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CFEC Report Number 96-R11N

September, 1996

Alaska Commercial Fisheries Entry Commission

8800 Glacier Highway, Suite 109

Juneau, Alaska 99801

(907) 789-6160

List of Preparers:
Ben Muse
Kurt Schelle
Elaine Dinneford
Kurt Iverson


In 1995, the National Marine Fisheries Service-Alaska Region (NMFS-AK) implemented a new Individual Fishing Quota (IFQ) program for management of the "fixed gear" sablefish and halibut fisheries off Alaska. These programs had been developed by the North Pacific Fishery Management Council (NPFMC) and approved by the U.S. Secretary of Commerce.

The purpose of this study is to document and analyze changes that occurred under the new sablefish IFQ program, from the initial allocation through year-end 1995. This report provides data on changes in the distribution of Quota Share (QS) holdings and QS holders during 1995, and provides summary information on QS lease and permanent transfer transactions. Other topics related to particular aspects of the program are also explored in the report.

Background On The Sablefish IFQ Program

The sablefish fishery was managed as an IFQ fishery for the first time in 1995. Quota shares (QS) are the basic use-privileges which were issued under the program. QS were issued to qualified applicants who owned or leased a vessel that made legal fixed gear landings of sablefish at any time during 1988, 1989, and 1990. The QS units issued to a person were equal to the person's qualifying pounds from the person's best five years of landings over the six year period from 1985 to 1990.

QS that was issued was specific to one of six sablefish management areas and one of three vessel classes. A person's IFQ for an area in a given year is determined by taking the person's fraction of the total QS units outstanding in the area times the total allowable catch (TAC) allocated to the area's IFQ fishery for the year.

Additional restrictions or privileges were added to some of the QS units to achieve other NPFMC objectives. The NPFMC wanted to achieve some of the benefits associated with IFQ management but was concerned that the program not lead to radical changes that would be deleterious to communities dependent upon the fishery. The NPFMC adopted many complicated rules in an effort to constrain the changes that could occur under the program. Many of these rules are explored in the report

Study Results

Chapter 2: How Did Predicted And Actual Distributions Compare?

Prior to adoption of the sablefish IFQ program, the NPFMC analyzed initial allocation alternatives before settling on the criteria that were incorporated into the sablefish IFQ program. These earlier NPFMC analyses used the best available data set at the time to make forecasts of the probable distribution of QS under the IFQ program.

Chapter 2 compares the actual initial distribution of QS with the distribution that would have been predicted from the data set used in the earlier NPFMC analyses. Several aspects of these distributions are compared.

Key Results:

Chapter 3: How Did The Distribution Of Sablefish QS Change During 1995?

Chapter 3 presents a series of tables which show the distribution of sablefish QS at initial issuance and the distribution of sablefish QS at the end of 1995. These tables highlight changes that occurred during the first year of the sablefish IFQ program. The chapter covers a variety of topics.

How was QS distributed by vessel category?

Under the sablefish IFQ program, QS was issued in one of three vessel categories depending on the vessels used in the fishery during the qualification years. In restricting QS to a particular vessel category, the NPFMC wanted to ensure that the diversity in the fleet that existed prior to the IFQ program would be retained. With minor exceptions, QS issued for a vessel category remains in that vessel category upon transfer. The sablefish vessel categories are as follows:

A. Freezer longliners

B. Catcher vessels less than or equal to 60 feet overall length.

C. Catcher vessels greater than 60 feet overall length.

While the amount of QS in each vessel category remains relatively constant, the number of QS holders overall and in each vessel category can change.

Key results:

How was QS distributed by resident category and how did it change during 1995 ?

Key results:

Table S-1 Initial sablefish QS allocation: Percent of total QS issued, by state of residence of the initial QS recipient.
Percent Percent Percent
Area Washington Alaska Other
Southeast 29 64 7
West Yakutat 58 34 8
Central Gulf 50 39 11
Western Gulf 68 23 9
Aleutian Is. 72 22 6
Bering Sea 56 38 6

How was QS distributed by block status?

The NPFMC was concerned about retaining opportunities for a smaller part- time fleet under the sablefish IFQ program. For that reason, they added blocking rules to the IFQ program that required the placing of sufficiently small allocations of QS into "blocks" at initial allocation.

Under the rules, the QS incorporated into a block can only be traded as a block. A person who holds no unblocked QS in an area can hold up to two blocks of QS, a person who holds some unblocked QS for an area can only hold one block of QS. Because of these constraints, blocked QS was expected to be unattractive relative to unblocked QS for persons trying to develop a more full-time fishing operation. Thus it was anticipated that the small part-time fleet would be the major bidders for blocked sablefish QS.

Key Results:

What was the distribution of QS by type of person and how did it change during 1995?

Under the sablefish IFQ program, QS was initially issued to qualified "persons" who owned or leased a vessel that made legal fixed gear landings of sablefish at any time over the 1988 to 1990 time period. A person could be an individual (natural person), partnership, corporation, or other legal entity.

Key Results:

Were new persons able to enter the fishery during 1995?

During 1995, some persons who were not initial QS recipients of sablefish QS in an area obtained QS through transfer and became "new entrants" to the area.

