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7 Distribution of QS by Blocking Factor, CDQ Compensation QS, CDQ Compensation QS "Swaps"

7.0 Introduction

QS Blocks

The sablefish IFQ program created non-severable "blocks" of QS that constrain how much QS can be aggregated. Persons received their QS in a block if their QS would have resulted in less than 20,000 pounds of sablefish, given 1994 TACs. Blocks cannot be broken up for sale, meaning all the QS in a block has to be sold as a single unit.2 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 5,000 pounds of 1994 IFQ.3 These sweep-ups are discussed in more detail in Chapter 8.

CDQ Compensation QS

The IFQ program also included provisions to set aside part or all of the TAC in the Bering Sea and Aleutian Islands management areas for community development quotas (CDQs). Individuals who received QS in the CDQ areas were faced with reduced TACs.4 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 equally among all fishermen from all management areas who received sablefish QS. Compensation was provided by giving fishermen from the CDQ areas (Bering Sea and Aleutian Islands) additional QS in each of the management areas in which CDQs were not allocated (Southeast, West Yakutat, Central Gulf, Western Gulf).

CDQ Compensation QS "Swaps"

In many cases persons who received CDQ compensation QS received it in areas where they had not previously fished or had not received initial QS. The Council added a provision to allow the transfer of catcher vessel CDQ compensation QS across catcher vessel categories within a management area, upon first transfer under certain conditions.5 This "swapping" provision was added to make it easier for persons to sell their CDQ compensation QS.

If a recipient of CDQ compensation QS held no other QS in the area on the date the CDQ compensation QS was issued, the catcher vessel CDQ compensation QS was unblocked and "swappable" to another catcher vessel upon the first transfer. This rule facilitates the transfer of CDQ compensation QS.

If a person held other QS for the same area and catcher vessel category when their CDQ compensation QS was issued, the catcher vessel CDQ compensation QS was "unswappable," and was rolled into the person's other QS holding for the area. This summed holding became either blocked or unblocked, depending upon it's size.6

Because of the CDQ compensation "swap" regulation, the total amount of QS within an area- vessel category combination may change from initial allocation to the end of 1996. This does not affect the management area totals, however, as the QS is only being "swapped" between catcher vessel categories and does not transfer outside the area.

7.1 Blocked QS, CDQ Compensation QS, and Swappable CDQ Compensation QS.

Table 7-1a provides summary data on the initial and 1996 year-end distribution of QS by IFQ area and block status. It also shows the distribution of CDQ compensation QS and how much of it was swappable or non-swappable. The overall QS change and percent change is also given by area and block status. Note that the total number of QS units declined slightly after initial issuance due to revocations.

The distribution of QS by block status can change over time due to: 1) Swap transfers of CDQ compensation QS; 2) Non-swappable CDQ compensation QS being rolled into the person's existing QS holdings; 3) Administrative appeals that change the catcher vessel category of the QS; 4) Administrative revocations of QS.

Table 7-1a indicates that the percent of QS that was issued as blocks varied greatly by area. The Bering Sea shows the highest percentage of blocked QS, with 64.3% of the total QS in the area initially issued in blocks. The other management areas had much lower percentages of blocked QS, ranging from 8.1% in the Central Gulf to 19.7% in the Western Gulf. In most areas, the amount of blocked and unblocked QS increased from initial issuance to the end of 1996 due to the net effects of the four factors mentioned above.

CDQ compensation QS was issued in the Southeast, West Yakutat, Central Gulf and Western Gulf areas and represented about 3.4% of the total QS in each of these areas. The CDQ non-swappable QS was rolled into the other blocked or unblocked holdings of initial recipients. The amount of swappable CDQ compensation QS also decreased as these QS units were transferred after initial issuance. The net result of these changes can be seen in the year-end 1996 column.

Table 7-1b contains much of the same information as Table 7-1a, except it shows the number of persons rather than the amount of QS by area and block status. The table also indicates the net changes in the number of QS holders from initial issuance through the end of 1996.

It is important to note that the sum of the initial QS holders in Table 7-1b is greater than the number of unique persons who were issued QS for that area. This is because a person is issued non-swappable CDQ compensation QS when they already hold either blocked or unblocked QS in the area. Table 7-1b records persons who initially received non- swappable CDQ compensation QS in the row for CDQ Non-Swappable; however, they are also recorded in either the Blocked or Unblocked rows, because their initial QS allocation falls into one of these categories as well.

