible to receive North QS. This is the unadjusted North QS pool.

(4) Repeat the procedure for the South Region. This is the unadjusted South QS pool.

(5) Subtract the amount of QS for persons receiving North QS only from the unadjusted North QS pool to calculate the amount of North QS available to all persons holding both North and South region QS.

(6) Subtract the amount of QS for persons receiving South QS only from the unadjusted South QS pool to calculate the amount of South QS available to all persons holding both North and South region QS.

(7) Subtract the Unadjusted North QS pool from the Target North QS pool to calculate the number of QS units that would be applied to the North QS pool to adjust the regional designations. This amount is the Adjustment Amount.

(8) Divide the Adjustment Amount by the unadjusted North QS pool for North and South QS holders. This yields the regional adjustment factor (RAF) for each person.

(9) For each person who holds both North and South Region QS, the QS adjustment (QS Adj. p) to that person's Unadjusted North QS is expressed in the following equation as:

QS adj. p = Unadjusted North QS p × RAF

(10) If the QS adjustment for a person is negative, the QS adjustment for that person is subtracted from that person's unadjusted North QS amount and added to that person's unadjusted South QS. If the QS adjustment for a person is positive, the QS adjustment for that person is added to that person's unadjusted North QS amount and subtracted from that person's unadjusted South QS. These adjustments would yield the regional amount of QS for that person.

Regional Adjustment in the Western Aleutian Islands Golden King Crab Fishery.

The PQS issued would need to be adjusted so that 50 percent of the PQS is designated as West region, and 50 percent is undesignated. However, the process for regionally allocating PQS

in the Western Aleutian Islands golden king crab fishery differs slightly from the North and South PQS regional designation, which is based on the location of the legal processing. Fifty percent of the PQS that would be issued in the Western Aleutian Islands golden king crab fishery would be issued with a West designation. The West designation applies to PQS for processing west of a line at 174° W. long. The remaining 50 percent of the PQS issued for this fishery is undesignated region PQS.

If a person owns a crab processing facility that is located in the West region at the time of application, that person would receive West PQS only. If a person applies to receive PQS and does not own a crab processing facility located in the West region at the time of application, then that person would receive West region (West) and Undesignated region (Und.) PQS. Expressed algebraically, for any person (p) allocated both West region PQS and undesignated region PQS the formula is as follows:

(1) PQS

West

= PQS × 0.50

(2) PQS

Und.

= PQS × 0.50

(3) PQS

West

for PQS

West & Und.

holders = PQS

West

− PQS

West only

(4) PQS

West

for Person

= PQS

× (PQS

West

for PQS

West & Und.

) holders/(PQS

West

for PQS

West & Und.

holders + PQS

Und

)

(5) PQS

Und.

for Person

= PQS

−PQS

West

for Person

For purposes of the allocation of PQS in the Western Aleutian Islands golden king crab fishery, ownership of a processing facility is defined as a sole proprietor, or a relationship between 2 or more entities in which a person directly or indirectly owns a 10‐percent or greater interest in the facility. A processing facility is defined as a shorebased, or stationary floating processor. Catcher/Processors would not be considered as ownership of a processing facility operating in the West region.

The QS issued to the Western Aleutian Islands golden king crab fishery is adjusted so 50 percent of the QS issued is West QS, which can be delivered only to an RCR located west of the 174° W. longitude. The adjustment in the initial issuance of QS would be made for persons who made landings of Western Aleutian Islands golden king crab west and east of 174° W. longitude.

If a person received QS based solely on landings made east of 174° W. longitude, all of that QS would be issued to that person as regionally undesignated QS. If a person received QS based on landings made only west of 174° W. longitude, all of that QS would be issued as West QS. However, if a person received QS based on landings made both east and west of the 174° W. longitude line, then, that QS would be issued such that a portion of the QS would be issued as “Undesignated” and a portion as “West” so that all of the QS issued in the Western Aleutian Islands golden king crab fishery are issued with a 50 percent West and a 50 percent Undesignated ratio. Person's receiving QS with both regional designations would have the QS pro‐rated so the total of all QS is issued initially as 50 percent West and 50 percent Undesignated QS. The following process would be followed:

(1) Sum the QS for all persons who are eligible to receive West QS. This is the unadjusted West QS pool;

(2) Sum the QS for all persons who are eligible to receive Undesignated QS. This is the unadjusted Undesignated QS pool;

(3) Subtract the amount of QS for persons receiving West QS only from the unadjusted West QS pool to calculate the amount of West QS available to all persons holding both West and Undesignated region QS;

(4) Subtract the amount of QS for persons receiving Undesignated QS only from the unadjusted Undesignated QS pool to calculate the amount of Undesignated QS available to all persons holding both West and Undesignated region QS;

(5) Subtract the Unadjusted West QS pool from the Target West QS pool to calculate the number of QS units that would be applied to the West QS pool to adjust the regional designations. This amount is the Adjustment Amount;

(6) Divide the Adjustment Amount by the unadjusted QS pool for West and Undesignated QS holders. This yields the regional adjustment factor (RAF) for each person;

(7) For each person who holds both unadjusted West and Undesignated Region QS, the QS adjustment to that person's Unadjusted West QS is determined by multiplying the Unadjusted West QS by the RAF; and

(8) If the QS adjustment for person is negative, the QS adjustment for that person is added to that person's unadjusted West QS amount and subtracted from that person's unadjusted Undesignated QS. If the QS adjustment for a person is positive, the QS adjustment for that person is subtracted from that person's unadjusted West QS amount and added to that person's unadjusted Undesignated QS. These adjustments would yield the regional adjustment amounts for that person.

Initial Issuance of Crab QS and PQS

In order to receive an initial allocation of QS or PQS, an eligible person would need to submit an Application for Crab QS or PQS. The application would be sent to the last known address of a person identified as an eligible applicant by the official crab rationalization record and would be available on the NMFS Alaska Region web page at

www.fakr.noaa.gov

. All applications would have to be submitted by the close of the application period. The application period would be specified in the

Federal Register

at the time of the publication of the Final Rule. Applications could be mailed, faxed, or hand delivered to the NMFS, Alaska Region (see

ADDRESSES

). The contents of the application vary, depending on the type of QS and/or PQS for which a person is applying. If an applicant is applying as the successor‐in‐interest to an eligible applicant, an application must also contain valid documentation demonstrating the applicant's status as a successor‐in‐interest to that eligible applicant.

An Application for Crab QS or PQS would be signed by the applicant or the individual representing the applicant and would contain the necessary information to identify the person applying, the basis for applying for QS or PQS, any necessary information on the vessel or processor, documentation of crew participation, contract provisions for community ROFR, and any other information deemed necessary by the Regional Administrator.

