05-14951. Magnuson-Stevens Act Provisions; Fishing Capacity Reduction Program; Bering Sea/Aleutian Islands King and Tanner Crabs; Industry Fee System for Fishing Capacity Reduction Loan

AGENCY:

National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.

ACTION:

Proposed rule.

SUMMARY:

NMFS proposes regulations to implement an industry fee system for repaying a $97,399,357.11 Federal loan financing a fishing capacity reduction program in the Bering Sea/Aleutian Islands King and Tanner Crab fishery. This action's intent is to implement the fee system.

DATES:

Written comments on this proposed rule must be received by August 29, 2005.

ADDRESSES:

You may submit comments by any of the following methods:

• E-mail: [e-mail]. Include in the subject line the following identifier: Bering Sea/Aleutian Islands Crab Fishing Capacity Reduction Program RIN 0648-AS46. E-mail comments, with or without attachments, are limited to 5 megabytes.
• Federal e-Rulemaking Portal: http:www.regulations.gov.
• Mail: Michael L. Grable, Chief, Financial Services Division, National Marine Fisheries Service, 1315 East-West Highway, Silver Spring, MD 20910-3282.
• Fax: [phone].

Comments involving the burden-hour estimates or other aspects of the collection-of-information requirements contained in this proposed rule should be submitted in writing to Michael L. Grable, at the above address, and to David Rostker, Office of Management and Budget (OMB), by e-mail at [e-mail] or by fax to 202-395-7285.

Copies of the Environmental Assessment, Regulatory Impact Review, and Final Regulatory Flexibility Analysis (EA/RIR/FRFA) for the program may be obtained from Michael L. Grable, at the above address.

FOR FURTHER INFORMATION CONTACT:

Michael L. Grable, [phone].

SUPPLEMENTARY INFORMATION:

I. Background

Sections 312(b)-(e) of the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1861a(b) through (e)) generally authorized fishing capacity reduction programs. In particular, section 312(d) authorized industry fee systems for repaying the reduction loans which finance reduction program costs.

Subpart L of 50 CFR part 600 is the framework rule generally implementing sections 312(b)-(e).

Sections 1111 and 1112 of the Merchant Marine Act, 1936 (46 App. U.S.C. 1279f and 1279g) generally authorized reduction loans.

The Consolidated Appropriations Act of 2001 (Public Law 106-554) directed the Secretary of Commerce to establish a $100 million fishing capacity reduction program in the Bering Sea/Aleutian Islands king and Tanner crab fishery. Congress amended the authorizing act twice (Public Law 107-20 and Public Law 107-117), once to change the crab reduction program's funding from a $50 million appropriation and a $50 million loan to a $100 million loan and once to clarify provisions about crab fishery vessels.

NMFS published the crab reduction program's proposed implementation rule on December 12, 2002 (67 FR 76329) and its final rule on December 12, 2003 (68 FR 69331). Anyone interested in the program's full implementation details should refer to these two documents. NMFS initially proposed and adopted the program's implementation rule as § 600.1018 of Subpart L of 50 CFR part 600, but NMFS has since, without other change, re-designated the rule as § 600.1103 in a new subpart M of part 600.

To avoid confusion, the following table identifies the various part 600 rules involved in or affecting the crab reduction program:

DESCRIPTION	SUBPART	SECTION
Reduction Framework Rule	L	600.1000-600.1017
Program Implementation Rule's Initial Designation	L	600.1018
Program Implementation Rule's Re-designation	M	600.1103
Proposed Fee Rule	M	600.1104

The crab reduction program's maximum cost was $100 million consisting of a 30-year loan to be repaid by fees on future crab landings. Each of six of the crab fishery's seven former crab area/species endorsement fisheries were to pay fees at different rates. In return for reduction payments equaling their bid amounts, voluntary program participants relinquished, among other things, their crab fishing license limitation program (LLP) licenses and other permits, their catch histories associated with those licenses and permits, and their crab fishing vessels' worldwide fishing privileges.

