HOUSE SPECIAL COMMITTEE ON FISHERIES February 16, 1994 8:30 a.m. MEMBERS PRESENT Representative Carl E. Moses, Chair Representative Harley Olberg, Vice Chair Representative Gail Phillips Representative Cliff Davidson MEMBERS ABSENT Representative Irene Nicholia COMMITTEE CALENDAR Overview: National Marine Fisheries Service Implementation of Halibut and Sablefish IFQ Program WITNESS REGISTER PHILIP SMITH, Chief Restricted Access Management National Marine Fisheries Service United States Department of Commerce P.O. Box 21668 Juneau, Alaska 99802 Phone: 586-7334 POSITION STATEMENT: Provided overview of the halibut and sablefish IFQ program CHERYL SUTTON, Legislative Aide Representative Carl Moses State Capitol Building, Room 204 Juneau, Alaska 99801-1182 Phone: 465-6848 POSITION STATEMENT: Inquired about the workshop schedule for the division ACTION NARRATIVE TAPE 94-8, SIDE A Number 000 CHAIRMAN CARL MOSES called the meeting to order at 8:35 a.m. He noted the members in attendance and asked that MR. PHILIP SMITH to begin the overview. Number 020 MR. PHILIP SMITH, CHIEF, RESTRICTED ACCESS MANAGEMENT, NATIONAL MARINE FISHERIES SERVICE, UNITED STATES DEPARTMENT OF COMMERCE, advised members that he was hired to develop a new division within the Alaska Region to implement the IFQ program for Pacific halibut and sablefish. As other forms of restricted access or limited entry emerge, implementation of those programs will fall under this division, also. There are about 7000 people in Alaska who will be eligible to receive an initial issuance of quota share; of that figure, about 80 percent are Alaskans. There is an application period which began on January 17, 1994, and will conclude on July 15, 1994, for information and application forms. MR. SMITH continued by noting that approximately 8,000 pre- application materials have been sent to potentially eligible people. From the Department of Fish & Game fish ticket data, State Limited Entry Commission data, and from the National Marine Fisheries Service (NMFS) vessel file and permit file data, quota share can be approximated for each eligible fisherman. Number 103 MR. SMITH said that about 3,000 of the requests for applications have been returned. Within two weeks, the formal applications should be issued for the halibut and sablefish fisheries. Beginning in March, the division will start a series of workshops in major ports around the state. There is a toll free phone line, 1-800-304-4846, that people can call with questions about applying. The appeals regulations are not yet finalized. MR. SMITH advised members that in three to five years, there may be combines, or groups of fishermen working with processors, transportation and marketing firms. The goal of the program is to put fresh product on the market for six to nine months of the year. There is more opportunity to maximize the economic returns from the harvest under this scenario, and the intent is to supply the market with a constant supply of fresh seafood. There has been a lot of criticism of the program, and currently there is a court case pending with the "Alliance against IFQ's". The controversy is understandable, as the program is a rather significant change in fisheries management. The program, however, has the potential to provide steady employment for 20-30 people in the cold storage business for seven to eight months, somewhat steady employment for the skippers and their crews, and to see the value of the product double or triple. Number 253 MR. SMITH advised members that the division is sensitive to the economies of coastal Alaska. Outreach is very important, to ensure that people who may be eligible get their applications, and have their questions answered. Number 265 CHAIRMAN MOSES asked if there were questions. REPRESENTATIVE GAIL PHILLIPS asked about a letter from Mr. Smith, to Representative Hudson, dated January 27, 1994, regarding program amendments. She then asked if anyone was considering significant changes to the program. MR. SMITH said that the statement in the letter is clarifying a point brought up by Representative Hudson, whereby an inquiry was made as to whether or not the legislature could alter the program through legislation. In fact, the program is conducted under federal authority, and under the terms of the Magnuson Act and the Halibut Act, any program changes are initiated through the North Pacific Fisheries Management Council (NPFMC), not the Alaska Legislature. He added that no one is considering major changes at this time. Some fine tuning may be needed, but no proposals are available. The issue of block restrictions are not yet finalized, for instance. Number 312 REPRESENTATIVE PHILLIPS then asked about the lawsuit potentially delaying the March 1995 start up date. She then asked about the marketing issue with cooperatives, specifically, who would be handling the marketing for the program. MR. SMITH replied that he couldn't respond on the merits of the lawsuit, yet the lawsuit should not affect the operations of the office. As a correction, there are two lawsuits pending, one with the Alliance Against IFQ's, the other with the Klawock Cooperative Association. He added that the division was not handling the marketing; the amount of product desired from the program should be market driven. REPRESENTATIVE PHILLIPS then asked if ASMI was doing any marketing for the program. Number 360 MR. SMITH advised members that his office has not been doing any marketing, and to his knowledge, has not been meeting with the Alaska Seafood Marketing