        DEPARTMENT OF COMMERCE
        National Oceanic and Atmospheric Administration
        50 CFR Part 679
        [Docket No. 030922237-3237-01; I.D. 082503D]
        RIN  0648-AQ98
        Fisheries of the Exclusive Economic Zone Off Alaska; Individual Fishing Quota Program; Community Purchase

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

          ACTION:
          Proposed rule.

          SUMMARY:
          NMFS issues a proposed rule to implement Amendment 66 to the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMP), and an amendment to the Pacific halibut commercial fishery regulations for waters in and off of Alaska.  Amendment 66 to the FMP and the regulatory amendment would modify the Individual Fishing Quota (IFQ) Program by revising the definition of an eligible quota share holder to allow eligible communities in the Gulf of Alaska (GOA) to establish non-profit entities to purchase and hold halibut and sablefish quota share (QS) for lease to, and use by, community residents as defined by specific elements of the proposed action.  This action is intended to improve the effectiveness of the IFQ Program and is necessary to promote the objectives of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) and the Northern Pacific Halibut Act of 1982 (Halibut Act) with respect to the IFQ fisheries.

          DATES:
          Comments on the proposed rule must be received on or before December 1, 2003.

          ADDRESSES:

          Comments may be sent to Sue Salveson, Assistant Regional Administrator for Sustainable Fisheries, Alaska Region, NMFS, P.O. Box 21668, Juneau, AK  99802, Attn:   Lori Durall.  Comments also may be delivered by hand to NMFS, Room 420, 709 West 9th Street, Juneau, AK 99801.  Send comments on collection-of-information requirements to the same address and to the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), via facsimile (202-395-7285; Attn:  NOAA Desk Officer) or email at David_Rostker@omb.eop.gov.  Comments also may be sent via facsimile (fax) to 907-586-7557.  Comments will not be accepted if submitted by email or the Internet.  Copies of Amendment 66 and the Environmental Assessment/Regulatory Impact Review/Initial Regulatory Flexibility Analysis (EA/RIR/IRFA) prepared for Amendment 66 may be obtained from the North Pacific Fishery Management Council at 605 West 4th, Suite 306, Anchorage, AK 99501-2252, Phone:  (907) 271-2809.

          FOR FURTHER INFORMATION CONTACT:
          Glenn Merrill, 907-586-7228 or email at glenn.merrill@noaa.gov.

        SUPPLEMENTARY INFORMATION:
        Background

        The groundfish fisheries in the Exclusive Economic Zone of the GOA are managed under the FMP.  The FMP was developed by the North Pacific Fishery Management Council (Council) under the Magnuson-Stevens Act (Public Law 94-265, 16 U.S.C. 1801).  The FMP was approved by the Secretary of Commerce and became effective in 1978.  Fishing for Pacific halibut (Hippoglossus stenolepis) is managed by the International Pacific Halibut Commission (IPHC) and the Council under the Halibut Act.  The IFQ Program, a limited access management system for the fixed gear Pacific halibut and sablefish (Anoplopoma fimbria) fisheries off Alaska, was recommended by the Council in 1992, approved by NMFS in January 1993, and initial implementing rules were published on November 9, 1993 (58 FR 59375).  Fishing under the IFQ program began on March 15, 1995.  The IFQ Program limits access to the halibut and sablefish fisheries to those persons holding QS in specific management areas.  The IFQ Program for the sablefish fishery is implemented by the FMP and Federal regulations at 50 CFR part 679 under authority of the Magnuson-Stevens Act.  The IFQ Program for the halibut fishery is implemented by Federal regulations at 50 CFR part 679 under the authority of the Halibut Act.
        The IFQ Program originally was designed to resolve conservation and management problems that are endemic to open access fisheries.  The background issues leading to the Council's initial action recommending the adoption of IFQs are described in the preamble to the proposed rule establishing the IFQ Program published December 3, 1992 (57 FR 57130).
        A central concern of the Council in developing the IFQ Program was that QS, from which IFQ is derived, would become increasingly held by corporate entities instead of independent fishermen who typically own and operate their own vessels.  To prevent this outcome, the Council designed the IFQ Program such that QS could, in most cases, be held only by individuals or natural persons, and not by corporate entities.  The Council provided limited exemptions to this basic approach to accommodate existing corporate ownership of vessels at the time of implementation and to recognize the participation by corporately owned freezer vessels.  However, the overall intent of the IFQ Program was for catcher vessel QS eventually to be held only by individual fishermen.  The IFQ Program is designed to limit corporate holding of QS and increase holdings of QS by individual fishermen as corporate owners divest themselves of QS.  The rationale for this owner-operator structure was that it would maintain a robust QS market and reasonable entry costs for new fishermen.  This provision is implemented through the QS and IFQ transfer regulations at 50 CFR 679.41.
        The purpose of this proposed rule is to revise existing IFQ Program regulations and policy to explicitly allow a new group of non-profit entities to hold QS on behalf of residents of specific rural communities located adjacent to the coast of the GOA.  This change would allow a non-profit corporate entity that meets specific criteria to receive transferred halibut or sablefish QS on behalf of an eligible community and to lease the resulting IFQ to fishermen who are residents of the eligible community.  This change is intended to provide additional opportunities to these fishermen, and may indirectly address concerns about the economic viability of those communities.
        A Notice of Availability (NOA) of the FMP amendment was published on September 2, 2003 (68 FR 52173), with comments on the FMP amendment invited through November 3, 2003.  Written comments may address the FMP amendment, the proposed rule, or both, but must be received by November 3, 2003, to be considered in the decision to approve or disapprove the FMP amendment.

        Since initial issuance of QS, and as a result of voluntary transfers of QS, the amount of QS and the number of resident QS holders has substantially declined in most of the GOA communities that would be affected by this action.  This trend may have had an effect on employment and may have reduced the diversity of fisheries to which fishermen in rural communities have access.
        The ability of fishermen in small rural communities to purchase QS or maintain existing QS may be limited by a variety of factors unique to those communities.  In particular, many fishermen in small rural communities may be limited in their ability to obtain access to financing due to the remote nature of the communities and their dependence on a limited range of economic opportunities.  Many small rural communities are isolated from other communities and this isolation limits access to a wider variety of markets for fishery product that are available to communities with better transportation infrastructure.  In addition, fishermen in these rural communities tend to have smaller vessels and fishing operations relative to fishermen in larger ports.  These fishermen may have received less QS during initial issuance and may have chosen to divest themselves of QS that was not economically viable.  Although the specific causes for decreasing QS holdings in rural communities may vary, the net effect is overall lower participation by residents of these communities in the halibut and sablefish IFQ fisheries.
        In June 2000, representatives of several GOA communities presented the Council with a proposal to allow communities to purchase QS. The Council approved several alternatives for analysis in June 2001, reviewed an initial analysis in December 2001, and took final action in April 2002.  The Council formally adopted a problem statement in June 2001 for this proposed action that recognized the fact that a number of small coastal communities “are struggling to remain economically viable.”  The Council stated that “[a]llowing qualifying communities to purchase halibut and sablefish quota share for use by community residents will help minimize adverse economic impacts on these small, remote, coastal communities in Southeast and Southcentral Alaska, and help provide for the sustained participation of these communities in the halibut and sablefish IFQ fisheries.”
        The proposed action developed by the Council would address these concerns by modifying the IFQ Program to allow non-profit entities that represent small rural communities in the GOA with a historic participation in the halibut and sablefish fisheries to hold QS.  The Council's recommendations also reflect the most recent amendments to the Magnuson-Stevens Act, and IFQ policy recommendations by the National Research Council (NRC).
        The 1996 amendments to the Magnuson-Stevens Act established a new national standard for fishery conservation and management (National Standard 8) that requires management programs to “take into the account the importance of fishery resources to fishing  communities in order to (A) provide for the sustained participation of such communities, and (B) to the extent practicable, minimize adverse economic impacts on such communities” (16 U.S.C. 1851).  The Halibut Act requires consideration of the effect of halibut allocations to fishing communities by reference to section 303(b)(6) of the Magnuson-Stevens Act.  This reference requires, among other things, that the effects of halibut allocations be considered as is described under the directives of National Standard 8 of the Magnuson-Stevens Act.
        The 1996 Magnuson-Stevens Act amendments also directed the NRC to submit a report to Congress on existing IFQ Programs and provide recommendations on the implementation of existing and future programs.  The NRC published its report “Sharing the Fish:  Toward a National Policy on Individual Fishing Quotas” in 1999.  In this report, the NRC recommends that NMFS and the Regional Councils consider including fishing communities as stakeholders in fishery management programs.  The NRC recommends that Regional Councils should be permitted to authorize the purchase, holding, management, and sale of QS/IFQs by communities.  This action proposes to implement provisions that would address the NRC recommendations on the use of QS by communities.
        The Council considered the range of comments from the public, NMFS, and the State of Alaska (State), and incorporated various suggestions in developing its proposed community QS policy.  The basic provisions of this proposed policy are described as follows.
        Community QS Provisions
        1. Community Quota Entities
        Community quota entities (CQEs), incorporated under the laws of the State to represent eligible communities, would obtain QS by transfer and hold the QS and lease the resulting annual IFQ to individual community residents.  Unless otherwise specified, the restrictions that apply to any current QS holder would apply to a CQE.  CQEs, however, would be subject to additional regulatory requirements beyond those applying to existing QS holders.
        A CQE could represent more than one eligible community.  However, no community could be represented by more than one CQE.  This provision would minimize confusion and ensure effective and efficient administration of the program.
        During Council deliberations, a new non-profit entity was selected as the appropriate QS holder for these communities based on recommendations from GOA communities.  These recommendations indicated that a non-profit entity could be more flexible and cost-effective than either a for-profit corporation or an existing governmental body.  To be considered eligible to hold QS on behalf of a community, a CQE would be required to be incorporated after April 10, 2002, the date of final Council action.
        The Council stated that the purpose of designating a new non-profit entity to hold QS is that existing administrative structures such as municipal governments, tribal councils, or other community organizations may be focused on other priorities.  The Council considered that a new non-profit entity may be better suited to represent an entire community with the express purpose of purchasing and managing QS.  Additionally, the EA/RIR/IRFA noted that a number of communities considered as eligible for this program are unincorporated, do not have local tribal governments, or other community organizations, and therefore lack an existing governmental body that could manage the QS.
        The Council also recommended that a non-profit organization provide proof of support from the community that it is seeking to represent.  This support must be demonstrated in the application by a non-profit organization to become eligible as a CQE.  The specific mechanism for the community to demonstrate its support for a CQE is described in the Administrative Oversight section of the preamble.

