# Fisheries off West Coast States; Pacific Coast Groundfish Fishery Management Plan; Amendments 20 and 21; Trawl Rationalization Program

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2010-23246

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** October 1, 2010
- **Citation:** 75 FR 60868

## Text

DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
15 CFR Part 902
50 CFR Part 660
[Docket No. 100212086-0354-04]
RIN 0648-AY68
Fisheries off West Coast States; Pacific Coast Groundfish Fishery Management Plan; Amendments 20 and 21; Trawl Rationalization Program

AGENCY:

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

ACTION:

Final rule.

SUMMARY:

NMFS is implementing Amendments 20 and 21 to the Pacific Coast Groundfish Fishery Management Plan (FMP), which were partially approved by the Secretary on August 9, 2010. Amendment 20 establishes a trawl rationalization program for the Pacific Coast groundfish fishery. Amendment 20's trawl rationalization program consists of: an individual fishing quota (IFQ) program for the shorebased trawl fleet (including whiting and non-whiting sectors); and cooperative (coop) programs for the at-sea (whiting only) mothership and catcher/processor trawl fleets. The trawl rationalization program is intended to increase net economic benefits, create individual economic stability, provide full utilization of the trawl sector allocation, consider environmental impacts, and achieve individual accountability of catch and bycatch. Amendment 21 establishes fixed allocations for limited entry trawl participants. These allocations are intended to improve management under the rationalization program by streamlining its administration, providing stability to the fishery, and addressing halibut bycatch. This rule finalizes only certain key components necessary for issuance of permits and endorsements in time for use in the 2011 fishery and in order to have the 2011 specifications reflect the new allocation scheme. Specifically, this rule establishes the allocations set forth under Amendment 21 and establishes procedures for initial issuance of permits, endorsements, quota shares (QS), and catch history assignments under the IFQ and coop programs. In addition, this rule restructures the entire Pacific Coast groundfish regulations to more closely track the organization of the proposed management measures and to make the total groundfish regulations more clear.

DATES:

This rule is effective November 1, 2010.

ADDRESSES:

Background information and documents, including the final environmental impacts statements for Amendment 20 and Amendment 21, are available at the Pacific Fishery Management Council's Web site at
http://www.pcouncil.org/.
NMFS prepared a Final Regulatory Flexibility Analysis (FRFA), which is summarized in the Classification section of this final rule. Copies of the FRFA and the Small Entity Compliance Guide are available from William W. Stelle, Jr., Regional Administrator, Northwest Region, NMFS, 7600 Sand Point Way NE., Seattle, WA 98115-0070; or by phone at 206-526-6150.

Written comments regarding the burden-hour estimates or other aspects of the collection-of-information requirements contained in this final rule may be submitted to William W. Stelle, Jr., Regional Administrator, Northwest Region, NMFS, 7600 Sand Point Way NE., Seattle, WA 98115-0070, and by e-mail to
OIRA_Submission@omb.eop.gov,
or fax to 202-395-7285.

FOR FURTHER INFORMATION CONTACT:

Jamie Goen, 206-526-4656; (fax) 206-526-6736;
Jamie.Goen@noaa.gov.

SUPPLEMENTARY INFORMATION:

Background

The Amendment 20 trawl rationalization program is a limited access privilege program under the Magnuson-Stevens Fishery Conservation and Management Act (MSA), as reauthorized in 2007. It consists of: (1) An IFQ program for the shorebased trawl fleet; and (2) coop programs for the mothership and catcher-processor trawl fleets. The trawl rationalization program is intended to increase net economic benefits, create individual economic stability, provide full utilization of the trawl sector allocation, consider environmental impacts, and achieve individual accountability of catch and bycatch. Amendment 21 establishes fixed allocations for limited entry trawl participants. These allocations are intended to improve management under the rationalization program by streamlining its administration, providing stability to the fishery, and addressing halibut bycatch.

The trawl rationalization program is scheduled to be implemented on January 1, 2011. Due to the complexity of the program and the tight timeline for implementation, NMFS has issued, or is in the process of issuing multiple rulemakings that would implement this program. The following actions are related to the trawl rationalization program:

• A final rule (75 FR 4684, January 29, 2010) which announced that potential participants in the program should review and, if necessary, correct their data that will be used for the issuance of QS, permits, and endorsements. It also established which data NMFS would use and requested ownership information from potential participants.

• A notice of availability for Amendments 20 and 21 (75 FR 26702, May 12, 2010).

• A proposed rule (75 FR 32994, June 10, 2010) that would implement Amendments 20 and 21, focused on provisions deemed necessary to issue permits and endorsements in time for use in the 2011 fishery and to have the 2011 harvest specifications reflect the new allocation scheme. In addition, the June 10th proposed rule also proposed to restructure the entire Pacific Coast groundfish regulations at 50 CFR part 660 from one subpart (Subpart G) to five subparts (Subparts C-G).

• A correction to the June 10th proposed rule (75 FR 37744, June 30, 2010) which corrected two dates referenced in the preamble to the proposed rule regarding the decision date for the FMP amendments and the end date for the public comment period.

• The Secretary's review of and decision to partially approve Amendments 20 and 21 on August 9, 2010.

• A proposed rule (75 FR 53380, August 31, 2010) which proposes for implementation on January 1, 2011, additional program details, including: measures applicable to gear switching for the IFQ program, observer programs, retention requirements, equipment requirements, catch monitors, catch weighing requirements, coop permits, coop agreement requirements, first receiver site licenses, QS accounts, vessel accounts, further tracking and monitoring components, and economic data collection requirements.

This final rule follows the June 10th proposed rule (75 FR 32994) and implements the following aspects of Amendments 20 and 21: (1) The allocations set forth under Amendment 21, and (2) procedures for initial issuance of permits, endorsements, QS, individual bycatch quota (IBQ), and catch history assignments under the IFQ and coop programs. In addition, this rule restructures the entire Pacific Coast groundfish regulations to more closely track the organization of the proposed

management measures and to make the total groundfish regulations more clear. The preamble to the proposed rule (75 FR 32994, June 10, 2010), called the “initial issuance” proposed rule because it proposed the requirements for initial issuance of new permits and endorsements for the trawl rationalization program, provided detailed information on the trawl rationalization program and a general overview on the provisions in Amendments 20 and 21, and is not fully repeated here.

Partial Approval of Amendments 20 and 21

NMFS partially approved Amendments 20 and 21 on August 9, 2010. Some minor provisions were disapproved in both Amendments 20 and 21. In Amendment 20, NMFS disapproved three provisions applicable to mothership coops (MS coops): (1) The requirement that MS coops file a coop contract with the Council and to make it available for public review [it must still be filed with NMFS]; (2) the requirement that MS coops file a letter from the Department of Justice; and (3) the requirement that coop agreements include a clause that at least a majority of the members are required to dissolve the coop. In Amendment 21, NMFS disapproved language that referred to the trawl, non-trawl allocations superseding limited entry, open access allocations. This partial disapproval of Amendment 21 does not affect implementation of the trawl rationalization program or the harvest specifications for 2011 because these allocations are currently suspended as a result of overfished species rebuilding plans. However, NMFS has requested the Council to go through the amendment process to make the FMP more clear on how the limited entry, open access allocations relate to the trawl, non-trawl allocations.

Description of Data Used for Initial Issuance Decisions

The allocation formulas in Amendment 20 and implemented by this final rule are based on vessel landings or processor receipt histories for the shoreside sector. As discussed in the preamble to the proposed rule, NMFS will use data from the Pacific Fisheries Information Network (PacFIN) of the Pacific States Marine Fisheries Commission (PSMFC) to derive these histories. Since 1974, PSMFC has worked actively with its member states and State and Federal fisheries agencies to improve the quality and timeliness of fisheries data collection, processing, and analysis, and to produce regionally coherent data summaries required for regional conservation and management purposes. PacFIN is a regional fisheries data network that is a joint Federal and State data collection and information management project; for more information
see http://pacfin.psmfc.org/index.php.
Although it addresses other species of fish and related uses, PacFIN has a strong focus on the informational needs of the Council. PacFIN first came on line in 1981 by providing the Council's Groundfish Management Team, originally called the Plan Team, with two reports and an associated retrieval system. One report displayed monthly catch by species by area and another report displayed monthly catch by species by data source, including foreign countries and joint-ventures.

The data in PacFIN include fish tickets, or state landings receipts, which are official documents required by the states of California, Oregon, and Washington, and logbook information. The information collected by the states undergoes substantial quality control and quality assurance processes before and after it is submitted to PacFIN. Since 1981, PacFIN data have provided the basis for numerous Federal and state fishery management actions, including harvest determinations necessary to take inseason action to maintain fishing levels within established quotas and fishery closures; analyses of major management restructuring programs such as the Council's groundfish limited entry system or the Federal groundfish trawl buyback program; assessments of salmon and groundfish fishery disaster programs including determining and verifying which fishermen and processors receive aid and at what level; and for scientific stock assessments and other scientific research carried out by states, NMFS, and academia. The states, the Council, and NMFS rely on the PacFIN information as the best scientific information available.

Similarly, the initial allocations for the at-sea coops rely on the observer data from NMFS' Northwest Fisheries Science Center's Pacific whiting observer data in NORPAC (NORPAC data), which also undergoes substantial quality control and quality assurance of the data. As with the PacFIN data, NMFS, the Council, and the states rely on the NORPAC data as the best scientific information available, and use it for multiple purposes, including quota monitoring and stock assessments.

In addition to the PacFIN and NORPAC quality control and quality assurance process, in early 2010, NMFS provided notice to all participants (basically all current owners of limited entry trawl permits and groundfish first receivers) to review their catch data for the purpose of ensuring that the QS and other calculations would be based on the best available data. As explained in more detail in the preamble to the proposed rule, NMFS provided instructions and Federal and state contact information for participants to use in requesting data and correcting data, and in support of this process, the PSMFC developed scripts for the States to use in providing fishermen and processors their data directly related to their business interests, specifically landings sold or purchased by the data requestor. A similar process was established for the NORPAC data. In order for participants to understand the calculations and application of the PacFIN and NORPAC information, the Council provided a series of tables with its preliminary estimates of QS, which were mailed to current permit owners, who were again notified of the importance of correcting the underlying data bases. These timely corrections through the states and ultimately to PacFIN were extremely important to assure that the data used by NMFS to determine the initial allocations are based on the best scientific information available because the correction process cannot be made by NMFS unilaterally and additional corrections or modifications to the underlying data would not be appropriate during the application process.

