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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 during the first two years of the halibut IFQ program. The report is restricted mainly to topics that can be addressed using National Marine Fisheries Service - Restricted Access Management Division's (NMFS-RAM) administrative and catch data. Some ancillary data are also used.

The Halibut IFQ Program Basics

Quota shares (QS) are the basic use-privileges that were issued under the program. QS were issued to qualified applicants who owned or leased a vessel that made legal fixed gear landings of halibut at any time during 1988, 1989, and 1990. The regular QS units issued to a person in a management area were equal to the person's qualifying pounds for that area from the person's best five years of landings over the seven year period from 1984 to 1990.

The QS that were issued are specific to one of eight halibut management areas and one of four vessel classes. The management areas are the ones defined by the International Pacific Halibut Commission (IPHC): 2A, 3A, 3B, 4A, 4B, 4C, 4D, and 4E. The four vessel classes include a freezer processor vessel class and three catcher vessel classes. The three catcher vessel classes are "35 feet or less," "36 to 60 feet," and "greater than 60 feet."

In Areas 4B, 4C, 4D, and 4E portions of the total allowable catch (TACs) were allocated to Community Development Quotas (CDQs) for communities in western Alaska. In Area 4E the entire TAC was allocated to CDQs and there has been no IFQ fishery. The Council compensated QS holders in these CDQ areas for the reductions in TAC due to CDQs by issuing them "CDQ compensation QS" in non-CDQ areas 2C through 4A.

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. Adjustments for the person's underages and/or overages from the previous year are then made to determine the person's final IFQ for the year.

The QS that were issued are permanently transferable and leasable albeit with many restrictions that are discussed in the report. 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. As a result, the NPFMC adopted several complex rules in an effort to constrain the changes that could occur under the program. Many of these rules are discussed and explored in the report.

Topics Covered In This Report

The topics covered in the report include basic data on the extent of consolidation of QS holdings since the beginning of the program, the volume of permanent QS transfer and QS prices, and the volume of seasonal QS lease transfers and IFQ lease prices. The report also includes detailed summary data on permanent transfers including the amount of QS transferred as sales, gift and trades, the relationships between the transferors and transfer recipients, and the finance methods used in sales transfers.

The report provides summary information related to many other topics that were important when the program was conceptualized and designed. The IFQ program contains several special features which the Council added to address specific objectives. The report provides data which highlight the importance of these features to date.

Topics examined include the amount and percentage of "blocked" QS as opposed to "unblocked" QS, the distribution of Community Development Quota (CDQ) compensation QS, the use of "swaps" of certain CDQ compensation QS across catcher vessel categories, and the use of a provision allowing for the "sweepup" of very small blocks to create more fishable blocks.

A concern of some persons is that the IFQ program might result in a radical change in the geographic distribution of QS holdings. The report provides an extensive examination of changes in the geographic distribution of QS holdings during the first two years of the program. Changes in the distribution of QS holdings are examined by state of residence, by Alaska census area, and by special resident-type designators defined for the study that classify communities as "local" or "nonlocal" to the IFQ management area and as "rural" or "urban".

Other distributional questions are also examined. These include changes in the distribution of QS by person-type, changes in the distribution of QS between initial QS recipients and new entrants, and changes in halibut harvest and delivery patterns during the first two years of the program. The report contains information on the consolidation of IFQ permit holders onto single vessel operations and the underharvest of IFQ during 1995 and 1996.

The report contains a total of sixteen chapters. The first two chapters provide an introduction and background information on the fishery and the new IFQ program. The last fourteen chapters contain the results of the study. The following sections provide brief synopses of the topics covered in each of these chapters and the key results.

Chapter 3 Consolidation of QS Holdings, 1995-1996

The Council's IFQ program provides for permanent transferability of QS. The Council intended some consolidation of QS to occur to spread out the fishing season. The Council hoped that a longer and slower-paced fishery would improve ex-vessel prices, provide for greater safety and less wastage and enhance the profitability of individual fishing operations. However, the Council built many features into the program to constrain the extent and the nature of QS consolidation.

Chapter 3 provides a broad overview of the extent to which QS holdings were consolidated and QS holders were reduced during the first two years of the program. Data are presented comparing distributions at initial allocation and at year-end 1996.

Key Results:

Chapter 4 QS Transfers and QS Prices

Consolidation of QS and changes in the distribution of QS can occur through permanent transfers of QS. Chapter 4 provides a broad overview of the extent of permanent transfers of QS in the first two years of the program. Any transaction resulting in a permanent change of ownership is treated as a transfer in the chapter. These include regular transfers, sweep-ups of small QS blocks, and administrative transfers due to court action or other causes.

Data are presented on QS transfers, the amount of QS transferred, and the number of unique transferors over the first two years of the program. QS transfer rates and QS holder transfer rates are defined and calculated.

