EXECUTIVE SUMMARY: CHANGES UNDER ALASKA'S SABLEFISH IFQ PROGRAM, 1995

Key results:

• Washington was the most important state with respect to the amount of sablefish QS held. At initial issuance, persons from Washington held the majority of QS in all sablefish areas except Southeast and the Central Gulf. At year-end 1995, persons from Washington held the majority of QS in all areas except Southeast.
• Persons from Washington increased their sablefish QS holdings during 1995 in all sablefish areas except the Southeast area. At year-end 1995, the percentage of QS held by persons from Washington ranged from about 28% in Southeast to 73% in the Aleutian Islands.

• The amount of sablefish QS held by persons from Oregon and other areas was small relative to the holdings of persons from Washington and Alaska.
• In the Southeast, W. Yakutat, and Central Gulf areas, the majority of QS holders were from Alaska both at initial issuance and at year-end 1995.
• In the Western Gulf, Aleutian Islands, and Bering Sea areas, the majority of QS holders were nonresidents of Alaska both at initial issuance and at year-end 1995.
• At initial issuance, the average amount of QS held by persons from Alaska was lower than the average amount of QS held by persons from Washington in all sablefish areas.

How was QS distributed by block status?

The NPFMC was concerned about retaining opportunities for a smaller part- time fleet under the sablefish IFQ program. For that reason, they added blocking rules to the IFQ program that required the placing of sufficiently small allocations of QS into "blocks" at initial allocation.

Under the rules, the QS incorporated into a block can only be traded as a block. A person who holds no unblocked QS in an 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. Because of these constraints, blocked QS was expected to be unattractive relative to unblocked QS for persons trying to develop a more full-time fishing operation. Thus it was anticipated that the small part-time fleet would be the major bidders for blocked sablefish QS.

Key Results:

• The percentage of the total sablefish QS that has been placed into blocks varies by area. In all areas except the Bering Sea, the vast majority of the QS was unblocked. In the Bering Sea area, 63% of the QS was blocked and 37% was unblocked.
• In areas other than the Bering Sea, the percentage of blocked sablefish QS at year-end 1995 varied from about 8% in the Central Gulf to about 20% in the Western Gulf. The percentage of unblocked sablefish QS at year-end 1995 in these areas varied from about 80% in the Western Gulf to 92% in the Central Gulf.

What was the distribution of QS by type of person and how did it change during 1995?

Under the sablefish IFQ program, QS was initially issued to qualified "persons" who owned or leased a vessel that made legal fixed gear landings of sablefish at any time over the 1988 to 1990 time period. A person could be an individual (natural person), partnership, corporation, or other legal entity.

Key Results:

• Corporations held the majority of sablefish QS both at initial issuance and at year-end 1995 in the Western Gulf, Aleutian Islands, and Bering Sea areas.
• Individuals held a majority of the sablefish QS in the Southeast and West Yakutat areas both at initial issuance and at year-end 1995. Individuals held the greatest percentage of the QS of any person-type in the Central Gulf area both at initial issuance and at year-end 1995.
• Individuals represented the largest percentage of QS holders of any person-type in all areas both at initial issuance and at year-end 1995. At year-end 1995 the percentage of QS holders who were individuals ranged from 47.2% in the Aleutian Islands to 76.5% in the Southeast area.

Were new persons able to enter the fishery during 1995?

During 1995, some persons who were not initial QS recipients of sablefish QS in an area obtained QS through transfer and became "new entrants" to the area.

Key results:

• At year-end 1995, the percentage of QS holders who were new entrants to an area ranged from about 6% of the total QS holders in the Central Gulf, Western Gulf, Aleutian Island, and Bering Sea areas to about 10% in the Southeast area.
• At year-end 1995, the percentage of QS held by new entrants to an area ranged from about 2% in the Central Gulf, Western Gulf, and Aleutian Island areas to about 5% in the Southeast area.
• Some of the "new entrants" in each area during 1995 were initial sablefish recipients in another area and/or received an initial allocation of halibut QS.

Chapter 4: What were the impacts of QS transfers, QS leases, "sweep-ups," and CDQ compensation "swaps" during 1995?

QS transfers, QS leases, "sweep-ups" and Community Development Quota (CDQ) compensation "swaps" are covered in Chapter 4 of the report.

The NPFMC adopted "sweep-up" rules to allow small unfishable blocks to be combined into a larger fishable block. Under the rules of the IFQ program during 1995, sufficiently small blocks of sablefish QS could be "swept-up" into a larger block as long as the larger block did not exceed 3,000 pounds of sablefish IFQ calculated by a special conversion rule. The two blocks per area rule does not impact sweep-up transactions.

During 1995, the NPFMC adopted rules to allow for some CDQ compensation QS to be "swapped" across catcher vessel categories. The purpose of the rule was to make it easier for some CDQ compensation QS recipients to transfer their QS when they could not readily fish in the area.

Persons who received an initial allocation of QS in areas where portions of the TAC were allocated to CDQs (Aleutian Islands and Bering Sea) were awarded CDQ compensation QS in the non-CDQ areas (Southeast, West Yakutat, Central Gulf, and Western Gulf). If a person received an initial allocation of catcher vessel CDQ compensation QS in an area but did not receive any other QS for that area, the CDQ compensation QS was made "swappable" across catcher vessel categories upon the first transfer. The catcher vessel category of the QS changes with a swap transaction.

Key results:

• There were permanent QS transfers and leases of QS during 1995.
• The amount of QS transferred during 1995 varied from about 5.4% of the total QS in the Western Gulf to about 9.0% of the total QS in Southeast.
• QS transfers during 1995 led to a small consolidation of QS holdings. The number of sablefish QS holders declined in all areas during 1995. These declines ranged from 1% of initial QS recipients in the Bering Sea area to about 7% of the initial QS recipients in the Southeast area. This decline in the number of QS holders led to an increase in average QS holdings in all areas.
• The percentage of QS transferred was highest in the small catcher vessel class (less than or equal to 60 feet) in all sablefish areas. The percentage of small catcher vessel QS that was transferred ranged from about 9.7% in the West Yakutat area to about 37.4% in the Aleutians.
• Swaps of CDQ compensation QS across catcher vessel categories did not play an important role in the sablefish fishery during 1995. Only one swap transaction occurred and it resulted in a switch from large catcher vessel QS to small catcher vessel QS. However, the amount of "swappable" CDQ compensation QS was reduced by transfers without swaps. The right to swap QS across catcher vessel categories terminates upon the first transfer.
• Only 15 sablefish sweepup transactions occurred during 1995 and these involved 15 sellers and 10 buyers. Ten of the transactions occurred in the Southeast area, one in the West Yakutat area, and four in the Central Gulf area.
• The NPFMC recently took action to increase the size of the block that can result from sweepup transactions to 5,000 pounds of sablefish IFQ calculated by a special conversion rule. Thus sweepups may have a larger impact in the future.
• The percentage of initial QS recipients who transferred some amount of their QS during 1995 ranged from about 8% in the Bering Sea area to about 20% in the Southeast area. The percentage of initial QS recipients who transferred some amount of their QS was over 10% in all areas except the Bering Sea.
• The percentage of initial QS recipients who transferred some amount of their QS was highest in the small catcher vessel class in all areas. This percentage varied from 11% in the Bering Sea to about 21% in the Southeast area.
• The amount of QS leased during 1995 varied from about 1.7% of the QS in the West Yakutat area to 21.6% of the QS in the Aleutian Island area. Lease rates in excess of 10% of the QS occurred in the Western Gulf, Aleutian Island, and Bering Sea areas.
• The vast majority of the sablefish QS that was leased during 1995 was freezer- longliner QS. Freezer-longliner QS holders were not restricted by a 10% QS lease provision as were catcher vessels. The percentage of freezer-longliner QS that was leased varied from about 19.3% in the West Yakutat and Central Gulf areas to 39.4% in the Aleutian Island areas.
• The only leases of catcher vessel QS occurred in the Southeast and W. Yakutat areas where a very small portion of the large catcher vessel QS was leased. Leases of catcher vessel QS are constrained by the 10% leasing restriction. In most cases, this makes blocked catcher vessel QS unleaseable under the rules of the program in 1995.

Chapter 5: What Was The Nature Of QS Transfer Activity During 1995?

NMFS-AK collects background information on each transfer transaction on their transfer application form. Some of this information is included on their computerized transfer and lease transactions.

Chapter 5 reports summary data on QS transfers and leases derived from the computerized records for these transfer transactions, including information on the pricing of QS and IFQ during 1995.

The following are highlights of some of the topics that are covered in the chapter:

What types of transfer exchanges occurred?

Information on the transfer application form was used to classify the permanent QS transfers in 1995 into "priced sales", "other sales", gifts, trades, and an unknown category.

Key Results:

• Many transfer observations had to be placed into the unknown category because the transfer form was inadequately completed.
• The percentage of transfers that fell into the unknown category ranged from 9.3% in the Southeast area to 46.2% in the Bering Sea. These transfers represented from 13.9% of the QS transferred in the Southeast area to 52.9% of QS transferred in the Bering Sea area.
• "Priced Sales" were sales transfers where sales price information could be found. Priced sales represented from 38.5% of the transfer transactions in the Bering Sea to 74.0% of the transfer transactions in the Southeast area. These priced sales transfers represented from 24.5% of the QS transferred in the Bering Sea area to 67.5% in the Southeast area.
• Other sales, gifts, and trades represented smaller portions of the QS transfer transactions and QS transfer volume in all areas.

What were sale and lease prices for sablefish QS during 1995?

QS "priced sales" transfers were divided into three categories. One category contained QS transfers where all of the associated 1995 IFQ had been included. A second category included QS transfers where none of the associated 1995 IFQ was included. A third category included QS transfers where a portion of the associated 1995 IFQ was included.

The report contains some pricing information on the first two categories of permanent transfers. There was some ambiguity on the pricing information, which is explained in the report, and many pricing categories could not be reported due to the small number of observations. The following are some results:

Key Results:

• QS priced sales transfers that included all of the associated 1995 IFQ were examined by vessel class.
• The largest number of QS priced sales transfers with IFQ were in the small catcher vessel classes. Annual average QS prices for small catcher vessels in terms of dollars per pound of 1995 sablefish IFQ ranged from $6.28 per pound in the West Yakutat area to $6.54 per pound in the Central Gulf. Prices in the Bering Sea and Aleutian Islands could not be reported because of the small number of observations
• There were fewer priced sales transfers with IFQ in the large catcher vessel class, except in the Aleutian Islands. Prices could not be reported in the Western Gulf and Bering Sea areas. In the remaining areas, average annual QS prices in terms of dollars per pound of 1995 IFQ ranged from $4.21 per pound in the Aleutian Islands to $6.00 per pound in the Southeast area.
• Large catcher vessel QS appeared to be less valuable then small catcher vessel QS in the Southeast, West Yakutat, and Central Gulf areas. However, the average prices for the large catcher vessel QS were based upon a small number of priced sales transactions and therefore may be less reliable than the prices of small catcher vessel QS.
• There were not enough priced sales transactions of freezer vessel QS with associated 1995 IFQ to make average price estimates. Priced QS sales transfers where all of the 1995 IFQ were included were also examined by vessel class and block status. The results were ambiguous, but again many categories of vessel class and block status combinations could not be reported because of confidentiality restrictions.
• When transfers of blocked QS with 1995 IFQs were examined by vessel class and the size of the block holding, there appeared to be a positive relationship between block size and average QS price within some areas. However, many of these categories had very few observations and often prices by block status could not be reported because of confidentiality restrictions.
• There were very few priced sablefish QS sales transactions where no associated 1995 IFQ was transferred with the QS. In all but one case there were too few observations to allow average annual price estimates to be reported.
• There were 77 formal leases of sablefish QS in 1995 and all but two of these were for freezer-longliner QS. Lease prices ranged from $.67 per pound of sablefish IFQ in the West Yakutat and Bering Sea areas to $.99 per pound of sablefish IFQ in the Western Gulf area. The averages were based upon a small number of observations.

How were QS purchases financed?

The NMFS transfer application form asked for the source of financing and included categories such as personal resources, bank, Alaska Department of Commerce and Economic Development (ADCED), Commercial Fishing and Agriculture Bank (CFAB), seller, processor, and other.

Persons filling out the form sometimes indicated multiple sources of financing. Other persons did not provide a source of financing at all.

Key Results:

• The percentage of sablefish QS "priced sales" transfers that had a "missing" finance source ranged from 0% in the Bering Sea area to 21.8% in the West Yakutat area.
• Personal resources, as a percentage of QS transferred, was the most common source of financing indicated in all areas except the Aleutian Islands and Bering Sea. As a percentage of transfer transactions, personal resources was the most common source of financing in all areas except the Aleutian Islands.
• "Commercial Bank" or "seller" were the next most common sources of financing cited.
• ADCED/CFAB and processors were relatively minor sources of financing for QS purchases during 1995.

How were buyers and sellers related?

The QS transfer application form asks QS transfer recipients to indicate their relationship with the transferor of the QS. The choices provided on the form are "business partner," "personal family member," "other friend or relative," and "no relationship." This relationship information was examined for all sales and gift transfers.

Key Results:

• Many persons did not answer this question. The percentage of 1995 QS transfer transactions with a "missing answer" ranged from 5.3% in the Southeast area to 33.3% in the Aleutian Islands. When measured as a percentage of the QS units transferred, the percentage missing ranged from 8.7% in Southeast to 49.4% in the Bering Sea.
• The most likely response in all areas was "no relationship" with the seller. The percentage of 1995 QS transfer transactions indicating "no relationship" ranged from 46.7% in the Aleutians to 61.3% in Southeast. When measured as a percentage of the QS units transferred, the percentage classified as "no relationship" ranged from 44.0% in the Bering Sea to 72.8% in the Aleutian Islands.
• The percentage classified as "no relationship" would be much higher if missing answers were excluded from the data.
• Responses indicating a relationship of "personal family member," "other friend or relative," or "business partner" represented smaller percentages of the transfer activity.

Were the resident-types of buyers and sellers related?

Transferors and transfer recipients were assigned to five resident-types based upon their addresses. These resident-types included four Alaska categories and a nonresident category. The Alaska categories were based upon a "rural" or "urban" classification for the community and a "local" or "nonlocal" classification for the community relative to each fishing area.

Thus the classification for a particular community relative to a particular fishing area could be "Alaska rural local (ARL)," "Alaska urban local (AUL)," "Alaska rural nonlocal (ARN)," "Alaska urban nonlocal (AUN)," or nonresident.

Key results:

• Nonresidents transferred the greatest amount of sablefish QS during 1995 in all areas except the Bering Sea. The majority of the QS transferred from nonresidents went to nonresidents. The percentage of the QS transferred from nonresidents to nonresidents ranged from 60% in the Western Gulf area to 97.3% in the Bering Sea area.
• AUNs transferred the next greatest amount of sablefish QS in 1995 except in Southeast and the Central Gulf. In all areas except the Aleutian Islands, the greatest portion of the QS transferred by AUNs went to other AUNs.
• The majority of the QS transferred from ARLs during 1995 was transferred to other resident types.
• The majority of the QS transferred from ARNs during 1995 was transferred to other resident types.
• The majority of the QS transferred by AULs went to other AULs in the Southeast and Central Gulf areas. The small amount of QS transferred by AULs in the Western Gulf area went to ARNs.

Chapter 6: Did Holders Of IFQ Consolidate Onto Combined Fishing Operations?