        Once an application to become a CQE has been approved, then that CQE would be eligible to hold and receive QS, and lease IFQ to eligible community residents under the mechanisms established by this proposed rule.  If a CQE does not remain in compliance, (e.g., by failing to submit a complete annual report), then NMFS could initiate administrative proceedings to deny the transfer of QS or IFQ to or from the CQE.  As with other administrative determinations under the IFQ Program, any such determination could be appealed under the procedures set forth in regulations (50 CFR 679.43).  The Council recommended regulatory measures, described below, as a means to monitor the ability of the non-profit entities to meet the goals of distributing IFQ among residents in these GOA communities.
        2. Eligible Communities
        Communities eligible to participate in this program would need to meet all the following criteria:  (a) have a population of less than 1,500 persons based on the 2000 United States Census; (b) have direct saltwater access; (c) lack direct road access to communities with a population greater than 1,500 persons; (d) have historic participation in the halibut and sablefish fisheries; and (e) be specifically designated on a list adopted by the Council and included in this proposed rule (see Table 21 to Part 679).
        If a community appears to meet the eligibility criteria but is not specifically designated on the list of communities adopted by the Council, then that community would have to apply directly to the Council to be included.  In this event, the Council may modify the list of eligible communities adopted by the Council through a regulatory amendment.  Under the criteria established in this proposed rule, a total of 42 communities in the GOA would qualify as eligible to purchase QS.  These eligible communities may designate a new non-profit entity to hold QS on behalf of that community.
        The specific criteria for community eligibility were developed through Council deliberations.  Generally, the Council chose criteria that were intended to define a set of communities that have experienced a similar decline in their participation in the halibut and sablefish IFQ fisheries.  Analysis in the EA/RIR/IRFA indicates that all but 2 of the 42 communities designated in Table 21 to part 679 have experienced a net loss in QS held by residents of those communities since initial allocation.
        (a) Population of Less than 1,500 persons
        The Council considered a range of population criteria and chose to limit eligibility to communities less than 1,500 persons based on an analysis of QS distribution.  This analysis indicated that several communities larger than 1,500, specifically Wrangell and Cordova, did not have the same decline in participation in the halibut and sablefish fisheries as the communities that this action proposes to address.  The 2000 United States Census was chosen as the standard for measuring total population.  This standard would be used to determine eligibility for community participation in this program because it is considered to be a more accurate measure of population than annual estimates conducted by the State.  Additionally, at the time that final action to modify the IFQ Program was taken by the Council to accommodate communities, the 2000 Census was the best available demographic data.
        This proposed rule establishes that a community with not less than 20 persons and not more than 1,500 persons that is defined as a Census Designated Place under the U.S. Census fulfills the requirement for the definition of a community for the purposes of this program.  If communities seek inclusion as an eligible community in the future, then NMFS would review those communities using the definitions of a community as defined by this proposed rule.
        The reason for using a minimum of a 20-person standard, is that two communities specifically designated by the Council for eligibility for this program have populations slightly higher than 20 persons.  Specifically, Meyers Chuck and Ivanof Bay have populations of 21 and 22 persons, respectively.  If a higher minimum population standard were used, neither of these communities would be eligible to participate in this program.  Excluding these two communities that have experienced a loss of QS since the implementation of the IFQ program would undermine the intent of this action, which is to provide an additional opportunity for residents of those communities to receive access to halibut and sablefish resources.
        The limitation on minimum population size would reduce the potential for future petitions for inclusion into the program by a small group of individuals living in a place solely for the purpose of participating in this program.  Additionally, there are a number of communities that are no longer populated that could be qualified under the historic participation criteria.  The Council did not intend this program to provide an opportunity for communities which do not exist to receive the ability to form non-profit entities and purchase QS.  The limitation on population size would prevent this possibility and also reflects existing definitions of a community as established by the State of Alaska for purposes of revenue sharing agreements.  The State defines a community as a group of not less than 25 people living in a geographic location as a social unit.  Without a minimum population standard established in this proposed rule, the goals of the Council and this action to provide additional opportunities for coastal residents in established communities is undermined. All of the communities designated by the Council on the list of eligible communities meet these requirements based on the analysis of these eligibility criteria in the EA/RIR/IRFA prepared for this proposed rule.
        (b) Have Direct Saltwater Access
        A community would be defined as adjacent to saltwater if it is located on the GOA coast of the North Pacific Ocean.
        (c) Lack of Direct Road Access
        The Council recommended limiting eligibility to communities without direct road access to communities larger than 1,500 persons because such communities may lack access to markets for fishery products and could be disadvantaged relative to other communities with better transportation infrastructure.  Communities that do have road access to larger communities would be expected to have access to larger markets, better access to capital, and are not likely to face the same economic conditions that this program is trying to address by providing additional harvest opportunities for community residents.
        (d) Have Historic Participation in the Halibut and Sablefish Fisheries
        Historic participation would be defined as communities for which a resident has recorded a commercial landing of either halibut or sablefish between 1980-2000 according to Commercial Fisheries Entry Commission (CFEC) data for permit and fishing activity.  This definition would provide a means for the Council to consider those communities for which halibut or sablefish has some historic commercial importance.  A broad range of years was chosen to accommodate the shifting patterns of halibut and sablefish harvests within these communities over the past twenty years.  The year 1980 was chosen because it represents the first year of widely collected and reliable data from the CFEC , and the year 2000 was chosen because it was the last year of data available prior to the Council's decision to recommend this program.
        (e) Be Specifically Designated on a List Adopted by the Council

        The Council adopted a specific list of eligible communities to limit the entry of new communities into the Community QS Program (see Table 21 to Part 679).  The Council expressed a desire to review the addition of any communities not listed.  Council review is ensured by listing eligible communities in the regulations.  Any change to the list of eligible communities would first require Council action to recommend such a change.  The Council desired this review to ensure that communities that were not originally considered under this proposed rule provide adequate evidence of their eligibility to participate in this program.  This review would reduce potential disruption in administration of the Community QS Program due to a sudden and unanticipated increase in competition for QS among eligible communities.  This Council review also would provide an additional public review process before modifying the Community QS Program.
        3. Use Caps for Individual Communities
        Each eligible community as represented by a CQE would be subject to the same use limitations on QS and IFQ currently established for QS holders as described under 50 CFR 679.42(e) for sablefish and 50 CFR 679.42(f) for halibut.  Therefore, for each community it represents, a CQE would be limited to using:

            No more than:  599,799 units of halibut QS
            in IFQ regulatory area 2C

            No more than:  1,502,823 units of halibut QS combined
            in IFQ regulatory areas 2C, 3A, and 3B

            No more than:  688,485 sablefish QS units
            in the IFQ regulatory Area East of 140° W. long. (Southeast Outside District)

            No more than 3,229,721 sablefish QS units combined
            in the Southeast Outside District West Yakutat, Central Gulf Regulatory Area, and Western Gulf Regulatory Area