Use of 2011 Harvest Specifications and Management Measures

Some of the initial issuance formulas include calculations that depend on results of the 2011-2012 biennial harvest specifications and management measures process. In particular, calculations for initial issuance of QS for overfished species caught incidentally (Group 2 and Group 3 species) and for Pacific halibut IBQ require that the target species used as a basis for the calculation be converted to pounds using the 2011 OYs in order to determine the relative weighting between the target species. The use of 2011 OYs in these formulas presents several implementation issues. First, the harvest specifications and management measures will not be final until after the initial issuance of QS and IBQ for the trawl rationalization program is scheduled to occur. Second, while the Council motion for trawl rationalization and the final initial issuance rule published here refer to OYs, the Council has been proceeding with the adoption of an FMP amendment on a parallel track, Amendment 23, which would replace OYs with annual catch limits

(ACLs) (if Amendment 23 is adopted, NMFS intends to replace all references to OY in the initial issuance regulations with references to ACL). Because of these two issues, pre-filled applications and initial issuance of QS and IBQ will be provisional based on the projected 2011 ACLs recommended by the Council during the 2011-2012 harvest specifications and management measures process. Thus, the initial issuance of QS and IBQ may be adjusted if NMFS adopts different OYs or ACLs for 2011 and 2012 than the ACLs adopted by the Council at their June 2010 meeting.

Similarly, some of the QS allocation formulas depend upon allocations between whiting and non-whiting trips developed as part of the 2011-2012 harvest specifications and management measures process. As described at § 660.140(d)(8)(iv)(A)(
10
) of this final rule, canary rockfish, bocaccio, cowcod, yelloweye rockfish, minor shelf rockfish N. of 40°10′ N. lat., and minor shelf rockfish S. of 40°10′ N. lat., and minor slope rockfish S. of 40°10′ N. lat. were not allocated between whiting and non-whiting trips through Amendment 21, and instead will be decided through the harvest specifications and management measures process. Consistent with the Council's June 2010 motion on the harvest specifications and with Amendment 21, Table 1e of the harvest specifications and management measures will list all of the IFQ species and the percentages of QS for whiting trips versus non-whiting trips. The initial issuance of QS for these species will be provisional based on the allocations recommended by the Council at its June 2010 meeting, pending final decision of the Secretary on the 2011 harvest specifications and management measures.

Comments and Responses

NMFS solicited public comment on both Amendments 20 and 21 (75 FR 26702, May 12, 2010) and on the proposed rule (75 FR 32994, June 10, 2010). The comment period for these notices ended July 12, 2010. Because these notices are related, the responses to public comments in this section of the preamble address Amendments 20 and 21 and the proposed rule.

NMFS received 33 individualized letters of comments on the proposed rule and amendments, submitted by individuals or organizations and 385 form letters. The letters raised a variety of issues related to the proposed rule and Amendments 20 and 21.

Some commenters have incorporated by reference previous comments submitted during the Council process. Comments presented to the Council are part of the record and were considered by the Council during their deliberation. In reviewing the proposed rule and amendments, NMFS considered the record as a whole.

General Comments in Support and Opposed

Comment 1.
NMFS received multiple comments expressing general support for the proposed rule and amendments.

Response.
NMFS acknowledges these comments.

Comment 2.
NMFS received multiple comments expressing general disagreement with the proposed rule and amendments.

Response.
NMFS acknowledges these comments.

Comment 3.
NMFS received multiple comments expressing support for the proposed rule and amendments and identifying expected benefits such as that it would help conservation of the resource, increase net economic benefits, provide stability, and reduce bycatch; stabilize the whiting fishery and traditional fisheries; give fishermen greater control over the resource; stabilize fishing communities; and eliminate regulatory discards.

Response.
NMFS concurs that multiple benefits are anticipated as a result of Amendments 20 and 21 and the proposed rule. The analyses supporting the amendments and the rule describe both costs and benefits, and conclude that the costs are justified by the benefits.

Comment 4.
NMFS received multiple comments objecting to the proposed rule and amendments on the grounds that they would not promote conservation or maximize economic benefit. Commenters stated that predicted benefits have been overstated and cited the example of the Orange Roughy. Commenters also cited studies that show catch share programs have hidden costs and adverse impacts on quality of life. Some commenters stated that the proposed rule and amendments would not meet the objectives of rationalization.

Response.
The underlying analyses support the conclusions regarding the anticipated effects of these measures and the extent to which they meet their objectives. While we can learn from other fisheries around the world, every fishery is different. The 5 year review will give us a chance to assess whether the program is working as anticipated and what changes may need to be made.

Comment 5.
NMFS received multiple comments objecting to the proposed rule and amendments due to general policy objections including to the use of quotas, the perception that the proposal serves the interests of a few against the interests of many, and objections to perceived redistribution of wealth and privatization of a public resource. In addition, NMFS received comments suggesting alternative management measures that commenters would prefer to see adopted such as owner on board requirements, IFQs for all three whiting sectors, and other approaches.

Response.
The MSA expressly authorizes the use of Limited Access Privilege Programs (LAPPs) and vests the Council with responsibility for developing and identifying which management measures to recommend through its open public process. The Council considered a number of alternative management measures in the development of this program, inclusive of those suggested in public comments. Appendix A “Analysis of Components, Elements, and Options for the Individual Fishing Quota Alternative Trawl Individual Quota Components” of the final EIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery” documents these considerations in two sections. Under Section A-2, IFQ System Details, pages A-33 to A-397, for many of the program details, a description is provided of options considered but either not included or not analyzed further. Additionally, Section A-3 of Appendix A, pages A-402 to A-444, addressed a number of options, including: Adaptive Management; Halibut Individual Bycatch Quota; Program Duration (Fixed Term and Auctions); Gear Conversion; Regional Landing Zones; Community Fishing Associations; Owner on Board Provisions; and Sideboard Measures to Prevent Spillover (into other fisheries). Council rationale and decisions regarding which options were selected, and which were not, are described. NMFS has reviewed the FEIS's, the public comments, and the record as a whole and concludes that the decision is consistent with MSA and other applicable law.

Comment 6.
NMFS received multiple comments praising the Council's process for development of the amendments for its transparency and fairness.

Response.
NMFS agrees that the Council utilized a fair and transparent public process that included numerous public committee meetings and Council meetings, as described in pages 19-22 in the FEIS (detailed list of those meetings).

Comment 7:
NMFS received some comments stating that the public process has been inadequate.

Response.
NMFS disagrees. In addition to the Council process referenced above, the agency complied with the MSA requirement to have a public comment period on both amendments and the proposed rule for initial issuance, and the NEPA requirement to have a comment period on the draft environmental impact statement (DEIS). NMFS also intends to publish for public comment the proposed rule on the program components.

Comment 8.
NMFS received multiple comments objecting to the proposed rule because it did not contain certain components such as the observer coverage requirements and tracking and monitoring requirements. One commenter added that the proposed rule's administrative provisions lack due process.

Response.
NMFS published a proposed rule to implement program components on August 31, 2010 (75 FR 53380). Prior to publication in the
Federal Register,
both rules to implement the rationalization program have gone through substantial public review and comment by the Council, including several public meetings of the Council's Regulatory Deeming Workgroup. As described above, the Council and NMFS followed an open public process in developing and adopting the amendments and the implementing regulations.

Comment 9:
Some commenters advocated partial approval for different elements of the program, such as disapproval of the shorebased section; approval of whiting components only; disapproval with respect to non-whiting groundfish.

Response.
NMFS has reviewed the amendments in their entirety and, except for several minor provisions, has not identified a basis for partial approval.

Comment 10.
One commenter stated that the trailing amendments burden the wrong people.

Response.
These amendments are currently under development by the Council. When completed, they will be submitted to NMFS for agency review in conjunction with public comment periods. Members of the public should participate in the Council process to help design these amendments.

Comment 11.
One commenter stated that the proposed rule and amendments should be disapproved due to unexplored alternatives and negative impacts.

Response.
As described in the EIS, NMFS and the Council have explored a wide range of alternatives and analyzed the potential impacts. As stated in the responses to comments 19 and 34, the underlying analyses conclude that the negative impacts are justified by the anticipated benefits.

Comment 12.
NMFS received multiple comments citing problems with the status quo.

Response.
NMFS acknowledges this comment.

Comment 13.
One commenter requested a workshop to explain the shoreside whiting allocation procedure.

Response.
NMFS has developed outreach materials that are currently available at:
http://www.nwr.noaa.gov/Groundfish-Halibut/Groundfish-Fishery-Management/Trawl-Program/index.cfm.
In addition, NMFS is planning a series of public workshops in September/October in California, Oregon and Idaho (session in Idaho during two evenings at the September Council meeting) at six locations to discuss the specifics of the program. These workshops are designed to address all aspects of the trawl rationalization program.

Comments Pertaining to Timing

Comment 14.
Congressman Thompson submitted a comment requesting a delay issuing rules until fully briefed.

Response.
The Congressman's staff has been briefed by NMFS on the provisions associated with the trawl rationalization program.

Comment 15.
One commenter suggested not making this a permanent program, to keep some flexibility when stocks rebuild.

Response.
The Council envisions a process whereby the program will adapt to changing circumstances. A major component of the program at the outset is the Adaptive Management Program (AMP), which sets aside 10 percent of the nonwhiting shoreside quota shares to address unforeseen impacts, beginning with year 3 of the program. Additionally, a comprehensive review of the program to evaluate effectiveness in relation to the original program goals and objectives is scheduled for year five of the program. Flexibility to adapt to changing circumstances was specifically acknowledged. On page 54 of the EIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery”, it states “In taking this action, the Council acknowledged that work will have to continue to monitor the program and to make adjustments in response to program performance. Even prior to implementation, the Council will continue to work on provisions for Community Fishing Associations (CFAs) and an AMP. While there may be unintended and unanticipated consequences, there will be an opportunity to modify the program through a review process, and a data collection process will be implemented to support that review.”

Comment 16.
One commenter suggested a delay of the program until a referendum is conducted.

Response.
The Council chose not to consider a referendum (vote by fishermen in support or disapproval) prior to moving forward. This program has been under development through the Council process for over five years, and ample opportunities have been provided for input into the design of the program. See response to comment 18 below for additional details on the public input process.

Comment 17.
One commenter suggested the program should not be implemented because the fishermen are still experiencing negative effects and financial impacts from buyback.

Response.
In 2003, approximately one-half of the West Coast Limited Entry Groundfish Trawl Fishery permits were retired as part of a voluntary government-backed loan and auction buyback scheme. Section 2.6.5 of the EIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery” describes broad level Council concerns and tradeoffs in choosing between status quo and trawl rationalization, and the buyback program was part of that discussion (page 53). The Council concluded that the trawl rationalization program addresses many of the difficult, time-consuming management problems it has struggled with under status quo. It is expected to provide a basic management framework that will provide the most benefits to the nation for the public resource, including: assigning personal accountability for the fisheries; providing opportunities for bycatch reduction; enhancing stock rebuilding through improved fishery information and full observer coverage; providing opportunities to maximize catch of targeted species while protecting species of concern; improving economic performance; helping to maintain community stability; improving safety; guarding against local stock depletion; and addressing unforeseen circumstances through an innovative adaptive management provision. The trawl rationalization program is a program that will help address conservation concerns and take a system that is not economically viable for many and turn it into one that will work for those who remain in the fishery after rationalization.

Comment 18.
There were a number of public comments on timing and implementation of the trawl

rationalization program. The comments ranged from those wanting to implement the program as proposed, without delay, to comments stating their opposition to implementation generally, to the “incremental approach, and the lack of opportunity for public comment and short time frames for review.

