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###### Department of Commerce

###### National Oceanic and Atmospheric Administration

          - 50 CFR Part 600
          - [Docket No. 041029298-4298-01; I.D. 052004A]
          - RIN 0648-AS38

# 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 $35,662,471 Federal loan partially financing a fishing capacity reduction program in the Pacific Coast groundfish fishery.  The fee system involves future landings in the trawl portion (excluding whiting catcher -  processors) of the Pacific Coast groundfish fishery as well as the California, Washington, and Oregon fisheries for coastal Dungeness crab and pink shrimp.  This action's intent is to implement the fee system.

# DATES:

Comments on this proposed rule must be received by December 16, 2004.

# ADDRESSES:

You may submit comments by any of the following methods:
      - E-mail: 0648-AS38@noaa.gov .  Include in the subject line the following identifier:  Pacific Coast Groundfish Buyback RIN 0648-AS38.  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: (301) 713-1306.

                        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                         *David_Rostker@omb.eop.gov*                         or by fax to 202-395-7285.                    

                        Copies of the Environmental Assessment, Regulatory Impact Review                               ( print page 67101)                            (EA/RIR) and Initial Regulatory Flexibility Analysis (IRFA) for the program may be obtained from Michael L. Grable, at the above address.                    

# FOR FURTHER INFORMATION CONTACT:

Michael L. Grable, (301) 713-2390.

# SUPPLEMENTARY INFORMATION:

## I. Background

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

Subpart L of 50 CFR part 600 contains the framework regulations (framework regulations) generally implementing section 312(b)-(e) of the Act.

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

Section 212 of Division B, Title II, of Public Law 108-7 (section 212) specifically authorized a $46 million program (groundfish program) for that portion of the limited entry trawl fishery under the Pacific Coast Groundfish Fishery Management Plan whose permits, excluding those registered to whiting catcher-processors, were endorsed for trawl gear operation (reduction fishery).  Section 212 also authorized a fee system for repaying the reduction loan partially financing the groundfish program's cost.  The fee system includes both the reduction fishery and the fisheries for California, Washington, and Oregon coastal Dungeness crab and pink shrimp (fee share fisheries).

Section 501(c) of Division N, Title V, of Public Law 108-7 (section 501(c)) appropriated $10 million to partially fund the groundfish program's cost.

Public Law 107-206 authorized a $36 million reduction loan financing up to $36 million of the groundfish program's cost.

                    Section 212 required NMFS to implement the groundfish program by a public notice in the                     **Federal Register**                    .  NMFS published the groundfish program's initial public notice on May 28, 2003 (68 FR 31653) and final notice on July 18, 2003 (68 FR 42613).  Anyone interested in the groundfish program's full implementation details should refer to these two notifications.                

The groundfish program's maximum cost was $46 million, consisting of a $10 million appropriation and a $36 million reduction loan.  Voluntary participants in the groundfish program relinquished, among other things, their fishing permits and licenses in the reduction fishery and the fee share fisheries, their fish catch histories in these fisheries, and their vessels' worldwide fishing privileges in return for a reduction payment whose amount the participant's bid determined.

On July 18, 2003, NMFS invited groundfish program bids from the reduction fishery's permit holders.  The bidding period opened on August 4, 2003, and closed on August 29, 2003.  NMFS 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.  This created reduction contracts whose performance was subject only to a successful referendum about the fee system required to repay the reduction loan.

Bid offers totaled $59,786,471.  NMFS accepted bids totaling $45,662,471.  The next lowest scoring bid would have exceeded the groundfish program's maximum cost.  The accepted bids involved 91 fishing vessels as well as 239 fishing permits (91 in the reduction fishery, 121 in the fee-share fisheries, and 27 other Federal permits).

In accordance with the section 212 formula, NMFS allocated portions of the prospective $35,662,471 reduction loan to the reduction fishery and each of the six fee share fisheries, as follows:

(1) Reduction fishery, $28,428,719; and

(2) Fee share fisheries:

(a) California Dungeness crab, $2,334,334,

(b) California pink shrimp, $674,202,

(c) Oregon Dungeness crab, $1,367,545,

(d) Oregon pink shrimp, $2,228,845,

(e) Washington Dungeness crab, $369,426, and

(f) Washington pink shrimp, $259,400.

NMFS next held a referendum about the fee system.  The reduction contracts would have become void unless the majority of votes cast in the referendum approved the fee system.  On September 30, 2003, NMFS mailed ballots to referendum voters in the reduction fishery and the six fee share fisheries.  The voting period opened on October 15, 2003, and closed on October 29, 2003.  NMFS received 1,105 responsive votes.  In accordance with the section 212 formula, NMFS weighted the votes from each of the seven fisheries.  Over 85% of the weighted votes approved the fee system.  This successful referendum result removed the only condition precedent to reduction contract performance.

