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8 "Sweep-ups" of Small QS Blocks


The sablefish 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 sablefish, 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 5,000 pounds of a hypothetical sablefish 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 5,000 pound limit of hypothetical IFQ.

Formerly, the sweep-up limit was only 3,000 pounds of a hypothetical IFQ. In April 1996 the NPFMC amended the IFQ program rules to increase the sweep-up limit to 5,000 pounds. This amendment became effective in December, 1996 and thus 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 occurred in the NMFS-RAM data base. They have resulted in minor 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 that in all areas there were substantial numbers of persons holding sweepable QS blocks at both initial issuance and year-end 1996. By the end of 1996, there had been slight decreases in the number of sweepable blocks and in the number of people who held them. Therefore, through the 1995 and 1996 seasons, the sweep-up provisions had very little impact.

8.2 Sweep-up Transactions

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 the Southeast, West Yakutat, or Central Gulf areas. 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, and the number of sweepable blocks involved was small relative to the number of sweepable QS blocks in each area. Table 8-2 indicates that the number of buyers and sellers were nearly the same 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.

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 is blocked at year-end 1996 varies considerably by area, ranging from 7.5% in the Central Gulf to 60.8% in the Bering Sea. The percentage of persons who held blocked QS was high, ranging from 56.6% in Southeast to 94.1% in the Bering Sea.

In contrast, the percentage of total QS that was sweepable was quite small in all areas, ranging from 2.8% of the total QS in the Central Gulf to 15.7% in the Bering Sea. 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, 39.6% of the total QS holders in Southeast held sweepable QS at the end of 1996, yet their total holdings represented only 4.3% of the total QS pool in that area. The Bering Sea shows the highest percentage of QS holders who held sweepable QS, with 69.6%.

8.4 Summary

The Council provided a sweep-up provision for small blocks of sablefish 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, very few sweep-up transactions occurred in 1995 and 1996.

In December 1996 a revised sweep-up limit representing 5,000 pounds of a hypothetical sablefish IFQ became effective. This may make sweep-up transactions more practical in future years.

Table 8-1. Persons Holding Sweepable Sablefish QS Blocks, Number of Sweepable Blocks, and Total Sweepable QS Holdings at Initial Issue and Year-end 1996

Table 8-2. Number of Transferors and Recipients of Sweep-up Transactions, With Mean QS of Sweep-ups, By Area

Table 8-3. 1996 Year-end Total Sablefish QS, Blocked QS, and Sweepable Blocked QS by Area