        A CQE representing an eligible community located within Areas 3A or 3B would be prohibited from purchasing QS in Area 2C (Southeast Alaska) on behalf of that community.  The Council recommended this provision because 21 of the 42 eligible communities are located in Area 2C.  Allowing additional CQEs representing communities located in Areas 3A and 3B to purchase QS in Area 2C would increase competition, and possibly result in higher QS prices, for 2C communities.  This increased competition could affect both prospective community QS buyers and new individual entrants to the fishery.
        Likewise, a CQE representing an eligible community within Area 2C would be prohibited from purchasing and using QS in Area 3B (Western GOA) on behalf of that community.  The Council recommended this limitation because residents from communities located in Area 2C traditionally did not fish in Area 3B, and one of the principal goals of the community QS program is to improve the access of residents of the eligible communities to local resources.
        Although the Council recommended limiting the use of halibut QS to those areas that are adjacent to the eligible communities, a similar provision was not recommended for sablefish.  The sablefish fishery occurs in deeper waters than much of the halibut fishery and typically requires larger vessels that can travel longer distances for harvesting fish.
        As noted above, the Council recommended limiting QS holdings by CQEs on behalf of communities to the levels established in the current IFQ program.  The Council noted that this limit would provide an adequate opportunity for communities to purchase and hold sufficient QS for leasing the resulting IFQ among community residents.  This level was considered not to be so restrictive as to discourage communities from purchasing and holding quota.  The Council also considered the potential effects on existing QS holders in recommending use caps for individual communities.  The use caps accommodate existing QS holders who are concerned that shifting potential QS holdings to communities could disadvantage individual fishermen by reducing the amount of QS available to them in the QS market.
        4. Cumulative Use Caps for All Communities
        Communities represented by CQEs cumulatively would be limited to holding a maximum of 3 percent of the total halibut and sablefish QS in each area in the first year after implementation of this program.  In each subsequent year, the percentage would be increased by an additional 3 percent until, after 7 years, a maximum of 21 percent of the total halibut and sablefish QS could be held in each area in which CQEs are eligible to hold QS.
        The Council recommended limiting cumulative community ownership of QS in each area as an additional measure to reduce the potential increase in QS price that could result if CQEs sought to purchase QS up to their respective communities' use cap(s) in each area.  The Council recommended this step-up cumulative use cap to balance potential QS market competition between communities and individuals, and to accommodate the desire of GOA community representatives to have adequate access to QS as CQEs enter the program on behalf of eligible communities.
        5. Transfer and Use Restrictions
        (a) Block Limits
        The purchase of blocked QS by CQEs would be restricted.  During Council deliberations, numerous industry representatives and fishermen indicated that allowing unrestricted purchasing of QS could disadvantage new entrants, particularly those individuals in the market for “blocked QS.”  Blocked QS are aggregates of small units of QS that were designated as blocks when they were initially issued and that cannot be subdivided upon transfer.  The number of blocks that may be held by a person is limited under the IFQ Program.  These limits were established to limit the consolidation of blocked QS and to ensure that smaller aggregate units would be available on the market.  Blocked QS typically is less expensive and more attractive to new-entrants.
        This proposed rule would modify the consolidation limits for blocked QS for communities represented by CQEs.  The Council is recommending this change to provide additional opportunities for CQEs (on behalf of the communities they represent) to access the typically less expensive blocked QS.  The Council also considered the potential effects on new entrants by allowing each community represented by a CQE to hold more QS blocks than can other types of QS holders.  Each community represented by a CQEs would be limited to holding, at any point in time, a maximum of 10 blocks of halibut QS and 5 blocks of sablefish QS in each IFQ regulatory area for halibut and sablefish.  The CQE could not subdivide blocked QS.

        Existing regulations at 50 CFR 679.42(g) limit QS holders to a maximum of two blocks for either species in any area if a person holds only blocked QS, and no more than one block for a species in an area if a person holds any unblocked QS for that species-area combination.  Allowing CQEs to hold more blocks than existing QS holders on behalf of their constituent communities would expand the potential QS market available to these communities.  The Council recommended this provision because in most areas of the GOA large portions of the QS are available only in blocked shares.  Limiting communities to existing unblocked QS would effectively limit the QS available to communities to a small portion of the total QS that is typically higher priced than the more available blocked QS.  The proposed  limits would provide additional opportunities for eligible communities represented by CQEs to purchase QS beyond those that constrain current QS holders.  In recommending this modification to the existing regulations, the Council balanced the objectives of this new program with concerns about protecting the interests of individual new entrants to the fishery.
        To accommodate the interests of prospective new entrants, the Council recommended prohibiting CQEs from purchasing:

            Halibut QS blocks less than or equal to 19,992 units. (e.g., 2,850 lb (1,292.8 kg) of IFQ in 2003)

            in Area 2C

            Halibut QS blocks 27,912 units. (e.g., 3,416 lb (1,549.5 kg) of IFQ in 2003).

            in Area 3A

            Sablefish QS blocks less than or equal to 33,270 units. (e.g., 4,003 lb (1,815.8 kg) of IFQ in 2003)

            in the Southeast Outside District

            Sablefish QS blocks less than or equal to 43,390 units. (e.g., 3,638 lb (1,650.2 kg) of IFQ in 2003)

            in the West Yakutat District

            Sablefish QS blocks less than or equal to 46,055 units. (e.g., 4,684 lb (2,124.7 kg) of IFQ in 2003)

            in the Central GOA regulatory area

            Sablefish QS blocks less than or equal to 48,410 units. (e.g., 6,090 lb (2,762.4 kg) of IFQ in 2003

            in the Western GOA regulatory area

        These QS limits are specified in 50 CFR 679.41(e) as the “sweep up” limit, or the number of QS units initially issued as blocks that could be combined to form a single block.
        The Council recommended that communities not be eligible to purchase or hold these smaller “sweep-up” blocks because these smaller QS blocks typically are purchased by individuals entering the IFQ fisheries.  The Council recommended this measure to minimize potentially unfair competition in the QS market between CQEs and individuals for these small QS blocks.  The Council did not recommend similar restrictions on QS in the halibut fishery for Area 3B because fewer “sweep-up” blocks exist in Area 3B and few new entrants in Area 3B have sought these “sweep-up” blocks.
        (b) Transfer and IFQ Leasing
        CQEs could only receive and use halibut QS assigned to vessel category B (greater than 60 feet length overall) and vessel category C (greater than 35 feet and less than or equal to 60 feet length overall) in Areas 2C and 3A.
        This provision would prohibit CQEs from holding QS assigned to vessel category D (less than or equal to 35 feet (10.7 m) length overall) in Areas 2C and 3A.  Category D QS typically is purchased by individuals seeking entry to the halibut IFQ fisheries.  The Council recommended this provision to reduce potential competition in the halibut QS market between individuals and CQEs.
        The Council did not recommend prohibiting CQEs from holding D category halibut QS in Area 3B.  A relatively small amount of D category QS exists in Area 3B, and traditionally few prospective buyers exist for this category of QS.  Existing D category QS holders in Area 3B indicated that allowing CQEs to purchase D category QS in Area 3B would increase the marketability of their QS.
        The Council did not recommend catcher vessel category restrictions for CQEs holding sablefish QS.  Only B and C vessel categories exist for sablefish QS and sablefish are typically harvested from larger vessels.
        So that the annual IFQ derived from the QS held on behalf of a community could be fished, a CQE would lease (i.e., transfer the annual IFQ) to one or more residents of the community, or communities, it represents.  Each IFQ lease would be made on annual basis, as is currently the requirement in existing regulations.  IFQ so transferred could be fished from a vessel of any size regardless of the QS vessel category from which the IFQ was derived.  This provision would apply only while the QS is held by the CQE.  The vessel category requirements for use of the QS would apply once again after the QS is transferred from a CQE to a qualified recipient that was not a CQE.
        The Council recommended this provision to facilitate the use of the IFQ on the wide range of vessel types that is present in many rural communities.  Limiting CQEs to purchase only certain vessel category QS could increase demand and price competition among CQEs and other QS holders, particularly for category C QS because many vessels in the eligible communities tend to be within this size range.  Broadening the use of IFQ from community-held QS could reduce this potential competition.
        The amount of IFQ that may be leased annually to an eligible community resident would be limited so that no such lessee could hold IFQ permits authorizing the harvest of more than 50,000 lb (22.7 mt) of halibut and 50,000 lb (22.7 mt) of sablefish IFQ, inclusive of any IFQ derived from any source.
        This limitation is intended to ensure a broad distribution of IFQ among community residents and to limit the amount of IFQ that may be leased to those residents who already hold QS or lease IFQ from another source.  The Council noted that one of the principal goals of this program was to provide access to halibut and sablefish resources to community residents that do not currently have access to these resources.
        Similarly, during any fishing year, no vessel participating in the community QS program could be used to harvest an amount of IFQ greater than 50,000 lb (22.7 mt) of halibut and 50,000 lb (22.7 mt) of sablefish, inclusive of all IFQ fished aboard that vessel.  Currently, vessels are limited to 1 percent of the Area 2C IFQ TAC for halibut (e.g., 85,000 net pounds (38 mt) in 2003), or, outside of Area 2C, 0.5 percent of the entire IFQ TAC (e.g., 295,050 net pounds (134 mt) in 2003), and 1 percent of the Southeast IFQ TAC for sablefish (e.g. 78,484 round pounds (36 mt) in 2003), or, outside of Southeast, 1 percent of the entire sablefish TAC (e.g. 348,635 round pounds (158 mt) in 2003).