Response.
The public participation process involving the Council's deliberations is specifically identified in detail in Chapter 1 of the Final Environmental Impact Statement “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery, June 2010” on pages 15-18. Development and refinement of the alternatives leading to the Council's choice of a preferred alternative has taken more than five years, with numerous Council and committee meetings during the process. The Council's initial scoping and program development process began at a Council meeting in September, 2003. The EIS includes Table 1-1 on page 18, listing all of the Council committees associated with this subject matter. The EIS also includes Table 1-2, on pages 19-22, listing the meetings that have been held by the committees as well as Council meetings at which trawl rationalization or intersector allocation were discussed, with a brief description of the topics covered in each meeting.

At the agency level, NMFS has complied with the statutory requirements regarding public comment on the Amendments, the proposed initial issuance rule, and the DEIS. In addition, consistent with statutory requirements, NMFS will provide for public review and comment on the program components rule. NMFS believes that were adequate opportunities for public comment on proposed Amendments 20 and, the NEPA documents and the initial issuance rule for trawl rationalization. As for the incremental approach, NMFS has fully analyzed the program and made that analysis available to the public and used it in the decision on the Amendments. The Council agreed with the agency's approach to implement the Amendments through two rulemakings.

Comments on Program Costs

Comment 19.
One commenter expressed concern about negative impacts on smaller boats, deckhands, and smaller ports, pointing out issues such as vessels in certain ports that will receive lower catch, but have increased costs, and the effects of fleet reduction on port infrastructure.

Response.
While the trawl rationalization program would move the fishery toward some of its most important goals and objectives, in order for the program to realize those benefits, a large amount of consolidation would have to occur, resulting in fewer people employed in the fishery. The Council acknowledged and expressed concern about the expected consolidation and its impacts, and noted the need to attend to the potential for disproportionate impacts on some communities. There was also concern that the potential accumulation of wealth under the IFQ program should have corresponding levels of benefit for the nation, and that state implementation costs be addressed. The Council also expressed an interest in maintaining the character of the fleet and a diversified industry. Balancing the need for consolidation to generate adequate levels of benefit with the potential adverse impacts of consolidation was a major challenge. At the same time, continuation of status quo would have its own impacts, with both the buyback program and cumulative limits having caused significant consolidation in the fleet and a redistribution of vessels along the coast.

Because of the high degree of concern about impacts on communities and maintaining some sharing of benefits (both among harvesters and between harvesters, processors, and others dependent on the fishery) the Council made a number of tradeoffs in the trawl rationalization program that may prevent the program from reaching the full degree of economic efficiency that might otherwise be achievable through rationalization. For example, accumulation limits would help disperse fishery benefits, but would inhibit consolidation. Additionally, some QS was set aside for use in an AMP to address such objectives as community and processor stability, new entry, conservation, and other unidentified/unforeseen adverse consequences. A number of other measures were also considered as the Council struggled to find a balance among sectors, states, vessels, ports, conservation obligations, and its responsibility to try to develop a regime that maximizes economic benefits while simultaneously realizing, recognizing, and honoring the social effects of its decisions.

Consideration was also given to allocating QSs to communities and crew members. With respect to the Council consideration of CDQs, up to the very end of the Council's deliberations, communities expressed little or no interest in receiving an initial allocation of QSs. Therefore, the Council developed other mechanisms to address concerns about communities, including, but not limited to, the AMP, a two-year moratorium on QS transfers, a five-year review that includes a community advisory committee, accumulation limits and a two-year review of some of the limits, the opportunity for communities to receive an initial QS allocation by acquiring a trawl permit, and a trailing action on CFAs. With respect to crew members, an initial allocation is difficult because there is limited historic information on the identity of crew members who have fished on trawl vessels. It is the Council's hope that by providing highly divisible QSs and ensuring that other elements of the program design facilitate crew ownership of QS, that crew members who want to do so will be able to incrementally accumulate QSs.

In terms of impacts on small businesses, the trawl rationalization program is intended to increase net economic benefits, create economic stability, provide full utilization of the trawl sector allocation, consider environmental impacts, and promote conservation through individual accountability for catch and bycatch. The allocations of quota under the new program do not differ significantly from status quo allocations made biennially in terms of total allocations. However, instead of fleetwide quotas, there will now be individual allocations of quota shares and quota pounds to permit owners. Allocations of overfished species constrain all groundfish fishermen, for both large and small operations. In some cases, smaller operators may be constrained to a greater extent. This was recognized in development of the program, and operators are encouraged to work together cooperatively, through mechanisms like combining and sharing quota amounts. The program provides for leasing of additional quota as needed to facilitate operations.

The proposed action includes provisions that would have a beneficial impact on small entities. It would create a management program under which most recent participants in the Pacific Coast groundfish limited entry trawl fishery (many of which are small entities) would be eligible to continue participating in the fishery and under which the fishery itself would experience an increase in economic profitability. Small entities choosing to exit the fishery should receive financial compensation from selling their permit or share of the resource. To prevent a particular individual, corporation, or other entity from acquiring an excessive share of the total harvest privileges in the program, accumulation limits would restrict the amount of harvest privileges

that can be held, acquired, or used by individuals and vessels. In addition, for the shoreside sector of the fishery, an AMP was created to mitigate any adverse impacts, including impacts on small entities and communities that might result from the proposed action.

Comment 20.
The Council has not adopted a methodology for a cost-recovery plan, as required by the MSA, and the cost to taxpayers and participants is too high.

Response.
Information about program costs was included in the EIS and the RIR/IRFA. The Council took all of these factors into consideration in moving forward with a recommendation to implement the trawl rationalization program. The Council intends to develop a cost recovery plan through a trailing amendment. NMFS encourages public participation in both the Council and the Secretarial review process.

Comment 21.
The costs to the government are too high and will divert funds from other conservation purposes.

Response.
NMFS has taken the costs of implementing the amendments into consideration when approving them. To the extent allowed by the MSA, NMFS will recover the agency costs of management, data collection and analysis, and enforcement activities from the fishing industry when a cost-recovery plan is implemented.

Comment 22.
The program costs to fishermen, including the costs of entering the fishery and the costs of observers and monitoring, are too high.

Response.
Analyses indicate that the program benefits will outweigh the program costs. The EIS anticipates that the value of the fishery will increase through a variety of mechanisms, including increased efficiency of existing vessels, the transfer of effort to the most efficient vessels, and increased retention of target species. The program includes opportunities for adaptive management if actual impacts differ from projected impacts. In addition, the Council made quota shares highly divisible to increase the ability of crew members and others to buy into the fishery. To aid the fishing industry during the transition to a rationalized fishery, the agency has announced its intent, subject to available Federal funding, to cover a portion of the initial cost of hiring observers and catch monitors. As stated by the agency, participants would initially be responsible for 10 percent of the cost of hiring observers and catch monitors, with that amount increased every year so that by 2014, the industry would be responsible for 100 percent of the cost of hiring the observers and catch monitors.

Comments on the Observer Program

Comment 23.
One commenter stated that observer rules need to change for trawl and small boats to reflect the “vastly different bycatch which occurs when mistakes are made.”

Response.
The final design features of the observer program and applicability to both large and small vessels were evaluated thoroughly through development of these program components, and ultimately led to the Council decision to require 100 percent observations for those fishing vessels that continue trawling under this rationalization program. By “mistakes” we assume the commenter meant situations where high bycatch of overfished species events occur, and that larger vessels may have potentially greater negative impacts. While this may be true, vessels that participate in the shorebased IFQ program will be held individually accountable for any bycatch of overfished species. In the at-sea program, there are sector specific bycatch caps that will remain in place. These bycatch caps are limits, and can have the effect of closing sectors of the trawl industry when reached. Conservation measures in order to facilitate the rebuilding of overfished species were specific components of the trawl rationalization program.

Comment 24.
Public comments expressed concern that the cost of the observer program disadvantages smaller operators; that IFQs, even with observers, increase the risk of high-grading; that observer costs are generally too high; and that observer program doesn't enhance conservation, just total catch accounting.

Response.
Appendix H to the EIS for Amendment 20, the “Regulatory Impact Review and Initial Regulatory Flexibility Analysis, (RIR/IRFA)” addresses a number of these issues. As noted in the RIR/IRFA, the cost estimates are preliminary; the direct observer and monitoring costs depend heavily on operational decisions by industry (both fishing vessels and processors) to reduce costs. In addition, it is impossible to predict how much consolidation will occur, especially in the initial years of program implementation. For these reasons, the RIR/IRFA makes broad assumptions about industry behavior to frame the range of costs. At one extreme, annual observer costs could rise to $18 million if a 100-vessel fleet needed observers 365 days a year at a cost of $500 per day. However, as stated at numerous Council meetings, the industry could reduce costs by voluntary limits on the number of vessels that can be at sea at any one time or agreements to share observer coverage between multiple vessels. Observer and other costs could decline as the number of participating vessels decline, when the fleet consolidates because of the program. As discussed in the RIR/IRFA, the Lian analysis (Lian
et al.,
2008) indicates an expectation that there will be a fleet of 50 to 60 vessels of a size of 60 to 70 feet after rationalization. If this were to happen, one would expect the costs to be significantly lower and approximately half of the estimated costs for the current fleet.

As stated in the response to comments on the draft EIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery,” analysis indicates that the program benefits will outweigh the program costs. For those participants who feel the costs are too much of a burden, they have the option of selling or leasing their QS. In addition, as stated at Council meetings, vessels, both large and small, are encouraged to coordinate with each other and with the observer providers to reduce costs and provide more efficiency.

In terms of the comment that the risk of high-grading (sorting to retain more marketable fish) will be increased under and IFQ system, NMFS believes that the exact opposite will occur under total catch accounting. With 100 percent mandated observer coverage, all catch will be accounted for, and individuals will be held responsible for their behavior. This structure leads to the opposite conclusion regarding high-grading.

One commenter questioned what conservation goals the observer program is achieving other than total catch accounting, citing lack of economic benefits and lack of individual stability. NMFS disagrees with this perspective. Conservation of the fishery resources and rebuilding of overfished species are the main reasons why the Council has recommended a program with total catch accounting. Individuals will be held responsible for conducting harvests consistent with their QS and QP allocated. To the extent that individuals may need additional QS and QP to conduct their operations, the options of leasing of QS and purchasing QS and QP through time should lead to economic stability for those individuals whom choose to remain as active participants in the trawl rationalization program.

Comments on Initial Allocation of Catch Shares

a. General Comments

Comment 25.
One commenter argued that shore-based processors should not receive 20 percent of the quota because that sector has too much control over the fishing fleet. Another commenter expressed support for the proposed allocation of quota to processors.

Response.
The Council recommended that 20 percent of the shoreside harvest allocation of whiting would be initially allocated to shoreside processors, based on those processors' history. The Council concluded, and NMFS agrees, that this initial allocation was fair and equitable, thus consistent with section 303A(c)(5) of the MSA, which requires the Council to “ensure fair and equitable allocations, including consideration of (i) current and historical harvests; (ii) employment in the harvesting and processing sectors; (iii) investments in, and dependence upon, the fishery; and (iv) the current and historical participation of fishing communities.” As explained in Section A-2.1.1a (Appendix A) of the EIS, NMFS and the Council took the statutory factors into account and determined that, among the various alternatives under consideration, the initial allocation of whiting harvesting privileges as a 20/80 percent split to processors and current permit holders was fair and equitable.

