3 COMPARISON OF INITIAL ALLOCATION
OF SABLEFISH QS WITH THE 1995 YEAR-END DISTRIBUTION
Prior to the sablefish IFQ program, there was considerable interest on the likely initial distribution of QS by resident type and how that distribution would change over time. The topic continues to be important in regions of Alaska where commercial fishing represents a substantial portion of the underlying economic base.
This chapter summarizes and compares the distribution of sablefish QS at initial allocation with the distribution of QS at the end of 1995. The chapter examines changes in the distribution of QS by resident type, by size of QS holding and by type of entity. The chapter also provides information on new entrants into the fishery during 1995.
The initial allocation of sablefish QS to eligible applicants began towards the end of 1994.1 By the end of 1995, most of the initial allocation had been completed and some of the initially allocated QS already had been transferred to different persons. Some of the transfers went to persons who had received initial allocations and resulted in consolidation of QS holdings. Other transfers went to new entrants.
This chapter provides a relatively simple set of tables on these topics. More detailed tables will be found in later chapters of the report. Chapters 4 and 5 will examine many transfer issues such as CDQ compensation swaps, sweep-up of QS into larger blocks, permanent transfers, leases of QS, and QS prices, among other topics.
There are 18 different types of QS defined by area and vessel category under the sablefish IFQ program. When blocking distinctions are added, the number of different types of QS increases further. Some CDQ compensation QS also contains a temporary attribute that allows the QS to be swapped across vessel categories within an area.2 Additionally, blocks of QS that are sufficiently small have a special "sweep-ability" attribute. The impacts of these different rules and attributes during 1995 will be examined later in this report.
The six different sablefish IFQ regulatory areas correspond with the traditional management areas. Each of the areas has its own separate sablefish TAC. In each of the regulatory areas, three distinct vessel classes are defined under the IFQ program. One vessel class consists of freezer-processor vessels. The other two classes consist of catcher vessels of different size categories defined by overall vessel length. The small catcher vessel class contains vessels up to 60 feet and the large vessel class contains vessels above 60 feet.
With six regulatory areas and three vessel classes there are a total of 18 different types of sablefish QS based solely on area and vessel class attributes. Under most circumstances, QS from one area-vessel category combination cannot be used to fish in another area-vessel category combination.3 QS from one IFQ regulatory area may not be fished legally in another area.
The ratio of the total QS outstanding in an area to the TAC available to the sablefish IFQ fishery in the area is different from area to area.4 This means the amount of IFQ a person can harvest with a given amount of QS varies considerably between different areas. Because of this, summing QS across management areas is not very meaningful. It does make sense, however, to add QS across vessel classes within a management area, since any QS unit within a given area in a particular year translates into the same amount of IFQ.
Within each IFQ regulatory area and vessel class combination, some QS is blocked and some QS remains unblocked under the rules of the IFQ program. The distinction is described in more detail in the next section on the allocation of QS. However, it should be noted that smaller amounts of QS were issued as blocks or parcels of QS that must be transferred as a unit and cannot be broken up on transfer.5 Under the IFQ program, there are limits on the number of blocks an entity can hold.
Because the "blocking rules" are an important issue, this chapter has several tables that examine the distribution of blocked and unblocked QS. For example, most catcher vessel blocks are unleasable due to the interaction of block and leasing rules, and some blocks have lower prices per QS than unblocked QS. Additionally, some blocks are so small they cannot be fished feasibly.
Sablefish QS can be transferred in a number of ways. This chapter focuses on changes in the distribution of QS among different resident types, changes in the distribution of QS by size of holdings, changes in the distribution of QS among different types of entities, and changes in the distribution between initial issuees and persons who received their QS through transfer.
The chapter examines the initial and year-end 1995 distribution of sablefish QS holdings and QS holders using a variety of resident types. Different tables highlight distributional changes by state of residence, by census area of residence (within Alaska), and by rural/urban and local/nonlocal resident type distinctions.
As noted above, QS was issued for six IFQ regulatory areas across the state in three separate vessel categories. QS cannot be traded across vessel or area categories.6 QS was issued in 18 different IFQ area/vessel category combinations.
QS were issued to eligible applicants who owned or leased vessels used to make landings of sablefish during the years 1988, 1989, or 1990.7 Applicants who were eligible to apply received QS equal to the sum, in round pounds, of their vessel's landings during their best five years out of the six years from 1985 to 1990.8
Because more people fished during this period than would normally fish in any one year, and because they could each have received QS equal to their harvests in more than one year, the number of QS units issued in each management area was greater than the pounds of TAC in any given year. Thus it takes more than one QS unit to generate a pound of IFQ.
Persons received their QS in a block if their QS would have resulted in less than 20,000 pounds of sablefish, given the 1994 TACs.9 Blocks could not be broken up for sale or lease. All the QS in a block would have to be sold as a single unit. There were also limits on the number of blocked and unblocked QS that could be held. A person could hold one or two blocks, but a person with more than one block could not hold any unblocked QS. Provisions were included to combine or "sweep-up" very small blocks below 3,000 pounds. These are discussed later in this report.