                    On November 4, 2003, NMFS published another                     **Federal Register**                     document (68 FR 62435) advising the public that NMFS would, beginning on December 4, 2003, tender the groundfish program's reduction payments to the 91 accepted bidders.  On December 4, 2003, NMFS required all accepted bidders to permanently stop all further fishing with the reduction vessels and permits.  Subsequently, NMFS:                

(1) Disbursed $45,662,471 in reduction payments to 91 accepted bidders;

(2) Revoked the relinquished Federal permits;

(3) Advised California, Oregon, and Washington about the relinquished state permits;

(4) Arranged with the National Vessel Documentation Center for revocation of the reduction vessels' fishery trade endorsements; and

(5) Notified the U.S. Maritime Administration to restrict placement of the reduction vessels under foreign registry or their operation under the authority of foreign countries.

Section 501(c) also requires the groundfish program, among other things, to ensure “that the owners of * * * [groundfish program reduction vessels] will operate only under the United States flag or be scrapped as a reduction vessel pursuant to section 600.1011(c) of title 50, Code of Federal Regulations.”

### II.  Present Status

NMFS has completed the groundfish program except for implementing the fee system and providing for certain aspects of the reduction vessels' post-reduction operation.  This action proposes to implement the groundfish program's fee system.  A later action will separately propose regulations providing for certain aspects of the reduction vessel's post-reduction operation and such other groundfish program matters as may require regulation.

Sections 600.1013 of the framework regulations govern the payment and collection of fees under a fee system.

                    Basically, the first ex-vessel buyers (fish buyers) of post-reduction fish subject to a fee system (fee fish) must withhold the fee from the trip proceeds which the fish buyers would otherwise have paid to the parties who harvested and first sold (fish sellers) 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,                           ( print page 67102)                        including all in-kind compensation or other goods or services exchanged in lieu of cash.                

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

Section 600.1014 governs fish buyers' depositing and disbursing collected fees as well as their keeping records of, and reporting about, collected fees.

Basically, 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 specifies for this purpose.  Settlement sheets must accompany these disbursements.  Fish buyers must maintain specified fee collection records for at least three years and submit to NMFS annual reports of fee collection and disbursement activities.

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

(1) Section 600.1012;

(2) Section 600.1013;

(3) Section 600.1014;

(4) Section 600.1015;

(3) Section 600.1016; and

(4) Applicable portions of Section 600.1017.

Section 212 provided an option for NMFS to enter into agreements with California, Washington, and Oregon regarding groundfish program fees in the fee share fisheries.  While this would not have involved actual fee collection (because both section 312(d) and the framework regulations require fish buyers to collect the fee), it would have allowed fish buyers to use existing state systems for post-collection fee administration.

After all three states enacted legislation which would allow them to function in this capacity, NMFS evaluated the feasibility of exercising the section 212 option.  NMFS concluded, however, that the option was not feasible because, among other reasons:

(1) The state systems sometimes:

(a) Assess and collect fees based on pounds rather than on dollars,

(b) Neither assess nor collect fees at the point of fish sale, and/or

(c) Involve quarterly fee disbursements;

(2) One state's legislation regarding this option authorizes participation of a state agency different from the one administering the existing state system (and might require amendment);

(3) One state's legislation regarding the section 212 option expires in less than two years;

(4) All states indicated that funding and staffing, under the section 212 option, for the reduction loan's 30-year term would be problematic; and

(5) The states' collection systems are dissimilar and, without significant modification, might not promote efficient and uniform groundfish program fee collection.

Accordingly, NMFS decided that the section 212 option was not feasible at this time.

NMFS intends to enter into landing and permit data sharing agreements with the states in order for NMFS to receive landing and permit information that will allow it to ensure full groundfish program fee payment, collection, and disbursement under the framework rule provisions.

                    NMFS proposes, in accordance with section 600.1013(d) of the framework regulations, to establish the initial fee applicable to the reduction fishery and to each fee share fishery by                     **Federal Register**                     notification and by separate mailed notification to each fish seller and fish buyer affected of whom NMFS then has notice.  This notification will not occur until after NMFS has adopted a final rule following its review of public comment about this proposed rule.  Until such notification actually occurs, fish sellers and fish buyers should neither pay nor collect the groundfish program fee.  Prospectively, however, the initial fee rates would be:                

(1) Reduction fishery, 5%; and

(2) Fee share fisheries:

(a) California Dungeness crab, 1.24%,

(b) California pink shrimp, 4.24%,

(c) Oregon Dungeness crab, 0.55%,

(d) Oregon pink shrimp, 2.33%,

(e) Washington Dungeness crab, 0.16%, and

(f) Washington pink shrimp, 1.50%.