Chapter 4 provides estimates of QS prices over the first two years of the program based upon analyses of priced sales transactions. Estimates are provided for QS sold with and without the associated current year IFQ. Estimates from regression models are used to project a more detailed breakdown of 1995 and 1996 QS prices where existing data are too sparse.

Key Results:

Chapter 5 Halibut QS Leases

The Council's IFQ program provides for restricted leasing of QS on a seasonal basis. Holders of freezer vessel QS can lease all of the IFQ associated with that QS. Holders of catcher vessel QS can lease up to 10% of that QS.

Chapter 5 examines the extent to which the leasing provisions were used during the first two years of the halibut program. Data are presented on the amount and percentage of QS leased and the number and percentage of QS holders who leased out QS. QS and QS holder lease rates are defined and calculated.

For some leases, price information was available. These data are used to provide statistics on IFQ lease prices during the first two years of the program.

Key Results:

Chapter 6 Types of Transfers, Financing of Transfers, Relationships between Transferors and Transfer Recipients, and Use of Brokers.

Persons who want to transfer QS must complete a transfer application form. The transfer application form collects basic information on each transfer.

Chapter 6 summarizes some of this basic information. Data are provided which classify permanent transfers as sales, gifts, trades, or other. Summary data are included that classify transfers by the nature of the relationship between the parties to the transfer (e.g., family, friend, business partner, or "no relationship"). The chapter also includes data on the use of brokers to facilitate QS transfers.

Chapter 6 also examines priced QS transfers and includes a breakdown of the finance sources used by buyers. The finance sources include bank, Commercial Fishing and Agricultural Bank (CFAB), Department of Commerce and Economic Development (DCED), personal, processor, and other.

Key Results:

Chapter 7 Distribution of QS By Blocking Factor, CDQ compensation QS, and CDQ Compensation QS Swaps.

Prior to implementation of the IFQ program, the Council added several special features to their IFQ plan. The Council decided that QS units that were worth less than 20,000 pounds of a hypothetical IFQ when they were issued would be placed into a nonseverable "block" and thereafter could only be transferred as a block.

The Council also restricted the number of these blocks that a person could hold in an area. If the person held any unblocked QS in an area they could only hold one block of QS for the area. If the person did not hold unblocked QS for an area then the person could hold up to two blocks for that area. The objective of these blocking rules was to preserve a portion of the QS for the fleet of small part-time operators.

Another feature of the program was the allocation of certain portions of the TAC in halibut areas 4B, 4C, 4D, and 4E to Community Development Quotas (CDQs). This had the result of reducing the available catch for QS holders in these areas. The Council decided that it wanted to make QS holders in all areas share proportionally in this loss by compensating the QS holders in the CDQ areas with an allocation of QS in the non-CDQ areas of 2C, 3A, 3B, and 4A. These compensatory shares were termed "CDQ compensation QS".

Regulations provide that if a person is issued CDQ compensation QS for an area where the person already has QS, then the CDQ compensation QS is combined with the existing QS and is either "blocked" or left "unblocked" depending on the total amount of the QS.

However, if a person is issued CDQ compensation QS in an area for which the person has no other QS, then the CDQ compensation QS is left unblocked. Moreover, if the CDQ compensation QS is catcher vessel QS, it can be fished on any size catcher vessel and upon first transfer can be permanently assigned to the specific catcher vessel category designated by the transfer recipient. This ability to "swap" certain CDQ compensation QS across catcher vessel categories within an area is termed "swapability" in the report. The ability to swap such QS across catcher vessel categories expires upon the first transfer.

Chapter 7 examines the distribution of QS by block status at initial issuance and at year-end 1996. The block status can be "blocked", "unblocked", "non-swappable" CDQ compensation QS, or "swappable" CDQ compensation QS.

Key Results:

Chapter 8 "Sweep-ups" of Small QS Blocks

Prior to the IFQ program the halibut fishery was characterized by short derby-like openings with a large turnover of participants on an annual basis. The Council's initial allocation methodology included persons who owned or leased a vessel(s) that made landings in the halibut fishery at any time during the 1988, 1989, or 1990 seasons.

Because of this, large numbers of persons with only a small amount of landings received a small initial allocation of QS. The IFQ regulations put initial QS allocations into non-severable blocks if the amount of the QS was worth less than 20,000 pounds of a hypothetical IFQ. Many of the QS blocks were very small and some were too small to make a fishing trip worthwhile.

In an effort to enhance consolidation of these blocks, the Council adopted a "sweep-up" provision for small blocks of QS. Originally it allowed a QS holder to acquire a number of small blocks and combine them into a single block as long as that single block was still worth less than 1,000 pounds of a hypothetical IFQ. In December, 1996 the sweep-up block size limit was raised to 3,000 pounds of a hypothetical halibut IFQ.

Chapter 8 examines the extent to which the sweep-up provisions were used during the first two years of the halibut IFQ program. The tables in the section are based on the new higher sweep-up limits.