Blocks were introduced to accomplish social objectives of the program. Members of the NPFMC were concerned about protecting access to the fishery for small part-time operators when they designed the program. The block system was designed to prevent all the quota from being accumulated by larger more full-time operations. In addition, proponents suggested that smaller blocks would sell for less per unit of QS than larger blocks or unblocked QS. As shown in Section 5.2 of Chapter 5, there is some reason to believe that smaller blocks do sell for less per QS.
The IFQ program included provisions to set aside part or all of the TAC in the Bering Sea and Aleutian Islands management areas for what were called "community development quotas" (CDQs). Individuals who received QS in these areas retained the QS, but were faced with reduced TACs.10
The IFQ plan contained provisions designed to compensate QS holders in these areas for the reduction in their harvests imposed by the CDQs. The goal of the plan was to spread the burden of the compensation among all fishermen receiving sablefish QS in all management areas. Compensation was provided by giving fishermen from the CDQ areas (the Bering Sea and Aleutian Islands regulatory areas) additional QS in each of the management areas in which CDQs were not allocated (the Southeast, West Yakutat, Central Gulf, and Western Gulf regulatory areas.)
In many cases CDQ compensation QS recipients received small amounts of compensation in areas in which they had not previously fished. The NPFMC added a provision to allow the transfer of sablefish CDQ compensation QS across catcher vessel categories within a management area upon first transfer under certain conditions.11 This provision was added to make it easier for some persons to sell their CDQ compensation QS.
Because of this regulation, the total amount of QS within a QS vessel category in an area may change between the initial allocation and the end of 1995. This does not affect the management area totals, however, as the QS is being "swapped" between the catcher vessel categories.
Several types of transactions could change the distribution of QS holdings between the initial allocation and the end of the first year of the program. These include routine transfers, as well as transfers associated with sweep-ups, CDQ swaps, and court ordered transfers.
The tables included in this section show changes due to permanent transfer activity. The transfers include sales, gifts, trades, and other. Formal leases of QS during 1995 are considered in Chapters 4 and 5.
The resolution of appeals and revocations will affect the amount of QS included in a management area and vessel class. Although many appeals have been resolved and QS has been revoked during the first year of the program, appeals and revocations are treated here as changes to the initial allocation of the QS since their impacts were all incorporated in the NMFS-RAM initial allocation file. Thus, in the tables herein, the total area QS holdings do not change between the initial allocation and the end of the first year of the program.
As noted earlier, CDQ compensation QS increased the amount of small QS holdings in many areas. In the fall of 1995, the RAM Division began to allow "swaps" of the "swappable" portion of the CDQ compensation QS across catcher vessel classes. These swaps can lead to changes in the number of QS in different vessel classes within a management area, but cannot lead to a change in the total QS in the area.
Many persons received such small blocks of sablefish QS that it was not practical for them to fish the blocks. The rules for the IFQ program allow persons who received blocked QS equivalent to less than 3,000 pounds of a "hypothetical" sablefish IFQ to combine their blocks into new permanent blocks so long as the new blocks were less than 3,000 pounds.12 These are called "sweep-up" transactions. The goal of the sweep-up feature is to reduce the number of very small unfishable blocks.
The program contains a number of rules designed to affect the nature of transfers and to limit the amount of QS aggregation. These rules are contained in the program regulations; however, it may be useful to summarize some of the more important ones here:
3.4 Changes in Sablefish QS Holdings by Management Area and Vessel Class
Table 3.4.1 provides the total amount of sablefish QS, the total number of QS holders at initial issuance, and the total number of QS holders at the end of 1995, by management area. It also shows the average QS holdings per QS holder at initial issuance, and the average QS holdings per QS holder at the end of 1995.
The numbers of sablefish QS holders declined over the year in all areas while the average QS holding increased. The decline in the number of QS holders ranged from about 1% in the Bering Sea area to 7% in the Southeast area. The increase in average QS holdings during 1995 ranged from 1,822 QS units in the Bering Sea area to 11,766 QS units in the Central Gulf area.
The figures in this table are aggregated across vessel classes within management areas. The total sablefish QS initially issued for each management area is also the amount of QS outstanding in the area at year-end 1995. The RAM initial allocation file includes the results of 1995 appeals and revocations.
Tables 3.4.2 and 3.4.3 elaborate on Table 3.4.1 to show the initial and 1995 year-end distributions of sablefish QS and QS holders by management area and vessel category. The initial and year-end QS distributions may be different in the catcher vessel categories because, under some conditions, persons receiving catcher vessel CDQ compensation QS can "swap" that QS to another catcher vessel category. This issue is dealt with more fully in this report in Section 3.6 of this chapter and in Section 4.2 of Chapter 4.