The issue of reduced competition and anticompetitive impacts of allocating quota to processors was analyzed extensively in the EIS and was discussed and considered carefully by the Council. During development of the trawl rationalization program, the NOAA Office of General Counsel (GC) had informal consultations with the Antitrust Division of the U.S. Department of Justice. Based on those informal consultations and analysis of relevant facts and applicable legal rules, NOAA GC submitted a letter to the Council dated October 11, 2008, in which the antitrust savings clause in Section 303A of the MSA was noted and advised “that any fishery participants that are uncertain about the legality under the antitrust laws of the United States of any of their anticipated activities should consult legal counsel prior to commencing those activities.” The NOAA GC letter provided citations to guidance or resource documents available on the Federal Trade Commission Web site. The NOAA GC letter is available on the Pacific Council's Web site at
http://www.pcouncil.org/bb/2008/1108/F3d_SUP_GC_1108.pdf.

Comment 26.
It is unfair that permits that have not made payments for the buyback program will receive an initial allocation.

Response.
All permits will receive an initial allocation of non-overfished species, based on the equal division of QS associated with the history of the permits bought back plus an amount of QS related to the actual 1994-2003 deliveries by the permit. The designation of an equal allocation amount based on the history of the buyback permits was viewed as an equitable way to help resolve the initial allocation issue, ensuring that the smaller producing harvesters were more likely to receive an initial allocation adequate to cover their needs while the larger producing harvesters, more likely to be better financed, might have to purchase more QS to maintain their recent harvest levels. NMFS and the Council are aware that this will include some permits that have not made landings since the inception of the buyback loan payback program (December 2003). The Council recommended, and NMFS is implementing, what it believes to be the best balance among a variety of possible allocation approaches.

Comment 27.
The quota allocations do not support current fishing practices. In order to keep fishing, some fishermen will have to purchase additional quota of some species while receiving more than needed of other species. In order for high producers to fish all their boats, they will have to buy more quota.

Response.
Chapter 4 the Amendment 20 EIS described in detail the anticipated impacts of the trawl rationalization program on the various sectors of the fishing industry. NMFS acknowledges that, depending on the allocation formula, some permit holders and catcher vessels may receive a greater or lesser amount of allowable catch than under status quo conditions. In addition, they may receive a different mix of species allocated as quota compared to the mix of species they currently harvest. In the long run, however, transfers of those fishing privileges should occur in a way that is more optimal to individual harvesters, and that transfer will act as a cost to those that purchase the shares and as a benefit to those that sell them.

The Council anticipates that consolidation is likely to occur in the nonwhiting sector that will trend toward the most efficient vessels. The fleet reduction and cost efficiency model shows the consolidation that may occur could diminish the number of vessels by 50 to 66 percent.

Comment 28.
One comment criticizes the eligibility criteria for initial allocations as too narrowly focused, not providing for captains and crew due to a lack of data.

Response.
Although a lack of data was one factor in the decision not to extend eligibility to receive an initial QS allocation, there were several other factors considered. The Council enumerates several of the reasons behind the decision to allocate to permits and processors in A-14 and A-15 of the Amendment 20 EIS, Appendix A.

Direct allocation to skippers and crewmembers was discussed and the costs and complexity of identifying vessel workers and determining whether they participated on vessels while those vessels were fishing in the groundfish trawl fishery were noted. Complexities include the fact that crew member-licensing requirements vary between states and in some cases crewmembers are not required to have permits. Multiple alternative sources of information would have to be considered in determining crew member eligibility for an initial allocation.

With respect to relative impacts of an initial QS allocation on different classes of fishery participants, it was noted that for a crew member dislocated because of the IFQ program there would likely be a greater number of economic alternatives available, as compared to a fishing permit or vessel. Additionally, since crew members move between fishing operations, an allocation to crew could reduce the initial allocation available to a harvester in comparison with its recent operation levels, leaving fixed capital assets without significant production opportunities. While harvesters receiving less than their needs would be able to acquire additional QS through purchase, the need to make such purchases would likely mean a greater disruption during initial implementation of the program.

b. Allocation Formula in General

Comment 29.
Several commenters addressed the qualifying history period selected by the Council for both whiting and nonwhiting non-overfished species. One commenter criticized the period as “arbitrary.” Others expressed a belief that MSA “recency” requirements are not being met because the qualifying period of 1994-2003 is too out of date. One commenter suggested increasing emphasis on recent years by moving the start of the allocation period from 1994 to 1997 and the end from 2003 to 2006 (and using 2003 through 2006 for the allocation period for overfished species), recognizing a new control date

of January 1, 2007. Further comments on the qualifying history period include:

• It rewards the inefficiencies, inadequate infrastructure and lack of investment that characterized the qualifying year window. Allocations of nonwhiting groundfish to inactive participants in the fishery harm active participants.

• The allocation period includes years with inaccurate species composition and discard data that will skew the picture of the true state of nature.

• More current data is available and critically important.

• There have been dramatic changes in the whiting fishery starting in 2001, and which have been especially significant after 2003.

Response.
Similar comments were received during the public comment period on the draft EIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery.” Parts of the detailed response to those comments bears repeating as directly relevant and responsive to the comments received recently. In recommending initial allocations, the Council is required to consider several factors including current harvests and historic harvests.
See
16 U.S.C. 1853a(c)(5)(A); see also 16 U.S.C. 1853(b)(6). Appendix A to the Amendment 20 EIS includes a review of the Council's consideration of all of these factors, including a discussion of the rationale for considering a variety of dates for the allocation period, including start dates of 1994 and each year from 1997 through 2001. The allocation dates selected represent a balance between emphasis on more recent history and considering the historic fishing opportunities which may have had a determining effect on the levels of capital investment by individual firms. The start date of 1994 was selected because 1994 was the first year of the license limitation program. The decision to utilize a long allocation period was deliberate; it is likely that capital investment is based on longer term opportunity and that capital persists after contractions in the fishery such as that reflected by the disaster declaration in 2000. On this basis it is appropriate to give some weight to landings from the 1990s. Because more fish was taken during that time period, the relative pounds approach (measuring catch history as a vessel's share of total catch) reduces the emphasis on a pound of fish caught in the 1990s as compared to a pound of fish caught after 2000. While some argue that fishermen who caught fish in the mid-1990s caused the disaster and should not receive QS for that fish, the catch taken in the mid-1990s was in line with what was allowed under the regulations and believed to be sustainable at the time.

The Council selected the ending year of 2003 because that year corresponds to the previously announced control date for the fishery. The Council adopted and published the control date of November 6, 2003 (see 69 FR 1563 (January 9, 2004); 70 FR 29713 (May 24, 2005). The Council believes it is very important that the 2003 control date be used in order to prevent future fishery disruptions. The purpose of announcing a control date in advance of developing a LAPP is to discourage entry into a fishery and increased harvest while the Council goes through the process of developing the program details, which can be a lengthy exercise. If the Council develops a pattern of announcing and abandoning control dates, then the announcement of control dates will become a signal to harvesters to intensify their efforts to catch fish in order to increase their odds of qualifying for greater initial allocations. Such a response would be disruptive to fisheries and exacerbate the challenges of meeting conservation objectives. Additionally, abandoning the original control date would reduce the perceived fairness of the program by rewarding those who fished speculatively after the control date (fishing primarily on the chance that the control date would be abandoned and they would acquire more quota as a result of their post control date fishing) at the expense of those who heeded the control date. In balancing the importance of the reliable control date, and the importance of considering historic participation, against the potential for some disruption of using a time period ending several years prior to the start of the program, the Council found that it was preferable to use the 2003 control date.

The public was given significant notice of the use of November 6, 2003, as a potential control date. The notice was originally published in the
Federal Register
on January 9, 2004, and an additional notice was published on May 24, 2005. Both notices were posted on the Council's Web site, with an explanation of the possible consequences of the control date. In addition, starting in October 2003, The Council and its Trawl Individual Quota Committee held numerous public meetings and discussions at Council meetings on the trawl rationalization program including the use of the control date and the alternate qualifying periods.

The Council disagrees with the commenter's assertion that Amendment 15 to the Groundfish management plan created a new control date of January 1, 2007, that should be controlling here. Nowhere does Amendment 15 address the 2003 control date or purport to change the qualifying period for the groundfish trawl program. Amendment 15 was a limited interim action for the non-Tribal whiting fishery issued in anticipation of the trawl rationalization that in no way attempted to address matters beyond its limited scope. Moreover, the Council has explicitly stated that vessels that qualified for Pacific whiting fishery participation under Amendment 15 were not guaranteed future participation or inclusion in the Pacific whiting fishery under the provisions of Amendment 20.
See http://www.pcouncil.org/groundfish/fishery-management-plan/fmp-amendment-15.

With regards to “recency” concerns, the Council does take into account recent participation patterns in the fishery by allocating QS to current permit holders rather than to individuals or vessels that originally caught the fish. In this way, during the extensive period required to develop a program of this kind, entry and exit can occur and QS can be allocated in a less disruptive manner than would occur if the allocations went to the individuals who caught the fish historically.

While the overfished species allocation formula includes logbooks for 2003-2006, these records are used to determine the fishing pattern, not the overall level of harvest activity. The Council's methodology for allocating overfished species is significantly different than the methodology for allocating target catch. The 1994-2003 period is still used to determine the target species allocation, and the harvest patterns from the 2003-2006 logbooks are used to determine the amount of overfished species an entity would need to take its target species. In this fashion, more recent information for the fishery is used without rewarding post control date increases in effort. The 1994-2003 harvest patterns were not used to determine a target species QS recipient's need for overfished species QS. This is because of the substantial changes in fishing patterns which were induced by the determination that some species were overfished and the implementation of the rockfish conservation areas (RCAs) and because the RCAs will remain in place after the trawl rationalization system is put into place. Therefore the Council considered that an estimate of likely patterns of activity should be based on a period of time when the RCAs were in place. The RCAs were not in place for most of the

1994-2003 period but were in place for 2003-2006.

One commenter made the point that the initial allocation, because it is different from the current distribution of harvest, may reward inefficiencies and reverse recent conservation gains, including reductions in bycatch. While it is possible that the initial allocations may not go to the most efficient and innovative harvesters, because of the need to draw a balance between a reliable control date and disruption, fairness and equity, recent participation and historic participation issues, it is expected that society will benefit over the long haul as the quota is transferred to use by the most efficient harvesters as the program progresses. Independent of the initial allocation, the QS system is expected to provide substantial incentive for vessels to avoid bycatch. One hundred percent observer coverage will ensure full individual vessel accountability. These individual vessel incentives are expected to preserve gains made in bycatch avoidance in recent years.