Additional requirements in the Application for Crab QS or PQS exist for persons applying to receive PQS from legal landings made in an ECC, or in a community in the GOA north of a line at 56°20′ N. latitude — a North GOA Community. Prior to the initial issuance of PQS based on legal processing located in an ECC, that person must provide documentation he or she has completed a contract with the entity representing the ECC that sets out the terms for ROFR for any PQS to be transferred in a future sale. In the case of a North GOA Community, a ROFR contract must be signed with the City of Kodiak and the Kodiak Island Borough.

The Regional Administrator would evaluate Applications for QS and PQS submitted during the specified application period and compare all claims in the application with the information in the official crab rationalization record. Claims in the application consistent with information in the official record would be accepted by the Regional Administrator.

Inconsistent claims in the application, unless verified by documentation, would not be accepted.

If NMFS determines the additional information or documentation submitted by the applicant is correct and supports the applicant's burden of proving the inconsistent claims, the information would be used to determine whether the applicant is eligible for a QS or PQS allocation. However, if the Regional Administrator determines the additional information or documentation does not support the applicant's burden, the applicant would be notified through an initial administrative determination (IAD), stating the applicant did not meet the burden of proof.

NMFS would specify a 30‐day evidentiary period during which an applicant may provide additional information or documentation to support the claims made in his or her application. An applicant would be limited to one 30‐day evidentiary period per application. Additional information or documentation, or a revised application, received after the 30‐day evidentiary period, but before an IAD is issued, would be considered.

NMFS would prepare and send an IAD to the applicant following the expiration of the 30‐day evidentiary period if sufficient documentation is not provided. The IAD would indicate the deficiencies in the application. The IAD would also indicate which claims cannot be approved based on the available information or documentation. An applicant who receives an IAD may appeal. An applicant who avails himself or herself of the opportunity to appeal an IAD would not receive the QS or PQS being contested.

NMFS would not initiate an IAD in the case of an Application for Crab QS or PQS that is complete except for a signed ROFR contract. This provision would accommodate applicants who have complied with the application requirements with the exception of a mutually signed contract which relies on agreement of both parties. Once an application is submitted with a ROFR contract, NMFS would allocate PQS to that person.

IFQ Issuance

The annual allocations of the TAC, in pounds, to QS holders are referred to as IFQ. IFQ would be issued for each of the four QS sectors. IFQ is a permit that allows the harvesting of an amount of the TAC for a fishery. As with QS, IFQ would be issued on a fishery‐by‐fishery and regional basis.

IFQ would be issued once the TAC for that crab fishery in that crab fishing year has been specified by the State of Alaska. The TAC available as IFQ would be the fishery TAC minus the 10 percent CDQ allocation. For the Western Aleutian Islands golden king crab fishery, the 10 Adak allocation would be deducted from the TAC prior to allocating the IFQ. All IFQ would be issued for a crab fishing year.

QS issued after NMFS has issued annual IFQ would not result in IFQ for that crab fishery for that fishing year. If additional actions such as appeals, or other administrative decisions occur after IFQ has been issued for that fishery, the person would not receive IFQ until the following year. This single annual issuance is required for administrative purposes so that mid‐year adjustments to other IFQ holders would not occur that would alter their allocation or the ratio of QS to IFQ for that year.

The account of the person holding IPQ would be debited as soon as the landings are reported. A person would be prohibited from harvesting an amount of crab in excess of the IFQ held. Penalties would be imposed for any overage in excess of a person's IFQ. The IFQ is subject to use provisions described later in this preamble. Descriptions of the types of IFQ resulting from each type of QS follow.

CVO IFQ

CVO QS yields two separate classes of IFQ: Class A IFQ and Class B IFQ. Class A IFQ limits the delivery of any crab harvested with that IFQ to an RCR holding unused IPQ with a specific regional designation. Class B IFQ could be delivered to any RCR, except to an RCR that has already used CPO or CPC IFQ in that crab fishery during that season. Class B IFQ would not be regionally designated.

The Class A/Class B IFQ distinction would be made only in the annual IFQ allocations. QS would be issued in a single class. Since the Class B IFQ are intended to provide negotiating leverage to harvesters who are unaffiliated with holders of PQS or IPQ, only QS holders who do not also hold PQS or who are unaffiliated with holders of PQS, would receive Class B IFQ. Holders of PQS or IPQ and their affiliates who hold QS would be allocated Class A IFQ for all of their QS holdings. For each region of each fishery, the allocation of Class B IFQ would be 10 percent of the total allocation of IFQ. For example, if no North QS holders are affiliated with PQS or IPQ holders, each IFQ allocation would be 90 percent North Class A IFQ and 10 percent Class B IFQ. If half of the North QS is held by persons affiliated with a PQS or IPQ holder, the holders of North QS who are not affiliated with a PQS or IPQ holder would receive 80 percent Class A IFQ and 20 percent Class B IFQ. The result would be that 10 percent of the total North IFQ in the fishery would be Class B IFQ. The absence of an affiliation with a holder of PQS or IPQ would be established by a harvester filing an annual affidavit stating the use of any IFQ held by that harvester is not subject to any control of any holder of PQS or IPQ.

Persons who hold CVO IFQ and also hold PQS or IPQ would receive only Class A IFQ. Persons who hold CVO IFQ and are affiliated with a person who holds PQS or IPQ would receive only Class A IFQ. Affiliation would be determined based on two factors: ownership and control. IFQ would be considered to be held by a processor if a PQS or IPQ holder directly or indirectly owns at least 10 percent of an entity who holds or receives IFQ. This 10 percent ownership standard has been used in other rationalization programs in the past as a means of measuring ownership and comports with the mechanism employed to measure common ownership for purposes of QS use caps. The definition of affiliation used in this proposed rule is similar to that developed for the AFA regulations, and is consistent with Council intent.

Examples of the affiliation rule follow: First, if a PQS or IPQ holder also held QS and received IFQ, that IFQ would be considered to be affiliated and issued as Class A IFQ; second, if a PQS or IPQ holder owned 50 percent of Corporation A and Corporation A owned 50 percent of Corporation B, which received IFQ, that IFQ would be considered to be affiliated with a processor because that PQS or IPQ holder indirectly owns 25 percent of Corporation B, which is receiving the IFQ; third, if a PQS or IPQ holder owned 20 percent of Corporation C and Corporation C owned 20 percent of Corporation D, which received IFQ, that IFQ would not be considered affiliated because the PQS or IPQ older indirectly owns only 4 percent of Corporation D; therefore, both Class A and Class B IFQ would be issued to Corporation D.