The amount of QS issued to freezer vessels was the same at initial allocation and at the end of the first year in all areas. QS compensation swaps do not affect this vessel category. The percentage of an area's total QS held as freezer vessel QS ranged between about 8% in the West Yakutat area to about 55% in the Aleutian Islands area. The number of persons holding freezer vessel sablefish QS rose in the Southeast, West Yakutat, Central Gulf, and Aleutian Islands areas during 1995, but stayed constant in the Western Gulf and Bering Sea areas. Average holdings fell in areas in which the number of QS holders rose. Average freezer vessel sablefish QS holdings were larger than the average QS holdings of the two catcher vessel categories in all IFQ regulatory areas except the West Yakutat area.
The amount of large (over 60 feet) sablefish catcher vessel QS remained unchanged during 1995 in all areas except West Yakutat where large catcher vessel QS declined slightly. This indicates that net swaps of CDQ compensation QS were not a major factor in the sablefish fishery during 1995.
The number of persons holding large catcher vessel QS declined slightly in all areas. The largest fall was six percent in the Aleutian Islands area. Average large catcher vessel QS holdings rose in all areas due to the small decline in QS holders.
The amount of small (60 feet or less) catcher vessel QS rose during 1995 in West Yakutat but was unchanged all other IFQ regulatory areas. The number of small catcher vessel QS holders fell in all Gulf of Alaska areas from Southeast to the Western Gulf but was unchanged in the Aleutian Islands and Bering Sea areas. The decrease in QS holders in the Gulf of Alaska ranged from about 5% in the Western Gulf to 9% in Southeast. Average QS holdings rose in the areas where the number of QS holders declined, indicating some consolidation of QS holdings.
3.5 Changes in the Distribution of QS by Resident Categories
3.5.1 Changes in the Distribution of Sablefish QS by State.
Tables 3.5.1-1 and 3.5.1-2 show how the distribution of sablefish QS holdings in each management area changed among the states from initial issuance through year-end 1995. RAM division records contain data on the current mailing address for the QS holders. The RAM Division did not retain old mailing address information when mailing addresses were changed.16 For this reason, the current mailing address on the RAM records has been assumed to be the place of residence for QS holders both at initial issuance and at year-end 1995.
The most important state with respect to sablefish QS holdings was Washington. At initial issuance and at year-end 1995, persons from Washington held the majority of the QS in all IFQ regulatory areas except Southeast. Persons from Washington also increased their QS holdings during 1995 in all IFQ regulatory areas except Southeast and the Central Gulf. In the Central Gulf, the highest percentage of sablefish QS was held by persons from Washington.
The percentage of each area's QS held by Alaskans at the end of the first year ranged from 22% in the Aleutian Islands area to 65% in the Southeast area. Alaska's QS holdings decreased slightly during 1995 in the W. Yakutat, Aleutian Islands, and Bering Sea areas and increased slightly in the Southeast, Central Gulf, and Western Gulf areas. Alaska's share of the total QS in each area was approximately the same at initial issuance and at year-end 1995. The largest change occurred in the Southeast area where the percentage of QS holdings held by Alaska residents increased by about 1%.17
At initial issuance and at year-end 1995, nonresidents of Alaska held a majority of the QS in all IFQ regulatory areas except Southeast. The QS holdings of persons from Oregon and other states were small relative to the QS holdings of persons from Washington and Alaska.
In the Southeast, W. Yakutat, and Central Gulf areas the majority of QS holders were from Alaska both at initial issuance and at year-end 1995. In the Western Gulf, Aleutian Islands, and Bering Sea areas the majority of QS holders were nonresidents of Alaska both at initial issuance and at year-end 1995.
The overall number of QS holders dropped during 1995 in all areas. However, in some instances the number of QS holders in an area who were from a particular state increased or remained constant during 1995. For example, the number of Aleutian Islands QS holders from Alaska increased by one person during 1995. The percentage of QS holders in an area who were from each state changed only slightly from initial issuance to the end of 1995.
The average size of QS holdings in each IFQ regulatory area for residents of most states tended to rise from initial issuance through year-end 1995, partially reflecting reductions in number of QS holders and in some cases also reflecting an increase in QS holdings by persons from the state. In a few cases average QS holdings fell.
Average QS holdings could vary considerably among persons from different states within a management area. For example, in the West Yakutat area, Alaska residents received average initial allocations of 72,359 QS units, while Oregon residents received average initial allocations of about 109,134 QS units, and Washington residents received average initial allocations of about 195,659 QS units.
3.5.2 Changes in the Distribution of Sablefish QS by Census Area.
This section includes four tables which provide data on both the initial distribution of sablefish QS holdings and the year-end 1995 distribution of QS holdings by IFQ regulatory area and resident category. The resident categories used in the tables are the 1990 Alaskan census areas plus a nonresident category for QS holders from other states. Entities that hold QS were assigned to a resident category based upon NMFS-RAM address information.
The first two tables in this section, Table 3.5.2-1A andTable 3.5.2-1B, are sorted by resident category and then by IFQ regulatory area. The focus of these tables is on the "resident category." The tables are good for viewing the IFQ areas where persons from a particular resident category received QS and the amounts they received.
