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1.1 The Purpose of This Study

In 1995, the National Marine Fisheries Service - Alaska Region (NMFS-AK) implemented a new Individual Fishing Quota (IFQ) program in Alaska's halibut and sablefish fisheries. The program had been developed by the North Pacific Fishery Management Council (NPFMC) and approved by the United States Secretary of Commerce.

The new IFQ program represents a dramatic change from the open access fisheries for sablefish and halibut that existed before 1995. The program continues to be controversial as many people have concerns about the potential changes that might occur. In 1995, the State of Alaska and the National Marine Fisheries Service formed an interagency study team to monitor and evaluate changes occurring under the new IFQ program. Several studies were initiated through this process.

The main purpose of this study is to document and analyze changes that occurred under the new halibut IFQ program from initial allocation through the end of 1995 using data and information from computerized administrative records maintained by NMFS's Restricted Access Management (NMFS-RAM) Division. The study reports and analyzes sundry changes in the distribution of QS holdings and QS holders that occurred during 1995 and provides summary information on transfer and lease transactions. Other topics and issues are also covered in this report and other ancillary data are utilized in the study.

Under present plans, this report will be revised and updated annually to provide an accurate summary of changes in the distribution of QS under the halibut IFQ program. NMFS and NPFMC will use the study as part of their ongoing IFQ program monitoring effort and the summary reports should provide some of the information needed to help analyze issues and proposed program changes.

1.2 The Halibut Fishery

Halibut are demersal, living on or near the bottom. Typically they are harvested in waters from 100 to 600 meters in the winter and less than 200 meters in the summer.

In the years before the IFQ program the directed commercial harvest of halibut was prosecuted with hook and line gear, including longline, handline, mechanical jig, and troll. Halibut from the directed fishery tended to be landed in Alaska, and to some extent in British Columbia, Washington and Oregon.1 Halibut are also harvested as by-catch in groundfish trawl fisheries, pot fisheries for crab, and longline fisheries for sablefish and Pacific cod. A recreational fishery in Alaska for halibut also grew considerably in the years before the program.

Since 1923 the International Pacific Halibut Commission (IPHC), established by a convention between the United States and Canada, has been responsible for the biological management of the fishery. The IPHC has authority to establish regulatory areas, limit catch by area, license vessels, regulate gear types, protect nursery areas, collect statistics and conduct scientific research. The IPHC has defined eight management areas off Alaska, and each of these has a separate Total Allowable Catch (TAC). These areas are shown in Figure 1.2-1.

In 1982, the U.S. government added to the management tools available for halibut by delegating additional regulatory authority to the geographically responsible Fishery Management Councils (Northern Pacific Halibut Act of 1982, P.L. 97-176). The North Pacific Management Council (NPFMC) has authority under the Magnuson Fishery Conservation and Management Act (MFCMA) and Halibut Act to regulate entry into the Alaska halibut fishery, although the NPFMC must defer to the IPHC on biological management issues. The authority of the IPHC and NPFMC extends to cover the management of halibut within Alaska's waters.

FIGURE 1.2-1. Map of IPHC halibut management areas

1.3 Background on the Halibut IFQ Program

In December 1991, the NPFMC recommended an Individual Fishing Quota (IFQ) Program for management of the "fixed gear" sablefish and halibut fisheries off of Alaska. "Fixed gear" was defined to include all hook and line fishing gears (longlines, jigs, handlines, and troll gear). The development of the program took place over a long time period. The NPFMC's IFQ plan for halibut was approved as a regulatory amendment by the Secretary of Commerce in early 1993.

This halibut IFQ program has to be considered one of the most ambitious IFQ programs ever attempted. The geographical area covered is quite large. If Alaska was superimposed on a map of the continental United States, the southern tip of Southeastern Alaska would lie on the east coast in the Carolinas, while the outer end of the Aleutians would lie on the West Coast in the area of Southern California.

The number of individuals involved was also very large, as the fishery had been open access prior to implementation. NMFS-RAM data indicate that 4,801 separate persons initially received halibut QS. To further complicate matters, the halibut IFQ program was implemented simultaneously with the sablefish IFQ program.

The new IFQ program is also very complex. The NPFMC wanted to achieve some of the benefits associated with IFQ management but was concerned that the program could lead to radical changes that would be deleterious to communities dependent upon the fishery. These concerns led the NPFMC to adopt many complicated rules and regulations in an effort to constrain the changes that could occur under the program.

QS units are the basic use-privileges under the Alaska halibut IFQ program and were issued to eligible applicants based upon their history of participation in the fishery. These QS were specific to each of four vessel classes and eight management areas. Early each year, the TAC within each management area is divided among the QS holders in proportion to their QS holdings. This means that the amount of IFQ per unit of QS can vary by IFQ management area and year depending upon the area's TAC and the total amount of QS outstanding. The amounts of QS and IFQs and the ratio of QS to IFQ for the different management areas in 1995 are summarized in Table 1.3-1.

Table 1.3-1. 1995 QS and TACs by management area.
1995 TAC in pounds 1995 ratio
Regulatory Area 1995 QS (adjusted for CDQs) of QS/IFQ
2C 59,853,126 9,000,000 6.650
3A 185,818,173 20,000,000 9.291
3B 54,435,504 3,700,000 14.712
4A 14,861,967 1,950,000 7.622
4B 9,236,860 1,848,000 4.998
4C 3,969,186 385,000 10.310
4D 4,685,996 539,000 8.694
4E 139,999 0 0

Although the NPFMC was interested in the efficiency gains that could be obtained from an IFQ program, they were also interested in preserving some of the traditional character of the fishery. The IFQ program includes many provisions, in addition to the general ones described above, which restrict the use-privileges associated with different types of QS.

These restrictions will be discussed in detail in subsequent sections of the report. They include limits on who may buy QS, limits on the amount of QS that may be held by any one person, constraints on the amount of QS that may be fished from any one boat, and restrictions forcing some QS holdings to be transferred as a single "block."

The halibut IFQ program was controversial before it began, and has remained controversial since it started. Proponents argue that an IFQ fishery will help to eliminate the race for the fish that takes place in an open access quota fishery. They argue that derby fisheries lead to the use of more capital and labor than is necessary to harvest the resource. Safety concerns, allocation conflicts, gear conflicts, deadloss from lost gear, and other problems are often associated with open-access fisheries.

In contrast, opponents of the IFQ program often point to the potential for shifts in landings patterns and IFQ holdings that will be deleterious to the economic base of their community or region. Concentration of IFQs or movements of IFQs and landings activity out of traditional fishing communities are cited as concerns. Secondary income and employment impacts from changes in landings patterns could harm some communities even if the overall program benefits are positive. Some persons also are concerned about the fairness of the initial allocation of IFQs and the potential to disrupt traditional patterns of social relationships.

1.4 Overview of This Report

This report uses NMFS-RAM administrative data and other data from fish ticket files and CFEC permit and license files to report on changes under the IFQ program during 1995. The report is organized into this introductory Chapter 1 and seven additional chapters.

Chapter 2

Chapter 2 compares and contrasts the actual initial distribution of QS based on the NMFS-RAM initial allocation file with the distribution of QS that would be predicted using the NMFS data that was used to analyze the program before it was adopted. There are many reasons why these two distributions might be different. The focus of the chapter is simply to identify the differences between the distributions where they exist.

The distributions are compared by management area and the size of the initial QS allocation, by management area and vessel category, and by management area and resident type. Several resident type categories are used.

Chapter 3

Chapter 3 provides a broad overview of the distribution of QS at initial allocation and the distribution of QS at year-end 1995. An emphasis is placed on identifying the changes that occurred during 1995, the first year of the program.

Among the topics examined are changes in QS holdings and QS holders by management area and vessel class, and changes by management area and resident type. Again, several resident type categories are used.

The chapter also examines changes in QS holdings by "block status," by size of holding category and by type of person holding the QS. The chapter also looks at new entrants during 1995.

Chapter 4

Chapter 4 takes a closer look at "swap," transfer, "sweep-up", and lease transactions during 1995. The right to "swap" QS across catcher vessel categories was a special rule written for recipients of CDQ compensation QS in an area who had not received an initial allocation of any other QS for the area. Swaps permanently impact the distribution of QS across catcher vessel classes in an area.

QS transfer and lease rates during 1995 are examined by IFQ area and by IFQ area and vessel class. The extent of consolidation of QS holders during 1995 due to transfers can also be seen from tables in this chapter.

A special rule in the IFQ program allows for the "sweep-up" of sufficiently small blocks into a single block that is less than 1,000 pounds of a hypothetical halibut IFQ in the area. This chapter also examines the impact of the sweep-up rule during 1995.

Chapter 5

Chapter 5 examines a number of topics related to QS transfers and leases. Answers to questions from the NMFS-RAM transfer application form are used in the analyses.

The chapter uses information from "priced sales" and leases to estimate QS prices, lease prices, and "implied" lease prices. While there is a paucity of pricing data, the tables in the chapter explore the variation in 1995 QS prices by vessel category, by block status, and by size of the block holding.

The chapter also provides data reports that categorize 1995 QS transfers as priced sales, other sales, gifts, trades, and other. The finance sources of priced sales transactions are examined. Summary data are also provided on the relationship between the transferor and transfer recipient on gift and sale transfers.

Chapter 6

The IFQ program holds the potential for fishermen to reduce the number of fishing operations by combining their QS holdings. While reducing the number of fishing operations was one of the goals of the program, excessive consolidation was also a concern. Chapter 6 provides a brief examination of the consolidation of QS holders onto fishing operations during 1995.

Chapter 7

Chapter 7 provides data on underages and overages during 1995. Again, NMFS-RAM catch data are compared to fish ticket data from earlier years. A special examination is made of QS holders who did not increase or decrease their QS holdings during 1995 to see what proportion fished some of their IFQ and what proportion did not fish their IFQ at all.

Chapter 8

The IFQ program had the potential to bring about changes in the distribution of landings by place. Chapter 8 compares halibut landing patterns during 1995 by state and by Alaska census area with those of recent years.

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