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CFEC Report Number 96-R10N
September, 1996
Alaska Commercial Fisheries Entry Commission
8800 Glacier Highway, Suite 109
Juneau, Alaska 99801
(907) 789-6160
Introduction
During 1995, the halibut fishermen operating in federal and state waters off Alaska fished under an individual fisherman's quota (IFQ) program for the first time.
The purpose of this study is to document and analyze changes that occurred under the program, from initial allocation of QS through the end of 1995, using data and information from administrative records maintained by the National Marine Fisheries Service's (NMFS) Restricted Access Management (RAM) Division.
Key results
How did predicted and actual distributions compare?
Before the IFQ program was adopted, the North Pacific Fishery Management Council (NPFMC) and NMFS analyzed the potential distributional impacts of the initial allocation rules. To analyze the initial QS distributions and other issues, NPFMC and NMFS staff built a data file from 1984-1990 halibut catch data and sundry sources on vessel ownership. Estimates of the initial QS distributions from this data set were reported in NPFMC reports and staff analyses.
In the current report, projected distributions, estimated from the actual data set used to make the original projections, have been contrasted with the distributions that actually occurred in the initial allocation. The projected distributions have been generated specifically for this report from the original data sets.
In most management areas the numbers of QS issued were greater than had been predicted using the original data set. Numbers of QS issued were 2% to 6% greater in Areas 2C to 3B, 6% to 10% greater in Areas 4A to 4D, and 15% lower in Area 4E.
When the QS recipients in each management area were divided into groups on the basis of the numbers of QS they had received, the predicted and actual distributions by these groups were generally similar. The biggest percentage discrepancies occurred for allocations of QS in 3B and 4A where the number of persons getting allocations under 5,000 QS were much larger than had been predicted.
In all halibut management areas where there is enough non-confidential data to allow a report, the percentage of QS allocated to the large catchers (over 60 feet) was greater than predicted. In contrast, the percentage of QS allocated to the medium catcher category (35 to 60 feet) was less than predicted in all areas except 2C, and the small catcher category (less than or equal to 35 feet) was less than predicted in all management areas except Area 4E. The percentage of QS allocated to freezer vessels was slightly greater than predicted in management areas 3A, 3B, and 4A but less than predicted in Area 4D.
The amount and percentage of halibut QS that was issued to entities from outside Alaska was greater in most halibut management areas than would have been predicted from the earlier data set. The only exception was in Area 4E.
How was QS distributed among vessel classes?
Most of the QS allocated in the different management areas was assigned to catcher vessels. Freezer vessel allocations ranged from 0% of the total QS in Area 4E to 8% of the total QS in Area 4D.
Large catcher vessels received the most QS in five management areas, medium catcher vessels received the most QS in two areas, and small catcher vessels received the most in one area.
Did transfers lead to very much consolidation?
The introduction of QS was expected to lead to reductions in the size of the halibut fleet. QS holdings were expected to consolidate as persons who could make less profitable use of what they received sold out to persons who could make more profitable use of it. This consolidation was expected to lead to greater efficiencies in fleet operation and to provide some of the benefits from the program.
However, although consolidation was expected to lead to benefits, the possibility of too much consolidation also caused many concerns. The NPFMC designed a program with a number of curbs on potential consolidation. The extent of consolidation, therefore, is a subject of considerable interest.
Due to the way QS was allocated, the numbers of persons who received it in the different management areas were large compared to the numbers who had fished in the preceding years. For example, in Area 2C an average of 1,635 permit holders had landed halibut in the years from 1990 to 1994. In contrast, 2,378 persons were initially issued QS.
The numbers of QS holders dropped between 8% and 10% in Areas 2C, 3A, 3B, and 4A, and by 3% in the Area 4B. There was no change in the numbers of QS holders in the other areas. In the areas in which the number of QS holders dropped, the size of the average QS holding rose.
Consolidation figures quoted for a management area can mask large differences among the vessel classes. Decreases in the number of Area 2C QS holders, for example, ranged between 3% for freezer operations and 10% for medium and small catcher vessels. In three cases, an overall management area decline hides an actual increase in the number of QS holders. The numbers of freezer vessel QS holders rose in 3A, 3B, and 4A. Aside from these three cases, numbers of QS holders either fell or remained constant.
How was QS distributed among residents of different states?
Alaskans received the most QS in six of the eight management areas and received over half of it in five of the eight. Alaskan percentages ranged from 12% in Area 4D up to 91% in Area 4E. Residents of Washington tended to receive the next largest percentages, followed by residents of Oregon.