Table 3.5.2-1A provides a summary on the QS holdings of each resident category in each sablefish IFQ regulatory area. For each resident category and IFQ management area, the table provides the initial QS holdings, the 1995 year-end QS holdings, the change in QS holdings during the year, and the percentage change in QS holdings. The table also shows the initial and 1995 year-end percentage of the total QS in the IFQ area that was held by persons in the resident category.
Persons from Alaska census areas that were local to a sablefish IFQ area tended to receive a significant portion of the QS from that local area. For example, persons from the Sitka census area were initially allocated 22.5% of the sablefish QS in the Southeast area and persons from the Wrangell-Petersburg census area were initially allocated 15.1% of the QS in the Southeast area.18
Persons who were initial QS recipients in coastal census areas also tended to increase their sablefish QS holdings in IFQ regulatory areas that were more "local" to the census area. For example, persons from the Kodiak area increased their sablefish QS holdings in the Central Gulf and Western Gulf during 1995. Similarly, persons from the Kenai Peninsula increased their sablefish QS holdings in the West Yakutat and Central Gulf areas.
However, this rule was not universal as the sablefish QS holdings of some coastal census areas declined in adjacent IFQ areas during 1995. For example, residents of the Ketchikan Gateway and Prince of Wales-Outer Ketchikan census areas reduced their sablefish QS holdings in the Southeast area during 1995.
Persons from the nonresident category held the majority of QS at initial issuance and at the end of 1995 in all sablefish IFQ regulatory areas except Southeast. During 1995, the amount of QS held by nonresidents increased slightly in the Bering Sea, Aleutian Islands, and West Yakutat areas and decreased slightly in the Southeast, Central Gulf, and Western Gulf areas.
Table 3.5.2-1B provides somewhatilar information on QS holders. The table provides a summary, by resident category, on the number of QS holders in each sablefish IFQ area. The table shows the initial number of QS holders, the 1995 year-end number of QS holders, the change in the number of QS holders during the year, and the percentage change in the number of QS holders for each resident category and IFQ management area.
For each resident category and IFQ management area, Table 3.5.2-1B also shows the initial average sablefish QS holdings, the 1995 year-end average QS holdings, the change in average QS holdings during 1995, and the percentage change in average QS holdings in 1995.
Table 3.5.2-1B demonstrates that there was some consolidation of sablefish QS holdings and a reduction in the number of QS holders in 1995 for most resident categories and IFQ areas. In the few cases where the number of QS holders in an IFQ area from a particular resident category increased during 1995, the increases were very small.
The decline in the number of persons in a resident category tended to lead to increases in the average QS holdings for that resident category. However, some resident categories showed decreases in average QS holdings for some IFQ areas during 1995 even when the number of QS holders had declined.
The last two tables in this section, Table 3.5.2-2A and Table 3.5.2-2B, are sorted first by IFQ area, and then by resident category. Thus the focus of these latter tables is on the "IFQ area." These are better tables to discern the distribution of sablefish QS holdings and QS holders within an IFQ area among the resident categories.
Table 3.5.2-2A provides the same information as Table 3.5.2-1A except the data are sorted and presented in this different fashion. In Table 3.5.2-2A data are sorted by sablefish IFQ area and then by resident category. The table provides a summary of the amount and percentage of the QS for a particular IFQ area that were held by persons from each resident category at initial issuance and at year-end 1995.19
Similarly, Table 3.5.2-2B provides the same information as Table 3.5.2-1B but again the data are sorted and presented in this different fashion. In Table 3.5.2-2B data are sorted by sablefish IFQ area and then by resident category and the focus of the table is on the IFQ area. The table shows the number and percentage of the QS holders for a particular IFQ area in each resident category, both at initial issuance and at year-end 1995. It also shows how the average QS holdings for a particular IFQ area changed during 1995 for persons from the different resident categories.
3.5.3 Changes by Management Area, Rural-Urban, Local- Nonlocal
The initial distribution of QS and the changes in that distribution are topics of interest for those who have been concerned about the potential consequences of the new IFQ program. The previous section examined this topic using Alaska census areas as resident categories. This section examines the topic using five resident types that were originally developed by Langdon to study permit holdings under Alaska's limited entry program. These resident types have since been used by the Commercial Fisheries Entry Commission to monitor distributional changes under the program.20 The five resident types are defined as follows:
AK Rural Local (ARL) A person residing in an Alaska rural community which is local to the IFQ management area for which the QS applies;
AK Rural Nonlocal (ARN) A person residing in an Alaska rural community which is not local to the IFQ management area for which the QS applies;
AK Urban Local (AUL) A person residing in an Alaska urban community which is local to the IFQ management area for which the QS applies.
AK Urban Nonlocal (AUN) A person residing in an Alaska urban community which is nonlocal to the IFQ management area for which the QS applies.
Nonresident A person residing in a location outside of Alaska.
The decision rules for designating rural/urban and local/nonlocal classifications are described in Appendix II. Essentially the rural/urban distinction is based on a population size of 2,500 or more as of the 1990 census. Some communities with populations less than 2,500 are classified as urban because they lie on a road system and are within a certain radius of an urban center. For instance, Auke Bay is designated as urban, even though it has a small population, because it is situated on a road system and is within 20 miles of Juneau.