Control of IFQ by a PQS or IPQ holder would be measured by linkages between the PQS or IPQ holder and the IFQ holder and would serve as a means of effectively extending the ability of the PQS or IPQ holder to control the deliveries of crab to a specific processor. NMFS would interpret control in situations in which the person holding PQS or IPQ: Control exists if an individual, corporation, or other business entity that holds PQS controls a 10 percent or greater interest in the

IFQ holder. An entity controls a 10 percent or greater interest in a second entity if the first entity: (1) Controls a 10 percent ownership share of the second entity, or (2) Controls 10 percent or more of the voting stock of the second entity. In addition to this direct form of control, affiliation would also include other means whereby an entity otherwise controls another entity.

An entity otherwise controls another when the first entity has the power to exercise a controlling influence over the management or policies of the other entity, unless such power is solely the result of an official position with such entity. This definition is drawn from the Investment Company Act of 1940. This definition is intended to incorporate all forms of control. Examples of the types of control that may be encompassed by this definition, include the authority to direct the delivery of crab harvested under an IFQ permit held by the second entity to a specific RCR, or when one entity absorbs the majority of costs and normal business risks associated with the operation of a second entity, including the costs associated with obtaining and using any amount of the QS, PQS, IFQ, or IPQ held by the second entity.

NMFS would require QS holders to submit an affidavit on an annual basis, along with the Annual Application for Crab IFQ/IPQ Permit, to attest to whether an affiliation exists between a PQS or IPQ holder and the IFQ recipient.

The Regional Administrator would determine the amount of Class A and Class B IFQ that is issued to a QS holder. This is calculated by allocating 90 percent of the TAC (TAC a) as Class A IFQ. A portion of TAC a is allocated to persons eligible to hold only Class A IFQ (TAC a only), the remaining TAC (TAC r) is allocated for harvest by a person (p) eligible to receive both Class A IFQ and Class B IFQ. Expressed algebraically, for an individual person (p) eligible to hold both Class A and Class B IFQ the annual allocation formula is as follows:

1. TAC

= TAC × 0.90

2. TAC

= TAC

− TAC

a only

3. IFQ

= TAC

/ (TAC − TAC

a only

) × IFQ

4. IFQ

= IFQ

− IFQ

CPO IFQ

CPO QS yields only one class of IFQ, CPO IFQ. This IFQ allows the harvest and processing of an amount of crab. The person holding CPO IFQ can choose to harvest an amount of crab and process it on board that same vessel. Alternatively, the CPO IFQ holder can harvest crab and deliver the crab to a separate RCR. CPO IFQ is not subject to regional restrictions while used as CPO IFQ.

CVC IFQ

CVC QS yields CVC IFQ. CVC IFQ would not be subject to regional designation until July 1, 2008. After July 1, 2008, CVC IFQ would be issued as Class A and Class B IFQ, subject to the same regional designation and affiliation requirements as those described under CVO IFQ.

CPC IFQ

CPC QS yields CPC IFQ. As with CPO IFQ, there are no regional delivery requirements, and crab harvested using a CPC IFQ can be harvested and processed on board a vessel, or it can be delivered to another RCR. Unlike CVC IFQ, CPC IFQ would not convert to Class A and Class B shares annually starting July 1, 2008.

IPQ Issuance

An annual allocation of PQS is referred to as IPQ and expressed in pounds of crab. IPQ would be equivalent to the amount of the TAC that is issued as Class A IFQ for that crab fishery. Processor privileges do not apply to the amount of the TAC allocated as Class B IFQ, or prior to July 1, 2008, allocated for use by the CPO and CPC sectors. IPQs would be regionally designated for processing with the same regional designations that apply to IFQ. The account of the person holding IPQ would be debited as soon as the landings are reported.

Annual Application for Crab IFQ/IPQ Permit

Prior to the issuance of IFQ or IPQ for a crab fishery, each person that wishes to receive IFQ or IPQ must submit an Annual Application for Crab IFQ/IPQ Permit. This application is necessary for NMFS to administer several aspects of this program, specifically: (1) to determine the designation of Class A and Class B IFQ in each crab fishing year for each person based on the affidavit; (2) to determine whether the applicant would be using the IFQ as part of a crab harvesting cooperative; and (3) to ensure that an EDR has been submitted, if required. This application must be submitted prior to the start of the crab fishing year.

A complete Annual Application for Crab IFQ/IPQ Permit would include the applicant's identification and contact information, whether the applicant has joined a crab cooperative, and a completed affidavit of affiliation declaring any and all affiliations with any PQS or IPQ holder. An affidavit of affiliation would include the applicant's relationships with IPQ or PQS holders that may involve direct or indirect ownership or control of the delivery of IFQ and any supplemental documentation deemed necessary by NMFS to determine whether an affiliation exists. This includes the names of all persons, to the individual level, holding an ownership interest in the entity and the percentage ownership each person holds. The application must also include the submission of an EDR, and pay any outstanding fees, if required.

As with the other permit applications, NMFS would review the application for completeness, payment of any fees required under this program, and other provisions required for permit holders.

QS/IFQ and PQS/IFQ Transfer Provisions

After the initial allocation of QS and PQS, these shares and their corresponding IFQ and IPQ, may be transferred. All transfers must be approved by NMFS. A transfer is any change in the person holding the QS or using the IFQ, permanently or for a fixed period of time. IFQ used by a person holding a Crab IFQ Hired Master Permit issued by NMFS, and the use of IFQ assigned to a crab harvesting cooperative and used within that cooperative, are not considered to be transfers of IFQ.

Eligibility to Transfer Quota

Before receiving quota by transfer quota, a person must establish eligibility to receive QS, PQS, IFQ, or IPQ by transfer by submitting a completed Application for Eligibility to Receive QS/IFQ or PQS/IPQ by Transfer, available on the NMFS Alaska Region website at

http://www.fakr.noaa.gov

, or from the NMFS Alaska Region (see

ADDRESSES

). If a person is an initial issuee of QS, an eligibility application is not required. To be eligible to receive QS, PQS, IFQ, or IPQ by transfer, a person must first meet the requirements in the following table:

Table 10—Eligibility Requirements to Receive Quota by Transfer

Quota Type

Eligible Person

Eligibility Requirements

PQS

Any person

None

IPQ

Any person

None

CVO or CPO QS

A person initially issued QS

None

An individual

who is a U.S. citizen with at least 150 days of sea time as part of a harvesting crew in any U.S. commercial fishery

A corporation, partnership, or other entity

with at least on individual member who is a U.S. citizen and who:

(1) owns at least 20 percent of the corporation, partnership, or other entity; and

(2) has at least 150 days of sea time as part of a harvesting crew in any U.S. commercial fishery

An ECCO

None

A CDQ Group

None

CVO or CPO IFQ

All persons eligible for CVO or CPO QS

Same as the requirements for CVO and CPO QS

A crab harvesting cooperative

None

CVC or CPC QS

An individual initially issued QS

None

An individual

who is a U.S. citizen with:

(1) at least 150 days of sea time as part of a harvesting crew in any U.S. commercial fishery; and

(2) recent participation in the 365 days prior to the transfer.