QS transfers led to increases in Alaskan holdings in four areas and a decrease in one. Transfer activity, however, did not lead to large changes in the percentage holdings of any state.
The percentages of QS holdings by state differ from the percentages of QS holders by state. Alaskans constituted a majority of entities holding QS in all management areas except 4D both at initial allocation and at the end of 1995. Alaskan percentages at initial allocation and at the end of 1995 ranged from 31% in 4D to 94% in 4E.
The numbers of QS holders from each state dropped or remained unchanged in 1995, irrespective of management area. Changes in the numbers of persons from each state did not lead to large changes in the percentages of QS holders from each state.
Did QS go to rural areas or areas local to the fisheries?
Communities that are near fisheries may have been historically dependent on them; one would like to know how much QS they received and how much they still held at the end of the first year. Rural communities, with fewer job opportunities, may also be dependent on fisheries in ways in which urban communities are not.
Among Alaska residents the resident type which received the highest percentage of the Alaskan allocation of QS initially issued varied by IFQ area:
Transfers during 1995 didn't change the relative rankings of the resident types in any area, and the resident type which received the highest percentage of QS in an area at initial issuance still held the highest percentage of the area's QS at year-end 1995. The following transfer patterns were evident among Alaskan residents:
How much QS was blocked and how much was unblocked?
QS issued to persons who would have received less than the equivalent of 20,000 pounds of IFQs in 1994 was issued in the form of blocks. Under the program rules, the QS incorporated into a block must be traded as a block. A person who holds no unblocked QS in one area can hold up to two blocks of QS, a person who holds some unblocked QS for an area can only hold one block of QS. These rules were designed to help preserve small operations in the fishery and to limit consolidation.
Large amounts of QS were blocked. The percentage blocked varied widely by area, from 35% in Area 3A to 100% in Area 4E. A majority of the QS was blocked in Areas 2C, 3B, 4A, 4C, and 4E. In most areas, the smaller and medium vessel categories received higher percentages of blocked QS than the freezers and large catcher vessel categories.
How was QS divided between small and large holders?
Large percentages of QS holders had relatively small holdings. In most management areas most persons initially received a half percent or less of the initial allocation of QS. In two areas, 2C and 3A, everyone did. In six areas, the number of persons receiving 0.5% or less was a majority. In Areas 4C and 4D, they made up a third of the recipients.
There were relatively fewer large holders. No person received more than 10% of the QS in any of the management areas. Some persons received from 5% to 10% in each of the management Areas 4B, 4C, 4D, and 4E. The percentage of recipients receiving one or more percent of the QS in an area ranged from zero in Areas 2C and 3A to 43% in Area 4D. In Areas 4C and 4D there were less than 100 initial recipients, making holdings greater than 1.0% inevitable for some persons.
Decreases in the total numbers of QS holders occurred in Areas 2C, 3A, 3B, 4A, and 4B. These decreases were concentrated among persons holding less than a half percent. In Areas 3B and 4A there were also some decreases among persons holding one percent or more. However, in each of these areas, except for 4B, there were offsetting increases in the numbers of QS holders holding 0.5% to just less than 1.0% of the QS.
How much QS went to corporations, partnerships and natural persons?
Effective individuals (defined to include natural persons, one-person corporations and estates) received most of the QS that was issued. Effective individuals never received less than 70% of the QS in any of the medium or small catcher vessel categories. They received over 60% in all but one of the freezer vessel categories (but in that one, 4D, they only received 6.4%). As a rule, they received their lowest percentages among the larger catcher vessel categories, where their percentages of the initial allocations ranged from 27.7% in Area 4D to 74.1% in Area 2C.
Corporate ownership was most important among the large catcher vessels. Corporation shares of the initial large catcher allocations ranged from 20.7% in Area 2C to 100% (of a small allocation) in Area 4E. Corporate holdings among small catcher vessels were trivial. Among freezer and medium catcher vessels they generally ranged between 1.9% and 34.2% (although they received about 78% of the freezer QS in Area 4D).
Partnerships were less important than either individual or corporate ownership. In general, they were most important among large catcher vessels; large catcher partnership percentages ranged from 5.2% to 12.6%. For the other vessel categories in the other areas partnerships generally held less than 5% of the QS (however in two cases, freezers in Area 4D and small catchers in 4C, partnerships held 15.6% and 28.9% of the QS).