NMFS notice in the Federal Register (69 FR 7421) issued the crab reduction program's invitation to bid on February 17, 2004. The bidding period opened on March 5, 2004, and closed on April 23, 2004. NMFS scored each bid's amount against the bidder's past ex-vessel crab revenues and, in a reverse auction, accepted the bids whose amounts were the lowest percentages of the revenues.

Forty-two non-interim crab LLP license holders submitted bids totaling $192,600,916. NMFS accepted 28 bids totaling $99,878,316. The next lowest scoring bid would have exceeded the program's maximum cost.

NMFS next held a referendum about the fees. The reduction contracts would have become void unless a two thirds majority of votes cast in the referendum approved the fees. Each crab LLP license holder received one vote. NMFS mailed ballots to qualifying referendum voters and the voting period opened on May 7, 2004. The voting period closed on June 11, 2004. NMFS received 283 timely votes, four of which were otherwise unresponsive. Approximately 93 percent (259 votes) approved the fees. The referendum appeared to be successful.

Before publishing a reduction payment tender notice, however, NMFS learned that the crab catch history for some reduction/history vessels overstated their actual crab catch history during the bid scoring period. This resulted from a computer programming error which multiplied the crab catch history of co-owned reduction/history vessels times the number of vessel co-owners. Accordingly, the bids associated with these vessels appeared to have more crab catch history during the bid scoring period than they actually did. This resulted in some inaccurate bid scores.

Because of the government's unilateral mistake, the information NMFS provided to the referendum voters on May 7, 2004, was materially inaccurate. In response, NMFS readministered the referendum by mailing new ballots to qualifying referendum voters. The voting period opened on July 9, 2004, and closed on July 30, 2004. NMFS received 236 timely votes. This referendum was not successful since only approximately 46 percent (109) of the votes cast approved the fees.

Because of the first referendum's special circumstances, NMFS decided to re-invite bids and held a second referendum based on the new bidding results. The second bidding period opened on August 6, 2004, and closed on September 24, 2004. Fifty-five non-interim crab LLP license holders submitted bids totaling $225,954,284.

NMFS again scored each bid's amount against the bidder's past ex-vessel revenues and, in a reverse auction, accepted the bids whose amounts were the lowest percentages of the revenues.

NMFS accepted 25 bids totaling $97,399,357.11. The next lowest scoring bid would have exceeded the program's maximum cost. The accepted bids involved 25 fishing vessels as well as 62 fishing licenses or permits. Twenty-five of the permits were non-interim crab fishery LLP licenses. The remaining included 15 groundfish fishing licenses, 20 Federal fishery vessel permits, one high seas permit, and one halibut individual fishing quota share allocation.

NMFS allocated the prospective $97,399,357.11 million reduction loan to the six reduction endorsement fisheries involved, as the following sub-amounts:

1. Bristol Bay red king, $17,129,957.23,

2. BSAI C. opilio and C. bairdi, $66,410,767.20,

3. Aleutian Islands brown king, $6,380,837.19,

4. Aleutian Islands red king, $237,588.04,

5. Pribilof red king and Pribilof blue king, $1,571,216.35, and

6. St. Matthew blue king, $5,668,991.10.

NMFS next held a another fee referendum. The reduction contracts would have become void unless a two thirds majority of votes cast in the second referendum approved the fees. Each crab LLP license holder received one vote. NMFS mailed ballots to 313 qualifying referendum voters. The voting period opened on October 1, 2004, and closed on November 15, 2004. NMFS received 273 timely votes. Over 79 percent (217 votes) approved the fees. The referendum was successful. Accordingly, the reduction contracts were in full force and effect.

On November 24, 2004, NMFS published another Federal Register notice (69 FR 68313) advising the public that NMFS would, beginning on December 27, 2004, tender the crab reduction program's reduction payments to the 25 accepted bidders. On December 27, 2004, NMFS required all accepted bidders to then permanently stop all further fishing with the reduction vessels and permits.