The number of persons who received swappable or non-swappable CDQ compensation QS varied by area, depending upon whether persons had received other QS units in the area. For example, in Southeast 76 persons received swappable CDQ compensation QS and 98 persons received non-swappable CDQ compensation QS. In contrast, in the Central Gulf only 16 persons received swappable CDQ compensation QS and 158 persons received non- swappable QS.

All persons who received non-swappable CDQ compensation had their compensatory QS rolled into their other initial holdings, as the year-end 1996 column of Table 7-1b indicates. The number of persons holding swappable CDQ compensation QS also dropped substantially. Note that this type of QS is no longer swappable after it is first transferred, regardless of whether it is "swapped" to a different catcher vessel category or transferred within the vessel category.

The overall number of QS holders has decreased in all areas, although the drop was slight in the Bering Sea and Aleutian Islands. Most of the decrease in total QS holders was probably due to persons consolidating QS holdings, and some of this consolidation involved persons who sold their CDQ compensation QS.

Table 7-2 repeats information presented in Tables 7-1a and 7-1b, but only presents data associated with swappable CDQ compensation QS. It shows, by area, the initial issuance and 1996 year-end amounts of CDQ compensation QS and the numbers of persons who held this type of QS. The table helps to show that substantial amounts of swappable CDQ compensation QS have yet to be transferred at the end of 1996.

In the Central Gulf, only 710 swappable QS units had been transferred, either with or without a "swap" in vessel category by the end of 1996, which represents only 1.8%% of the total swappable QS issued. In other areas the percentage of swappable CDQ compensation QS transferred was higher. For example, in Southeast 21.7% of the swappable CDQ compensation QS had been transferred (94,091 QS units), and in West Yakutat and the Western Gulf, 38.5% and 11.0% of the respective swappable QS units had changed to non- swappable status after being transferred. As previously stated, these transfers may or may not have occurred with an accompanying vessel category swap. The table also shows that the number of persons holding swappable CDQ compensation QS has dropped since initial issuance as this type of QS has been transferred.

Table 7-3 breaks out swappable CDQ compensation QS by area and catcher vessel category, showing the distribution of swappable QS at both initial issuance and year-end 1996. The table serves to illustrate how much QS has been "swapped" from each vessel category in a management area. It also indicates how much swappable CDQ compensation QS has changed hands in regular transfers within a vessel category without being swapped. Recall that swappable CDQ compensation QS loses its swappable status upon its first transfer, regardless of whether it has been swapped to a different catcher vessel category or has merely changed hands through a regular transfer. A comparison between the amount of swappable QS initially issued and the amount remaining at the end of 1996 indicates a decrease in all but one catcher vessel category. The table also shows how administrative revocations have changed the amount of swappable CDQ compensation QS in a catcher vessel category.

Table 7-4 shows the changes, due to swaps only, in the distribution of swappable CDQ compensation QS by area and vessel category. The table provides more detail on the number of swaps and amount of QS swapped to and from each vessel category. The table does not include changes to swappable QS that occurred due to administrative appeals or revocations. The table demonstrates that only very small amounts of CDQ compensation QS were swapped to other vessel categories and the few swaps moved QS to smaller catcher vessel categories.

Table 7-5 lists the initial and year-end distribution of all QS by management area and vessel category. It shows how the amount of QS has changed between catcher vessel categories, and compares swap changes of CDQ compensation QS to administrative appeals, revocations, and other actions that may change the amount of QS in a vessel category. It is important to consider that Table 7-5 indicates the net QS changes due to appeals only if they resulted in changes between vessel categories, and not the net result of all appeals that have occurred since initial issuance.

Table 7-5 again indicates there have been only small changes in the distribution of QS between vessel categories. Administrative revocations have played a greater role than CDQ compensation swaps in changing the percentages of area QS held by different catcher vessel categories.

Table 7-1a. Sablefish Initial Allocation and Year-end 1996 QS by Area, Block, and CDQ Status

Table 7-1b. Sablefish QS Holders: Initial Allocation and Year-end 1996 QS Holders by Area, Block, and CDQ Status

Table 7-2. Net Changes in Swappable QS and Number of Persons From Initial Issuance Through 1996, By Area

Table 7-3. Swappable Sablefish QS: Net Changes From Initial Allocation to Year-end 1996, By Area and Vessel Category

Table 7-4. Swappable Sablefish QS: Swaps From/To Vessel Categories, By Area

Table 7-5. Initial and Year-end 1996 Sablefish QS: Net QS Changes in Vessel Categories Due to Swaps, Revocations, Appeals, and Other Factors