During 1995, relative percentage holdings by individuals tended to decline among medium catcher vessels, tended to decline or remain constant among freezer vessels and small catcher vessels, and tended to increase among large catcher vessels. The percent of QS held by individuals increased among all classes of catcher vessels in Area 2C.
Corporate holders had increased percentages of total QS among the medium catcher boats in six of eight areas. Corporate-held freezer and small catcher vessel QS percentages were up slightly or unchanged. Corporate-held large catcher vessel percentages were up, down, and unchanged depending on area. Partnerships generally saw their percentage shares drop or remain constant during 1995.
Was there much new entry into the fishery?
All the areas except 4E saw some transfer of QS from original issuees to new entrants during 1995.
At the end of the year persons who had not received an initial QS allocation in the area represented from 3% of QS holders in Areas 4C and 4D, to 6% of QS holders in Areas 2C, 3A, and 4A (although there were no new entrants in Area 4E). These new entrants held from 2% of the area QS in Areas 4C and 4D to 9% in Area 4A.
A large portion of the leased QS went to persons who were not initial QS recipients. New persons constituted 50% or more of the persons leasing QS in eight of the nine management area and vessel class combinations in which leasing took place.
Was the QS swap rule used very much?
Community Development Quota (CDQ) allocations were made from the TACs in management Areas 4B, 4C, 4D, and 4E. QS recipients in these areas were compensated for their reduced harvests by being given a one time initial allocation of QS in each of the non-CDQ management areas.
If a person got CDQ compensation catcher vessel QS in an area without holding any other regular QS already in that area, the person was permitted to convert it into QS for another catcher vessel class in that same area on its first transfer. This is called a QS swap. QS loses its convertability after being swapped; it also loses its convertability on its first transfer, even if that transfer did not involve a swap.
Swappable QS was only issued in catcher vessel classes in the non-CDQ Areas 2C, 3A, 3B, and 4A. Initial allocations were generally less than 2% of total area QS.
There were 114 swaps. Swappable small vessel QS dropped between 21.6% and 25.2% in these areas through swaps. There was also a 4.2% drop in the large vessel QS in Area 2C through swaps. In many areas, some of the swappable CDQ compensation QS lost its swap-ability through transfers that did not involve swaps.
Small vessel class QS was reduced through swaps in each of these areas. The large vessel class QS in 2C was also reduced. Mid-sized catcher vessel and large catcher vessel QS holdings generally increased.
At the end of the year from 56% to 100% of the swappable QS retained its convertability, depending on the vessel class and management area.
Was there much transfer and lease activity?
There tended to be a lot of transfer activity for catcher vessel QS in non-CDQ areas, but almost no catcher vessel QS was leased. Catcher transfer rates in non-CDQ areas ranged from 7.2% for large catchers in Area 4A to 23.2% for small vessels in Area 3A while catcher lease rates in non-CDQ areas ranged from 0% in most vessel classes to 0.1% in three classes.
Conversely, there tended to be relatively little transfer activity for freezer vessel QS in non-CDQ areas, but large quantities of it were leased. Freezer transfer rates ranged from 1.2% in Area 2C, to 10.0% in Area 4A. Freezer lease rates ranged from 13.5% in Area 2C to 38.8 in Area 4A.
In general, transfer and lease rates were lower for CDQ area QS. The exceptions were transfer rates of 11.2% for medium catcher QS in Areas 4B and 4D and lease rates of 0.7% for large catchers in 4B and 54.3% for freezer QS in 4B. In Area 4C, an area with only a small amount of freezer QS, a 200% transfer rate was produced when everything was transferred twice.
There were only 31 leases, and almost all leasing activity was confined to freezer vessel QS. There were no leases of blocked catcher vessel QS, but a high percentage of the leases of freezer vessel QS were blocked. Out of 24 leases of freezer vessel QS, 13 involved blocks.
Was the sweep-up rule used very much?
The NPFMC recognized that many of the blocks that would be issued would be too small to be fished. It therefore included a provision in the plan that would allow fishermen with blocks under 1,000 pounds to combine them into blocks that were no greater than 1,000 pounds. These provisions were called the "sweep-up" provisions.
Significant numbers of sweepable halibut QS blocks were issued in 1995, but not many halibut sweep-up transactions occurred before the year ended. For example, the largest number of sweep-ups took place in Area 3A. However, this only involved 15 sweepable blocks out of a possible 1,035. The next largest number of sweep-ups took place in Area 2C, but this only involved 11 out of 658 sweepable blocks.