CVC or CPC IFQ

All persons eligible for CVC or CPC QS

Same as the requirements for CVC and CPC QS

A crab harvesting cooperative

None

Prior to receiving QS by transfer on behalf of a specific ECC, a non‐profit entity that intends to represent that ECC as an ECCO must have approval from the Regional Administrator. To receive approval, the non‐profit entity seeking to become an ECCO must submit a complete Application to Become an ECCO to NMFS, available on the NMFS Alaska Region website at

http://www.fakr.noaa.gov

, or from the NMFS Alaska Region (see

ADDRESSES

). If an application is disapproved, then the determination may be appealed.

An ECCO is a non‐profit organization that is authorized to hold QS and lease the resulting IFQ to residents of the ECC on whose behalf it holds the QS. Each ECC would have to designate an ECCO to transfer and hold QS on its behalf. The ECCO would be identified by either the CDQ group, or the municipality in which the ECC is located, except in cases where the ECC is also located in a borough. In such case, the municipality and borough must agree to designate the same non‐profit organization to serve as the ECCO. Each ECC may designate only one ECCO to hold crab QS on behalf of that community at any one time.

A complete Application to Become an ECCO consists of: (1) The articles of incorporation under the laws of the State of Alaska for that non‐profit entity; (2) A statement indicating the ECC represented by that non‐profit entity for purposes of holding QS; (3) Management organization information; and (4) A statement describing the procedures that would be used to determine the distribution of IFQ to residents of the community represented by that ECCO.

Transfer Applications

Once an eligibility application is submitted, and eligibility to receive QS, PQS, IPQ, or IFQ is established, a transfer application must be submitted to NMFS for the actual transfer of a specific type of quota. There are three forms of transfer applications and the application form used would vary depending on the person applying for the transfer. The three forms are: (1) Application for Transfer of Crab QS/IFQ or PQS/IPQ. This application is required to transfer any amount of QS, PQS, IFQ, or IPQ from an entity that is not an ECCO or a crab harvesting cooperative; (2) Application for Transfer of Crab QS/IFQ to or from an ECCO. This application is required to transfer any amount of QS or IFQ to or from an entity that is an ECCO; or (3) Application for Inter‐cooperative Transfer. This application is required to transfer any amount of IFQ from a crab harvesting cooperative to another crab harvesting cooperative. All of these transfer forms would be available on the NMFS Alaska Region website at

http://www.fakr.noaa.gov

, or from the NMFS Alaska Region (see

ADDRESSES

For the transfer of PQS or IPQ, an application must contain a signature of a representative of an ECC entity with ROFR. For the transfer of CVC QS or IFQ or CPC QS or IFQ, individuals must submit proof of at least one landing of crab in any crab fishery in the 365 days prior to submission to NMFS of the application. Proof of this landing is either: signature of the applicant on an ADF&G Fish Ticket; or an affidavit from the vessel owner attesting to that individual's participation as a member

of a fish harvesting crew on board that vessel at the time of the landing.

NMFS would establish the deadline of August 1 by which QS and PQS holder must apply for their annual IFQ or IPQ permits for that crab fishing year. This deadline provides NMFS the time necessary to calculate whether, and how much, of the IFQ issued to a person should be designated as Class A or Class B IFQ based on the affidavit of affiliation provided in the application. NMFS would need to know all affiliation information for all persons to calculate the Class A/B IFQ ratios for each person accurately. Without this deadline, NMFS would not have sufficient information on affiliations and could not calculate the Class A/B ratio for a person.

This deadline date of August 1 allows NMFS time to issue the IFQ and IPQ for the Aleutian Islands golden king crab fishery (which typically begins in mid-August) and sufficient time to calculate and issue the IFQ and IPQ for all the other fisheries when the TACs are announced by the State of Alaska (in the Fall). Between August 1 and the issuance of IFQ or IPQ for a crab fishery, NMFS would not approve any transfers of QS, PQS, IFQ, or IPQ. This limit on transfer approval ensures that NMFS calculates the Class A/B IFQ ratio based on the affiliation information of all persons in the fishery at the same time. Once the IFQ and IPQ is issued, NMFS would resume the approval of valid transfer applications. For most crab fisheries, this would effectively result in a one month period when NMFS would not approve transfers. Persons may still submit applications during this time, but approval would not occur until NMFS has issued the IFQ and IPQ for the crab fishery.

Approval criteria for an Application for Transfer of Crab QS/IFQ or PQS/IPQ.

An Application for Transfer of Crab QS/IFQ or PQS/IPQ would not be approved until the Regional Administrator has determined that: (1) The person applying to receive the quota is eligible to receive it; (2) The application is notarized; (3) All fees for this program are paid as well as any fines, civil penalties, or other payments due and owing, or outstanding permit sanctions, resulting from Federal fishery violations involving either party exist; (4) The person applying to receive quota currently exists; (5) The transfer would not cause the person applying to receive the quota to exceed the use limit; (6) The person applying to make or receive the QS, PQS, IFQ or IPQ transfer has submitted an EDR, if required; (7) In the case of the transfer of PQS or IPQ, that the provisions for ROFR have been met; and (8) Other pertinent information requested on the application for transfer has been supplied to the satisfaction of the Regional Administrator.

Application for Transfer of Crab QS/IFQ to or from an ECCO.

An Application for Transfer of Crab QS/IFQ to or from an ECCO must be approved by the Regional Administrator. This application is required for the ECCO to hold the QS and for the individual that would use the IFQ to harvest crab. Any transfer of QS from an ECC by the ECCO requires authorization of the appropriate governing body of the ECC to ensure proper oversight.

In the application, all individuals applying to receive IFQ by transfer from an ECCO must submit proof of at least one delivery of crab in any crab fishery in the 365 days prior to submission to NMFS of the application. Proof of this landing is either: the signature of the applicant on an ADF&G Fish Ticket; or an affidavit from the vessel owner attesting to that individual's participation as a member of a fish harvesting crew on board that vessel during that landing. In conjunction with the transferee, the ECCO would be a party to the Application for the Transfer of QS/IFQ to or from an ECCO. The ECCO would provide to NMFS an explanation for the transfer of QS/IFQ to be included in NMFS' review of the community benefits of ECCO's. Included among the reasons for transfer are: facilitation of ECCO management and administration; to finance future QS purchases by the ECCO; to permit community residents to fish; or, to facilitate dissolution of the ECCO. A person receiving IFQ from an ECCO must affirm that they have been a permanent resident in the ECC for a period of 12 months prior to the submission of the application.