        This limitation on the amount of IFQ that could be fished on any one vessel using community-held QS is intended to encourage use of a broad distribution of community-held IFQ on vessels that may otherwise have limited or no participation in the IFQ Program.
        Eligibility to lease IFQ derived from community-held QS would be limited to permanent residents of the community represented by the CQE.  The Council recommended this provision to explicitly tie the potential benefits of QS held by a CQE on behalf of a community to the residents of that community.  Such a resident who wishes to lease IFQ would be required to state that he or she maintains a permanent domicile in that specific community and is qualified to receive QS and IFQ by transfer under the existing regulations (i.e., that he or she holds a Transfer Eligibility Certificate issued by NMFS).
        Existing regulations at 50 CFR 679.41 require that, for an individual to be eligible to receive QS/IFQ by transfer, such an individual must be a U.S. citizen and must either have received QS upon initial issuance or have 150 days of experience onboard a vessel working as part of the harvesting crew in a U.S. commercial fishery.  Upon having demonstrated that he or she has satisfied those requirements, such an individual is issued a Transfer Eligibility Certificate (TEC).  These requirements would remain in place for individuals seeking to lease IFQ derived from community QS.  Individuals receiving IFQ must meet these qualifications and attest that they are permanently domiciled within that community when receiving IFQ by transfer from a CQE.  For purposes of this program, an individual would need to affirm that he or she maintained a domicile in the community from which the IFQ is leased for 12 consecutive months immediately preceding the time when the assertion of residence is made, and had not claimed residency in another community, state, territory, or country.
        An individual who receives IFQ derived from QS held by a CQE may not designate a skipper to fish the community IFQ, instead that individual must be onboard the vessel when the IFQ is being fished.  The Council recommended this requirement to help ensure that the potential benefits of QS held by communities would be realized by resident fishermen of those communities and not leased outside the communities.
        Individuals who hold leases of IFQ from communities would be considered to be IFQ permit holders and would be subject to the regulations that govern other permit holders, including the payment of annual fees as required under 50 CFR 679.45, unless noted otherwise in this proposed rule.
        (c) Sale Restrictions
        Certain restrictions would apply to the transfer of QS held by a CQE on behalf of a community.  A CQE is restricted to sell its QS to generate revenues to improve, sustain, or expand the opportunities for community residents to participate in the IFQ halibut and sablefish fisheries.  These restrictions are designed to ensure that the goals of the program are met.  NMFS would approve the transfer of QS held by a CQE on behalf of a community only if the community for which the CQE holds the QS authorizes that transfer.  This authorization may be in the form of a signature from a authorized representative of the governing body of the eligible community for QS transfers on the Approval of Transfer form.  The purpose of this authorization is to ensure that the community is fully aware of the transfer because certain restrictions apply to future transfers if the transfer of QS is for a reason other than to sustain, improve, or expand the program (i.e., the CQE would be prohibited from holding QS on behalf of that community for a period of three years and the CQE must divest itself of all QS held on behalf of that community).
        This proposed action would also provide an opportunity for a CQE to transfer QS to dissolve the CQE; or as a result of a court order, operation of law, or as part of a security agreement.  These provisions are allowed to account for those cases in which a CQE is no longer capable of representing an eligible community and seeks to divest itself of QS holdings in order to provide an opportunity for another non-profit to form and seek approval as a CQE for a community.  Transfers that are required as a result of a court order, operation of law, or as part of a security requirement would be authorized under this proposed action.  These forms of transfers are authorized under the existing IFQ program.

        During Council deliberations, NMFS indicated that the enforcement and monitoring mechanism for these transfer provisions would be limited.  The EA/RIR/IRFA prepared by the Council (see ADDRESSES) notes these concerns.  Rather than requiring an extensive monitoring and auditing program for each transfer of QS, NMFS would rely on the declaration by the CQE about the purpose of the transfer of any QS held on behalf of a community and the authorization by the governing body of that community to transfer that QS.  If subsequent information is made available to NMFS that confirms that the transfer of QS is made for reasons other than to sustain, improve, or expand the opportunities for community residents, then NMFS would withhold annual IFQ permits on any remaining QS held by the CQE on behalf of that community and would disqualify that CQE from holding QS on behalf of that community for 3 calendar years following the year in which final agency action adopting that determination is made.
        NMFS would not impose this restriction until the CQE had received full administrative due process, including notice of the potential action and the opportunity to be heard.  An initial administrative determination (IAD) proposing an adverse action would only become final agency action if the CQE failed to appeal the IAD within 60 days, or upon the effective date of the decision issued by the Office of Administrative Appeals.  The procedures for appeal are provided at 50 CFR 679.43.
        The 3-year restriction was recommended by the Council because the Council did not intend for this program to provide a mechanism for speculating in the QS market or using potential assets to fund other unrelated projects but intended to encourage the long-term participation of fishery dependent communities in the IFQ Program.  The public is encouraged to comment specifically on these transfer restrictions, the administrative process that would be established to monitor these requirements, and the enforcement of these restrictions.
        6. Joint and Several Liability for Violations
        Both the CQE and the individual fisherman to whom the CQE leases its IFQ will be considered jointly and severally liable for any IFQ fishery violation committed while the individual fisherman is in the process of fishing the leased IFQ.  This joint and several liability is analogous to the joint and several liability currently imposed on IFQ permit holders and any hired skippers fishing the permit holders' IFQ.
        7. Administrative Oversight

        Implementing this proposal would require that NMFS:  (1) review applications of eligibility for non-profit entities seeking to be qualified as a CQE for a particular community and certify eligible CQEs; and (2) review an annual report detailing the use of QS and IFQ by the CQE and community residents.  These reviews ensure that the CQEs are adequately representing the communities and that the program is meeting the goals established by the Council.  If a CQE fails to provide a completed annual report to NMFS for each community that it represents, then that CQE would be deemed ineligible to use the IFQ resulting from that QS on behalf of that community until a complete annual report is received.  Before becoming a Final Agency Action, any such determination by NMFS may be appealed through the administrative appeals process described under the IFQ Program (50 CFR 679.43).
        Each non-profit entity applying to become a CQE would have to provide NMFS with the following:
        (1) Its articles of incorporation as a non-profit entity under the laws of the State;
        (2) A statement designating the community, or communities, represented by that CQE;
        (3) Management organization;
        (4) A detailed statement describing the procedures that will be used to determine the distribution of IFQ to residents of each community represented by that CQE; and
        (5) A statement of support and accountability of the non-profit entity to that community from a governing body representing each community represented by the CQE.
        During Council deliberations, the State noted that it would like to have an opportunity to provide NMFS with comments on applications by non-profit entities seeking to become CQEs.  NMFS will provide the State with a copy of the applications.  The State will have a period of 30 days to provide comments to NMFS after they are received.  NMFS will consider these comments before certifying a non-profit entity as a CQE.  This opportunity for comment does not diminish the authority of NMFS to administer these regulations and certify CQEs, but does provide an opportunity for the State to provide comments on the applications.  NMFS will review all applications for completeness.  Those applications that are not complete would be returned to the applicant for revision.  This proposed action does not establish a limit on the amount of time that a non-profit would have to correct deficiencies in an application.
        To minimize potential conflicts that may exist among non-profit entities seeking qualification as a CQE, NMFS would not consider a recommendation from a community governing body supporting more than one non-profit entity to hold QS on behalf of that community.  The specific community governing body that would be relied on to make a recommendation would recommend a non-profit entity would vary depending on the governance structure of the particular community.
        The Council intended that any CQE establish that it is accountable to the community that it would seek to represent.  By establishing a requirement that a specific governing body within a community provide a recommendation supporting a CQE, this proposed rule would establish a clear link between the governing body that represents that community and the CQE.  Allowing multiple non-profits to apply as CQEs for a singly community would require additional review by NMFS to ensure accountability.  Additionally, it would be difficult to establish specific criteria that would establish a clear accountability or lack of accountability.  The Council did not intend that this proposed action would serve the interests of a small number of individuals within a given community who may choose to form a corporate entity to narrowly represent their interests.  The specific linkage to specific recognized governing bodies within a community minimized the need for additional administrative oversight to ensure accountability to a community and provides a clear nexus between the CQE and the community members it is intended to represent by holding QS on behalf of that community.

          Communities incorporated as municipalities. For a community that is incorporated as a municipality under State statutes, the City Council would recommend the non-profit entity to serve as the CQE.

          Communities represented by tribal governments. For those communities that are not incorporated as municipalities but that are represented by a tribal government recognized by the Secretary of the Interior, the tribal governing body would recommend the non-profit entity to serve as the CQE.