Table 3.5.3-1 provides the initial distribution and year-end 1995 distribution of sablefish QS by area and resident type. For each resident type within an area it also shows the initial and year-end percentage of the area's QS held by that resident type, and the change in QS held by that resident type during the year.
As noted earlier, nonresidents were initially issued the majority of the QS in all sablefish areas except Southeast. Nonresident QS holdings decreased slightly in the Southeast, Central Gulf, and Western Gulf areas during 1995 and increased slightly in the West Yakutat, Aleutians, and Bering Sea regulatory areas.
At the end of 1995, nonresidents still held a majority of the QS in all sablefish areas except Southeast. The percentage of QS held by nonresidents ranged from 35% in the Southeast area to about 78% in the Aleutian Islands area at the end of 1995.
The percentage of sablefish QS initially issued to AULs ranged from about 0% in the West Yakutat, Western Gulf, Aleutian Islands, and Bering Sea areas to about 45% in the Southeast area. The percentage of QS held by AULs increased slightly in the Southeast and Central Gulf areas, decreased slightly in the Western Gulf area, and remained unchanged elsewhere during 1995.
The percentage of sablefish QS initially issued to ARLs ranged from about 0% in the Bering Sea area to 14% in the Southeast area. The amount of sablefish QS held by ARLs decreased in the Southeast, West Yakutat, and Western Gulf areas, increased in the Central Gulf area, and remained unchanged elsewhere during 1995.
The percentage of sablefish QS initially issued to AUNs ranged from about 4% in the Southeast area to about 36% in the Bering Sea area. The amount of sablefish QS held by AUNs decreased in the Southeast, Aleutian Island, and Bering Sea areas and increased in the West Yakutat, Central Gulf, and Western Gulf areas during 1995.
The percentage of sablefish QS initially issued to ARNs ranged from about 0% in the Southeast and Aleutians areas to about 2% in the Bering Sea and West Yakutat areas. The amount of sablefish QS held by ARNs decreased in the non-CDQ areas of Southeast, West Yakutat, Central Gulf, and Western Gulf areas during 1995. This may partially reflect transfers of CDQ compensation QS. The amount of sablefish QS held by ARNs increased in the Aleutian Islands during 1995.
Table 3.5.3-2 provides similar information on the initial and year-end 1995 distribution of sablefish QS holders by area and resident type. The table includes data on the change and percentage change in the number of QS holders by area and resident type. The table also includes data on the percentage of QS holders in each area from each resident type and their average QS holdings both at initial issuance and at year-end 1995.
The number of QS holders declined and the average QS holdings increased in many of the area and resident type combinations. This again indicates that some overall consolidation of QS holdings occurred during 1995. In some cases the average QS holdings per person fell for a resident type, usually reflecting a percentage decline in QS holdings that was greater than the percentage decline in QS holders.
3.6 Changes in Holdings by Block Status
This section examines the initial and 1995 year-end distribution of sablefish QS by block status. Four categories are examined. These are "blocked," "unblocked," "swappable CDQ compensation QS," and "unswappable CDQ compensation QS." Section 4.2 provides a more thorough discussion of rules governing CDQ compensation QS.
Persons received their initial allocation of QS in a non-divisible "block" if their area QS was worth less than 20,000 pounds of a hypothetical IFQ that was calculated using 1994 TACs and the number of QS units outstanding on October 17, 1994. Block sizes were measured by the number of sablefish QS units the block contained. In most cases, blocked QS units have to be transferred as a unit under the rules of the program. Moreover, a person can hold a maximum of two blocks in an IFQ area. If a person holds any unblocked sablefish QS for an IFQ area then the person can only hold one block of QS.21
These blocking rules were meant to generate a type of QS that would be unattractive to large operators trying to build more full-time sablefish fishing operations, thus preserving opportunities in the fishery for small scale part-time sablefish fishing operations. The block accumulation limits also reduce the opportunities for consolidation of fishing operations. Some hoped that QS in blocks would have a lower price per QS than unblocked QS and would reduce the cost for small scale fishermen entering the fishery. This issue is examined in Section 5.7 of this report.
Some of the blocks issued were relatively small and may be unattractive to even small scale fishermen. Leasing rules also interacted with block rules to make it almost impossible to lease blocked catcher vessel QS. Program rules only permitted the lease of 10% of a QS holder's catcher vessel QS. Since blocks must be transferred as a unit, a person who held blocked catcher vessel QS usually was not able to lease any of it.22 For these reasons, the amounts of QS issued as blocks are an important aspect of the IFQ program.
Table 3.6.1 provides summary data on the initial and 1995 year-end distribution of sablefish QS by IFQ area and block status. The "after 1995 swap" allocation of QS is identical to the initial allocation of QS at the IFQ area level.23 The tables also show the initial and 1995 year- end percentage of QS held in the area by block status and the change and percentage change in the amount of QS by block status during 1995.