Because no sweep-ups actually brought any blocks up to the 1,000 pound limit, there was little real change in the amount of sweepable QS in 1995. The percentages of total QS that were sweepable at the end of the year were very close to initial percentages. These generally ranged between 0.3 and 3.1 percent of total management area QS (except for 19.9% in 4E).
What did QS sell and lease for?
QS and IFQs could be sold and leased. QS could be sold with all of the associated current year's IFQs, they could be sold with some, but not all of the current year's IFQs, or they could be sold with none of the current year's IFQs.
Prices could be reported in either dollars per QS unit or in dollars per pound of 1995 IFQ. The available price data has been summarized in the following table. Prices for the few transactions in which QS was sold with some, but not all IFQs, are not reported to preserve data confidentiality.
Catcher vessel QS prices tended to be higher for larger vessel size categories. Prices in dollars per IFQ also tended to decline from eastern management areas to western management areas.
Prices for QS during 1995
| Area | Vessel class | Price for QS sold | Price for QS sold | Price for QS leases |
| with all IFQs | with no IFQs | ($/IFQ - $/QS) | ||
| ($/IFQ - $/QS) | ($/IFQ - $/QS) | |||
| 2C | freezers | C | 1.04 - 0.16 | |
| large catcher | 8.17 - 1.23 | |||
| medium catcher | 7.78 - 1.17 | na - 1.09 | ||
| small catcher | 6.80 - 1.02 | na - 0.70 | ||
| 3A | freezers | C | 0.80 - 0.09 | |
| large catcher | 7.77 - 0.84 | na - 0.79 | ||
| medium catcher | 7.23 - 0.78 | na - 0.71 | C | |
| small catcher | 6.99 - 0.75 | na - 0.70 | ||
| 3B | freezers | C | ||
| large catcher | 6.87 - 0.47 | C | ||
| medium catcher | 6.28 - 0.43 | na - 0.49 | ||
| small catcher | C | C | ||
| 4A | freezers | C | ||
| large catcher | 6.35 - 0.83 | C | ||
| medium catcher | 5.47 - 0.72 | C | ||
| small catcher | 5.96 - 0.78 | C | ||
| 4B | freezer | C | ||
| large catcher | C | |||
| Medium catcher | C |
Did blocking affect the price of QS?
Blocked QS tended to sell for less than unblocked QS. Smaller blocks tended to sell for less than larger blocks. The differences in average prices could be large. For example, unblocked small vessel QS in Area 2C, with all associated IFQs, sold for $7.97 per IFQ in 1995, while blocked QS sold for $6.76, and blocks of less than 1,000 pounds sold for $5.85.
Were there many gifts or non-monetary transfers of QS?
Priced sales were the most likely type of transaction in each of the areas with permanent transfers. The percentage of transferred QS transferred in priced sales ranged from 42.4% in Area 4B to 74.1% in Area 2C. (Note that these and the other statistics in this section do not report on Areas 4C, 4D, or 4E. The data for 4C and 4D are confidential, and there were no transfers in 4E.)
However, other transactions were possible. Some transactions were clearly sales, but prices could not be calculated. This might occur if the sale contract specified that the QS was to be paid for with a share of the earnings, or if the transfer was part of a package deal, possibly involving a vessel and other gear. Other sales appear to have accounted for from 1.9% of QS transfers in Area 2C to 27.7% in Area 4B.
Other transfers appear to have involved a trade of QS for something of value. Trades accounted for between 0% of QS transferred in Area 4A and 7% in Area 4B.
Many persons indicated that their QS transfers were gifts. Gifts accounted for between 0% of QS transferred in Area 4B and 14.4% in Area 2C.
Finally, there were a large number of transfers that could not be assigned to one or another of these categories. These unknown transfers accounted for from 7.9% of the QS in Area 2C to 22.8% in Area 4B.
How did people finance QS transfers?
Information is available from the transfer application about the source of financing for QS sales. Possible sources listed on the form included personal, bank, Alaska Department of Commerce and Economic Development (ADCED), Commercial Fishing and Agriculture Bank (CFAB), seller, processor, and other. If the transfer application was completed accurately, it should show the sources of financing used in any particular transaction. In many cases persons indicated more than one source of financing. Information is not available, however, on the proportions of financing from different sources when multiple sources were used.
Personal resources were the most common finance source indicated on the transfer application form. A majority of the QS transferred through priced sales indicated personal resources as a finance method in all IFQ areas where these types of transfers occurred. "Commercial Bank" or "Seller" were the next most common methods of financing used. "ADEC/CFAB" and "processors" were not indicated as large sources of QS financing for these 1995 priced sales.