The same commenter also made the point that the discard and catch composition data quality from those years is poor and will skew the picture of the true state of nature. The allocation formula does not use discard data from the mid-1990s. With respect to catch composition data, it has been accepted that these data may skew the mix of species any particular permit would receive away from its actual catch, simply because the catch composition data was designed to estimate catch at the fleet level rather than the individual vessel level. Catch composition data has the same problem whether it is from the mid-1990s or early 2000s. While the catch composition data might be of better quality in more recent years, the Council felt that it was more important that the control date and longer allocation period be maintained and worth the tradeoff entailed in relying on older catch composition data.

Comment 30.
A comment was submitted on behalf of owners and operators of a harvesting vessel, in support generally of Amendments 20 and 21 for improving management of groundfish but noting that the program improperly excludes valid “B” Permit groundfish fishing history in the initial allocation process. The commenter submitted multiple exhibits in support of their comments.

Response.
NMFS has reviewed the comments and the supporting exhibits. The commenter's position is that the prior permit owner's assignment in 2004 of all fishing history to the current vessel/permit owner included the groundfish “B” Permit fishing history from 1994, 1995 and 1996, and therefore the program improperly excludes valid “B” Permit groundfish fishing history in the initial allocation process. Further, the comment notes that nothing in Amendment 20 or 21 precludes inclusion of that “B” Permit history in the total catch history owned by the current permit owner. NMFS disagrees, for the following reasons.

Amendment 20 specifies that the initial allocation will be made to the current owner of groundfish limited entry permits. These permits have been in place since 1994, as part of the implementation of Amendment 6, the groundfish limited entry program. Limited entry permits with “A” and “B” endorsements were implemented as part of the groundfish limited entry program (57 FR 54001-01, November 16, 1992). The program established permits with “A” endorsements, which were transferable, for trawl vessels that met specific minimum landing requirements. It also established permits with “B” endorsements, which were not transferable, and which expired upon transfer to a different owner, or at the end of 1996 (whichever occurred first). These “B” endorsements were intended for vessels that had some low level of activity in the fishery prior to August 1, 1988, and under the current owner, but did not meet the landing requirements for vessels receiving “A” endorsements. The “B” endorsements provided a three-year adjustment period during which the vessel owners could either make arrangements to stay in the fishery through the purchase of an existing “A” endorsed permit or stop participating in the limited entry fishery. NMFS accordingly removed the “B” endorsement provisions from the regulation after the “B” endorsements had expired; in addition to the “A” endorsement, the only endorsements on limited entry permits are now gear endorsements (trawl, longline, pot or trap) and size endorsements (
see
66 FR 29729, June 1, 2001, and 50 CFR 660.333).

Consistent with this background, the current limited entry permits are “A” endorsed only and have no relationship to “B” endorsed permits, which expired at the end of 1996. The current limited entry permits in the trawl fishery with trawl endorsements originally, under Amendment 6, were called limited entry permits with “A” endorsements. When the “B” permits expired, NMFS revised the regulations to refer to limited entry permits with trawl endorsements. These are the limited entry permits referred to in the trawl rationalization program and they and their landings history, are distinct from the permits with “B” endorsements that are no longer in existence.

NMFS recognizes that the supporting exhibits submitted by the commenter show that for purposes of the American Fisheries Act (AFA), the NMFS, Alaska Region, approved the request that the F/V Pacific Challenger be named as a replacement vessel for the F/V Amber Dawn. However, this decision for the AFA fisheries is separate from and has no effect on the relation to the Pacific Coast Groundfish permits and the trawl rationalization fishery.

c. Allocation of Bycatch/Overfished Species IFQ

Comment 31.
Some commenters stated that the program has been compromised by a Council recommendation to not allocate overfished species in the same manner as all other species, but to instead use a method based on a constrained fleet outside of the time frame which the rest of the program is based. Commenters state that during the years used for the overfished species allocation, responsible operators made efforts to minimize bycatch of overfished species. They further state that this punishes those who attempted to fish sustainably and rewards those who maximized their landings in a manner contrary to the conservation goals of the Magnuson-Stevens Act.

Response.
The Council considered and rejected the option of allocating overfished species for nonwhiting trips using the same method as for other nonwhiting IFQ species as not appropriate under the circumstances. In particular, the relative weighting approach, by which landings for a year are measured as a percent of all landings for the year and species, would have given a particularly high amount of credit for pounds caught during the rebuilding period. Additionally, QS would have been allocated to those who targeted some of the overfished species in the mid-1990s (before they were declared overfished) rather than to those who need such QS to access current target species. Accordingly, the Council rejected the approach of using the same allocation formula for overfished species as for nonwhiting target species based on the desire to not reward bycatch during the rebuilding period and in order to provide QS to those who would need it to cover incidental catch taken with their target species QS allocation.

Regarding the comment that overfished species years selected were arbitrary, the Council's methodology for allocating overfished species is

significantly different than the methodology for allocating target catch. The 1994-2003 period is still used to determine the target species allocation, and the harvest patterns from the 2003-2006 logbooks are used to determine the amount of overfished species an entity would need to take its target species. In this fashion, more recent information for the fishery is used without rewarding post control date increases in effort. The 1994-2003 harvest patterns were not used to determine a target species QS recipients need for overfished species QS. This is because of the substantial changes in fishing patterns which were induced by the determination that some species were overfished and the implementation of the RCAs and because the RCAs will remain in place after the trawl rationalization system is put into place. Therefore the Council considered that an estimate of likely patterns of activity should be based on a period of time when the RCAs were in place. The RCAs were not in place for most of the 1994-2003 period but were in place for 2003-2006, further supporting the conclusion to use this period for the allocation of overfished species.

Comment 32.
One comment expressed concern over the impact of the allocation formulas on Fort Bragg fishermen.

Response.
After the adoption of its final preferred alternative, the Council heard public comment with regard to concerns of the owners of Fort Bragg trawl vessels over the initial allocation of QS for constraining overfished species. The Council considered such testimony and subsequently revised its initial final preferred alternative so that all permits would receive an allocation of canary rockfish from the equal division of the pool of QS associated with the catch history of the buyback permits. The Council declined to revise the FPA for constraining overfished species other than canary.

Comment 33.
A comment stated that establishing IFQs for overfished species will not solve problems of overfishing. IFQs will be transferrable and distributed freely in the initial allocation to those who are deemed to have the greatest need due to catch history. IFQs are presumed to incentivize responsible fishing due to the cost of purchasing additional quota. Because the value of IFQs is likely to skyrocket due to high demand for a scarce resource, this system favors larger operations with greater access to capital.

Response.
The Council recommended its preferred alternative in response to the identified need for bycatch control and the need for conservation through its focus on individual accountability for catch and bycatch. At present, total mortality for all species is measured and controlled by monitoring total landings and sampling 20 percent of the trawl trips to estimate bycatch rates (discard rates) that are then applied to landings to develop an estimate of total catch and mortality. With this approach, there is substantially less certainty about total catch and mortality than there are total landings. Further, while agencies are able to regulate total landings in the nonwhiting trawl fishery through two-month cumulative limit periods and influence bycatch rates with catch area restrictions and gear restrictions, they face difficulties in managing for total catch in the nonwhiting portion of the trawl fishery. The fishery is a mixed stock fishery. When, despite best regulatory efforts, a fisherman encounters amounts of certain species that are in excess of the two-month cumulative landing limits, they may continue to fish for other target species, discarding the species for which they have reached their limit. The current monitoring system was designed to provide fleetwide total catch estimates over the course of a year. It was not intended as a tool for managing individual vessel discards in the nonwhiting trawl fishery or for providing for individual accountability.

With 100-percent observer coverage, NMFS and the Council will be able to better monitor total mortality of all groundfish species. Better mortality estimates will improve both stock assessments and the ability to keep catch below the harvest limits developed based on those assessments, substantially contributing to conservation goals. Additionally, rationalization, based on a system that relies on transferable quotas, enhances the incentive to avoid bycatch. Without transferable quota, the incentive is to reduce bycatch only to the point where all targeted species can be harvested. With transferable quotas, fishermen who can lower bycatch rates even further have a potential opportunity to sell their unused quota to others, thus benefitting from reducing their bycatch rate to a level lower than what was necessary for them to take their own available target harvest.

Finally, this is a forward-looking management program. It is expected to improve the economics of the overall trawl fishery. Economic analysis of the fishery indicates that the average nonwhiting shoreside fisherman is either breaking even or losing money (not fully covering its capital costs). Fishing businesses that don't receive an initial allocation may participate either by acquiring QP each year from quota shareholders or acquiring long-term security through the purchase of QS. Those fishing businesses that do not choose to acquire QS will have to compete each year in the market for QP. Their ability to purchase QP will depend on their ability to be more efficient than other fishing businesses, and thereby more able to offer a higher price for the QP. Fishing businesses that choose to do so will be able to increase the security of their investments by acquiring QS.

Comments on Quota Ownership and Transfer

Comment 34.
Commenters expressed concern that the average fisherman will not be able to afford to participate and that this will lead to increased consolidation and leave many ports no longer viable.

Response.
NMFS recognizes the likelihood of increased consolidation and negative impacts on some communities. The RIR/IRFA and FEIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery” analyze these impacts and consider them in the context of other costs and benefits expected to result from this program. Based on these analyses, the program is expected to achieve net benefits to the nation.

It is recognized that fleet consolidation will have an impact on communities; however, other measures are provided to mitigate impacts on communities (see Section 10.1.5 of the FEIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery”). Under an IFQ program, communities will have opportunities to plan and control their destiny through the acquisition of QS, if they so desire. Furthermore, the Council may use part or all of the 10 percent quota set aside in the AMP to mitigate impacts on communities. The Council will also be considering a trailing amendment to allow community fishing associations to acquire quota, potentially in excess of control limits.

While this rule and amendments may have negative impacts on certain communities and participants, viewing the fishery as a whole, the rule and amendments are expected to improve the economics of the overall trawl fishery.

The Council recognizes that for new entrants, the cost of acquiring individual quota will add to the expense of entering the fishery. An increase in profits (before taking into account the cost of the quota and normal profits after taking into account the cost of the quota) and stability is expected to

compensate for the increase in costs. Under status quo management, the value of a new entrant's capital investment would be at greater risk because of the potential erosion of fishing opportunity through the increased effort of others. With respect to the capital badly needed for infrastructure and vessel improvements, this is a condition that has occurred under status quo management. There is no reason to believe that continuation of status quo would improve the situation; however, under IFQs, greater economic stability may facilitate a safer fleet with a stronger infrastructure. Section A-2.2.2.d of Appendix A to the EIS identifies ways in which the Council considered the needs of new entrants.

With respect to new entrants working their way up from the bottom, the QS system provides an opportunity for individuals such as crew members to accumulate capital. For example, crew members might invest in some QS, which is highly divisible, and sell their QP to the vessel each year, creating a stream of income which may be accumulated to allow them to purchase more QS and eventually a vessel.

Comment 35.
Commenters stated that there should be greater restrictions on ownership and transfer, such as requirements for an owner on board, maximum lease percentages, and control at the community level. Some commenters also stated that captains and crew can be disadvantaged when employed on vessels with leased quota as opposed to when fishing on vessels run by quota owners. One commenter stated that the need to recoup the price of the quota lease makes it more difficult for vessels fishing leased quota to be profitable and provides an example from the Canadian halibut fishery.