The $35,662,471 principal amount of the reduction loan began accruing interest on March 1, 2004 at a fixed interest rate of 6.97%.

## 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 EA for the final notice implementing the groundfish program.  The EA discusses the impact of the groundfish program on the natural and human environment and resulted in a finding of no significant impact.  The EA considered the implementation of this fee collection system, among other alternatives.  Therefore this proposed action has earned a categorical exclusion from additional analysis.  NMFS will send the EA to anyone who requests it (see                     **ADDRESSES**                    ).                

                    This proposed rule has been determined to be not significant for purposes of Executive Order 12866.  NMFS prepared an RIR for the final notice implementing the groundfish program.  NMFS will send the RIR to anyone who requests it (see                     **ADDRESSES**                    ).                

NMFS prepared an IRFA as required by Section 603 of the Regulatory Flexibility Act.  The IRFA, describes the impact this proposed rule, if adopted, would have on small entities.  A summary of the IRFA follows.  NMFS will send a complete copy to anyone who requests it (see ADDRESSES).

Description of Reasons for Action and Statement of Objective and Legal Basis:  Section 212 of division B, Title II, of Public Law 108-7 (section 212) specifically authorized a $46 million fishing capacity reduction program for that portion of the limited entry trawl fishery under the Pacific coast Groundfish Fishery Management Plan whose permits, excluding those registered to whiting catcher-processors, were endorsed for trawl gear operation (reduction fishery).  Section 212 also authorized a fee system for repaying the reduction loan partially financing the groundfish program's cost.  The fee system includes both the reduction fishery and the fisheries for California, Washington, and Oregon coastal Dungeness crab and pink shrimp (fee share fisheries).

Section 501(b) of Division N, Title V, of Public Law 108-7 (section 501(b)) appropriated $10 million to partially fund the groundfish program's cost.  Public Law 107-206 authorized a $36 million reduction loan financing up to $36 million of the groundfish program's cost.  Pursuant to section 212, NMFS implemented the groundfish program by initial public notice on May 28, 2003 (68 FR 31653) and final notice on July 18, 2003 (68 FR 42613).

                    NMFS has completed the groundfish program except for implementing the fee system and providing for certain aspects of the reduction vessels' post-reduction operation.  This action                           ( print page 67103)                        proposes to implement the groundfish program's fee system.                

Description of Small Entities to Which the Rule Applies:  The Small Business Administration (SBA) has defined all fish harvesting businesses that are independently owned and operated, not dominant in its field of operation, and with annual receipts of $3.5 million or less as small entities.  In addition, processors with 500 or fewer employees, involved in related industries such as canned and cured fish and seafood, or preparing fresh fish and seafood, are also considered small entities.  According to the SBA's definition of a small entity, virtually all of the approximate 1,800 catcher vessels are considered small entities.  This includes the remaining 172 groundfish trawl permits and over 1,600 fee share permits.

Description of Recordkeeping and Compliance Costs:  Please see collection-of-information requirements listed below.

Duplication or Conflict with Other Federal Rules:   This rule does not duplicate or conflict with any Federal rules.

Description of Significant Alternatives Considered: Three alternatives have been considered:  (1) Status Quo (no fee system); (2) Statutorily Mandated Reduction Program with Fee Collection; and (3) Statutorily Mandated Reduction Program with Fee Collection Cooperation by States.

Status Quo (Alternative 1):   Under the status quo, vessel profitability would not be affected.  The status quo represents a significant alternative compared to the proposed action because it minimizes impacts on post reduction fishermen because they do not pay fees on landings, however, this alternative was not chosen because it is contrary to Pub. Law 107-206.

Statutorily Mandated Reduction Program with Fee Collection (Alternative 2):   Under Alternative 2, the preferred alternative, the first ex-vessel buyers (fish buyers) of post-reduction fish subject to a fee system (fee fish) would withhold the fee from the trip proceeds which the fish buyers would otherwise have paid to the parties who harvested and first sold (fish sellers) 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.  This is the preferred alternative because it is mandated by Pub. Law 107-206.

Statutorily Mandated Reduction Program with Fee Collection Cooperation by States (Alternative 3):   Like Alternative 2, Alternative 3 would have an adverse effect on vessel profitability; though the extent of that adverse effect it is not yet clear.  Alternative 3 would leave the design of the fee collection system to the individual states.  This alternative was not chosen because such state systems would:

(a) Assess and collect fees based on pounds rather than on dollars,

(b) Neither assess nor collect fees at the point of fish sale, and

(c) Involve quarterly fee disbursements.

In addition, one state's legislation regarding fee collection authorizes participation of a state agency different from the one administering the existing state system.  Another state's fee collection legislation expires in less than two years.  Furthermore, all states indicated that funding and staffing for the reduction loan's 30-year term would be problematic.  Finally, the states' collection systems are dissimilar and, without significant modification, might not promote efficient and uniform groundfish program fee collection.