          Communities represented by a non-profit association. For those communities that are not incorporated as a municipality, and that are not represented by a tribal government, the community non-profit association that has an established relationship as the governmental body recognized by the State for purposes of governmental functions would recommend the non-profit entity to serve as the CQE for that community.

          Communities without governing bodies. Those communities that are not incorporated as a municipality, or represented by a tribal government recognized by the Bureau of Indian Affairs, and that do not have a community non-profit association recognized by the State for purposes of governmental functions, would not be eligible to recommend a non-profit entity to hold QS on its behalf until a representative governing entity was formed (e.g., the community incorporated as a municipality, was represented by a tribal government recognized by the Bureau of Indian Affairs, or a community non-profit association was formed and recognized by the Alaska Department of Community and Economic Development).  NMFS would consult with the State to determine if a community non-profit association is formed, and that it adequately represents the interests of the community before that community non-profit association could recommend a CQE to hold QS on behalf of that community.
        This requirement would ensure that any communities that do not have a governmental structure form such a structure prior to being allowed to recommend a specific non-profit entity as a CQE.  This requirement is expected to affect only two of the 42 eligible communities recommended by the Council:  Halibut Cove and Meyers Chuck.  Neither of these communities possess any of the governmental bodies described above.  These communities could establish community non-profit associations and have those entities reviewed by the State prior to recommending a CQE.  This requirement is determined to be adequate to ensure that any non-profit designated as a CQE for these communities represents the interests of the residents of those communities.   The public is encouraged to comment on this particular aspect of this proposed rule.
        Establishing that only one CQE to represent the interests in a given community would reduce potential conflicts and reduce administrative burdens.  This requirement would not undermine a community's ability to access QS and would ensure that an entity seeking authorization to hold QS on behalf of a community is reviewed by the appropriate governing body within that community before it is certified by NMFS.  The definition for “eligible community” is revised by redesignating the existing paragraph as paragraph (1) for purposes of the CDQ Program and by adding a new paragraph (2) for purposes of the IFQ Program.
        (a)  Annual Report.

        NMFS would require each CQE to submit an annual report by January 31 to NMFS and to the governing body for each community represented by the CQE, detailing the use of QS and IFQ by the CQE and community residents during the previous year's fishing season.  That annual report would contain the following information for the preceding fishing season:
        (1) Identification of the eligible community, or communities, represented by the CQE ;
        (2) Total amount of halibut QS and sablefish QS held by the CQE at the start of the calendar year and at the end of the calendar year;
        (3) Total amount of halibut and sablefish IFQ leased from the CQE;
        (4) Names, business addresses, and amount of halibut and sablefish IFQ received by each individual to whom the CQE leased IFQ;
        (5) The name, ADF&G vessel registration number, USCG documentation number, length overall, and home port of each vessel from which the IFQ leased from community owned QS was fished;
        (6) The names, and business addresses of those individuals employed as crew members when fishing the IFQ derived from the QS held by the CQE.
        (7) A detailed description of the criteria used by the CQE to distribute IFQ leases among eligible community residents;
        (8) A description of efforts made to employ crew members who are eligible community residents of the eligible community aboard vessels on which IFQ derived from QS held by a CQE is being fished;
        (9) A description of the process used to solicit lease applications from eligible community residents of the eligible community on whose behalf the CQE is holding QS;
        (10) The names and business addresses and amount of IFQ requested by each individual applying to receive IFQ from the CQE;
        (11) Any changes in the bylaws of the CQE, board of directors, or other key management personnel;
        (12) Copies of minutes and other relevant decision making documents from CQE board meetings; and
        (13) The number of vessels that fished for IFQ derived from QS held by a CQE.
        The purpose of the annual report is to assist NMFS and the Council to assess the performance of the CQEs in meeting the objectives of providing for community-held QS.  The Council expressed its intent that the use of community QS would be reviewed 5 years after the effective date of implementing the regulations.  The Council may use the annual reports in this review.  In particular, the Council wished to evaluate the distribution of IFQ leases within a community, the use of IFQ by local crew members, and the percentage of IFQ resulting from community-held QS that is fished on an annual basis.  This annual report would also be provided to the governing body of each community represented by the CQE.  This would assist the governing body and residents of that community in reviewing the activities of the CQE relative to that community.
        Submitting the annual report by January 31 would provide NMFS adequate time to review the annual report before issuing annual IFQ to the CQE at the beginning of the IFQ fishing season and would provide an opportunity for NMFS to indicate to the CQE any deficiencies that may exist in the annual report and allow that CQE time to make corrections.
        The Council also requested that the communities provide information on the location of landings and other biological data to assess the distribution of landings that occur.  These data are routinely reported on the State Fish Ticket and IFQ landing reports and can be summarized by NMFS.  CQEs would not be expected to have access to these records.  NMFS routinely collects specific information on the transfer of QS as part of transfer applications.  Therefore, NMFS can collect several components of the annual report and provide them to the Council and the communities as requested.  Specifically, NMFS can provide directly to the Council or any of the CQEs items 1 through 4 and item 13, as described above.  The CQEs may wish to incorporate this information in the annual report provided to the Council and the community governing body.  This proposed rule does not require that the CQEs collect this information separately.
        If a CQE fails to submit a timely and complete annual report, or if other information indicates that the CQE is not adhering to the procedures for distributing or managing QS and IFQ on behalf of a community as established under its application and these regulations, then NMFS would initiate an administrative action to suspend the ability of that CQE to transfer QS and IFQ, and to receive additional QS by transfer.  This action would be implemented consistent with the administrative review procedures provided at 50 CFR 679.43.  Also, a CQE would be subject to enforcement actions for violating regulations.  Because of the significant impacts these restrictions can impose on a community for which the CQE holds QS, communities are encouraged to carefully monitor the actions of a CQE and to provide a mechanism to ensure that the CQE acts in the best interest of that community and fulfills all the requirements established in its application for eligibility and the regulations for this program.
        Effect of this Action
        Assuming that CQEs are formed and enter the QS market, this action could affect the distribution of halibut and sablefish QS and the associated IFQ throughout the GOA.  Specifically, by enabling non-profit entities to hold QS, some QS may shift from existing QS holders to these new eligible non-profit entities.  No data exist to predict the source of the QS that would be purchased by CQEs, the amount that would be purchased by CQEs, or the specific fishing activities of those individuals that lease IFQ from the CQEs.  Because the potential effects of this proposed rule are unknown, the Council proposed limits on the amount of QS that each community may hold individually and in the aggregate.
        This action would not increase the overall harvests of either the halibut or sablefish resource.  The amount of halibut and sablefish available for harvest would not be affected by this proposed rule and would remain limited by the annual catch limit established for halibut by the IPHC and the annual TAC for sablefish established by the Council.
        Although this action may affect the distribution of harvests within the sablefish and halibut management areas, the potential effect of this redistribution of effort is unknown.
        Some effect on the price of QS could be expected.  Authorizing new entities to enter the QS market could increase the competition for QS and could result in elevated prices.  However, the effect of this potential competition on the market value of QS is unknown.
        Nothing in this proposed rule is expected to undermine existing management measures designed to prevent overfishing or increase the bycatch of non-target species.  The intent of this proposal is to expand the opportunity for fishermen in remote fishing communities to harvest commercial halibut and sablefish.  Any possible effect on local stock abundance would depend on the amount of QS purchased and the actual fishing locations of the IFQ lessees, as compared to the current distribution of fishing effort.  No effect on the overall stock abundance would be expected.
        Classification
        This proposed rule has been determined to be not significant for the purposes of Executive Order 12866.