Subsequently, NMFS:

1. Disbursed $97,399,357.11 in reduction payments to 25 accepted bidders;

2. Revoked the relinquished reduction permits;

3. Revoked each reduction vessel's fishing history;

4. Notified the National Vessel Documentation Center to revoke the reduction vessels' fishery trade endorsements and appropriately annotate the reduction vessel's document; and

5. Notified the U.S. Maritime Administration to prohibit the reduction vessel's transfer to foreign ownership or registry.

On March 2, 2005, NMFS published a final rule (70 FR 10174 et seq.), effective April 1, 2005, implementing Amendments 18 and 19 to the Fishery Management Plan for Bering Sea/Aleutian Islands King and Tanner Crab. Among other things, this rule added a new part 680 to this chapter. Amendments 18 and 19 amended the crab fishery management plan to include the Voluntary Three-Pie Cooperative Program, otherwise known as the Crab Rationalization Program (CRP).

The CRP involves terminology which sometimes differs from the terminology in the crab reduction program's implementation rule. For example, the CRP uses different terminology for each of the eight crab rationalization fisheries which, under the crab reduction program's implementation rule, constitute only six reduction endorsement fisheries. Rather than redefining these terms for an already completed crab reduction program, this action proposes to retain these terms and cross reference them to the new CRP terms.

The following table cross references the terms for the six reduction endorsement fisheries involved in the crab reduction program with the different terminology for the eight crab rationalization fisheries involved in the CRP:

REDUCTION ENDORSEMENT FISHERIES	CRAB RATIONALIZATION FISHERIES
Bristol Bay red king	Bristol Bay red king (BBR)
BSAI C. opilio and C. bairdi	Bering Sea snow (BSS) and Bering Sea tanner (BST)
Aleutian Islands brown king	Eastern Aleutian Islands golden king (EAG) and Western Aleutian Islands golden king (WAG)
Aleutian Islands red king	Western Aleutian Islands red king (WAI)
Pribilof red king and Pribilof blue king	Pribilof red king and blue king (PIK)
St. Matthew blue king	St. Matthew blue king (SMB)

Please note that, in two instances, what are two separate crab reduction fisheries are together but one reduction endorsement fishery. Consequently, both of the two separate crab reduction fisheries will, in each of the two instances, pay fees at the same rate as the one reduction endorsement fishery in which the two fisheries are included until the one fishery's reduction loan sub-amount, for whose payment the two fisheries are equally obligated, is fully repaid.

II. Proposed Regulations

NMFS has completed the crab reduction program except for implementing the fee which this action proposes to implement.

The terms defined in § 600.1103 of the crab reduction program's implementation rule and in section 600.1000 of the program's framework rule apply to this action except for the definitions of “reduction endorsement fishery” and “reduction fishery”. This action proposes to refine the definitions of these two terms to reflect the post-CRP fishery's circumstances. If this rule is adopted, the new definitions of these terms would, for purposes of this action, supersede the old definitions in this subpart's § 600.1103.

The framework rule's § 600.1013 governs fee payment and collection in general, and this action proposes to apply the section 600.1013 provisions to the crab reduction program.

Under § 600.1013, the first ex-vessel buyers (fish buyers) of post-reduction fish (fee fish) subject to an industry fee system must withhold the fee from the trip proceeds which the fish buyers would otherwise have paid to the parties (fish sellers) who harvested and first sold the fee fish to the fish buyers. Fish buyers calculate the fee to be collected by multiplying the applicable fee rate times the fee fish's full delivery value. Delivery value is the fee fish's full fair market value, including all in-kind compensation or other goods or services exchanged in lieu of cash.

Fish sellers pay the fees when fish buyers collect by withholding the applicable amount from trip proceeds. Fee payment and collection is mandatory, and there are substantial penalties for failing to pay and collect fees in accordance with the applicable regulations.