ECCO Annual Report for an ECC.

In addition to the Application to Transfer Crab QS/IFQ to or from an ECCO, the ECCO must submit an annual report for the ECC to NMFS. An ECCO would be required to submit a complete annual report by June 30 of the crab fishing year that it is required. If an ECCO did not submit an annual report for the previous year, NMFS would not approve an Application to Transfer Crab QS/IFQ to or from that ECCO. This annual report is similar to the requirement in the current halibut and sablefish community purchase program. The annual report would ensure that the ECCO maintains the intent of the ECC QS purchase provisions that the QS and IFQ benefit residents of eligible communities.

The annual report would detail the use of the QS and IFQ in that community, including information on the IFQ lease holders, crew employed, criteria used by the ECCO to distribute IFQ leases among eligible community residents, any changes in the management structure of the ECCO, and copies of decision making documents from ECCO board meetings. In addition, NMFS would request a description of efforts the ECCO has made to ensure that IFQ lessees employ crew members who are eligible community residents of the ECC aboard vessels on which IFQ derived from QS held by an ECCO is being fished.

Inter‐cooperative Transfers

A crab harvesting cooperative would be permitted to transfer its IFQ only to another crab harvesting cooperative. Crab harvesting cooperatives wishing to engage in an inter‐cooperative transfer must complete an Application for Inter‐cooperative Transfer.

Application for Inter‐cooperative Transfer.

A complete application consists of the following: (1) the name and contact information of the crab harvesting cooperative transferor and transferee; (2) the identification of the crab IFQ being transferred, including the permit number, year that permit was issued, and number of pounds being transferred; (3) price paid for the IFQ; (4) whether an EDR was submitted, if required; (5) whether all fees have been paid; and (6) original notarized signatures of both the transferee and transferor. The approval criteria for an Application for Inter‐Cooperative Transfer are the same as those for an Application for Transfer of Crab QS/IFQ or PQS/IPQ.

Specific Provisions on the Transfer of CVO and CPO QS and IFQ

CVO and CPO QS and the resulting IFQ would be transferrable under the Program, subject to the caps on the amount of shares a person may hold or use. Leasing would be defined for purposes of this program as the use of IFQs on a vessel in which the QS holder has less than 10 percent ownership interest or on which the QS holder is not present. The general provisions for the leasing of CVO and CPO IFQ (i.e., the temporary transfer of IFQs without the accompanying QS) would expire on July 1, 2010, which is five years after Program implementation. Leasing among crab harvesting cooperatives would not expire. The Council's intent in allowing leasing to continue through crab harvesting cooperatives is to create an incentive for cooperative membership.

Specific Provision on the Transfer of CVC and CPC QS and IFQ

CVC or CPC QS would be fully transferable to persons determined by NMFS to be eligible to receive this type of QS by transfer. In order to be eligible to receive CVC/CPC QS and/or IFQ by transfer, a person must be an individual U.S. citizen with at least 150 days of sea time as part of a harvesting crew in any U.S. commercial fishery. Additionally, the person must be an “active participant” in the BSAI crab fisheries as demonstrated by a landing in a crab fishery in the last 365 days. Documentation of “active participation” includes an ADF&G fish ticket, an affidavit from the vessel owner, or other verifiable documentation.

The accompanying CVC or CPC IFQ may also be leased until July 1, 2008. After July 1, 2008, leasing would be permitted only in the case of a documented hardship for the term of the hardship, subject to a maximum of 2 years over a 10 year period. A hardship would be considered if there is: (1) a severe medical condition of the QS holder documented by a medical doctor who verifies the QS holder cannot participate in the fishery because of the medical condition, (2) a medical condition involving a person that requires the QS holder's full‐time care of that person, or (3) a total or constructive physical loss of a vessel. The QS holder would be required to provide documentation to NMFS the vessel was lost and could not be replaced in time to participate in the fishery.

Specific Provisions on the Transfer of PQS and IPQ

PQS and the resulting IPQ are fully transferable subject only to use and ownership caps. This allows for the entry of new processors into the fishery. The Council did not identify any specific eligibility criteria for persons wishing to obtain PQS or IPQ by transfer. However, the Council did establish a ROFR provision that restricts transfers of PQS and IPQ out of a community.

Right of First Refusal (ROFR)

The Program contains provisions for a ROFR to be granted to ECCs, with the exception of Adak, for the purchase of PQS/IPQ that is proposed by the PQS holder to be transferred out of the ECC. ROFR would apply to all crab PSQ/IPQ derived from legal processing that occurred in that ECC except for PSQ/IPQ issued for Tanner crab, Western Aleutian Islands golden king crab, and Adak red king crab. The Tanner crab fishery is exempt because this species has been and likely would continue to be a concurrent fishery with Bristol Bay red king crab and snow crab. The Western Aleutian Islands golden king crab fishery is exempt because the fishery is regionalized in a manner that largely makes ROFR provisions unnecessary. Last, the Adak red king crab fishery was closed for several years limiting community dependence on that fishery.

To qualify as an ECC, a community must have processor history that accounts for at least 3 percent of the initial allocation of PQS in any crab fishery. The 3 percent threshold is intended to limit the ROFR to communities with historical dependence on the crab fisheries. Based on the Alaska State fish ticket database, the following nine communities meet this threshold of historical dependence as an ECC: Adak, Akutan, False Pass, St. George, St. Paul, Dutch Harbor, Kodiak, King Cove, and Port Moller. Adak is not eligible for ROFR because the Program excludes any community that receives a direct allocation of crab, which Adak does (see provisions for Adak allocation within this proposed rule). The rationale for this provision is that the direct allocation of crab is sufficient to support Adak's dependence on the crab fisheries, and any further protection of the community's interest in the fisheries is unnecessary.

ECCs would be required to designate an entity to represent it for purposes of ROFR. For those ECCs that are also CDQ communities (Akutan, False Pass, St. George, and St. Paul), the entity would be the CDQ group of which the community is a member. For non CDQ communities that are ECCs (Dutch Harbor, Kodiak, King Cove, and Port Moller), the entity would be a person or organization designated by the governing bodies of the ECCs. The entity for an ECC would be designated the right to intervene on behalf of its communities if a PQS holder proposes to transfer PQS or IPQ outside the community.