        The Council and NMFS prepared an Initial Regulatory Flexibility Analysis (IRFA) that describes the impact this proposed rule, if adopted, would have on small entities.  The IRFA considered two alternatives.  The first alternative is the status quo alternative in which only qualified persons, as defined under current Federal regulations, would be eligible to hold QS.  The second alternative would allow eligible communities in the GOA, as defined in this proposed action, to hold halibut and sablefish QS for use by residents of those eligible communities. The second alternative would address concerns noted in the IRFA regarding the lack of initially issued QS and the loss of QS in remote, fishery-dependent GOA communities and thus, address negative impacts sustained by these communities through loss of participation in the IFQ fisheries that would continue under the status quo.  This action proposes to implement the second alternative considered in the IRFA.
        As of December 31, 2001, the most recent year for which data are available for analysis, NMFS records show 1,534 halibut QS holders in Area 2C, 2,047 QS holders in 3A, and 585 QS holders in Area 3B.  Similarly, as of December 31, 2001, NMFS data indicate 486 sablefish QS holders in the Southeast Area, 300 QS holders in the West Yakutat Area, 442 QS holders in the Central Gulf Area, and 177 QS holders in the Western Gulf Area.  All of these QS holders could be considered small entities for purposes of the Regulatory Flexibility Act (RFA).  The proposed rule could impact the estimated 860 registered commercial halibut buyers participating in the commercial halibut and sablefish IFQ program, many of which are small entities.  Also classified as small entities under the RFA are the 42 communities that would qualify as eligible to participate in the IFQ Program as small government jurisdictions with fewer than 50,000 residents.
        Analysis of the proposed action indicates no adverse impact on small entities from this action.  This action does not reallocate QS away from existing QS holders.  The potential adverse effects of this proposed action would be limited to the potential increase in competition which may exist between CQEs, existing QS holders, and new entrants in the QS market.  This competition could increase the market price of QS for all persons seeking to purchase QS.  No data exist to determine if this potential increase in QS price would occur, or if it would disadvantage existing QS holders or new entrants relative to CQEs.
        The ability of CQEs to compete in the QS market is limited by 3 factors:  Their access to capital, the amount of QS available on the market, and the cumulative use cap.  The cap limits CQEs to holding a maximum of 3 percent of the total halibut and sablefish QS in each IFQ regulatory area per year, for a total of 21 percent of the total halibut and sablefish QS in each IFQ regulatory area in the GOA.  Limiting the amount of QS that communities can purchase each year would mitigate the effects of expanding the universe of potential new participants in the QS market.
        This action may have an economic benefit for small entities, to the extent that this action provides additional fishing opportunities to rural fishermen.  The benefit is largely due to the redistribution of fishing opportunities, and is primarily a social benefit, not a strictly economic benefit.  However, the potential economic benefits of this possibility can not now be measured or estimated.
        Net benefits cannot be quantified because of the importance of non-market social costs and benefits in the proposed action.  The sale of QS to the CQEs will increase the revenues of some community members who may wish to exit the fishery, or redirect capital into other industries within the larger communities incurring a net loss of QS.  To the extent that residents within larger communities currently hold proportionally more quota shares, these residents, and presumably the communities where they live, will benefit from the compensation received by the sale of quota, otherwise they would not voluntarily choose to sell.  Although the Council and NMFS do not anticipate that this rule would have a significant impact on a substantial number of small entities, they are unable to state this with certainty and therefore prepared an IRFA.
        This proposed rule contains collection-of-information requirements subject to the Paperwork Reduction Act (PRA).  The following requirement and estimated response time has been approved by OMB under control number 0648-0272:  2 hours for Application for Transfer Eligibility Certificate (TEC).
        The following requirements have been submitted to OMB for approval:  200 hours for the  Application to Become a CQE; and 40 hours for the CQE annual report; 2 hours for an Application for Transfer of QS or IFQ; 30 minutes for Approval of Transfer of QS from Governing Body; and 10 hours for a community petition for, and State comments on, forming a governing body.
        These estimates include the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, completing and reviewing the collection of information, and sending the initial application to NMFS to become a CQE, and sending the annual report to NMFS and the community governing body of the community that the CQE represents.

        Public comment is sought regarding:  whether this proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; the accuracy of the burden estimate; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection of information, including through the use of automated collection techniques or other forms of information technology.  Send comments on these or any other aspects of the collection of information to Sue Salveson, Assistant Regional Administrator for Sustainable Fisheries, at the ADDRESSES above, and to the Office of Information and Regulatory Affairs, OMB facsimile or email at the ADDRESSES above.
        Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.
        There are no duplicative, overlapping, or conflicting Federal rules associated with this proposed rule.

          List of Subjects in 50 CFR Part 679
          Alaska, Fisheries, Recordkeeping and reporting requirements.

          Dated:  October 8, 2003.
          Rebecca Lent,
          Deputy Assistant Administrator for Regulatory Programs, National Marine Fisheries Service.

        For the reasons discussed in the preamble, 50 CFR part 679 is proposed to be amended as follows:

          PART 679—FISHERIES OF THE EXCLUSIVE ECONOMIC ZONE OFF ALASKA

        1.  The authority citation for 50 CFR part 679 continues to read as follows:

          Authority:
          16 U.S.C. 773 et seq, 1801 et seq., 3631 et seq., Title II of Division C, Pub. L. 105-277; Sec. 3027, Pub. L. 106-31, 113 Stat. 57; 16 U.S.C. 1540(f).

        2.  In § 679.2, the definition for “Eligible community” is revised and new definitions for “Community quota entity (CQE)” and “Eligible community resident” are added in alphabetical order to read as follows:

          § 679.2
          Definitions.

            Community quota entity (CQE): (for purposes of the IFQ Program) means a non-profit organization that:
          (1) Did not exist prior to April 10, 2002;
          (2) Represents at least one eligible community that is listed in Table 21 of this part; and,
          (3) Has been approved by the Regional Administrator to obtain by transfer and hold QS, and to lease IFQ resulting from the QS on behalf of an eligible community.

            Eligible community means:
          (1) For purposes of the CDQ program, a community that is listed in Table 7 to this part or that meets all of the following requirements:
          (i) The community is located within 50 nm from the baseline from which the breadth of the territorial sea is measured along the Bering Sea coast from the Bering Strait to the most western of the Aleutian Islands, or on an island within the Bering Sea.  A community is not eligible if it is located on the GOA coast of the North Pacific Ocean, even if it is within 50 nm of the baseline of the Bering Sea.
          (ii) That is certified by the Secretary of the Interior pursuant to the Native Claims Settlement Act (Public Law 92-203) to be a native village.
          (iii) Whose residents conduct more than half of their current commercial or subsistence fishing effort in the waters of the BSAI.
          (iv) That has not previously deployed harvesting or processing capability sufficient to support substantial groundfish fisheries participation in the BSAI, unless the community can show that benefits form an approved CDP would be the only way to realize a return from previous investment.  The community of Unalaska is excluded under this provision.
          (2) For purposes of the IFQ program, a community that is listed in Table 21 to this part, and that:
          (i) Is a municipality or census designated place as defined in the 2000 United States Census located on the GOA coast of the North Pacific Ocean;
          (ii) Has a population of not less than 20 and not more than 1,500 persons based on the 2000 United States Census;
          (iii) Has had a resident of that community with at least one commercial landing of halibut or sablefish made during the period from 1980 through 2000, as documented by the State of Alaska Commercial Fisheries Entry Commission; and
          (iv) Is not accessible by road to a community larger than 1,500 persons based on the 2000 United States Census.

            Eligible community resident means, for purposes of the IFQ Program, any individual who:
          (1) Is a citizen of the United States;
          (2) Has maintained a domicile in a rural community listed in Table 21 to this part for the 12 consecutive months immediately preceding the time when the assertion of residence is made, and who is not claiming residency in another community, state, territory, or country; and
          (3) is an IFQ crew member.

        3. In § 679.5, paragraph (l)(8) is added to read as follows:

          § 679.5
          Recordkeeping and reporting (R&R).

          (l) * * *
          (8) CQE Annual Report for an Eligible Community. By January 31, the CQE shall submit a complete annual report on halibut and sablefish IFQ activity for the prior fishing year, for each community represented by the CQE to the Regional Administrator, National Marine Fisheries Service, Post Office Box 21668, Juneau, AK 99802, and to the governing body of those communities identified in Table 21 to this part.
          (i) A complete annual report contains the following information:
          (A) Name, ADF&G vessel registration number, USCG documentation number, length overall, and home port of each vessel from which the IFQ leased from QS held by a CQE was fished;
          (B) Name and business addresses of individuals employed as crew members when fishing the IFQ derived from the QS held by the CQE;
          (C) Detailed description of the criteria used by the CQE to distribute IFQ leases among eligible community residents;
          (D) Description of efforts made to employ crew members who are eligible community residents of the eligible community aboard vessels on which IFQ derived from QS held by a CQE is being fished;
          (E) Description of the process used to solicit lease applications from eligible community residents of the eligible community on whose behalf the CQE is holding QS;
          (F) Names and business addresses and amount of IFQ requested by each individual applying to receive IFQ from the CQE;
          (G) Any changes in the bylaws of the CQE, board of directors, or other key management personnel;
          (H) Copies of minutes and other relevant decision making documents from CQE board meetings.
          (ii) Additional information may be submitted as part of the annual report based on data available through NMFS.  This includes:
          (A) Identification of the eligible community, or communities, represented by the CQE;
          (B) Total amount of halibut QS and sablefish QS held by the CQE at the start of the calendar year and at the end of the calendar year;
          (C) Total amount of halibut and sablefish IFQ leased from the CQE;
          (D) Names, business addresses, and amount of halibut and sablefish IFQ received by each individual to whom the CQE leased IFQ;
          (E) Number of vessels that fished for IFQ derived from QS held by a CQE.

        4. In § 679.7, paragraphs (f)(16) and (f)(17) are added to read as follows:

          § 679.7
          Prohibitions.

          (f) * * *
          (16) Hire a master to fish for IFQ halibut or IFQ sablefish that is derived from QS held by a CQE.
          (17) Process IFQ halibut or IFQ sablefish onboard a vessel on which a person is using IFQ derived from QS held by a CQE.