Key results:

Chapter 4: What were the impacts of QS transfers, QS leases, "sweep-ups," and CDQ compensation "swaps" during 1995?

QS transfers, QS leases, "sweep-ups" and Community Development Quota (CDQ) compensation "swaps" are covered in Chapter 4 of the report.

The NPFMC adopted "sweep-up" rules to allow small unfishable blocks to be combined into a larger fishable block. Under the rules of the IFQ program during 1995, sufficiently small blocks of sablefish QS could be "swept-up" into a larger block as long as the larger block did not exceed 3,000 pounds of sablefish IFQ calculated by a special conversion rule. The two blocks per area rule does not impact sweep-up transactions.

During 1995, the NPFMC adopted rules to allow for some CDQ compensation QS to be "swapped" across catcher vessel categories. The purpose of the rule was to make it easier for some CDQ compensation QS recipients to transfer their QS when they could not readily fish in the area.

Persons who received an initial allocation of QS in areas where portions of the TAC were allocated to CDQs (Aleutian Islands and Bering Sea) were awarded CDQ compensation QS in the non-CDQ areas (Southeast, West Yakutat, Central Gulf, and Western Gulf). If a person received an initial allocation of catcher vessel CDQ compensation QS in an area but did not receive any other QS for that area, the CDQ compensation QS was made "swappable" across catcher vessel categories upon the first transfer. The catcher vessel category of the QS changes with a swap transaction.

Key results:

Chapter 5: What Was The Nature Of QS Transfer Activity During 1995?

NMFS-AK collects background information on each transfer transaction on their transfer application form. Some of this information is included on their computerized transfer and lease transactions.

Chapter 5 reports summary data on QS transfers and leases derived from the computerized records for these transfer transactions, including information on the pricing of QS and IFQ during 1995.

The following are highlights of some of the topics that are covered in the chapter:

What types of transfer exchanges occurred?

Information on the transfer application form was used to classify the permanent QS transfers in 1995 into "priced sales", "other sales", gifts, trades, and an unknown category.

Key Results:

What were sale and lease prices for sablefish QS during 1995?

QS "priced sales" transfers were divided into three categories. One category contained QS transfers where all of the associated 1995 IFQ had been included. A second category included QS transfers where none of the associated 1995 IFQ was included. A third category included QS transfers where a portion of the associated 1995 IFQ was included.

The report contains some pricing information on the first two categories of permanent transfers. There was some ambiguity on the pricing information, which is explained in the report, and many pricing categories could not be reported due to the small number of observations. The following are some results:

Key Results:

How were QS purchases financed?

The NMFS transfer application form asked for the source of financing and included categories such as personal resources, bank, Alaska Department of Commerce and Economic Development (ADCED), Commercial Fishing and Agriculture Bank (CFAB), seller, processor, and other.

Persons filling out the form sometimes indicated multiple sources of financing. Other persons did not provide a source of financing at all.

Key Results:

How were buyers and sellers related?

The QS transfer application form asks QS transfer recipients to indicate their relationship with the transferor of the QS. The choices provided on the form are "business partner," "personal family member," "other friend or relative," and "no relationship." This relationship information was examined for all sales and gift transfers.

Key Results:

Were the resident-types of buyers and sellers related?

Transferors and transfer recipients were assigned to five resident-types based upon their addresses. These resident-types included four Alaska categories and a nonresident category. The Alaska categories were based upon a "rural" or "urban" classification for the community and a "local" or "nonlocal" classification for the community relative to each fishing area.

Thus the classification for a particular community relative to a particular fishing area could be "Alaska rural local (ARL)," "Alaska urban local (AUL)," "Alaska rural nonlocal (ARN)," "Alaska urban nonlocal (AUN)," or nonresident.

Key results:

Chapter 6: Did Holders Of IFQ Consolidate Onto Combined Fishing Operations?

Another means by which the number of sablefish fishing operations could be reduced under the IFQ program is if multiple IFQ holders combine their holdings to fish from a single vessel. Chapter 6 looks at 1995 sablefish landings by area and vessel category.

Chapter 6 also looks at 1991 to 1995 sablefish landings for catcher vessels to see if changes occurred during 1995 under the IFQ program. To make some of the comparisons, "persons" were identified by CFEC permits over the 1991 to 1994 time period and were identified by NMFS-RAM IFQ identifiers during 1995.

Key results:

Chapter 7: How Did Overages and Underages Change During 1995?

This chapter examines the 1995 sablefish harvest and compares it to the Total Allowable Catch (TAC) by area. The 1995 percentage of the TAC harvested is compared with estimated harvest percentages over the 1991 to 1994 time period. A special section examines a group of initial QS recipients who did not alter a QS holding during 1995 to see what percentage of the associated 1995 IFQ was totally unfished.

Key Results:

Chapter 8: How Did The Distribution Of Landings Change During 1995?

Prior to adoption of the program, there was much concern that the distribution of sablefish landings could change dramatically under an IFQ program. Chapter 8 examines 1991 to 1995 landings data to see if there were differences between 1995 and the prior years.

Key Results:

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