Institute (ASMI) officials. He noted that the intent was not to have ASMI develop a market, but instead visit Safeway and similar stores, and negotiate a daily supply channel and price. REPRESENTATIVE CLIFF DAVIDSON inquired about the possible concentration of ownership of the Individual Fishing Quota shares. Number 399 MR. SMITH replied that the current configuration of the fishing fleet was not working, and the intent to privatize the access to a public resource is meant to distribute those benefits. Now, there is terrible overcapitalization in the race to fish such short openings; unfortunately, this method is terribly inefficient. Goals of the program were developed to help eliminate the concentration of ownership. First, there was a cap of no more than one-half of one percent on the amount of quota that each person can hold for halibut and sablefish for the Gulf and Bering Sea. The cap is no more than one percent in the waters of Southeast Alaska. Number 439 MR. SMITH noted that another restriction is the allocation of quota share by vessel class. Quota shares that are initially allocated to one vessel class are not transferable to another vessel class. In addition, under the program, with the exception of Southeast, only people who receive their initial issuance of quota may hire skippers to fish that quota. That quota share can then only be transferred to an individual, not a corporation or company. Second generation quota share must only be fished by the people who hold it. In Southeast, the restrictions are a bit more stringent. Finally, there are block restrictions to ensure that quota share is not consolidated into a few number of holders. He then noted that the division will carefully monitor any transfers. REPRESENTATIVE DAVIDSON asked where the division gets its funding to do the labor intensive `careful monitoring' of enforcement. MR. SMITH replied that this division is currently funded at $1.2 million for the current federal fiscal year, and is anticipated at the same level for the next year. The enforcement division has a request in for funding for a sufficient amount, plus the use of computers allows a few number of staff to monitor several thousand permits. The incentive under the program, for fishermen to act as whistleblowers on other operations that are not following the rules, is very high. REPRESENTATIVE DAVIDSON noted the success of the Canadian quota system, yet asked if there was a method built in to abort the program if, after years down the road, the program does not seem to work. He then asked if the privatization of the access wasn't more like privatizing the common property resource. Number 564 MR. SMITH replied that there was a lot of time put into developing the program. At anytime, the North Pacific Fisheries Management Council can abort the program, the NMFS can request that the secretary abort the program, or Alaska's congressional delegation can delete the program's funding. There are many routes to abolishing the program if it does not work. To clarify the privatization, he added that actually, people with quota shares own the right, or privilege to harvest that amount of resource. Number 606 CHAIRMAN MOSES asked if there was a minimum of the initial quota. MR. SMITH replied that the quota share is based on the number of pounds of resource harvested between 1984 and 1990 for halibut, and 1985 and 1990 for sablefish, less the two least productive years. That share is designated by management area and by vessel class. The total allowable catch will rise and fall from year to year, depending upon biological considerations. TAPE 94-8, SIDE B Number 000 CHERYL SUTTON, LEGISLATIVE AIDE FOR REPRESENTATIVE MOSES, asked if the division had a list of the locations and times for the workshops, and inquired why there were no stops scheduled for the Aleutian Chain. She then asked how the issue of fishermen who fished the 1984-1990 time span in a small vessel, yet now have a larger vessel will receive their quota share, since the vessel size has changed. MR. SMITH said the list would be available by the end of the week, and will be distributed to the areas of the meetings, as well as the fisheries committee. The meeting schedule was first designed to visit communities where at least 100 or more potentially eligible IFQ holders resided. Although there are no workshops scheduled for the Aleutian Chain, the division will entertain adding a few stops for those fishermen, as well as teleconferencing the workshops. The quota share will be issued in the vessel class that was last used in a groundfish fishery by the fisherman, prior to September 25, 1991. If a person now has a larger vessel class, there may not be a match between the IFQ and the vessel. MR. SMITH noted, in addition some exotic steps being taken by the program to limit the black market, or the high seas selling of fish. The idea of primary ports, and hailing to the NMFS six hours before delivery, and a credit card system that will keep a running balance of the resource, as well as random boardings will all help to discourage inefficiencies in the program. The last problem is high-grading, or throwing out less valuable small fish and only keeping the larger fish. Economically, this is not sensible, and processors will notice if all fish in a catch are large. Lastly, there is no current plan for lapsing and reissuance of quota share. Number 280 ADJOURNMENT CHAIRMAN MOSES asked members and the public if there were further comments. Hearing none, he adjourned the meeting at 9:42 a.m.