Key Results:

Chapter 9 Changes In QS Holdings By Type of Person

Under the Council's IFQ program, QS can be owned by individuals (natural persons who were initial QS recipients), corporations, one-owner corporations, estates, partnerships, crew (natural persons who were not initial QS recipients but who met the qualifications to acquire QS), and other entities. However, the Council has included provisions which should encourage QS to move gradually to individual owner-operators.

Chapter 9 provides data on the amount and percentage of QS held and the number and percentage of QS holders by person-type. Data are provided for the fishery at initial issuance and at year-end 1996.

Key Results:

Chapter 10 Distribution of QS by State of Residence

Prior to the IFQ program, persons participating in the halibut fishery came from Alaska and from other states, particularly Washington and Oregon. A concern in Alaska is that QS holdings might gradually drift to holders outside of Alaska thereby reducing the economic impacts of the halibut fishery on Alaska.

Chapter 10 examines the distribution of QS and QS holders by state of residence (Alaska, Washington, Oregon, and other). The tables provide a broad overview of how these distributions have changed in the first two years of the IFQ program.

Key Results:

Chapter 11 Changes By Management Area, Rural-Urban, Local-Nonlocal

Under Alaska's limited entry program, there has been a movement of permits away from holders who live in rural areas that are "local" to limited fisheries to holders who live in urban areas that are "nonlocal" to the limited fisheries. Some persons are concerned that similar results might occur under the halibut IFQ program.

Chapter 11 examines changes in QS holdings within Alaska and between Alaska and other states using special resident-type classifications. All communities within Alaska are classified as "rural" or "urban" based largely upon 1990 census definitions and as "local" or "nonlocal" to each halibut management area. Persons within each community can then be placed into one of five resident-types relative to the halibut management area for which a QS applies. These are as follows:

Chapter 11 examines the distribution of QS and QS holders by these five special resident-types.

Key Results:

Chapter 12 Distribution of Halibut QS By Census Area

Within Alaska there have been concerns that the IFQ program might result in a dramatic restructuring that will increase the role of the halibut fishery in some areas while reducing its impact in other areas. Chapter 12 provides another view of the changes that have occurred in the geographic distribution of QS holdings since initial issuance.

In this chapter, QS holders within Alaska are assigned to census areas based upon their addresses. Nonresidents are placed into an "Outside Alaska" classification. The distribution of QS and QS holders are then examined at initial issuance and at year-end 1996.

Key Results:

Chapter 13 New Entrants In The Fishery

The Council provided a means under the IFQ program for new persons to receive halibut QS through transfer and enter the fishery. Any person from the United States can acquire freezer-processor (category A) QS. Only persons who are initial QS recipients or IFQ crew members may receive catcher vessel QS through transfer. Under the IFQ program, an IFQ crew member is defined as any individual who has at least 150 days experience working as part of a harvesting crew in any United States commercial fishery or as any individual who receives an initial allocation of QS.

New entrants may also occur by regulations which allow an individual to transfer QS to the individual's solely owned corporation (a new entity). New entrants might also occur because of transfers due to court order, operation of law, or as part of a security agreement. However, in these latter cases IFQ is not assigned unless the person receiving the QS transfer meets all of the eligibility requirements.

Chapter 13 examines the distribution of QS ownership between initial QS recipients and new entrants at year-end 1996. New entrants to the management area, new entrants to the halibut fishery, and new entrants to the IFQ program are all differentiated.

Key Results:

Chapter 14 Changes In Harvest and Delivery Patterns

Chapter 14 concentrates on halibut harvest data as opposed to QS holdings. The chapter examines the distribution of harvest and deliveries in several different ways.

Data are provided on the delivery of Alaska caught halibut by state of delivery and by Alaska census area of delivery. These data are for the 1990-1996 time period, which covers the immediate period prior to the IFQ program and the two years since the IFQ program was implemented. These data highlight the variation in delivery patterns over the time period.

Data are also provided which compare the number of persons recording individual landings in the years preceding the IFQ program with the number of persons recording landings in the first two years of the IFQ program.

In addition, the chapter provides data on the harvest of halibut by year and quarter and the harvest of halibut by the state of residence of the permit holder. A special section is also included which estimates the use of hired skippers in the fishery under the IFQ program.

Key Results:

Chapter 15 Overharvest and Underharvest of IFQs and TACs

This chapter examines the overharvest and underharvest of IFQ and TACs in the first two years of the IFQ program. The chapter also examines the amount of totally unfished IFQ held by initial QS recipients who have not altered their QS holdings.

Key Results:

Chapter 16 Consolidation of IFQ Permit Holders On Vessels

One way a reduction in the number of fishing operations occurs under the IFQ program is the consolidation of QS holdings. Another way a reduction can occur is when IFQ holders combine and fish their IFQ holdings from a single vessel.

Chapter 16 provides time series data on the halibut fishery over the 1990 to 1996 time period. These data suggest the extent to which vessels have been used by more than one person both before and since implementation of the IFQ program.

Key Results: