[Federal Register Volume 74, Number 177 (Tuesday, September 15, 2009)]
[Rules and Regulations]
[Pages 47119-47123]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-22181]
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DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 665
[Docket No. 080304370-91192-02]
RIN 0648-AW52
Fisheries in the Western Pacific; Compensation to Federal
Commercial Bottomfish and Lobster Fishermen Due to Fishery Closures in
the Papahanaumokuakea Marine National Monument, Northwestern Hawaiian
Islands
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Final rule.
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SUMMARY: This final rule describes how NMFS will compensate eligible
and interested Northwestern Hawaiian Islands (NWHI) commercial lobster
permit holders who were, and commercial bottomfish permit holders who
will be, displaced by fishery closures with the establishment of the
Papahanaumokuakea Marine National Monument (Monument). Congress
mandated that the compensation be based on the economic values of
fishing permits. NMFS estimated the net present value of permits using
a proxy based on a multiple of annual gross revenues. Permit holders
who voluntarily accept compensation must immediately surrender their
permits and leave the fisheries.
DATES: This final rule is effective October 15, 2009.
ADDRESSES: Eligible participants in the permit compensation program may
contact William L. Robinson, Regional Administrator, NMFS, Pacific
Islands Region (PIR), 1601 Kapiolani Blvd., Suite 1110, Honolulu, HI
96814-4700.
FOR FURTHER INFORMATION CONTACT: Toby Wood, Sustainable Fisheries
Division, NMFS PIR, 808-944-2234.
SUPPLEMENTARY INFORMATION: This final rule is also available at
www.gpoaccess.gov/fr.
Public Law 110-161, the Consolidated Appropriations Act of 2008,
authorized the Secretary of Commerce (Secretary), through NMFS, to
compensate commercial lobster permit holders who were, and commercial
bottomfish permit holders who will be, impacted with establishment of
the Monument on June 15, 2006 (Proclamation 8031, 71 FR 3644, June 26,
2006, as amended by Proclamation 8112, 72 FR 10031, March 6, 2007).
Regulations governing the Monument require that any commercial lobster
fishing permit be subject to a zero annual harvest limit, permanently
closing the NWHI lobster fishery. The NWHI commercial bottomfish
fishery is allowed to operate until June 15, 2011, when it will be
closed permanently (see 71 FR 51134, August 29, 2006, and 50 CFR
404.10).
Congress authorized funding for the compensation in the amount of
$6,697,500, and directed the Secretary to initiate rulemaking for a
voluntary capacity-reduction program. This final rule establishes a
process to implement the Act.
A future voluntary vessel and gear buyout may be developed once the
permit compensation is complete, but only if funds authorized by the
Act are available. NMFS would publish a separate proposed rule to
describe and seek public comment on any future vessel and gear buyout
program, as appropriate.
Eligible Participants
The Act defines ``eligible participants'' as individuals holding
commercial Federal fishing permits for
[[Page 47120]]
lobster or bottomfish within the Monument at the time the Monument was
established. NMFS is not authorized to compensate anyone not meeting
the definition of ``eligible participant.'' NMFS determined eligible
participants to be holders of eight valid commercial Federal permits
for bottomfish, and holders of 15 valid commercial Federal permits for
lobster. As a condition of voluntarily receiving compensation,
fishermen must immediately surrender their NWHI fishing permit to NMFS
and agree to relinquish any claim associated with each permit.
Compensation Methodology
In the absence of a documented market for the permits, NMFS
determined the economic value of NWHI lobster and bottomfish Federal
commercial fishing permits by using a proxy for the net present value
(NPV) of the permits that uses imputed (estimated) values. The proxy
for NPV is a multiple of annual gross revenues, based on a variety of
separate investigations of these relationships. NMFS determined the
permit values using reported revenues for the three consecutive years
in which each fishery operated immediately prior to the designation of
the Monument.
Bottomfish. NMFS determined the economic value of each of the eight
Federal bottomfish permits individually using the base value time
period of 2003-05. The NPV of each individual permit reflects the
average ex-vessel revenue, calculated as the ex-vessel gross revenue
proxy, times a multiplier of approximately 2.5 that considered the
discount rate. The economic value of each permit, and the compensation
offer, will be different for each of the eight permit holders, based on
the 2003-05 official fishing records associated with each permit. All
imputed values will be updated to current dollar figures based on
Consumer Price Indices.
Lobster. NMFS determined the economic value of each of the 15
Federal lobster permits, collectively, using the base value time period
of 1997-99. The NPV of each permit used a similar ex-vessel gross
revenue proxy to reflect the average ex-vessel net revenue for the
fleet as a whole during 1997-99, times a multiplier of approximately
2.5 that considered the discount rate. The economic value of each
permit, and the compensation offer, will be identical for all 15 permit
holders. Imputed values will be updated to current dollar figures based
on Consumer Price Indices.
Implementation
After the effective date of this final rule, eligible permit
holders will be notified in writing of their individual permit
compensation offer, as determined by the compensation methodology
described above. Within 30 days of receipt of notification (verified by
NMFS), each permit holder must review the permit compensation offer and
notify NMFS in writing of either their voluntary acceptance or non-
acceptance of the compensation offer. Failure to inform NMFS of a
decision (i.e., acceptance or non-acceptance decision) by the
prescribed deadline date is deemed a non-acceptance by the permit
holder. This determination by NMFS of non-acceptance for compensation
is final and is not subject to agency appeal. If the combined total
value of all permits is greater than the authorized amount, minus
NOAA's administrative costs, then the amount of monetary compensation
disbursed to all participants will be prorated.
At the conclusion of the 30-day response period, NMFS or its
authorized contractor will review responses from permit holders,
identify those who have accepted the offer of permit compensation, and
disburse funds to the permit holders who have accepted. A permit
holder's receipt of compensation funds will immediately invalidate the
holder's Federal permit in the NWHI bottomfish and/or lobster fishery,
as appropriate, and such permit will be immediately surrendered to
NMFS. NMFS will notify the permit holder, at the time that funds are
disbursed, that his or her permit is no longer valid, and the vessel is
no longer registered to participate in the fishery for which
compensation has been received.
Vessel owners who do not accept the offer of permit compensation
are authorized to continue fishing in accordance with the terms and
conditions of their respective permits, and to the extent otherwise
permitted by law. Permit holders should note that commercial fishing
for lobster in waters of the Monument is prohibited, and that fishing
for commercial bottomfish and associated pelagic species will be
prohibited in waters of the Monument after June 15, 2011.
Transferability of Compensation
The NWHI lobster fishery was closed permanently as a result of the
designation of the Monument, so permit compensation will be offered to
the holder of the permit that was valid on the date of the Monument's
designation, i.e., June 15, 2006.
The NWHI bottomfish fishery remains open until June 15, 2011.
Bottomfish permits are not transferrable, so the bottomfish permit
compensation is available only to the holder of the permit at the time
compensation funds are disbursed. Any claim to permit compensation is
both non-transferable and non-assignable. Accordingly, only the NWHI
bottomfish permit holder of record is eligible to receive permit
compensation under this program.
Additional background information on this final rule may be found
in the preamble to the proposed rule, and is not repeated here.
Comments and Responses
On April 7, 2009, NMFS published a proposed rule and request for
public comment (74 FR 15685). The public comment period ended on May 4,
2009. In addition to one comment that supported the methodology for
determining permit values, NMFS received additional public comments,
and responds as follows:
Comment 1: For the lobster permit valuation, NMFS should have used
more recent price data, such as that for 2006, to calculate NPV, rather
than using data based on an average of gross receipts accumulated in
the 1997-99 NWHI lobster fishery.
Response: The NPV model requires identification of annual, or
average annual, gross receipts upon which to set a baseline. Prices
depend on a set of unique parameters including same-period quantities,
income, prices of substitute and compliment goods. Thus, there is no
economic rationale to assign a 2006 price to a quantity of production
from 1997-99.
Comment 2: The model should have used an average of 14 years of
landings data (1983-97), as advocated in a 2007 report by the
Association of NWHI Lobster Permit Holders.
Response: The prices of lobster noted in the report were estimated
using an interpolation of the Urner Barry Market Report for frozen
lobster tails, most likely delivered prices, i.e., including shipping
costs, from Australia, Brazil, and the Caribbean. Therefore, to apply
those 2006 processed product prices, i.e., $23.50 and $13.00 dollars,
respectively, for spiny and slipper lobster to quantities harvested
would cause a significantly large overestimation of gross receipts.
NMFS data indicate that the real price (in 1996 dollars) of slipper
lobster had been relatively stable at $3.20 and $4.00 per pound in
every year between 1988 and 2000. The real price (in 1996 dollars) for
spiny lobster had been between $5.00
[[Page 47121]]
and $7.00 per pound between 1989 and 2000. The spiny lobster price had
been more variable and showed no real trend. In addition, the quantity
used in the report (average landings from 1983-97) potentially
reflected a fishing-down stage of the fishery, which in conjunction
with an oceanographic regime change in the late 1980s, led to the
yields that were utilized in the analysis. Using this quantity would
lead to an overestimation of the imputed value of the permits.
Comment 3: NMFS should use a 15-year period instead of a 30-year
period to calculate NPV.
Response: The 30-year NPV calculation presupposes that vessels
(capital) used in the NWHI fisheries will be utilized over that period.
The NPV using a 30-year period would yield a higher permit value than
over 15 years. Thus, NMFS used the 30-year analysis period.
Comment 4: $6.3 million is not enough to buy out the combined
lobster and bottomfish fisheries.
Response: The Act directs the Secretary, through NMFS, to provide
compensation ``not to exceed the economic value of the permit.'' The
total amount was appropriated by Congress, and NMFS has no discretion
to increase the amount.
Comment 5: The ex-vessel revenue data regarding lobster prices
cited in the Regulatory Impact Review (RIR) for the proposed rulemaking
was not accurate.
Response: Prices for lobsters were obtained from the NMFS
Administrative Report ``Study of Northwestern Hawaiian Islands Lobster
Fishery Discards (AR-SWR-00-01).'' No information was offered to
address any possible inaccuracies, so the prices cited in the report
represent the agency's best available official information on the
fishery.
Comment 6: The same formula and variables should not be used to
determine the economic value of lobster and bottomfish permits.
Response: The methodology to determine the imputed value of permits
is a standard capital budgeting approach (e.g., F.M. Wilkes, Capital
Budgeting Techniques, 1977). In this approach, the NPV methodology is
based on underlying principles of economic theory in valuing assets
over time. To properly estimate NPV, the same formula and variables are
required, including baseline, time period, and discount rate. The
difference is in the actual values used to estimate NPV for the two
fisheries, which depend on their context. While there are clear
differences in the two fisheries from an operational point of view, the
permits in both cases represent assets with an investment value.
Comment 7: The assumption is incorrect in the RIR that the profit
margins are similar for both fisheries.
Response: The RIR correctly notes that profit margins are assumed
to be similar within each fishery, not between them, and would not
affect relative permit compensations.
Comment 8: The proposed rule improperly assesses different economic
values for individual bottomfish permits based on each fisherman's
catch history from 2003-05. Because the bottomfish fishery does not use
individual quotas, a permit holder's catch history is not relevant to
determine the market value of a permit. The only rationale for
distinguishing between bottomfish sectors would be to recognize that
vessels fish on either of two zones, the Mau and Ho'omalu Zones.
Response: An approach similar to the lobster fishery analysis could
have been taken for bottomfish, including separation into the two
management zones. Given the ongoing activity in the bottomfish fishery,
however, NMFS determined that it was not appropriate to treat all
permit holders the same. Bottomfish permit holders' future prospects,
absent the Monument, were determined by their individual investments in
vessel and gear, and in their own skills and experience, particularly
since bottomfish fishing permits were not transferable. An established
catch history is a reliable predictor of future performance, and there
is no basis to believe that individual fishermen would alter their
behavior over time, aside from overall changes in the fishery.
Comment 9: Because of bad weather, vessel repairs, etc., NMFS
should use time periods other than 2003-05, which would result in a
higher value for all bottomfish permits. Alternatives include the three
years of highest catch from 2003-08, or an average of the two best
years out of the years 2003-05.
Response: Using three consecutive years to determine imputed permit
value, and keeping the approach similar between the lobster and
bottomfish compensation schemes, strives to maintain equity in
computing permit values between the two fisheries. Basing permit values
on alternative time periods for the bottomfish permit holders would not
be equitable to the lobster permit holders, who faced the same
constraints prior to closure of their fishery in 2000. Hence, for
reason of fairness, NMFS will use the three-year period 2003-05 to
calculate the average individual ex-vessel gross revenue to determine
permit values for bottomfish permits.
Comment 10: The proposed permit values do not accurately reflect
the value that fishermen put on their way of life.
Response: Congress intended the compensation be for no more than
the economic value of the permit. Accordingly, NMFS did not consider
using other forms of valuation, such as intrinsic value of fishing
lifestyles, to implement the compensation program.
Comment 11: NMFS has recently estimated bottomfish stock biomass in
the NWHI to be at 150% of maximum sustainable yield, thus promising
high abundance for the future.
Response: NMFS interprets this comment to mean that the potential
value of bottomfish permits would be higher than using the catches from
2003-05. Stock assessments are good gauges of present status of a
stock, but have been proven to be accurate predictors of stock levels
only in the very near term and certainly not over a 30-year period. The
NPV model used here is not a predictive model, nor does it attempt to
optimize future returns; it is used simply to calculate a lump sum
payment based on the present value of future returns given a specific
baseline in the form of average gross receipts, discount rate, and time
line. Stochastic net benefit models are frequently utilized for public
policy decisions; however, these are usually applied to specific
physical projects of a much shorter duration where probabilities of
future economic events are measurable with an acceptable level of
confidence.
Comment 12: To address equity and fairness, the compensation amount
should be divided equally among eligible permit holders in the
bottomfish fishery.
Response: NMFS determined that the most equitable method to
establish a baseline for the NPV model was to use actual gross receipts
earned by individual vessels. This process is inherently most fair
because each producer is compensated based on individual fishing
behavior and documented earnings.
Comment 13: NMFS should clarify the principles of equity and
efficiency as they relate to the bottomfish permit valuations.
Response: As described in the RIR, addressing efficiency is the
norm for capacity-reducing buyouts where the buyout is conducted as an
auction in which participants have a choice of whether to accept a
government offer to buy or retire their permits and/or vessels for a
particular price. This is termed ``willingness to accept''
[[Page 47122]]
compensation for giving up their fishing rights. The participant may
also reject the government's offer and choose to continue fishing.
Efficiency solutions, on the other hand, require a market (in this
case, for permits) or a survey of the values of willingness-to-accept.
The NWHI situation has neither option; exit from the bottomfish fishery
is involuntary. Accordingly, the permit compensation program addresses
equity, rather than efficiency. Imputing the values is the most
equitable method of compensation for early fishery closures (although
the bottomfish fishery will officially remain open until June 2011).
Thus, NMFS relied on historical data that reflect gross receipts and
historical cost-earnings relationships for bottomfish as being most
equitable to the different levels of investment and history of the
participants in the fishery.
Individual valuations could not be developed for the lobster
fishery because management constraints, such as area-specific quotas
and industry cooperatives, changed individual fishing behavior
dramatically in the final years of the fishery. For example, some
vessels fished only intermittently, and all were constrained by annual
harvest guidelines. Thus, gross receipts did not present a reliable
baseline for individual vessels in the lobster fishery.
Comment 14: NMFS should clarify where it will spend the $336,029 it
removed from the amount available to compensate fishermen.
Response: NOAA expended $197,500 for internal indirect costs and
$138,529 to contract the Pacific States Marine Fisheries Commission for
coordinating and administering the disbursement of compensation funds
to eligible participants.
Comment 15: NMFS should not require eligible bottomfish
participants who accept permit compensation to exit the NWHI fishery
prior to June 15, 2011.
Response: Allowing fishing to continue is not consistent with the
intent of the Act, which provided compensation for a voluntary
capacity-reduction program. In addition, if a vessel owner decides to
accept compensation, that owner would, in effect, receive compensation
for that remaining portion of the 2009 fishery, the entire 2010
fishery, and the 2011 fishery until June 15, because compensation is
part of the stream of benefits comprising the NPV of a vessel's
landings from 2007 to 2036
Comment 16: The government should not compensate fishermen using
public funds; just stop the fishing pressure on public resources.
Response: NMFS is mandated by Congress to compensate eligible
bottomfish and lobster fishermen who were, or will be, forced out of
their respective fishery with the establishment of the Monument.
Changes From the Proposed Rule
No changes were made from the proposed rule.
Classification
The NMFS Assistant Administrator has determined that this final
rule is consistent with the Consolidated Appropriations Act of 2008 and
other applicable laws.
This final rule has been determined to be significant for purposes
of Executive Order 12866.
A final regulatory flexibility analysis (FRFA) was prepared. The
FRFA incorporates the IRFA, and a summary of the significant issues
raised by the public comments in response to the IRFA. The analysis
follows:
NMFS prepared this FRFA for the rule to provide compensation to
Federal NWHI commercial bottomfish and lobster fishermen due to
fishery closures in the Papahanaumokuakea Marine National Monument.
This FRFA incorporates the initial regulatory flexibility analysis
(IRFA) prepared for the proposed rule (74 FR 15685; April 7, 2009).
The analysis provided in the IRFA is not repeated here in its
entirety.
The need for, reasons why action by the agency is being
considered, and the objectives of the action are explained in the
preambles to the proposed and final rules and are not repeated here.
This rule does not duplicate, overlap, or conflict with any other
Federal rules. There are no disproportionate economic impacts from
this action based on vessel size or home port. There are no
recordkeeping, reporting, or other compliance requirements
associated with this rule. The action is taken under authority of
the Consolidated Appropriations Act, 2008 (Act).
Description of Small Entities to Which the Rule Would Apply
This action will impact the vessel owners who held 15 NWHI
lobster permits and eight NWHI bottomfish permits at the time the
Monument was designated. These permit holders were determined by
NMFS to be eligible for compensation under the Act. The Small
Business Administration's accepted definition of a small fish
harvester is a vessel that produces no more than $4.0 million in
gross revenue annually. Using this definition, all permit holders
who are eligible for compensation are defined as small entities.
Economic Impact to Small Entities
There will be no adverse economic impact to any of the eligible
permit holders resulting from this rule. For bottomfish permit
holders, the amount of monetary compensation available will be the
NPV of each individual's average net revenue for the years 2003-05
using a discount rate equal to the real interest rate on 30-year
treasury notes and bonds, discounted over a 30-year period. The
lobster permit holders will receive compensation in the form of
equal payments derived from NPV of the fleet-wide average net
revenue for 1997-99. The NPV for the lobster fishery would use the
same discount rate and time period as the value imputed for
bottomfish permit holders. The real interest rate for 30-year
treasury notes and bonds as prescribed by Office of Management and
Budget, Circular A-4, Appendix A, is 2.7 percent.
In the event that costs are unavailable or unreliable for a net
revenue calculation, NMFS will use a proxy for net revenue based on
total or gross revenue. Since profit margins within each fishery are
assumed to be similar, this would not affect relative amounts of
compensation. In addition, with a relatively low real discount rate
(2.7 percent) and long time frame (30 years), the differences
between net and total revenues will be mitigated.
Comments and Responses
NMFS received one comment on the IRFA and responds, as follows.
Comment 1: The IRFA appears to be incomplete in that it does not
fully contain the required elements and analyses. Among other things
it does not describe a range of alternatives but instead only
describes the impacts of the proposed rule. In addition, the IRFA
fails to consider measures to minimize adverse impacts on fishery
participants such as waiving the requirement that participants in
the compensation program exit the NWHI fishery prior to June 15,
2011. This is especially appropriate as there is no requirement for
this in the Act and there are no overfishing or other environmental
issues that would necessitate these early departures. If the
immediate exit provision is to be retained, the compensation
packages should be directly increased to fully include the
additional two years of foregone revenues.
Response: The IRFA is consistent with Sec. 603 of the
Regulatory Flexibility Act and Agency guidelines for regulatory
analysis. The required elements of a IRFA include, verbatim, a
description of the reasons why action by the agency is being
considered, a succinct statement of the objectives of, and legal
basis for, the proposed rule, a description and, where feasible, an
estimate of the number of small entities to which the proposed rule
will apply, a description of the projected reporting, recordkeeping,
and other compliance requirements of the proposed rule, including an
estimate of the classes of small entities which will be subject to
the requirements of the report or record, an identification, to the
extent practicable, of all relevant Federal rules, which may
duplicate, overlap, or conflict with the proposed rule. Each IRFA
shall also contain a description of any significant alternatives to
the proposed rule which accomplish the stated objectives of
applicable statutes and which minimize any significant economic
impact of the proposed rule on small entities.
For purposes of this rulemaking, there are no significant
alternatives to the proposed rule which accomplish the stated
objectives of applicable statutes and which minimize
[[Page 47123]]
any significant economic impact of the proposed rule on small
entities. The no-action alternative would not accomplish the stated
objectives of the Act and, therefore, is not a significant
alternative.
Allowing fishing to continue is not consistent with the intent
of the Act, which provided compensation for a voluntary capacity-
reduction program. Furthermore, there will be no adverse economic
impacts to be minimized here because all recipients of compensation
will benefit. If a vessel owner decides to accept compensation as
described in the proposed rule, that owner would, in effect, receive
compensation for that portion of the 2009 fishery, the entire 2010
fishery, and the 2011 fishery until June 15, 2011, as part of the
stream of benefits comprising the NPV of a vessel's landings from
2007 to 2036. Therefore, allowing a vessel to continue to fish until
June 2011 would be an additional de facto compensation not discussed
or described in the Act.
Additional comments on the validity of the NPV model and other
economic concerns are addressed in the preamble to this rule and are
not repeated here.
Small Entity Compliance Guide
Section 212 of the Small Business Regulatory Enforcement
Fairness Act of 1996 requires, for each rule or group of related
rules for which an agency is required to prepare a FRFA, that the
agency publish one or more guides to assist small entities in
complying with the rule, and designate such publications as ``small
entity compliance guides.'' The agency must explain the actions a
small entity is required to take to comply with a rule or group of
rules. As part of this rulemaking process, a small entity compliance
guide was prepared and will be sent to all eligible participants. In
addition, copies of this final rule and small entity compliance
guide are available from NMFS(see ADDRESSES) and are also available
at www.fpir.noaa.gov/SFD/SFD_regs_2.html.
Authority: Pub. L. 110-161
Dated: September 9, 2009.
Samuel D. Rauch III,
Deputy Assistant Administrator for Regulatory Programs, National Marine
Fisheries Service.
[FR Doc. E9-22181 Filed 9-14-09; 8:45 am]
BILLING CODE 3510-22-S