The framework rule's § 600.1014 governs how fish buyers must deposit, and later disburse to NMFS, the fees which they have collected as well as how they must keep records of, and report about, collected fees.

Under the framework rule's § 600.1014, fish buyers must, no less frequently than at the end of each business week, deposit collected fees in segregated and Federally insured accounts until, no less frequently than on the last business day of each month, they disburse all collected fees in the accounts to a lockbox which NMFS has specified for this purpose. Settlement sheets must accompany these disbursements. Fish buyers must maintain specified fee collection records for at least 3 years and send NMFS annual reports of fee collection and disbursement activities.

All parties interested in this proposed action should carefully read the following framework rule sections, whose detailed provisions apply to the fee system for repaying the crab reduction program's loan:

1. § 600.1012;

2. § 600.1013;

3. § 600.1014;

4. § 600.1015;

5. § 600.1016; and

6. § 600.1017.

You will not understand this action's full requirements unless you read this action in conjunction with reading at least the framework rule sections listed above.

NMFS proposes, in accordance with the framework rule's section 600.1013(d), to establish the initial fee for the program's six reduction endorsement fisheries. After this action becomes a final rule, NMFS will then separately mail notification to each affected fish seller and fish buyer of whom NMFS has notice. Until this notification, fish sellers and fish buyers do not have to either pay or collect the fee. After this action becomes a final rule, the initial fee rates applicable to each reduction endorsement fishery would be as indicated in the last column of the following table:

REDUCTION ENDORSEMENT FISHERIES	CRAB RATIONALIZATION FISHERIES	LOAN SUB-AMOUNT	FEE RATE
Bristol Bay red king	BBR	$17,129,957.23	1.9%
BSAI C. opilio and C. bairdi	BSS and BST	$66,410,767.20	5.0%
Aleutian Islands brown king	EAG and WAG	$6,380,837.19	2.6%
Aleutian Islands red king	WAI	$237,588.04	5.0%
Pribilof red king and Pribilof blue king	PIK	$1,571,216.35	5.0%
St. Matthew Blue	SMB	$5,668,991.10	5.0%

The rates are percentages of delivery value. Please see the framework rule's section 600.1000 for the definition of “delivery value” and of the other terms relevant to this proposed fee rule.

Each disbursement of the reduction loan's $97,399,357.11 principal amount began accruing interest as of the date of each such disbursement. The loan's interest rate will be the applicable rate, plus 2 percent, which the U.S. Treasury determines at the end of fiscal year 2005.

Classification

The Assistant Administrator for Fisheries, NMFS, determined that this proposed rule is consistent with the Magnuson-Stevens Fishery Conservation and Management Act and other applicable laws.

In compliance with the National Environmental Policy Act, NMFS prepared an environmental assessment for the crab reduction program's final implementing rule (December 12, 2003; 68 FR 69331). The assessment discusses the program's impact on the natural and human environment. The assessment resulted in a finding of no significant impact. The assessment considered, among other alternatives, the implementation of the fee payment and collection which this action proposes. Therefore, this proposed action has received a categorical exclusion from additional analysis. NMFS will provide a copy of the assessment upon request (see ADDRESSES).

The Office of Management and Budget determined that this proposal is significant under Executive Order 12866. NMFS prepared a Regulatory Impact Review for the crab reduction program's final rule. NMFS will provide a copy of the review upon request (see ADDRESSES).

NMFS prepared a Final Regulatory Flexibility Analysis for the crab reduction program as required by the Regulatory Flexibility Act's section 603. The analysis describes the impact this proposed rule would have on small entities. NMFS will provide a copy of the analysis upon request (see ADDRESSES). An analysis summary follows:

1. Description of Reasons for Action and Statement of Objective and Legal Basis

Please see the initial background section of this proposed action's supplementary information, because the information there is similar to the analysis in this regard.