As can be seen, the percentage of sablefish QS that was blocked at the end of 1995 varied considerably by area, from 8% in the Central Gulf area to 63% in the Bering Sea. In all areas except the Bering Sea, the amount of sablefish QS that was blocked was 20% or less.
CDQ compensation QS was issued initially in non-CDQ areas in the Gulf of Alaska. These areas include the Southeast, West Yakutat, Central Gulf, and Western Gulf. This CDQ compensation QS represented about 3 to 4% of the total QS in each of these areas. If the recipient held no other QS in an area, the catcher vessel CDQ compensation QS was unblocked and "swappable" to another catcher vessel class upon the first transfer. If the person held other QS in the area, the CDQ compensation QS was "unswappable." Such CDQ compensation QS was rolled into the person's other QS for the area and was blocked or unblocked based upon the size of the person's summed holding.24
The amount of both blocked and unblocked sablefish QS increased during 1995 in non- CDQ areas from Southeast through the Western Gulf, as the unswappable CDQ compensation QS was all rolled into other QS holdings of the recipients at initial allocation.25 Some of the increase was also due to "swappable CDQ compensation QS" being swapped and transferred or simply transferred. Under the program rules, the rights to "swap" such QS disappear upon first transfer.
Table 3.6-2 provides similar data on the initial and year-end distribution of sablefish QS holders by area and block status. The number and percent of blocked QS holders and CDQ compensation QS holders declined in all sablefish IFQ areas. The number of "unblocked" QS holders appears to rise in the non-CDQ areas from Southeast through the Western Gulf. However, this is due largely to the reclassification of portions of the unswappable CDQ compensation QS. The number of unblocked QS holders also rose slightly in the Aleutian Islands area.
Table 3.6-3 elaborates on Table 3.6-1 to provide data on block status by vessel category. It provides summary data on the initial and 1995 year-end distribution of QS by IFQ area, vessel category, and block status. The table also shows the "after 1995 swaps" and 1995 year-end percentage of QS held in the area, and the change and percentage change in the amount of QS during 1995 by vessel category and block status.26
As can be seen from the table, the small catcher vessel category has higher percentages of blocked QS than the freezer vessels and large catcher vessel categories in most areas. The Bering Sea area has high percentages of blocked QS for all vessel categories.
Freezer vessels did receive some CDQ compensation sablefish QS in the non-CDQ areas from Southeast through the Western Gulf. However, all freezer vessel CDQ compensation QS was unswappable. Thus their CDQ compensation QS was "rolled in" to their other holdings at initial issuance.
Table 3.6-4 elaborates on Table 3.6-2 to provide data on QS holders by vessel category and block status. The table provides data on the initial and year-end distribution of sablefish QS holders by area, vessel category and block status.
3.7 Changes in Holdings by Size of Holding
The potential consolidation of QS into a few hands was a concern of the NPFMC when they developed the IFQ program. While some consolidation of QS holdings was felt to be desirable, many persons felt that consolidation might be deleterious if it went "too far."
The IFQ program contains several provisions designed to constrain consolidation of sablefish QS holdings. For example, unless the amount of QS was received at initial allocation, no person, individually or collectively, may use more than 1% of the combined total sablefish QS for all of the sablefish IFQ regulatory areas. In the Southeast regulatory area, no person may use more than 1% of the area's total QS unless the amount was received at initial allocation.27
Further, no vessel may be used, during a fishing year, to harvest more than 1% of the combined fixed gear sablefish TACs for all the IFQ regulatory areas, and no vessel may be used to harvest more than 1% of the fixed gear sablefish TAC for the IFQ regulatory area East of 140o W. Longitude (Southeast), unless a person received an approved IFQ allocation in excess of these limitations.28 Other constraints against consolidation include the prohibition of transfer of QS across vessel categories, and the creation of blocked QS with limits on holdings of blocked and unblocked QS. As noted elsewhere in this report, under the block system, no person can hold more than two blocks in an area and no person who holds two blocks may hold any unblocked QS.29
Table 3.7-1 summarizes sablefish QS holdings at initial issuance and at year-end 1995 by IFQ area and by the relative size of the holding. Each line provides information for all the persons whose QS holdings fall within a certain range of percentages of the total QS for the management area. Thus, the first line in the table contains information for all the persons who held less than a half percent of the QS for the Southeast area. The table shows that about 62% of the sablefish QS holdings for the Southeast area fell into this range at initial issuance and at year-end 1995.
Approximately 11% of the total QS holdings in the Southeast area were in the 1% to 2% or 2% to 3% ranges. These exceeded the use constraints for the area. As noted, initial QS recipients can fish their QS in excess of the constraints.
The distribution of sablefish QS holdings by size of holding varied substantially by IFQ area. Some QS holdings represented relatively large percentages of the total QS in some areas. For example, initial allocations of 10% to 15% of the area's total QS occurred in the Western Gulf and Aleutian Islands regulatory areas.