The ROFR provisions attempt to strike a balance between community and industry interests. Generally, the ROFR provides an ECC with the right to purchase PQ or IPQ from a processor for the same price and subject to the same conditions as offered by the seller in an open market. Under this system, the holder of PQS/IPQ would notify the ECC or its representative of the terms of the pending sale. The ECC would then have the opportunity to exercise the ROFR by notifying the seller of acceptance of those terms within a specified time period. If the terms are not accepted, the open market sale may proceed.

An exception to the ROFR would allow a company to consolidate operations among several commonly owned plants to achieve intra‐company efficiencies. In addition, companies could lease IPQ for use outside a community. However, use of more than 20 percent of a person's IPQ holdings outside an ECC during a crab fishing year would trigger the ECC's right of first refusal. The time period of a crab fishing year to allow for this 20 percent exception differs from the Council's motion that was based on a time period of “3 of the preceding 5 years.” Under the Council's motion, 5 years potentially would need to pass before an ECC entity could determine whether or not to exercise ROFR. This approach would be inconsistent with the community protection objective of ROFR. Thus, NMFS proposes to base this 20 percent exception on an annual time period and specifically requests public comment on this approach relative to Council objectives and practicality (see

ADDRESSES

The designation of a representing entity for non‐CDQ ECCs must be completed well in advance of the end of the application period for initial issuance of PQS to allow applicants for PQS and ECC entities to develop and sign contracts between the ECC entity and the applicant for PQS. The Council suggested ECCs designate the entity to represent it for purposes of ROFR at least 90 days before the end of the application period for initial issuance of PQS. This time frame would provide processors time to enter a contract that would establish ROFR. Given the proposed application period is 60 days and in order to meet a schedule that would allow for issuance of QS for the 2005 Fall crab fisheries, NMFS proposes that ECCs designate the entity to represent them within 30 days of the publication of the final rule which implements the Program. This time frame still would allow a 60‐day period for processors to enter into contracts prior to submission of their application for PQS. An application for PQS would not be considered complete until it is accompanied by a valid contract signed by the applicant for initial issuance of PQS and the ECC entity.

To exercise a ROFR, an ECC would be required to meet all of the terms and conditions of the underlying transaction. As indicated above, the ROFR would be established by a contract to be entered into between the PQS holder receiving the allocation of PQS and the ECC entity. The applicant for PQS would be required to enter the

contract in order to receive the initial allocation of PQS by NMFS.

The contracts establishing the ROFR for ECCs must include specified conditions set forth at § 680.40(m). An explanation for each of these conditions is presented in section 3.6.2.2 of Appendix 1 to the EIS (see

ADDRESSES

). These conditions were developed by an ad hoc committee assigned by the Council to develop community protection measures and were ultimately adopted by the Council. They generally are intended to protect a balance between community and processor interests while providing some flexibility under contractual arrangements that would be enforced through civil contract law. NMFS does not intend to provide draft contractual language for purposes of ROFR; however, the agency would support the enforcement of some of the contract conditions, such as requiring signed contracts to be submitted as part of the application process for initial issuance of PQS. Similarly, NMFS would require the ECC entity as signatory on the contract to acknowledge in writing the community does not wish to exercise ROFR prior to agency approval of any transfer of PQS or IPQ. NMFS also could annually notify each ECC entity of the location where IPQs from the community were used and of any transfer of shares linked to the community. This notification could assist the community in tracking transfers and use of shares, thereby assisting the community efforts to enforce the ROFR. NMFS specifically requests comments on whether such notification would be helpful (see

ADDRESSES

The Program would establish an additional ROFR provision for ECCs located in the northern GOA. The only ECC in this area is the combined City and Borough of Kodiak. Under this provision, the ECC entity representing Kodiak would have a ROFR to purchase PQS that is proposed to be transferred from non ECC communities located in the northern GOA. The terms and conditions supporting Kodiak's ROFR would be the same as those for the general ROFR provisions referenced above. Applicants for PQS in non ECC communities in the northern GOA would be required to enter into a contract with the ECC entity representing Kodiak and to submit a copy of a signed contract with their application for initial issuance of PQS. Subsequently, a holder of PQS in a non ECC community in the northern GOA who wishes to transfer PQS out of that community must provide NMFS with a written acknowledgment from the ECC entity representing Kodiak confirming that Kodiak does not wish to exercise ROFR prior to agency approval of transfer of PQS to a community other than Kodiak.

The northern GOA ROFR provision is intended to provide Kodiak with a ROFR that would enable it to consolidate processing shares of non ECC communities in the northern GOA.

QS, PQS, IFQ, and IPQ Use Caps

This proposed rule establishes use caps on the amount of QS, PQS, IFQ, and IPQ which may be held by a person and the amount of IFQ used on a vessel. Use caps would limit the degree of consolidation of QS and PQS holders and the numbers of vessels in the crab fisheries.

QS and IFQ Use Caps

Use caps would be imposed on a person's holdings of QS. No person could use IFQ in excess of the amount of IFQ that is yielded from these QS caps unless that IFQ is derived from QS that was received by that person in the initial allocation of QS for that crab fishery. Different caps are chosen for the different fisheries because fleet characteristics and dependence differ across fisheries. Separate caps on QS holdings are established for CDQ groups. Also, separate caps would be established for persons who hold QS and PQS.

Use caps on the amount of QS and IFQ a person may hold are based on the initial QS pools to provide greater stability for participants and to determine where their allocation is relative to the overall allocations. Because the QS pool would change over time, establishing a set pool early‐on would provide greater stability and would not require QS holders to divest themselves of QS should the quota pool change. The QS use caps in the halibut and sablefish IFQ program are set at a fixed amount of QS units, and a similar management approach is used to set use caps in this Program.

A person who receives an initial allocation of QS that exceeds the use caps listed here is limited to hold no more than that amount. NMFS would not issue a person QS in excess of use caps based on QS derived from landings attributed to an LLP license obtained via transfer after June 10, 2002. This provision would prevent excessive consolidation prior to the issuance of QS through the trading of LLP licenses and their associated history.

Non‐individuals holding QS would be required to provide, on an annual basis, ownership information as required by the Annual Application for Crab IFQ/IPQ Permit. Use caps would be applied both individually and collectively. Under this rule, all of a person's direct holdings of QS and IFQ would be credited toward the cap. In addition, a person's indirect holdings would be also credited toward the cap in proportion to the person's ownership interest. For example, if a person owns a 20 percent interest in a company that holds 100 QS units, that person is credited with holding 20 QS units for purposes of determining compliance with the cap.