2. Description of Small Entities to Which the Rule Applies

The Small Business Administration has defined small entities to be all fish harvesting businesses which are independently owned and operated, are not dominant in their field of operation, and have annual receipts of $3.5 million or less. The definition also includes processors with 500 or fewer employees involved in related industries such as canned and cured fish and seafood or preparing fresh fish and seafood. Moreover, the definition also includes virtually all harvesting vessels.

3. Description of Recordkeeping and Compliance Costs

Please see this action's collection-of-information requirements following the analysis.

4. Duplication or Conflict with Other Federal Rules

This proposed rule does not duplicate or conflict with any Federal rules.

5. Description of Significant Alternatives Considered

NMFS considered three alternatives: (1) status quo (no fees); (2) buyback with uniform fees; and (3) buyback with weighted (by reduction endorsement fishery) fees.

Status Quo (Alternative 1)

Under the status quo, vessel revenues would not be affected. The status quo is a significant alternative to the proposed action because the former involves no fees and the latter does. NMFS could not choose this alternative because it is contrary to Public Law 106-554.

Uniform Loan Repayment Fees (Alternative 2)

Under Alternative 2, NMFS would apply one fee to the entire crab fishery rather than assigning a different fee to each of the six reduction endorsement fisheries based on their proportional bid crab values. NMFS could not choose this alternative because it is contrary to Public Law 106-554.

Repayment Fees (Alternative 3)

Under Alternative 3, NMFS would assign a different fee rate for each of the six reduction endorsement fisheries based on their proportional bid crab values. Like Alternative 2, Alternative 3 would adversely affect vessel revenues. Nevertheless, Alternative 3 is the most equitable because it apportions repayment obligations based on the actual reduction benefits which each reduction endorsement fishery actually received. This is the preferred alternative both because it is the most equitable and Public Law 106-554 requires this alternative's method.

6. Steps the Agency Has Taken to Mitigate Negative Effects of the Action

With the lack of available cost data, increases in revenues may serve as a proxy for increased profitability. Further, in light of available revenue data, and assuming that each individual vessel shares in the increased revenues resulting from the crab buyback program, the comparison of the relative effects of the program versus the effects of the fees show that overall economic benefits of the program would still be greater than the relative fees charged under this rule. NMFS is not aware of any other measures that could reduce the impact on small entities and still meet statutory requirements. However, NMFS welcomes comments that relay such ideas.

This proposed rule contains collection-of-information requirements subject to the Paperwork Reduction Act. OMB has approved these information collections under OMB control number 0648-0376. NMFS estimates that the public reporting burden for these requirements will average:

1. Two hours for submitting a monthly fish buyer settlement sheet;

2. Four hours for submitting an annual fish buyer report; and

3. Two hours for making a fish buyer/fish seller report when one party fails to either pay or collect the fee.

These response estimates include the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the information collection.

Send comments regarding this burden estimate, or any other aspect of this data collection, including suggestions for reducing the burden, to both NMFS and OMB (see ADDRESSES).

Notwithstanding any other provision of the law, no person is required to respond to, and no person is subject to a penalty for failure to comply with, any information collection subject to the Paperwork Reduction Act unless that information collection displays a currently valid OMB control number.

List of Subjects in 50 CFR Part 600

• Fisheries
• Fishing capacity reduction
• Fishing permits
• Fishing vessels
• Intergovernmental relations
• Loan programs business
• Reporting and recordkeeping requirements

Dated: July 25, 2005.

James W. Balsiger,

Acting Deputy Assistant Administrator for Regulatory Programs, National Marine Fisheries Service.

For the reasons in the preamble, the National Marine Fisheries Service proposes to amend 50 CFR part 600 as follows:

PART 600—MAGNUSON-STEVENS ACT PROVISIONS

1. Section 600.1104 text is added to read as follows:

§ 600.1104

Bering Sea and Aleutian Islands (BSAI) crab species fee payment and collection system.