Table 3.7-2 provides similar information on the number of sablefish QS holders at initial issuance and at year-end 1995 by IFQ area and the relative size of the holding. Again, the data indicate that a small number of persons received relatively high percentages of the overall QS in the Western Gulf, Aleutians, and Bering Sea areas.
The distribution of sablefish QS holdings by area and relative size of the holding did not change substantially during 1995. The percentage distribution of QS holders by area and size of holding also did not change substantially. However, there were some changes in the number of QS holders by size of holding due to consolidation. This latter change is most noticeable in the decline in the number of QS holders in the "less than 5%" category in all IFQ regulatory areas during 1995.
3.8 Changes in Sablefish QS Holdings During 1995 by Type of Person.
Under the new sablefish IFQ program, individuals, partnerships, solely owned corporations, corporations, and other types of entities are defined as "persons" who may hold QS. This section examines the change in the distribution of QS during 1995 by the type of person holding the QS.
Table 3.8-1 summarizes information on the distribution of sablefish QS by IFQ area and type of person. Table 3.8-2 provides similar information on the number of persons holding QS. Tables 3.8-3 and 3.8-4 provide similar information, but break the data out by vessel category and by management area. These tables provide information on the following categories of QS holders:
The sablefish IFQ program contains some restrictions on the ability of corporations and partnerships to hold and use sablefish catcher vessel QS and IFQ. The intent of these restrictions appears to be to assign QS to corporations and partnerships that qualified as initial issuees, but to impose restrictions on the ability of corporations and partnerships to expand their positions in the fishery. These restrictions were somewhat stricter in the Southeast regulatory area than elsewhere.
Corporations and partnerships that were initial catcher vessel QS recipients could use the QS and IFQ and (except in the Southeast area) could buy additional QS. The QS had to be used on a vessel owned by the corporation or partnership and operated by one of its employees. In the Southeast area, corporations and partnerships that were initially issued catcher vessel QS could fish what they were issued, but they could not increase their fishable holdings through transfer.30
Corporations and partnerships that are not initial catcher vessel QS recipients cannot acquire catcher vessel QS by transfer. If a corporation or partnership that was not an initial issuee comes into possession of catcher vessel QS, perhaps following a default on a loan, it would not be able to fish with the QS.31
A corporation or partnership, except for a publicly held corporation, would lose the rights to fish its initial allocation and to buy additional QS and IFQ if a new shareholder or partner were added (except for court appointed trustees acting on behalf of shareholders or partners who became incapacitiated). In these cases, QS would have to be transferred to an individual before it could be fished again.32
The rules governing corporate or partnership holdings of freezer vessel QS are not as strict as those for catcher vessels.
Table 3.8-1 shows the initial and year-end 1995 distribution of sablefish QS by IFQ area and type of person. The table shows that the proportion of QS initially allocated to corporate holders varied considerably among IFQ areas. Initial allocations of QS to corporations ranged from 12.5% of the total QS in the Southeast Area to 62.8% of the total QS in the Bering Sea area.
The percentage of an area's QS held by corporations increased by small amounts from initial allocation to year-end 1995 in all areas except Southeast and the Aleutians. However, at the end of 1995 the proportion of each area's QS that was held by corporations had not changed substantially, ranging from 11.9% in the Southeast area to 64.6% in the Bering Sea area.
Individuals, meaning natural persons who were initial QS recipients, held the highest proportion of the QS of any "type of entity" in the Southeast, West Yakutat, and Central Gulf areas at both initial issuance and at year-end 1995. Individuals held the second highest proportion of an area's QS of any type of entity in the Western Gulf, Aleutians, and Bering Sea areas. The percentage of an area's QS held by individuals varied from 22.6% in the Aleutians to 80.5% in the Southeast area at initial issuance. At year-end 1995, the percentage of an area's QS held by individuals varied from 22.5% in the Aleutians to 78.7% in the Southeast area.
The amount of QS held by individuals declined slightly in all areas during 1995. The amount of QS held by solely owned corporations also declined slightly in all areas during 1995 except for the Bering Sea. However, the amount of QS held by "crew," meaning new entrants who are individuals, increased in all sablefish regulatory areas during 1995.
Table 3.8-2 provides similar information on the change in the number of persons holding QS by area and type of entity. In all sablefish regulatory areas, the number of persons declined or remained unchanged for all types of entities except new individuals entering into the fishery for the first time as " IFQ crew." The number of entities classified as crew increased in all sablefish areas during 1995.
The declines in QS holders were largely due to the consolidation of QS holdings that occurred during 1995. The declines in QS holders led to only minor changes in the percentage distribution of total QS holders in most areas by type of entity. The most noticeable changes were the decline in the percentage of QS that was held by individuals who were initial issuees and the increase in the percentage of QS held by crew who were new individuals entering the system.
In Tables 3.8-3 and 3.8-4 the categories of estates, individuals, one owner corporations, and crew are reported as a single consolidated "effective individual" category. These tables show the management areas and vessel classes in which corporate, partnership, and effective individual QS holdings are most common. Table 3.8-3 looks at the amount of QS held and 3.8-4 looks at the numbers of persons holding QS. These tables are sorted by type of entity, vessel category, and management area. Note the definition of the effective individual category above.