Many transfer application forms had missing information. The amount of priced QS transferred with a "missing" finance method ranged from 5.5% in Area 4A to 23.7% in Area 4B. There were no priced transactions in Areas 4C, 4D, or 4E.
How were buyers and sellers related?
Information is also available from the transfer survey about the relationships between buyers and sellers. Buyers were able to select from one of four possibilities: "business partner," "personal family member," "other friend or relative," and "no relationship" on the transfer survey. Respondents were asked to select only one of these possibilities.
"No relationship" was the most likely response in Areas 2C to 4B among those answering the question. The percentage of all transactions indicating that there was no relationship ranged from 30.4% in Area 4A to 63.1% in Area 2C. (data for Areas 4C and 4D are confidential, and there were no transactions in 4E).
Was the number of fishing operations reduced very much?
The number of persons with landings in 1995 was down in most areas from the previous year. Drops from the previous year ranged from 10% in Area 2C to 44% in Area 4C (the number was down 100% in 4E where the entire TAC was set aside for the CDQ program). In four of the management areas, the number of persons with landings was the lowest in the six year period from 1990 to 1995 (not counting Area 4E). However, in two areas, 3B and 4A there were actual increases in the number of persons making landings; the increase in 3B was 33%.
The number of vessels used to make landings was also down in most areas in 1995 from the preceding year. Drops from the previous year ranged from 20% in Area 4A to 45% in Area 4C. In five of the management areas (excluding 4E), the number of vessels with landings was the lowest in the six year period from 1990 to 1995. There was a slight increase in the number of vessels in Area 3B.
The numbers of vessels tended to drop by more than the number of persons making landings. In five of the management areas (excluding 4E), the ratio of persons to vessels was the highest in the six year period, 1990-1995. In one more area it was the second highest.
The interpretation of these reductions is complicated by the fact that the TACs (minus CDQs) were generally below those of preceding years in 1995. This is reflected in the fact that, although the numbers of persons and vessels making landings were both generally down in 1995, the pounds landed per person or per vessel were also generally down in 1995. With constant TACs these should have risen as the number of persons and vessels dropped.
Did fishermen catch or exceed their TACs?
None of the eight management area TACs was fully harvested in 1995. Harvests, as a percent of the overall TAC, ranged from 67.5% in Area 4B to 88.7% in Area 3A (none of the TAC was available for harvest in Area 4E due to the CDQ program).
A focus on management areas can mask large variations in the performance of different vessel classes within the area. Thus, in Area 2C, 67.7% of the available small vessel IFQs were harvested, while 91.4% of the medium catcher vessel IFQs were harvested. In general, the small vessel classes IFQs went unharvested to a greater extent than those of other vessel classes.
During 1995, large numbers of initial QS recipients in each area who had small amounts of QS, and who did not alter their QS holding for a particular species, area, and vessel category, did not fish any portion of the IFQ associated with that QS. The percentage of persons with an unchanged QS holding who did not fish that holdings ranged from 32.6% in Area 2C to 53.7% of the initial QS recipients in Area 4D (no Area 4E IFQ was available for harvest since 100% of it was assigned to CDQs).
Did the places where landings were made change?
Total halibut landings dropped between 1994 and 1995, continuing a trend begun in 1993. The drop from 1994 to 1995 was much larger, however than the previous two annual drops. The 1995 drops were due in part to reductions in TACs, and in part to the fact that the fleet did not fully harvest the available TACs. Landings in Alaska dropped along with overall landings in 1995, but less than proportionately.
A larger percentage of the available halibut were landed in Alaska in 1995 than had been landed there in 1993 or 1994. In 1995, about 90% of the halibut were landed in Alaska. This was the fourth largest percent of landings during the six years from 1990 to 1995.
Washington was the next most important landings state. Total Washington landings, and Washington landings as a percent of overall landings, were down in 1995; Washington accounted for 9.1% of the landings in 1994 but only 7.6% in 1995.
The percentage of total halibut landings within some regions of Alaska changed in 1995 relative to 1994. Between 1994 and 1995, the Wrangell-Petersburg census area, Sitka Borough, Juneau Borough, Skagway-Yakutat-Angoon census area, and the Kodiak census area all increased their relative shares of the landings. The Ketchikan/Prince of Wales region, the Valdez-Cordova census area, the Kenai Peninsula-Anchorage census areas, and the Aleutian-Alaska Peninsula-Bering Sea regions, all saw decreases in their relative shares of the landings.