        5. In § 679.41, paragraphs (d)(1) and (g)(1) are revised, and paragraphs (c)(10), (e)(4), (e)(5), (g)(5) through (g)(8), and (l) are added to read as follows:

          § 679.41
          Transfer of quota shares and IFQ.

          (c) * * *
          (10) If the person applying to transfer or receive QS or IFQ is a CQE, the following determinations are required for each eligible community represented by that CQE:
          (i) An individual applying to receive IFQ from QS held by a CQE is an eligible community resident of the eligible community in whose name the CQE is holding QS;
          (ii) The CQE applying to receive or transfer QS, has submitted a complete annual report(s) required by 679.5 (l)(8) of this section;
          (iii) The CQE applying to transfer QS has provided information on the reasons for the transfer as described in paragraph (g)(7) of this section;
          (iv) The CQE applying to receive QS is eligible to hold QS on behalf of the eligible community in the halibut or sablefish regulatory area designated for that eligible community in Table 21 to this part; and

          (v) The CQE applying to receive QS has received notification of approval of eligibility to receive QS/IFQ for that community as described in paragraph (d)(1) of this section.
          (d) Eligibility to receive QS or IFQ by transfer—(1) Application for Eligibility.

          All persons applying to receive QS or IFQ must submit an Application for Eligibility to Receive QS/IFQ (Application for Eligibility), containing accurate information, to the Regional Administrator, except that an Application for Eligibility to Receive QS/IFQ (Application for Eligibility) is not required if a complete application to become a CQE, as described in paragraph (l)(3) of this section, has been approved by the Regional Administrator on behalf of an eligible community.  The Regional Administrator will not approve a transfer of IFQ or QS to a person until the Application for Eligibility for that person is approved by the Regional Administrator.  The Regional Administrator shall provide an Application for Eligibility form to any person on request.

          (e) * * *
          (4) A CQE may not purchase or use sablefish QS blocks less than or equal to the number of QS units specified in (e)(2)(i) through (e)(2)(iv) of this section.
          (5) A CQE may not purchase or use halibut QS blocks less than or equal to the number of QS units specified in (e)(3)(i) and (e)(3)(ii) of this section.

          (g) * * *
          (1) Except as provided in paragraph (f), paragraph (g)(2), or paragraph (l) of this section, only persons who are IFQ crew members, or who were initially issued QS assigned to vessel categories B, C, or D, and meet the eligibility requirements in this section, may receive by transfer QS assigned to vessel categories B, C, or D, or the IFQ resulting from it.

          (5) a CQE may not hold QS in halibut IFQ regulatory areas 2C or 3A that is assigned to vessel category D.
          (6) Except as provided by paragraph (f) of this section, QS held by a CQE on behalf of an eligible community may be used only by an eligible community resident of that eligible community.
          (7) A CQE may transfer QS:
          (i) To generate revenues to provide funds to meet administrative costs for managing the community QS holdings:
          (ii) To generate revenue to improve the ability of residents within the community to participate in the halibut and sablefish IFQ fisheries;
          (iii) To generate revenue to purchase QS for use by community residents;
          (iv) To dissolve the CQE; or
          (v) As a result of a court order, operation of law, or as part of a security agreement.
          (8) If the Regional Administrator determines that a CQE transferred QS for purposes other than those specified in paragraph (g)(7) of this section, then:
          (i) The CQE must divest itself of any remaining QS holdings and will not be eligible to receive QS by transfer for a period of three years after the date of the Regional Administrator's determination; and
          (ii) The Regional Administrator will not approve a CQE to represent the eligible community in whose name the CQE transferred quota for a period of three years after the date of the Regional Administrator's determination.

          (l) Transfer of QS to CQEs.—(1) Each eligible community must designate a CQE to transfer and hold QS on behalf of that community.
          (2) Each eligible community may designate only one CQE to hold QS on behalf of that community at any one time.
          (3) Prior to initially receiving QS by transfer on behalf of a specific eligible community, a non-profit entity that intends to represent that eligible community as a CQE must submit a complete application to become a CQE to the Regional Administrator, National Marine Fisheries Service, Post Office Box 21668, Juneau, AK 99802.  The Regional Administrator, will provide a copy to the Alaska Department of Community and Economic Development, Commissioner, P.O. Box 110809, Juneau, AK 99811-0809.  Comments by the State of Alaska on an application to become a CQE must be submitted to the NMFS, P.O. Box 21668, Juneau, AK 99802 within 30 days of the application being received by the State.  NMFS will consider comments received by the Alaska Department of Community and Economic Development, when reviewing applications for a non-profit entity to become a CQE.  A complete application to become a CQE consists of:
          (i) The articles of incorporation for that non-profit entity in the State of Alaska;
          (ii) A statement designating the eligible community, or communities, represented by that non-profit entity for purposes of holding QS;
          (iii) Management organization information, including:
          (A) The bylaws of the non-profit entity;
          (B) A list of key personnel of the managing organization including but not limited to:  the board of directors, officers, representatives, and any managers;
          (C) A description of the organizational management structure of the non-profit including resumes of management personnel, including the name, address, fax number, telephone, email, and any other contact information for the non-profit entity;
          (D) A description of how the non-profit entity is qualified to manage QS on behalf of the eligible community, or communities, it is designated to represent, and a demonstration that the non-profit entity has the management, technical expertise, and ability to manage QS and IFQ; and
          (E) The name of the non-profit organization, taxpayer ID number, NMFS person number, permanent business mailing addresses, name of contact persons and additional contact information of the managing personnel for the non-profit entity, name of community represented by the CQE, name of contact for the governing body of the community represented, date, name and notarized signature of applicant, Notary Public signature and date when commission expires.
          (iv) A statement describing the procedures that will be used to determine the distribution of IFQ to residents of the community represented by that CQE, including:
          (A) Procedures used to solicit requests from residents to lease IFQ; and
          (B) Criteria used to determine the distribution of IFQ leases among qualified community residents and the relative weighting of those criteria;
          (v) A statement of support from the governing body of the eligible community as that governing body is identified in Table 21 to this part.  That statement of support is:
          (A) A resolution from the City Council or other official governing body for those eligible communities incorporated as first or second class cities in the State of Alaska;
          (B) A resolution from the tribal government authority recognized by the Bureau of Indian Affairs for those eligible communities that are not incorporated as first or second class cities in the State of Alaska; but are represented by a tribal government authority recognized by the Secretary of the Interior;

          (C) A resolution from a non-profit community association, homeowner association,  community council, or other non-profit entity for those eligible communities that are not incorporated as first or second class cities in the State of Alaska, and is not represented by a tribal government authority recognized by the Bureau of Indian Affairs.  The non-profit entity that provides a statement of support must:
          (1) Have articles of incorporation as a non-profit community association, homeowner association, community council, or other non-profit entity;
          (2) Have an established relationship with the State of Alaska Department of Community and Economic Development for purposes of representing that community for governmental functions.
          (D) If an eligible community is not incorporated as a first or second class city in the State of Alaska, is not represented by a tribal government authority recognized by the Secretary of the Interior, and does not have a non-profit community association, homeowner association, community council, or other non-profit entity within that community with an established relationship with the Alaska Department of Community and Economic Development for purposes of representing that community for purposes of governmental functions, then NMFS will not consider any statement from a non-profit entity representing that community until that community:
          (1) Is incorporated as a first or second class city in the State of Alaska;
          (2) Establishes a tribal government authority recognized by the Secretary of the Interior; or
          (3) Establishes a non-profit community association, homeowner association, community council, or other non-profit entity within that community that meets the requirements established in paragraph (l)(3)(v)(E) of this section.
          (E) If a community described under paragraph (l)(3)(v)(D) of this section establishes a non-profit community association, homeowner association, community council, or other non-profit entity within that community, then NMFS will consider any recommendations from this entity to support a particular applicant after reviewing:
          (1) Petitions from residents affirming that the non-profit community association, homeowner association, community council, or other non-profit entity within that community represents the residents within that community; and
          (2) Comments from the State of Alaska Department of Community and Economic Development on the articles of incorporation for that non-profit entity and the ability of that non-profit entity to adequately represent the interests of that community for purposes of governmental functions.
          (3) The governing body of an eligible community as that governing body is identified in Table 21 to this part, must provide authorization for any transfer of QS by the CQE that holds QS on behalf of that eligible community prior to that transfer of QS being approved by NMFS.  This authorization must be submitted as part of the Application for Transfer.  That authorization consists of a signature on the Application for Transfer by a representative of the governing body that has been designated by that governing body to provide such authorization to approve the transfer of QS.