Table 3.8-3 provides the initial QS, the year-end 1995 QS, the change and the percentage change in QS during 1995 for the each person type, vessel category, and management area combination. It also shows the percentage of total QS for the vessel category and area that was held by each person type at initial issuance and at year-end 1995.
The data indicate that corporate owners held a majority of the freezer vessel class sablefish QS in the Central Gulf, Western Gulf, Aleutian Islands, and Bering Sea areas at initial issuance and at year-end 1995. The combined "effective individual" category owned the highest percentage of the freezer vessel class QS in the Southeast and W. Yakutat areas.
Partnerships held smaller portions of the QS in most vessel classes and areas. The largest percentage of QS held by partnerships occurred in the freezer vessel class. Partnerships held in excess of 25% of the freezer vessel class QS in the Southeast, Western Gulf, and Aleutians areas, both at initial issuance and at year-end 1995.
The "Effective Individuals" held a majority of the QS in the "less than or equal to 60 feet" catcher vessel classes in the Southeast, W. Yakutat, Central Gulf, and Western Gulf areas both at initial issuance and at year-end 1995.
Corporations held a majority of the "greater than 60 feet" large catcher vessel class QS in the West Yakutat, Central Gulf, Aleutian Islands, and Bering Sea areas. Effective individuals held the next highest percentage of large catcher vessel class QS in these areas.
In contrast, effective individuals held a majority of the "greater than 60 feet" large catcher vessel class QS in the Southeast and Western Gulf areas, while corporations held the second highest portion of the large sablefish catcher vessel class QS in these areas.
Table 3.8-3 also shows the percentage change in the QS holdings by type of entity, vessel category, and IFQ area from initial issuance through year-end 1995. This provides more detail on the changes outlined above under Table 3.8-1.
Table 3.8-4 provides similar information on QS holders. These data are also sorted by type of person, vessel category, and IFQ area.
Other sections of this report examine the net result of consolidations and transfer activities that occurred during 1995. Some of the transfers that occurred during 1995 went to initial issuees and some transfers went to new entrants. The tables in this section look at the distribution of sablefish QS at year-end 1995 by IFQ regulatory area to see what portion of the QS was still held by initial issuees and what portion was held by new entrants. The data suggest that significant numbers of persons who were not initial issuees for an area were able to obtain QS for the area by year-end 1995.
The NPFMC's IFQ program provides for free transferability of QS, subject to several constraints designed to temper consolidation and ensure preservation of opportunities for the smaller-boat and part-time portion of the fleet that existed under open access. These constraints are discussed in other sections of this report.
Free transferability allows participants to enter and exit the fishery at times opportune to them. Free transferability also provides a means for economically efficient consolidations to occur and a means for new persons to enter the fishery. This section examines the extent to which new entrants entered the sablefish fishery as QS holders during 1995.
Table 3.9-1 shows the amount of QS and the percentage of QS by sablefish area which was still held by initial issuees as of year-end 1995. The table provides the number of remaining initial issuees in each area, the percentage these initial holders represent of all QS holders, and the average QS holdings of these initial QS holders.
The table also shows the amount and the percentage of sablefish QS by IFQ regulatory area which is held by new entrants to the area as of year-end 1995. The table provides the number of new entrants to each area, the percentage these new entrants represent of all QS holders, and the average QS holdings of these new entrants.
As can be seen from the table, new entrants held a variable amount of QS at year-end 1995, from about 2% of the total QS in the Central Gulf, Western Gulf, and Aleutians to about 5% of the total QS in the Southeast area. The number of QS holders in an area at year-end 1995 who were new entrants to the area also varied from about 6% in the Central Gulf, Western Gulf, Aleutians, and Bering Sea areas to about 10% in the Southeast area. These data suggest that significant numbers of new persons were able to enter the sablefish fishery in 1995. Some of the new QS holders in an area during 1995 were initial issuees in other sablefish areas or received an initial allocation of halibut IFQ. This can be seen in Table 3.9-2, which examines more closely the new entrants in each sablefish IFQ regulatory area.
Table 3.9-2 provides data on the total sablefish QS and the total number of persons holding QS at year-end 1995 by NMFS area. The table also shows the number of remaining initial issuees at year-end 1995 and the percentage of QS holders which they represent.
The table also examines new entrants in each area. New entrants are defined as entities who were not initial recipients of QS in an area, but who held QS for that area at year-end 1995. However, some of the new entrants in an area were initial recipients of QS in another area or for another species. This can be seen by looking at the other columns in Table 3.9-2.
For example, in the Central Gulf area there were 38 new entrants who held QS as of year-end 1995. Of these persons, 33 were "new holders" of sablefish QS and 23 were entirely new entrants to the IFQ program. The numbers imply that 5 of the 38 new entrants in the Central Gulf were initial issuees of sablefish QS in some other area, and 15 of the 38 new Central Gulf entrants were initial issuees of some other type of halibut or sablefish QS.