Response.
As noted above, with respect to new entrants working their way up from the bottom, the QS system provides an opportunity for individuals such as crew members to accumulate capital. For example, crew members might invest in some QS, which is highly divisible, and sell their QP to the vessel each year, creating a stream of income. In addition, the AMP may potentially be used for aiding new entrants into the fishery; the Council will be addressing the AMP program during the first two years of the rationalization program.

The Council considered requiring an owner on board, but rejected that alternative due to: The impracticality of such a provision in a multispecies fishery which would rely heavily on quota trading to match quota mix to catch mix; the substantial increase in tracking and monitoring costs that such a provision would entail; and the fact that the owner-operator mode of organization is less dominant in the trawl fleet than in other, smaller boat, fisheries.

The Council recommended accumulation limits that reflect the current level of concentration in the fleet, as reflected by the harvest activity of individual permits. After consideration of a variety of approaches, the Council recommended control at levels more constraining than necessary to address concerns related to the effective functioning of QS markets. This was done in order to achieve certain objectives related to the distribution of QS ownership.

Accumulation limits for IFQ fisheries range widely depending on the needs and circumstances of any particular fishery. The U.S. surf clam and Wreckfish IFQ programs have no limits and rely on antitrust laws to ensure excessive control does not occur. Limits in the New Zealand system range from 10 to 40 percent, and limits in Iceland's IFQ system run from 12 to 35 percent. Nova Scotia has a limit of 2 percent. Limits in the halibut and sablefish IFQ fisheries in Alaska are set at 0.5 and 1.0 percent. The method used by the Council to develop the QS control limits for this program considered experiences with these approaches in other programs and is explained in the FEIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery.”

The Council's recommended limits are intended to facilitate fleet consolidation and increase efficiency.

Comment 36:
Two commenters supported substantially rewriting the ownership and control rules in proposed § 660.140(d)(4)(iii).

Response:
The specific comments are summarized and addressed below.

a. Under proposed § 660.140(d)(4)(iii)(B), “any person who serves in an executive or management capacity of a corporate entity that may own quota shares is considered to have control, even though that person may have not actual control over the use of the company's quota shares.” A similar situation exists with (iii)(F), where there is implied control as a coincidental circumstance of employment with a particular entity.

The commenters provided an example where the Vice President of Human Resources of Company X would be considered to have control even though she has no control over fishing activities, and such Vice President is also a member of a family corporation that owns a boat that has quota shares. The commenters ask who would be required to divest shares in excess of the accumulation limits, if the total of the “two completely separate and distinct quota share holding exceeds the accumulation limits, or whether the Vice President would be required to resign her position.

NMFS does not agree that § 660.140(d)(4)(iii)(B) needs revision. The commenters did not provide sufficient facts to enable NMFS to determine whether the Vice President's position provides her the type and scope of authority described in that section of the regulations. It did not provide sufficient information to determine her share of the family corporation to determine how much of that corporation's quota share she has attributed to her for ownership purposes. It also does not describe the amount of control she has within the family corporation or to determine whether she should be attributed with control over the entire family share. A determination of whether this person would exceed any control limit would be based on a variety of factors, including the details of the Vice President's position with Company X, the share of the family corporation she has, and her position in the structure of the family corporation. As to divestiture when a limit is exceeded, the parties involved would need to make the decision on how to divest or otherwise come into compliance with the limits.

b. Proposed § 660.140(d)(4)(iii)(D) and (E) “could eliminate the ability of a quota share/quota pound owner to obtain necessary financing for fishing operations. Under these sub-clauses, a bank or other financial institution would be unable to provide loans using quota shares/pounds as collateral, a common practice in limited access fisheries. A quota share brokerage would be unable to take title or otherwise encumber quota shares/pounds beyond the accumulation limits, even if a fisherman requested the broker do so.”

NMFS does not intend that these sections apply to banks or financial institutions, unless the financial documents specify control beyond normal business agreements. NMFS has modified the regulations accordingly. As for quota share brokerages, each transaction must comply with the accumulation or control limits; however, compliance does not prevent brokerage transactions. Compliance would be based on the facts of the transactions.

c. Proposed § 660.140(d)(4)(iii)(D) and (E), “along with sub-clause (iii)(H), could prevent the formation of

cooperative entities among fishermen to maximize efficiencies, reduce observer costs, and increase revenues—all activities that are assumed to be benefits and expected outcomes of Amendment 20.”

In response, NMFS notes that participants in any cooperative arrangement need to comply with the accumulation limits; it will be important that the terms of the cooperative arrangement, or any other arrangement, be carefully drafted and implemented such that the accumulation limits are not exceeded. The Council has stated its intent to consider a type of cooperative arrangement for communities (community fishing associations or CFAs) in the future as a trailing amendment—proponents of CFAs have suggested the need for modifications to the accumulation limits under certain circumstances.

NMFS acknowledges that participants in the fishery may be concerned about whether potential actions would comply with the accumulation limits. It is the responsibility of the participants to comply with the regulations; if participants have questions about potential actions, NMFS encourages those participants to provide the agency with specific facts and questions prior to entering into agreements or taking action in order to understand NMFS's interpretation of the potential facts in relation to the regulation.

Comment 37.
Commenters stated that factors such as the cost of quota, unrestricted leasing, and no owner-on-board requirement will increase involvement of those not currently involved in fishing to the detriment of fishing families and communities.

Response.
This issue, as well as eligibility-to-own rules, and other relevant issues will be reviewed during the 5-year review. The proposed program components rule includes a comprehensive mandatory economic data collection program that is specifically designed to provide socioeconomic data that will assist the Council in their scheduled 5-year review of the program. NMFS has published a final rule (75 FR 4684, January 29, 2010) to collect information needed to track ownership patterns. This issue, as well as eligibility-to-own rules, and other relevant issues will be reviewed during the 5-year review.

Comment 38.
A commenter expressed concern that the cost of quota shares will lead to dominance by larger scale participants resulting in a loss of political voice by smaller scale fishermen affecting the Council's ability to change or revoke catch shares in the future.

Response.
The Council will conduct a comprehensive review no later than five years after the implementation of the program to determine whether the program has achieved the goals and objectives of Amendment 20. Based on this review, which will be during the public Council process, the Council may recommend a variety of actions, including dissolution of the program, revocation of all or part of the quota shares, or other fundamental changes to the program.

Comment 39.
Several commenters objected to the ownership and transfer provisions for the following reasons: Concerns over consolidation that may leave ports no longer viable; negative effects on captains and crew when employed on vessels with leased quota; concerns about loss of opportunity to comment in the process; auctions and rent caps should have been considered; costs of quota and unrestricted leasing will increase involvement of those currently not participating; and the need for owner on board requirements.

Response.
With respect to the concern that excessive consolidation will leave some ports no longer viable, and that this is inconsistent with MSA national standards, as stated in the FEIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery,” Chapter 10, page 672, National Standard 8 states that “Conservation and management measures shall, consistent with the conservation requirements of the Magnuson-Stevens Act (including the prevention of overfishing and rebuilding of overfished stocks), take into account the importance of fishery resources to fishing communities in order to: (1) Provide for the sustained participation of such communities; and (2) To the extent practicable, minimize adverse economic impacts on such communities.”

Chapter 4.14 of the analysis describes anticipated impacts on communities and acknowledges a possibly profound impact on communities that depend on trawling. This is due to the nature of rationalization which results in fewer fishery participants and likely geographic shifts. The goal of attaining a sustainable fishery as a whole requires some impacts to individual communities. However, the Council also recommended measures that should mitigate these impacts. For example, the program would allow communities to purchase quota or permits to keep some of the fishery in the community. In addition, the AMP is intended for use in ameliorating impacts on communities.

In addition, fishing community participation is addressed in the FEIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery,” on page 676. Appendix A provides additional discussion of the Council's consideration of communities at Section A-2.1.1.a, and lists alternative means by which Amendment 20 addresses community needs, including:

• Maintenance of a split between the at-sea and shoreside trawl sectors.

• Broad eligibility for ownership.

• A temporary moratorium on the transfer of QS to ease the adjustment period and allow for adaptive response.

• Specification of vessel and control limits to spread QS among more owners and potentially more communities.

• Inclusion of a community advisory committee as a formal part of the program performance review process.

• The Adaptive Management set-aside.

In conclusion, NMFS believes that potential impacts to Pacific coast communities as a result of trawl rationalization were well analyzed, and the rationalization program minimizes these impacts to the extent practicable.

With respect to the concern that vessel leasing arrangements can adversely impact the captains and crew participating under a quota share program, NMFS notes that captains and crew have the option of selecting employment opportunities under the trawl rationalization program that best suits their individual needs, including selection based on their understanding of the terms associated with their employment. In addition, the accumulation limits envisioned under this program place serious constraints on the abilities of vessel owners to accumulate quota through leasing arrangements.

With respect to the comment that there was a lack of opportunity to comment on the QS ownership and transfer options, NMFS does not agree that there was a lack of opportunity to comment on the specifics of this program. The reader is referred to the response to comment 18 above where the public input process is described in detail.

With respect to the suggestions regarding the auction concept and rent caps suggested by one commenter, or “cap-rent-recycle model alternative,” NMFS's response was addressed in the response to comments on the draft EIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery,” and is repeated here. This alternative would have government capture resource rents to be used for

public purposes. The use of fixed-term QS that would be auctioned off periodically is one method to achieve such “rent capture.” The Council considered fixed terms and auctions but rejected this mechanism from further detailed study. In doing so, the Council considered the analysis contained in Appendix F of the EIS and the critique of the analysis presented by their SSC. The Council rejected inclusion of fixed-term QS and auctions in the range of alternatives, because (1) auctioning quota at the outset of the program could make it more difficult for the groundfish trawl fleet to successfully transition to IFQ/co-op management, and (2) exclusion of auctions from the range of alternatives does not imply that access privileges have been irrevocably distributed.

NMFS and the Council intend to give further consideration of auctioning harvest privileges during the 5-year program review.

With respect to the comment that unrestricted leasing could be problematic, NMFS agrees with this perspective, and in Appendix A of the FEIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery,” on pages A-284 to A-307, there is a lengthy discussion of the vessel limits and QS control limits recommended by the Council. Accumulation limits are described generally on page A-284, “This provision restricts the amount of QS and QP that may be held. Three types of accumulation limits are included, control limits, vessel limits, and an unused QP limit for vessels. The control limit would apply to QS; the vessel limit would cap the total amount of QP that may be registered to a single vessel during the year, and would cover both the vessels' used and unused QP. Under this limit, a vessel could not have more QPs registered for the vessel than a predetermined percentage of the QP pool. The unused QP limit for vessels would cap the amount of unused QP in a vessel's account.” From page A-285, “There is a tension between allowing a sufficient accumulation to improve the efficiencies of harvesting activities and preventing levels of accumulation that could result in a variety of adverse economic and social effects.” NMFS believes that the accumulation limits established for Amendment 20 represent a reasonable balance of interests.