These caps would be applied in two steps. First, NMFS would use a threshold rule for determining whether the shares are held by a person. Second, NMFS would use the individual and collective rule for determining the extent of share ownership. Under the threshold rule, any entity with 10‐percent or more common ownership is considered to be an owner for purposes of determining this cap. Any direct holding of QS by those entities would be fully credited to the QS holder for purposes of establishing use caps. See the following table for details:

Table 11—Use Caps on QS and IFQ Holdings for all Persons not Holding PQS, and Non-CDQ Groups

Fishery

CVO and CPO Use Cap in QS Units

CVC and CPC Use Cap in QS Units

1.0 percent of the initial QS pool for Bristol Bay red king crab

3,880,000

120,000

1.0 percent of the initial QS pool for Bering Sea snow crab

9,700,000

300,000

1.0 percent of the initial QS pool for Bering sea Tanner crab

1,940,000

60,000

2.0 percent of the initial QS pool for Pribilof Islands red and blue king crab

582,000

18,000

2.0 percent of the initial QS pool for St. Matthew blue king crab

582,000

18,000

10.0 percent of the initial QS pool for Eastern Aleutian Islands golden king crab

970,000

30,000

10.0 percent of the initial QS pool for Western Aleutian Islands golden king crab

3,880,000

120,000

10.0 percent of the initial QS pool for Western Aleutian Islands golden king crab

5,820,000

180,000

The use cap limits for CDQ Groups are shown in the following table (Table 12). The QS and IFQ use caps in Table 12 apply to a CDQ group regardless of whether the CDQ holds PQS and QS. No CDQ group could use IFQ in excess of the amount of IFQ that is yielded from these QS caps unless that IFQ is derived from QS that was received by that CDQ group in the initial allocation of QS for that crab fishery.

Table 12—Use Caps on QS and IFQ Holdings for CDQ Groups

Fishery

CDQ CVO and CPO Use Cap in QS Units

5.0 percent of the initial QS pool for Bristol Bay red king crab

19,400,000

5.0 percent of the initial QS pool for Bering Sea snow crab

48,500,000

5.0 percent of the initial QS pool for Bering sea Tanner crab

9,700,000

10.0 percent of the initial QS pool for Pribilof Islands red and blue king crab

2,910,000

10.0 percent of the initial QS pool for St. Matthew blue king crab

2,910,000

20.0 percent of the initial QS pool for Eastern Aleutian Islands golden king crab

1,940,000

20.0 percent of the initial QS pool for Western Aleutian Islands golden king crab

7,760,000

20.0 percent of the initial QS pool for Western Aleutian Islands golden king crab

11,640,000

No person who holds QS and PQS could use IFQ in excess of the amount of IFQ that is yielded from these QS caps unless that IFQ is derived from QS that was received by that person in the initial allocation of QS for that crab fishery. The use cap limits for PQS holders who also hold QS are shown in the following table:

Table 13—Use Caps on QS and IFQ Holdings for Persons who Hold QS and PQS

Fishery

CVO and CPO Use Cap in QS Units

CVC and CPC Use Cap in QS Units

5.0 percent of the initial QS pool for Bristol Bay red king crab

19,400,000

600,000

5.0 percent of the initial QS pool for Bering Sea snow crab

48,500,000

1,500,000

5.0 percent of the initial QS pool for Bering sea Tanner crab

9,700,000

300,000

5.0 percent of the initial QS pool for Pribilof Islands red and blue king crab

1,455,000

45,000

5.0 percent of the initial QS pool for St. Matthew blue king crab

1,455,000

45,000

5.0 percent of the initial QS pool for Eastern Aleutian Islands golden king crab

485,000

15,000

5.0 percent of the initial QS pool for Western Aleutian Islands golden king crab

1,940,000

60,000

5.0 percent of the initial QS pool for Western Aleutian Islands golden king crab

2,910,000

90,000

CVC and CPC QS and IFQ use is capped based on the QS and IFQ pool that is issued to those QS sectors, not as a percentage of the whole QS pool, or TAC issued for that fishery for that year. The effect is that the use caps are set at the percentage of the QS pool for that sector. This is intended to preserve the goals of CVC and CPC QS and IFQ allocations as a means to provide participation for crew members and limit consolidation in crew employment.

PQS Use Caps

A person may not use more than 30 percent of the initial PQS pool in any crab fishery unless that person received an initial allocation of PQS in excess of this limit. A person would not be issued PQS in excess of the use caps based on processing history transferred after June 10, 2002, the same date for limiting the QS use caps. This would limit the consolidation that could occur prior to the implementation of this Program, thereby frustrating the goals of a use cap limitation.

As with vertical integration caps, PQS use caps would be applied using a threshold rule for determining whether the shares are held by a processor and then the individual and collective rule for determining the extent of share ownership. Under the threshold rule, any entity with 10 percent or more common ownership with a processor is considered to be a part of that processor. Any direct holdings of those entities would be fully credited to the processor's holdings. Indirect holdings of those entities would be credited toward the processor's cap in proportion to the entity's ownership.

IPQ Use Caps

IPQs would be capped at the same levels as those for the PQS, and the same would be established using the same threshold rule for determining the amount of PQS held by a person. In addition to this general use cap, two other provisions would apply to IPQs. In addition to the overall 30 percent PQS use cap, in the Bering Sea snow crab fishery no person would be permitted to hold in excess of 60 percent of the IPQ issued with a North region designation for that fishery.

A further restriction would exist, which limits the annual allocation of IPQs in seasons when the TAC exceeds a threshold amount in two fisheries. In the Bristol Bay red king crab fishery, IPQs would not be issued for the amount of the TAC in excess of 20 million pounds (9,072 mt). In the Bering Sea snow crab fishery, IPQs would not be issued for the amount of the TAC in excess of 175 million pounds (79,379 mt). Any Class A IFQ issued in excess of the threshold would not be required to be delivered to an RCR with unused IPQ, but it would be subject to the regional landing requirements. This Class A IFQ would be distributed among users based on their QS holdings.

Vessel Use Caps

The amount of CVO or CPO IFQ that could be used on any one vessel during a crab fishing year would be limited. This vessel use limit would apply for all vessels, except for vessels that participate solely in a crab harvesting cooperative. A vessel could not harvest crab in excess of the following percentages of the TAC for that crab fishery for that crab fishing year: (1) 2 percent of the TAC for the Bering Sea snow crab, Bristol Bay red king crab, and Bering Sea tanner crab fisheries; (2) 4 percent of the TAC for the Pribilof Islands red and blue king crab, and St. Matthew blue king crab fisheries; and (3) 20 percent for Eastern Aleutian Islands golden king crab, Western Aleutian Islands golden king crab, and Western Aleutian Islands red king crab west of 179° W. long.

CVC or CPC QS used on a vessel would not be included in determining whether a vessel use cap is met. Crab that are allocated to the CDQ program or the Adak community entity would not be included in determining whether a vessel use cap is met.