Another means by which the number of sablefish fishing operations could be reduced under the IFQ program is if multiple IFQ holders combine their holdings to fish from a single vessel. Chapter 6 looks at 1995 sablefish landings by area and vessel category.

Chapter 6 also looks at 1991 to 1995 sablefish landings for catcher vessels to see if changes occurred during 1995 under the IFQ program. To make some of the comparisons, "persons" were identified by CFEC permits over the 1991 to 1994 time period and were identified by NMFS-RAM IFQ identifiers during 1995.

Key results:

• The available data suggest that the ratio of use-privilege holders to catcher vessels tended to increase during 1995.
• The statistic, persons per catcher vessel, increased in all sablefish areas during 1995. Persons per catcher vessel was defined as the ratio of persons with landings to vessels with landings
• The 1995 persons per catcher vessel ratio was higher than the maximum ratio observed over the 1991 to 1994 time period in all areas. The catcher vessels that recorded landings, total vessel landing days, and total person landing days declined over 1994 levels in the Southeast, W. Yakutat, and Central Gulf areas. In the Central Gulf, the 1995 values for these measures were lower than those observed over the 1991 to 1994 time period. In the other two areas, the values for most of these variables were within the ranges observed over the 1991 to 1994 time period.
• The number of persons with recorded landings from catcher vessels, catcher vessels that recorded landings, total vessel landing days, and total person landing days increased over 1994 levels in the Western Gulf, Aleutian Islands, and Bering Sea areas. However, in most cases, the 1995 values for these variables were within the range of values that existed over the 1991 to 1994 time period.

Chapter 7: How Did Overages and Underages Change During 1995?

This chapter examines the 1995 sablefish harvest and compares it to the Total Allowable Catch (TAC) by area. The 1995 percentage of the TAC harvested is compared with estimated harvest percentages over the 1991 to 1994 time period. A special section examines a group of initial QS recipients who did not alter a QS holding during 1995 to see what percentage of the associated 1995 IFQ was totally unfished.

Key Results:

• The 1995 sablefish harvest fell below the TACs for the sablefish fishery in all management areas. The estimated shortfall ranged from 7.2% in the West Yakutat area to 34.6% in the Aleutians.
• In the Southeast and West Yakutat areas, the percentage of the TAC harvested in 1995 fell below the estimated percentage of the TAC harvested in all years over the 1991 to 1994 time period. In other areas, the percentage of the TAC harvested during 1995 fell within the range of percentages observed over the 1991 to 1994 time period.
• For all sablefish vessel categories, the percentage of the 1995 TAC that was unharvested was highest in the Aleutian Islands and Bering Sea areas. In the Southeast and West Yakutat areas, freezer vessels harvested a lower percentage of their 1995 IFQs than did the two catcher vessel categories. In all other areas, the small catcher vessel category harvested a lower percentage of their 1995 IFQs than did the other two vessel categories.
• The number of persons with an unchanged QS holding who did not fish that QS holding during 1995 was large, ranging from 21.4% of initial QS recipients in the Southeast Area to about 40.7% of initial QS recipients in the Western Gulf and Bering Sea areas. However, the average size of these holdings in terms of 1995 IFQ was quite small and the associated QS ranged from 1.5% of the total QS for the Central Gulf area to 14.3% of the total QS for the Bering Sea area.

Chapter 8: How Did The Distribution Of Landings Change During 1995?

Key Results:

• The percentage of sablefish landings in Alaska ports was slightly higher in 1995 than in 1994. The 1995 percentage was within the range of percentages observed over the 1991 to 1994 time period.
• The percentage of sablefish landings within some regions of Alaska changed substantially in 1995 compared to 1994. For example, the 1995 sablefish landings in the Kodiak borough census area declined to 10.3% of the sablefish harvest. This was the lowest percentage observed over the 1991 to 1994 time period.
• In contrast, the 1995 sablefish landings on the Kenai Peninsula increased to 24.8% of the total sablefish harvest. This was a considerable increase over the 1994 percentage and was the highest percentage observed on the Kenai Peninsula since 1991.

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