(a) Purpose. As authorized by Public Law 106-554, this section's purpose is to:

(1) In accordance with § 600.1012 of subpart L, establish:

(i) The borrower's obligation to repay a reduction loan, and

(ii) The loan's principal amount, interest rate, and repayment term; and

(2) In accordance with § 600.1013 through § 600.1016 of subpart L, implement an industry fee system for the reduction fishery.

(b) Definitions. Unless otherwise defined in this section, the terms defined in § 600.1000 of subpart L and § 600.1103 of this subpart expressly apply to this section. The following terms have the following meanings for the purpose of this section:

Crab rationalization crab means the same as in § 680.2 of this chapter.

Crab rationalization fisheries means the same as in § 680.2 of this chapter.

Reduction endorsement fishery means any of the seven fisheries that § 679.2 of this chapter formerly (before adoption of § 680 of this chapter) defined as crab area/species endorsements, except the area/species endorsement for Norton Sound red king. More specifically, the reduction endorsement fisheries, and the crab rationalization fisheries which (after adoption of § 680 of this chapter) correspond to the reduction endorsement fisheries, are:

(1) Bristol Bay red king (the corresponding crab rationalization fishery is Bristol Bay red king crab),

(2) Bering Sea and Aleutian Islands Area C. opilio and (the corresponding crab rationalization fisheries are two separate fisheries, one for Bering Sea snow crab and another for Bering Sea Tanner crab),

(3) Aleutian Islands brown king (the corresponding crab rationalization fisheries are the two separate fisheries, one for Eastern Aleutian Islands golden king crab and another for

Western Aleutian Islands golden king crab),

(4) Aleutian Islands red king (the corresponding crab rationalization fishery is Western Aleutian Islands red king crab),

(5) Pribilof red king and Pribilof blue king (the corresponding crab rationalization fishery is Pribilof red king and blue king crab), and

(6) St. Matthew blue king (the corresponding crab rationalization fishery is also St. Matthew blue king crab).

Reduction fishery means the fishery for all crab rationalization crab in all crab rationalization fisheries.

Sub-amount means the portion of the reduction loan amount for whose repayment the borrower in each reduction endorsement fishery is obligated.

(c) Reduction loan amount. The reduction loan's original principal amount is $97,399,357.11.

(d) Sub-amounts. The sub-amounts are:

(1) For Bristol Bay red king, $17,129,957.23;

(2) For Bering Sea and Aleutian Islands Area C. opilio and C. bairdi, $66,410,767.20;

(3) For Aleutian Islands brown king, $6,380,837.19;

(4) For Aleutian Islands red king, $237,588.04;

(5) For Pribilof red king and Pribilof blue king, $1,571,216.35; and

(6) For St. Matthew blue king, $5,668,991.10.

(e) Interest accrual from inception. Interest began accruing on each portion of the reduction loan amount on and from the date on which NMFS disbursed each such portion.

(f) Interest rate. The reduction loan's interest rate shall be the applicable rate which the U.S. Treasury determines at the end of fiscal year 2005 plus 2 percent.

(g) Repayment term. For the purpose of determining fee rates, the reduction loan's repayment term is 30 years from January 19, 2005, but each fee shall continue indefinitely for as long as necessary to fully repay each subamount.

(h) Reduction loan repayment. (1) The borrower shall, in accordance with § 600.1012, repay the reduction loan;

(2) Fish sellers in each reduction endorsement fishery shall, in accordance with § 600.1013, pay the fee at the rate applicable to each such fishery's subamount;

(3) Fish buyers in each reduction endorsement fishery shall, in accordance with § 600.1013, collect the fee at the rate applicable to each such fishery;

(4) Fish buyers in each reduction endorsement fishery shall, in accordance with § 600.1014, deposit and disburse, as well as keep records for and submit reports about, the fees applicable to each such fishery; and,

(5) The reduction loan is, in all other respects, subject to the provisions of § 600.1012 through § 600.1017.