A person who receive an approval of IFQ allocation in excess of these vessel use caps may catch and retain all of that IFQ with a single vessel. However, two or more persons may not catch and retain their IFQs with one vessel in excess of these limitations.

The vessel use cap would not apply to a vessel if all of the IFQ used on that vessel in a crab fishing year is IFQ held by a crab harvesting cooperative. This exemption does not apply if that vessel is used to harvest any amount of IFQ not held by a crab harvesting cooperative during the same crab fishing year.

Catcher/Processor Vessel Activity

A person may purchase additional PQS for use on a CP vessel, but any crab processed with purchased PQS must be processed within three miles of shore in the region designated for that PQS. This effectively limits the use of PQS and the resulting IPQ to vessels that are operating as stationary floating crab processors.

A vessel operating as a CP may not accept deliveries of Class B IFQ for processing. For purposes of this provision, any vessel that receives and processes crab harvested with Class B IFQ for processing during a season would be prohibited from acting as a CP during the remainder of the season, and any vessel that operates as a CP during a season would be prohibited from receiving and processing crab harvested with Class B IFQ during that season. This provision only applies for that crab fishery for that season. A vessel could operate as a CP in one crab fishery and receive crab harvested with Class B IFQ in another crab fishery.

QS Holder On Board Provisions

A person holding CVC or CPC QS is required to be aboard the vessel upon which their IFQ is being harvested; unless the IFQ resulting from that QS has been: (1) leased to a qualified person; or (2) is used by a crab harvesting cooperative.

A person holding CVO or CPO QS does not have to be aboard the vessel being used to harvest their IFQ if they hold at least a 10 percent ownership interest in the vessel upon which the IFQ is to be harvested and are represented by a crab IFQ hired master employed by that QS holder.

Crab Harvesting Cooperatives

Consistent with the Fishermen's Collective Marketing Act (FCMA, 15 U.S.C. 521) and other applicable laws, including antitrust, QS holders may form voluntary crab harvesting cooperatives to combine and cooperatively manage their aggregate QS holdings. Each cooperative that is approved by NMFS would receive the amount of cooperative IFQ that would be yielded by the aggregate QS holdings of all of the members of the cooperative. The Program contains two primary incentives to encourage individual QS holders to join and participate in crab harvesting cooperatives. First, vessels fishing exclusively in cooperatives would be exempt from the vessel use caps that restrict vessels that harvest individually‐held IFQ. Second, beginning in the sixth year of the program, only leasing within cooperatives or between cooperatives would be allowed. The proposed regulations at § 680.21 set out the provisions governing the formation and operation of crab harvesting cooperatives.

Membership Requirements

Under the Program, a minimum membership of four unique QS holders would be required for cooperative formation. The language of Amendment 18 explicitly states that the four or more unique members of a crab harvesting cooperative are to be harvester QS holders engaged in one or more crab

fisheries. Therefore, the proposed regulations concerning membership requirements for a crab harvesting cooperative require that members of a cooperative be QS holders. However, there is no explicit language in Amendment 18 as to whether QS holders who also hold PQS or IPQ, or are affiliated with persons who hold PQS or IPQ, may be members of a crab harvesting cooperative. NMFS considered this issue in developing the proposed rule and, for the reasons set forth below, proposes that QS holders who also hold PQS or IPQ or are affiliated with persons who hold PQS or IPQ be prohibited from joining a crab harvesting cooperative.

Section 313(j)(6) of the Magnuson‐Stevens Act (16 U.S.C. 1862(j)(6)) states that “Nothing in [the Magnuson‐Stevens Act] shall constitute a waiver, either express or implied, of the antitrust laws of the United States.” However, the FCMA was enacted to provide exemptions from antitrust liability for certain activities by associations of qualified members. The FCMA reads as follows:

Sec. 521. Fishing industry; associations authorized; “aquatic products” defined; marketing agencies; requirements

Persons engaged in the fishery industry, as fishermen, catching, collecting, or cultivating aquatic products, or as planters of aquatic products on public or private beds, may act together in associations, corporate or otherwise, with or without capital stock, in collectively catching, producing, preparing for market, processing, handling, and marketing in interstate and foreign commerce, such products of said persons so engaged.

The term “aquatic products” includes all commercial products of aquatic life in both fresh and salt water, as carried on in the several States, the District of Columbia, the several Territories of the United States, the insular possessions, or other places under the jurisdiction of the United States.

Such associations may have marketing agencies in common, and such associations and their members may make the necessary contracts and agreements to effect such purposes: Provided, however, That such associations are operated for the mutual benefit of the members thereof, and conform to one or both of the following requirements:

First. That no member of the association is allowed more than one vote because of the amount of stock or membership capital he may own

therein; or

Second. That the association does not pay dividends on stock or membership capital in excess of 8 per centum per annum.

and in any case to the following:

Third. That the association shall not deal in the products of nonmembers to an amount greater in value than such as are handled by it for members.

The FCMA, enacted in 1934, permits persons engaged in the fishing industry, as fishermen that catch, collect, or cultivate aquatic products or as planters of aquatic products, to act together in associations (cooperatives) for the purposes listed. The FCMA extended to the fishing industry the exemption from the operation of antitrust laws that is granted to agricultural cooperatives in the Clayton Act (15 U.S.C. 17) and the Capper‐Volstead Act (7 U.S.C. 291,

et seq.

). The intent of the FCMA is to provide fishermen, acting through fishery cooperatives, an opportunity to compete on the same basis as may an individual corporation. Because there is no waiver of antitrust laws in the Magnuson‐Stevens Act and because the only exemption from antitrust law for fishing cooperatives is provided by the FCMA, crab harvesting cooperatives are required to be organized and operate in a manner that is consistent with requirements of the FCMA and the proposed rule contains a provision reflecting this requirement.

According to the case law that has developed under the Capper‐Volstead Act and the FCMA (particularly

National Broiler Marketing Assn.

United States

, 436 U.S. 816 (1978) and

United States

Hinote

, 823 F. Supp. 1350 (S.D. Miss. 1993)), all members of an FCMA‐protected cooperative must be “producers” and any non‐producer participation in the control and policy making of a cooperative would disqualify the cooperative for exemption from antitrust law provided by the FCMA. While NMFS recognizes that there is some legal uncertainty as to whether members of a cooperative who participate in both production and processing would be considered “non‐producers,” NMFS has determined that there is a significant likelihood that a crab harvesting cooperative that is permitted to include members that hold PQS or IPQ or process Class B IFQ, or who are affiliated with persons who hold PQS or IPQ or process Class B IFQ would be found to incl

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