8 "Sweep-ups" of Small QS Blocks
The halibut IFQ program rules created non-severable "blocks" of QS. Persons received their QS in a block at initial allocation if their QS would have resulted in less than 20,000 pounds of halibut, given 1994 TACs.1 Blocks cannot be broken up for sale, meaning all the QS in a block has to be sold as a single unit. Originally, blocks could not be broken up for leasing purposes, either. In late 1996 a new regulation became effective that allows the IFQ associated with the blocked QS to be separated for annual leasing.
Under the blocking rules, a person can hold no more than two blocks, and a person with two blocks cannot hold any unblocked QS. The regulations allow persons to combine, or "sweep-up," more than two blocks if their combined total is worth less than 3,000 pounds of a hypothetical halibut IFQ.2
The sweep-up provisions were added to the QS block rules because many of QS blocks that were issued were very small, and in some cases probably too small to make a fishing trip worthwhile. The sweep-up rules allow a person to consolidate small QS blocks, up to the 3,000 pound limit of hypothetical IFQ.
Formerly, the sweep-up limit was only 1,000 pounds of a hypothetical IFQ. In April 1996 the NPFMC amended the IFQ program rules to increase the sweep-up limit to 3,000 pounds. This amendment became effective in December 1996 and therefore did not have a substantial impact during the 1995 and 1996 seasons. The tables in this section reflect only the current rules for sweep-ups.
8.1 Changes in Sweepable QS Blocks
Table 8-1 provides data on the number of persons holding sweepable QS blocks, the number of sweepable QS blocks, and the total amount of sweepable QS in an area. Data are shown for both initial issuance and year-end 1996.
Administrative QS revocations are the only actions that should reduce the amount of sweepable QS in an area from initial issuance through year-end 1996. However, administrative errors appear to have been recorded in the RAM data base. They have resulted in changes to the amount of sweepable QS that cannot be explained by revocations. Some of the changes are the result of NMFS-RAM applying corrections during 1996 so that QS units formerly issued as unblocked became blocked.
The table indicates there were substantial numbers of persons holding sweepable QS blocks at both initial issuance and year-end 1996. This was particularly true in Areas 2C, 3A, and 3B. The number of persons holding sweepable QS blocks and the number of sweepable blocks have each declined since initial issuance. The percentage decrease in number of persons who held sweepable QS was roughly equivalent in each of Areas 2C, 3A, 3B, 4A, and 4B, ranging from an 8.1% decline in Area 4A to an 11.2% decline in Area 3A. There was a smaller percentage decrease in the number of sweepable blocks.
Table 8-1. Persons Holding Sweepable Halibut QS Blocks, Number of Sweepable Blocks, and Total Sweepable QS Holdings at Initial Issue and Year-end 1996
Table 8-2 provides summary information on the sweep-up transactions by area and year. As can be seen, there have been relatively few sweep-up transactions and all of these transactions occurred in Areas 2C through 4A. A comparison with Table 8-1 shows that the total amount of sweepable QS involved in these transactions was quite small relative to the amount of sweepable QS in each area. Table 8-2 indicates the number of buyers and sellers were similar in each area and year, suggesting that most sweep-up transactions involved a sweep-up of only one or two blocks.3 An oddity of the RAM database is that a person must first hold QS before they can execute a sweep-up transaction. Therefore, if a person holds no QS but purchases and sweeps one or more blocks, the first transaction is recorded as a "transfer" and not a "sweep-up." Subsequent transactions associated with the entire sweep-up are entered individually as sweep- up transactions. Thus for some persons, the data in Table 8-2 do not show the transfer of the first block involved in the sweep-up. If a person already held a block of sweepable QS then the purchase of additional blocks to combine in the sweep-up would be recorded as sweep-up transactions.
Table 8-2. Number of Transferors and Recipients of Sweep-up Transactions, QS of Sweep-ups, By Area
8.3 Sweepable QS Relative to Total QS
Table 8-3 compares sweepable QS and sweepable QS holders with the total QS and QS holders in each area at the end of 1996. It also shows how much blocked QS there was in each area, and how many persons held blocked QS. As was shown in Chapter 7, the percentage of QS that was blocked at year-end 1996 was relatively high in each area, ranging from 35.2% in Area 3A to 100% in Area 4E. More than half the QS was blocked in Areas 2C, 3B, 4A, and 4C. The percentages of persons who held blocked QS were also high, and were over 80% for all areas except Area 4A, which shows 64.9% of the total QS holders held blocked QS at the end of 1996.
In contrast to blocked QS, the percentage of total QS that was sweepable was relatively small, ranging from 3.5% of the total QS in Area 4B to 16.0% in Area 3B. Although sweepable QS may have represented a fairly small percentage of each area's total QS pool, a considerable number of persons held sweepable QS. For example, 62.0% of the total QS holders in Area 3A held sweepable QS at the end of 1996, yet their sweepable holdings represented only 7.5% of the total QS pool in that area. More than half of the QS holders in Areas 2C, 3A, 3B, and 4C held sweepable QS.
Table 8-3. 1996 Year-end Total Halibut QS, Blocked QS, and Sweepable Blocked QS by Area
The Council provided a sweep-up provision for small blocks of halibut QS because many small blocks of QS were initially issued under the IFQ program and many of these blocks were not worthwhile to fish. It was hoped that the sweep-up provision would allow such blocks to be combined into fishable blocks of QS. However, relatively few sweep-up transactions occurred in 1995 and 1996.
In December 1996 a revised sweep-up limit representing 3,000 pounds of a hypothetical halibut IFQ became effective. This may make sweep-up transactions more practical in future years.