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 groundfish 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 (PRA).  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) 2 hours for submitting a monthly fish buyer settlement sheet;

(2) 4 hours for submitting an annual fish buyer report; and

(3) 2 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 law, no person is required to respond to, and no person is subject to a penalty for failure to comply with, an information collection subject to the requirements of the PRA unless that information collection displays a currently valid OMB control number.

NMFS has determined that this proposed rule will not significantly affect the coastal zone of any state with an approved coastal zone management program.  This determination has been submitted for review by the States of Washington, Oregon, and California.

# 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:  November 9, 2004.

John Oliver,

Deputy Assistant Administrator for Operations, 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. The authority citation for part 600 is revised to read as follows:

Authority:5 U.S.C. 561, 16 U.S.C. 1801*et seq.*, 16 U.S.C. 1861a(b) through (e), 46 App. U.S.C. 1279f and 1279g, section 144(d) of Division B of Pub. L. 106-554, section 2201 of Pub. L. 107-20, section 205 of Pub. L. 107-117, Pub. L. 107-206, and Pub. L. 108-7.                    

2. Section 600.1102 is added to subpart M to read as follows:

§ 600.1102

                        (a)                         *Purpose.*                         This section's purpose is to implement an industry fee system to repay the reduction loan partially financing the Pacific Coast groundfish fishery fishing capacity reduction program authorized by section 212 of Division B, Title II, of Pub. L. 108-7 and implemented by a final notification on July 18, 2003, in the                         **Federal Register**                         (68 FR 42613).                    
      ( print page 67104)    
                        (b)                         *Definitions.*                         Unless otherwise defined in this section, the terms defined in § 600.1000 of Subpart L of this Part expressly apply to this section.  The following terms have the following meanings for the purpose of this section:                    

*Borrower*                         means, individually and collectively, each post-reduction fishing permit holder and/or fishing vessel owner fishing in the reduction fishery, in any or all of the fee share fisheries, or in both the reduction fishery and any or all of the fee share fisheries.                    

*Fee fish*                         means all fish harvested from the reduction fishery during the period in which any portion of the reduction fishery's subamount is outstanding and all fish harvested from each of the fee share fisheries during the period in which any portion of each fee share fishery's subamount is outstanding.                    

*Fee share fisheries*                         means the California, Washington, and Oregon fisheries for coastal Dungeness crab and pink shrimp.                    

*Reduction fishery*                         means all species in, and that portion of, the limited entry trawl fishery under the Federal Pacific Coast Groundfish Fishery Management Plan that is conducted under permits, excluding those registered to whiting catcher-processors, which are endorsed for trawl gear operation.                    

*Subamount*                         means each portion of the reduction loan's original principal amount which is allocated to the reduction fishery and to each of the fee share fisheries.                    

                        (c)                         *Reduction loan amount.*                         The reduction loan's original principal amount is $35,662,471.                    

                        (d)                         *Subamounts.*                         The subamounts are:                    

(1) Reduction fishery, $28,428,719; and

(2) Fee share fisheries:

(i) California Dungeness crab, $2,334,334,

(ii) California pink shrimp, $674,202,

(iii) Oregon Dungeness crab, $1,367,545,

(iv) Oregon pink shrimp, $2,228,845,

(v) Washington Dungeness crab, $369,426, and

(vi) Washington pink shrimp, $259,400.

                        (e)                         *Interest accrual inception.*                         Reduction loan interest began accruing on March 1, 2004.                    

                        (f)                         *Interest rate.*                         The reduction loan's interest rate shall be 6.97%.                    

                        (g)                         *Repayment term.*                         For the purpose of determining fee rates, the reduction loan's repayment term shall be 30 years from March 1, 2004, but each fee shall continue for as long as necessary to fully repay each subamount.                    

                        (h)                         *Reduction loan repayment.*

(1) The borrower shall repay the reduction loan in accordance with § 600.1012 of Subpart L of this Part;

(2) Fish sellers in the reduction fishery and in each of the fee share fisheries shall pay the fee applicable to each such fishery's subamount in accordance with § 600.1013 of Subpart L of this Part;

(3) Fish buyers in the reduction fishery and in each of the fee share fisheries shall collect the fee applicable to each such fishery in accordance with § 600.1013 of Subpart L of this Part;

(4) Fish buyers in the reduction fishery and in each of the fee share fisheries shall deposit and disburse, as well as keep records for and submit reports about, the fees applicable to each such fishery in accordance with § 600.1004 of Subpart L of this Part; and

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

[FR Doc. 04-25428 Filed 11-15-04; 8:45 am]

BILLING CODE 3510-22-S