The owner-on-board provision was addressed in the response to comments on the draft EIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery,” and is repeated here. “An owner-operator or owner-on-board provision was considered but rejected. In Section A-11 of Appendix A, three reasons are identified for rejection of the provisions: First, the impracticality of such a provision in a multispecies fishery which would rely heavily on quota trading to match quota mix to catch mix; second, the substantial increase in tracking and monitoring costs that such a provision would entail; and third, the owner-operator mode of organization is less dominant in the trawl fleet than in other, smaller boat, fisheries.”

Comments on Community Impacts, Involvement, and CFAs

Comment 40.
A commenter expressed concern that the cost of quota shares will lead to dominance by larger scale participants resulting in a loss of political voice by certain communities and negative impacts on community infrastructure.

Response.
As stated in responses to comments 39, and 65-67, the underlying analyses consider a wide variety of community impacts, including impacts related to consolidation. However, the Council process is an open public process and communities will continue to be able to participate regardless of the amount of QS located within a community.

Comment 41.
Several commenters stated that there should be an initial allocation to communities and that the Council should have worked with communities. Some commenters provided additional specific input on this point such as that the crabbers in San Francisco are forming a CFA and would benefit from an initial allocation. One commenter stated that CFAs should receive 25 percent at time of initial allocation. Another suggested providing CFA an initial allocation out the adaptive management program, from quota from the “bought out draggers”, or from increases in fish populations due to rebuilding.

Response.
The Council conducted extensive outreach to communities beginning very early in the development of Amendments 20 and 21. The results of this outreach effort and community concerns thereby raised was summarized in Appendix H to the Council's 2005 scoping report (
see
pp. 108-112). The Trawl Individual Quota Committee (TIQC) also discussed community-related issues at length; as with all Council committees, their meetings were open to the public and opportunities for public comments from non-committee members were provided. Another example of community outreach may be found in the 2004 Environmental Defense report submitted to the Council summarizing the results of a survey of community stakeholders and their concerns over the development of the trawl rationalization program.

In June 2005, the Council directed the analytical team in consultation with the Council's SSC to draft a range of alternatives for community involvement in the trawl rationalization program. Then in November 2005, the Council devoted substantial time to the consideration of options to address community impacts, including the distribution of QS to communities. DEIS Appendix A, pp. A-41 to A-42, summarizes results of the process, noting the difficulty in identifying an appropriate representative body within the community that would hold QS. As described there, at that time community leaders did not express interest in receiving an initial allocation of QS because of the administrative and political costs of managing such an allocation. Furthermore, communities (through whatever organizational mechanism) have not been precluded from acquiring groundfish limited entry trawl permits, which would make them eligible for the initial allocation of QS associated with a permit. Additionally, the Council's preferred alternative includes a very broad definition of who may own QS so communities are not precluded from acquiring QS once the program is implemented. Appendix A of the 2005 Council's scoping report also contains an analysis of community measures and effects in the context of the use of regional area restrictions.

Although the Council considered incorporating provisions for CFAs into the alternatives early in the development process, no strong recommendation or advocacy was voiced by members of the public or representatives on the TIQC, which was intended to represent a cross section of interests for the development of recommendations on structuring the trawl rationalization program. Proposals for including provisions for CFAs in the program emerged later on, when the Council was at the point of adopting a preferred alternative in November 2008, in part tied to the issue of how to deal with QS holding in excess of accumulation limits. Further refinement of the preferred alternative, which occurred at Council meetings in 2009, included additional consideration of CFA provisions. Specifically, at the April 2009 Council meeting, Agenda Item F.4 addressed CFAs, and it was at this time that the Council concluded that it would be more appropriate for CFA provisions to be implemented through a trailing action. However, the moratorium on the transfer of QS during

the first two years of the program, combined with provisions to allow divestiture of QS over accumulation limits during years 3 and 4 of the program, were designed to facilitate the transfer of QS to CFAs. The moratorium is in part intended to slow the movement of QS holdings out of communities during a time when the trailing action for CFAs can be developed and implemented in a considered fashion. Recommendations for how to structure the CFA provisions in a trailing action are welcome and should be brought forward as that proposal is developed. The Council is likely to begin developing CFA provisions in 2010 so that they could be in place before the QS divestiture period begins.

Comment 42.
Several commenters stated that it is important that CFAs be formed at the start of the process, rather than after the initial issuance. They stated that the proposed rule would hinder development of CFAs. One commenter stated that having to purchase quota will make it too expensive for communities, without a public subsidy, to acquire what was once a public resource.

Response.
See response to comment 41 above with respect to the timing issue. See the discussion in section 13(a), below, about perceptions regarding the privatization of a public resource.

Comment 43.
One commenter stated that the development of coops for nonwhiting shoreside would help communities, but the rule seems to preclude this.

Response.
This rule does nothing to preclude the formation of coops as long as they are consistent with accumulation and control limits. However, other authorities may apply, including but limited to the Fishermen's Collective Marketing Act, 15 U.S.C. 12.

Comment 44.
Some commenters stated that the proposed rule and amendments would have negative impacts on community infrastructure. Specific examples of negative impacts, projected to be devastating, were provided for several communities including Humboldt Bay, and Port Orford. One commenter stated that the Council refused to evaluate impacts to Port Orford.

Response.
See response to comments 39, 40 and 65-67. Impacts on a broad range of communities are assessed and acknowledged.

Comment 45.
Some commenters objected to the disparate impacts on some communities versus others.

Response.
See response to comments 39, 40 and 65-67. Impacts on a broad range of communities are assessed and acknowledged.

Comment 46.
Some commenters stated that as a result of consolidation there will be fewer active fishing ports.

Response.
See response to comments 39, 40 and 65-67. Impacts on a broad range of communities are assessed and acknowledged.

Comments on Adaptive Management

Comment 47.
Two comments were received regarding the AMP: One felt the AMP “should be used to mitigate `one-off' transition impacts including the one-time resolution of proven stranded capital issues. It should then be held, to provide an incentive pool for conservation results and for further transitions as required to improve the program;” and the other general comment was “too little too late.”

Response.
The comments on how the AMP should be used can be seen as entirely consistent with the intent of the Council and NMFS in designing the program. Beginning in year 3, the AMP set-aside of 10 percent of the nonwhiting QS in the shoreside non whiting sector will be used to address specific objectives, identified on page 402 of Appendix A of the FEIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery.” The objectives are: “Community stability, processor stability, conservation, unintended/unforeseen consequences of IFQ management, and facilitating new entrants.” The objective of an incentive pool for conservation results was identified by NMFS as a high priority for use of the AMP in future years.

Regarding the “too little too late” comment, for the first two years of the program, the 10 percent AMP is allocated to the shoreside nonwhiting sector to ease the transition to an IFQ system. The Council and NMFS will be evaluating the changes that will occur after implementation, and will be in a position to react as necessary to address impacts under the objectives already identified. NMFS believes this is the proper way to proceed with the AMP component of the program, and is not too little or too late.

Comments on Participation by and Effect on Nontrawl Fisheries

Comment 48.
Comments on participation by and effect on non-trawl fisheries as a result of this rule included: Concerns with spillover effects in non-trawl fisheries; impacts on fixed gear fleet; impacts on crab and shrimp fisheries; more equitable intersector allocation to allow fixed gear to harvest trawl quota; and lack of conservation associated with gear switching provisions.

Response.
The potential spillover effects on other fisheries associated with the trawl rationalization program are specifically addressed in the FEIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery” in Chapter 4, Sections 4.8.2 and 4.8.3 on pages 402-409. The potential effects due to rationalization include fleet consolidation, harvest timing flexibility, bycatch, and gear switching. All of these potential effects were identified and analyzed, to the extent possible, without the knowledge of observed or actual impacts. These potential impacts were highlighted for the purpose of monitoring behavioral changes in the fishery, understanding their impacts, and reacting through the Council process to minimize impacts. These matters will also be evaluated through the 5 year comprehensive review of the trawl rationalization program.

With regard to intersector allocations and allowing fixed gear to harvest trawl quota, it should be noted that trawlers who have entered the fishery since 1994 have had to buy trawl permits to access trawl quota, thus in this respect other vessels would be on an even footing with trawl vessels. This issue of requiring a trawl permit and quota to harvest trawl quota with fixed gear is addressed in Chapter 10, page 661 of the FEIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery.” On average there are about 120 trawl vessels that participate in the fishery each year; however, there are about 168 permits. This indicates some opportunity for nontrawl vessels to acquire trawl permits and use trawl IFQ. Further, it is expected that there will be consolidation in the trawl fleet, increasing the number of trawl permits potentially available for use by nontrawl vessels. Thus, despite the limited scope the IFQ system will allow for some use of trawl IFQ by nontrawl vessels.

Regarding the comment about lack of conservation associated with gear switching provisions, this issue of fishing with more environmentally friendly gear can be evaluated through time. All fishing associated with trawl IFQ will be subject to 100 percent observer requirements, including trawl IFQ that is harvested with fixed gear. Given this, there will be documentation of impacts associated with target catch, bycatch of overfished species, and non-target species. This documentation will provide first hand opportunities for assessing the impacts of differential gear types on all groundfish species in a quantitative manner.

Comments on Other Effects

Comment 49.
Some commenters stated that there will be negative impacts on processors, that small processors will be driven out of business due to consolidation, and that processors will not be able to make up losses from lost trawl revenues, and that shortened seasons will further affect them. Some commenters stated that the proposed rule and amendments will change the nature of the fishery, and eliminate the “mom and pop” businesses, and cause loss of fishing heritage.

Response.
This response builds on the response to Comment 19. The processing sector is organized with a few very large operations and their subsidiaries, along with a number of small and mid-sized firms. Based on available information, the processing sector for nonwhiting trawl groundfish is characterized by a relatively small number of processing companies processing most of the harvest. The three largest companies handle approximately 80 percent of the nonwhiting trawl landings, while the fourth through sixth largest companies handle just over 10 percent of the landings. For 2008, purchases of limited entry trawl groundfish by first receiver. In 2008, 75 first receivers purchased limited entry trawl groundfish. There were 36 small purchasers (less than $150,000), 26 medium purchasers (purchases equal to or greater than $150,000 but less than $1,000,000), and 13 large purchasers (purchases equal to or greater than $1.0 million). When the trawl rationalization program is implemented, to continue buying limited entry trawl groundfish, these purchasers will have to obtain a processor site license that includes requirements to submit electronic fish tickets, provide a catch monitoring plan, and schedule a catch monitor. Given the costs associated with these reporting requirements, it is expected that many of the 36 small purchasers will cease buying fish altogether or obtain their fish through other processors that have invested in a site license.

It is expected that the TIQ will lead to consolidation and this may affect small processors, particularly if they are in disadvantaged ports. Chapter 4 of the FEIS analyzed the effects on processors from various perspectives: The distribution of landings across west coast ports may change as a result of fleet consolidation, industry agglomeration, and the comparative advantage of ports (a function of bycatch rates in the waters constituting the operational area for the port, differences in infrastructure, and other factors). In particular, the Council analysis indicated that processors associated with disadvantaged communities may see trawl groundfish volumes decline.

The analysis highlights that those processors receiving landings from Central California or Neah Bay may see a reduction in trawl caught groundfish if the market is able to redirect activity toward more efficient and advantaged ports. However, in addition to increased landings that are expected to result from the TIQ program, small processors and disadvantaged communities may benefit from the control limits, vessel limits, and adaptive management policies. Control limits will limit the ability of large processors to obtain shares of the fisheries while the adaptive management processes will allow the Council to consider the impacts on small processors, and disadvantaged communities when allocating the adaptive management quota (10 percent of the total non-whiting trawl quotas). Although vessel accumulation limits tend to lower economic efficiency and restrict profitability for the average vessel, they could help retain vessels in communities because more vessels would remain.

Another process by which small processors and disadvantaged communities may benefit from will be the future establishment of regulations and policies that allow CFAs to be formed. Some of the potential benefits of CFAs include: Ensuring access to the fishery resource in a particular area or community to benefit the local fishing economy; enabling the formation of risk pools and sharing monitoring and other costs; ensuring that fish delivered to a local area will benefit local processors and businesses; providing a local source of QSs for new entrants and others wanting to increase their participation in the fishery; increasing local accountability and responsibility for the resource; and benefiting other providers and users of local fishery infrastructure. The development of CFAs could have a positive impact on the culture of fishing communities. Although little research has been done on the effect of CFAs on culture, it seems likely that CFAs could strengthen a community's cultural associations with fishing by contributing to a unique sense of identity, increasing accountability for both natural and cultural resources, and building and strengthening connections among community members.

Comments on the RIR/IRFA

Comment 50.
One commenter stated that the summary of the initial regulatory flexibility analysis (IRFA) contained in the preamble makes erroneous assumptions regarding costs and benefits. Benefits to harvesters are in part predicated on the idea that somehow raw fish prices can increase if harvesters have enough time available to suspend their fishing activity and hold fish processors hostage (“The extended period would give harvesters greater latitude to hold out for better prices compared to the no action alternative.” 75 FR 33022). The commenter noted that the idea that fishermen going on strike to force higher prices of a commodity that has substantial substitutability in the marketplace was unreasonable and referred the preparers of the IRFA to review reports in local and trade press regarding the groundfish trawl vessel tie-up that occurred in March and April of 2007 and its aftermath to see where their assumptions are erroneous. Similarly, the commenter objected to the following in the summary of the IRFA: “Even though processors may have to pay fishermen higher ex-vessel prices, processors may see cost savings under the preferred alternative to the degree that rationalization allows greater control over the timing and location of landings.” The commenter noted that if the preferred alternative is going to allow fishermen to control timing through their ability to hold out for better prices, how can it also allow processors to control timing?

Response.
There are two versions of the IRFA. The first version of the IRFA was a preliminary analysis that was developed for the DEISs (DEIS IRFAs): Amendment 20—Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery, which would create the structure and management details of the trawl fishery rationalization program; and Amendment 21—Allocation of Harvest Opportunity Between Sectors of the Pacific Coast Groundfish Fishery, which would allocate the groundfish stocks between trawl and non-trawl fisheries. The second version of the IRFA was developed to support the proposed rule (75 FR 32994, June 10, 2010) associated with this final rule (PR IRFA) and is a combination and update of the DEIS IRFAs. NMFS has reviewed the summary of the PR IRFA contained in the preamble to the proposed rule and concludes that the summary statements are inconsistent with Chapter 4 of the Amendment 20 DEIS and with that DEIS IRFA.

The main analysis of the Amendment 20 DEIS IRFA included the following correct statement, which was not included in the PR IRFA: “Groundfish compete in regional, national, and global markets where many products are

substitutable. Therefore, west coast groundfish producers (harvesters and buyers/processors) have little ability to influence price based on supply. In general, the ability to influence price is not expected to change under the proposed action. However, rationalization of the fishery could allow quality improvement and the development of new product forms/markets that could increase prices for certain species of fish currently caught. As noted above as an example, the whiting fishery operates as a derby fishery (especially in relation to bycatch species limits rather than the target species) causing the fishery to close due to imposed limits rather than availability of fish or market conditions. Whiting attain a larger size later in the year, commanding a higher unit price. Nonwhiting harvesters currently operate under 2-month cumulative landing limits, which allow greater flexibility in terms of harvest timing between 2-month periods but less flexibility within periods (because any difference between actual limits and the period limit cannot be carried over to the next period). In contrast, under the IFQ program harvesters will have control over harvest timing over the whole calendar year. However, in terms of any influence on price, this increased flexibility is unlikely to have a noticeable effect. The degree to which harvesters versus processors are able to capture profits due to increases in price depends on their relative bargaining power * * *.” Bargaining power is a concept related to the abilities of parties in a given situation to exert influence over each other. Fishermen and processors negotiate the prices that are paid to the fishermen for delivering their fish to the processor. One way for fishermen to exert influence on the prices they receive for their fish is to delay the delivery of fish until the processor provides the desired price. Under the IFQ system, fishermen have the ability to choose when they can deliver their fish. Under the current system, the fishermen are given two month landing limits and these limits are designed to achieve a year-round fishery and to address the seasonality of the market. Given that the current system is already designed to address the seasonality of the market, the influence of fishermen to raise market prices based on the timing of deliveries relative to the current timing of deliveries is not expected to be great.

Chapter 4 of the FEIS (
http://www.pcouncil.org/groundfish/fishery-management-plan/fmp-amendment-20/#EIS
) provides the following analyses concerning the issue of a fishermen's strike: “In order to foster the year-round goal of this fishery, regulations are created with the intention of spreading the harvest throughout the year. These management tools evolved into two-month catch limits, which effectively act as a two-month nontransferable quota for vessels in the fishery. Because of this two-month quota system, Olympic conditions do not exist in this fishery, and large pulses of harvest over a short time generally do not occur, except in cases where prolonged episodes of poor weather have restricted harvest opportunities. The two-month limit structure and elimination of Olympic fishery conditions make it possible for harvesters in this sector to collectively negotiate over ex-vessel prices with processors compared to harvesters in the whiting fishery. However, the ability for these negotiations to occur appears to be somewhat limited by the length of the two-month period. If harvesters strike for more than 60 days, they risk foregoing the harvest available to them during that two-month period. While managers may increase opportunities later in the year to make up for lost harvest, history has shown that often this is not possible because of time-sensitive interactions with rebuilding stocks and the fact that protecting rebuilding stocks often leads to a reduction in harvest opportunity for healthy stocks. This means that, while harvesters have a greater likelihood of collectively negotiating higher prices in the nonwhiting fishery, the ability to do so may break down quickly as the end of a two-month limit approaches.

A review of relevant articles indicates that 100 fishermen did undergo a six week strike from March 1, 2007 to April 12, 2007, seeking an agreement with processors for increased prices for petrale sole and dover sole and that the strike was unsuccessful. Within these articles the following factors were mentioned: Prestrike glut due to high effort and trip limits; loss of income to fishermen; differences between fishing groups; differences between processors; that the major products were sold in fresh markets; competition with frozen product; increased quotas for dover sole and petrale sole; effects of the bimonthly trip limits; processor fleets versus fishermen's association fleet; independent fishermen; destabilized prices; major decrease in prices, because of the strike—loss of market share to tilapia; and the inability of the largest groundfish fishermen's association and two of the largest processors to come to an agreement.

Therefore, in response to this comment, the FRFA will contain this comment and response and NMFS will make the summary consistent with main body of analysis by redrafting the summary to reflect the following statement: “Nonwhiting harvesters currently operate under 2-month cumulative landing limits, which allow greater flexibility in terms of harvest timing between 2-month periods but less flexibility within periods (because any difference between actual limits and the period limit cannot be carried over to the next period). In contrast, under the IFQ program harvesters will have control over harvest timing over the whole calendar year. However, in terms of any influence on price, this increased flexibility is unlikely to have a noticeable effect.”

Comments on Policies and Legal Standards

Comment 51.
One commenter stated that Amendment 20 fails to meet the goals and objectives for the program established for it by the Council which are to: create and implement a capacity rationalization plan that increases net economic benefits, creates individual economic stability, provides for full utilization of the trawl sector allocation, considers environmental impacts, and achieves individual accountability of catch and bycatch. The commenter further states that Amendment 20 fails to meet at least four of the eight specific objectives identified by the Council: It does not provide for a viable, profitable and efficient groundfish fishery in northern California; it does not increase operational flexibility for the shoreside non-whiting sector (in fact the opposite is true); it does not “minimize adverse effects from an IFQ program on fishing communities and other fisheries to the extent practical;” and it will destroy fishing related employment in Fort Bragg, rather than “promot[ing] measurable economic and employment benefits through the seafood catching, processing, distribution elements and support sectors of the industry.”

Response.
The analyses included in the FEIS “Rationalization of the Pacific Coast Groundfish Limited Entry Trawl Fishery” fully disclose anticipated impacts and recognize that catch share programs can have disparate impacts on different segments of the fishery. Thus, while negative impacts will occur in some areas, NMFS believes that Amendment 20 will result in a fishery that is more sustainable as a whole and that will provide maximum benefits to the nation.

a. Public Trust and Privatization

Comment 52.
Some comments expressed concern that the trawl IQ program gives a public resource to individual fishermen and fishing corporations in perpetuity.

Response.
The Amendments do not change the fundamental nature of the Pacific groundfish fishery. Fishery resources continue to be public resources managed under the MSA and fish are not considered to be private property until they are harvested. The MSA authorizes the implementation of limited access programs such as the trawl IQ program. Under this program, fishermen will need to acquire QS, through initial allocation or subsequent transfer, before harvesting fish. IQs are Federal fishing permits that may be transferred to qualified individuals or entities. They also may be revoked, limited or modified. NMFS and the Council will monitor the programs established by Amendments 20 and 21, and can amend the programs if they are not in the public interest.

Comment 53.
A comment expressed concern that QS will be treated as assets to be traded, pledged as collateral, and held by third parties with no interest in fishing.

Response.
QS are federal fishing permits that may be revoked, limited or modified. After the first 2 years of program implementation, transfers of QS would be allowed. While criteria for initial issuance limit recipients to owners of LE trawl permits, after the first 2 years, transfers could be made to a broader group. Generally, anyone eligible to own a U.S.-documented fishing vessel could acquire QS and QP in increments as small as one pound. As long as the regulatory requirements are met, this rule does not limit private arrangements for use or transfer of QS.

Comment 54:
Some commenters expressed concern that the American public is not compensated for the privatization of a public resource.

Response:
The Council intends to develop a trailing amendment that will provide for a program of fees to recover the agency costs of management, data collection and analysis, and enforcement activities, within limits established by the MSA. In addition, the Council considered an auction system to collect royalties for the initial allocation of QS, as required by the MSA. The Council concluded that the collection of resource rents without a phase-in would be disruptive to the fishery. Therefore, the Council deferred further deliberations on royalties until the first 5-year review of the program. As the trawl rationalization program matures in the future, the Council may provide for a greater return to the American public.

Comment 55:
Commenters

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2010-23246. Public record. Not legal advice.