        6. In § 679.42, paragraphs (a), (f), (g)(1), and (h) are revised, and paragraphs (e)(3) through (e)(8), and (i)(4) are added to read as follows:

          § 679.42
          Limitations on use of QS and IFQ.
          (a) IFQ regulatory area and vessel category. (1) The QS or IFQ specified for one IFQ regulatory area must not be used in a different IFQ regulatory area.
          (2) The QS or IFQ assigned to one vessel category must not be used to harvest IFQ species on a vessel of a different vessel category, except:
          (i) As provided in paragraph (k) of this section (processing fish other than IFQ halibut and IFQ sablefish);
          (ii) As provided in § 679.41(i)(1) of this part (CDQ compensation QS exemption);
          (iii) IFQ derived from QS held by a CQE may be used to harvest IFQ species from a vessel of any length.
          (3) Notwithstanding § 679.40(a)(5)(ii) of this part, IFQ assigned to vessel Category B must not be used on any vessel less than or equal to 60 ft (18.3 m) LOA to harvest IFQ halibut in IFQ regulatory area 2C or IFQ sablefish in the regulatory area east of 140 degrees W. long. unless such IFQ derives from blocked QS units that result in IFQ of less than 5,000 lb (2.3 mt), based on the 1996 TAC for fixed gear specified for the IFQ halibut fishery and the IFQ sablefish fishery in each of these two regulatory areas.

          (e) * * *

          (3) No CQE may hold sablefish QS in the IFQ regulatory areas of the Bering Sea subarea and the Aleutian Islands subareas.
          (4) No CQE may hold more than 3,229,721 units of sablefish QS on behalf of any single eligible community.
          (5) In the IFQ regulatory area east of 140 degrees W. long., no CQE may hold more than 688,485 units of sablefish QS for this area on behalf of any single eligible community.
          (6) In the aggregate, all CQEs are limited to holding a maximum of 3 percent of the total QS in those IFQ regulatory areas specified in § 679.41(e)(2)(i) through (e)(2)(iv) of this part for sablefish in the first calendar year implementing the regulation in this section.  In each subsequent calendar year, this aggregate limit on all CQEs shall increase by an additional 3 percent in each IFQ regulatory area  specified in § 679.41(e)(2)(i) through (e)(2)(iv) of this part up to a maximum limit of 21 percent of the total QS in each regulatory area specified in Section 679.41(e)(2)(i) through (e)(2)(iv) of this part for sablefish.
          (7) No individual that receives IFQ derived from sablefish QS held by a CQE may hold, individually or collectively, more than 50,000 pounds (22.7 mt) of IFQ sablefish derived from any sablefish QS source.
          (8) A CQE receiving category B, or C sablefish QS through transfer may lease the IFQ resulting from that QS only to an eligible community resident of the eligible community on whose behalf the QS is held.
          (f) Halibut QS use. (1) Unless the amount in excess of the following limits was received in the initial allocation of halibut QS, no person, individually or collectively, may use more than:
          (i) IFQ Regulatory area 2C. 599,799 units of halibut QS.
          (ii) IFQ regulatory area 2C, 3A, and 3B. 1,502,823 units of halibut QS.
          (iii) IFQ regulatory area 4A, 4B, 4C, 4D, and 4E. 495,044 units of halibut QS.
          (2) No CQE may receive an amount of halibut QS on behalf of any single eligible community which is more than:
          (i) IFQ Regulatory area 2C. 599,799 units of halibut QS.
          (ii) IFQ regulatory area 2C, 3A, and 3B. 1,502,823 units of halibut QS.
          (3) No CQE may hold halibut QS in the IFQ regulatory areas 4A, 4B, 4C, 4D, and 4E.
          (4) A CQE representing an eligible community may receive by transfer or use QS only in the IFQ regulatory areas designated for that species and for that eligible community as described in Table 21 to this part.

          (5) In the aggregate, all CQEs are limited to holding a maximum of 3 percent of the total QS in those IFQ regulatory areas specified in § 679.41(e)(3)(i) through (e)(3)(iii) of this part for halibut in the first calendar year implementing the regulation in this section.  In each subsequent calendar year, this aggregate limit on all community quota entities shall increase by an additional 3 percent in each IFQ regulatory area specified in § 679.41(e)(3)(i) through (e)(3)(iii) of this part.  This limit shall increase up to a maximum limit of 21 percent of the total QS in each regulatory area specified in § 679.41(e)(3)(i) through (e)(3)(iii) to this part for halibut.
          (6) No individual that receives IFQ derived from halibut QS held by a CQE may hold, individually or collectively, more than 50,000 pounds (22.7 mt) of IFQ halibut derived from any halibut QS source.
          (7) A CQE receiving category B, or C halibut QS through transfer may lease the IFQ resulting from that QS only to an eligible community resident of the eligible community represented by the CQE.
          (g) * * *
          (1) Number of blocks per species. Except as provided in paragraphs (g)(1)(i) and (g)(1)(ii) of this section, no person, individually or collectively, may hold more than two blocks of each species in any IFQ regulatory area.
          (i) A person, individually or collectively, who holds unblocked QS for a species in an IFQ regulatory area, may hold only one QS block for that species in that regulatory area; and
          (ii) A CQE may hold no more than ten blocks of halibut QS in any IFQ regulatory area and no more than five blocks of sablefish QS in any IFQ regulatory area on behalf of any eligible community.

          (h) Vessel limitations. (1) Halibut. No vessel may be used, during any fishing year, to harvest more than one-half percent of the combined total catch limits of halibut for IFQ regulatory areas 2C, 3A, 3B, 4A, 4B, 4C, 4D, and 4E, except that:
          (i) In IFQ regulatory area 2C, no vessel may be used to harvest more than 1 percent of the halibut catch limit for this area.
          (ii) No vessel may be used, during any fishing year, to harvest more than 50,000 pounds (22.7 mt) of IFQ halibut from any halibut QS source if that vessel is used to harvest IFQ halibut derived from halibut QS held by a CQE.
          (2) Sablefish. No vessel may be used, during any fishing year, to harvest more than one percent of the combined fixed gear TAC of sablefish for the GOA and BSAI IFQ regulatory areas, except that:
          (i) In the IFQ regulatory area east of 140 degrees W. long., no vessel may be used to harvest more than 1 percent of the fixed gear TAC of sablefish for this area.
          (ii) No vessel may be used, during any fishing year, to harvest more than 50,000 pounds (22.7 mt) of IFQ sablefish from any sablefish QS source if that vessel is used to harvest IFQ sablefish derived from sablefish QS held by a CQE.
          (3) A person who receives an approved IFQ allocation of halibut or sablefish in excess of these limitations may nevertheless catch and retain all of that IFQ with a single vessel, except that this provision does not apply if that IFQ allocation includes IFQ derived from QS held by a CQE.  However, two or more persons may not catch and retain their IFQ in excess of these limitations.

          (i) * * *

          (4) IFQ derived from QS held by a CQE must be used only by the individual whose IFQ permit account contains the resulting IFQ.

        7. In 50 CFR part 679, Table 21 is added to read as follows:

          Table 21 to Part 679—Eligible GOA Communities, Halibut IFQ Regulatory Use Areas, and Community Governing Body that Recommends the Community Quota Entity

            Eligible GOA Community
            Community Governing Body that recommends the CQE

            May use halibut QS only in halibut IFQ regulatory areas 2C, 3A

            Angoon
            City of Angoon

            Coffman Cove
            City of Coffman Cove

            Craig
            City of Craig

            Edna Bay
            Edna Bay Community Association

            Elfin Cove
            Community of Elfin Cove

            Gustavus
            Gustavus Community Association

            Hollis
            Hollis Community Council

            Hoonah
            City of Hoonah

            Hydaburg
            City of Hydaburg

            Kake
            City of Kake

            Kasaan
            City of Kasaan

            Klawock
            City of Klawock

            Metlakatla
            Metlakatla Indian Village

            Meyers Chuck
            N/A

            Pelican
            City of Pelican

            Point Baker
            Point Baker Community

            Port Alexander
            City of Port Alexander

            Port Protection
            Port Protection Community Association

            Tenakee Springs
            City of Tenakee Springs

            Thorne Bay
            City of Thorne Bay

            Whale Pass
            Whale Pass Community Association

            May use halibut QS only in halibut IFQ regulatory areas  3A, 3B

            Akhiok
            City of Akhiok

            Chenega Bay
            Chenega IRA Village

            Chignik
            City of Chignik

            Chignik Lagoon
            Chignik Lagoon Village Council

            Chignik Lake
            Chignik Lake Traditional Council

            Halibut Cove
            N/A

            Ivanof Bay
            Ivanof Bay Village Council

            Karluk
            Native Village of Karluk

            King Cove
            City of King Cove

            Larsen Bay
            City of Larsen Bay

            Nanwalek
            Nanwalek IRA Council

            Old Harbor
            City of Old Harbor

            Ouzinkie
            City of Ouzinkie

            Perryville
            Native Village of Perryville

            Port Graham
            Port Graham Village Council

            Port Lyons
            City of Port Lyons

            Sand Point
            City of Sand Point

            Seldovia
            City of Seldovia

            Tatitlek
            Native Village of Tatitlek

            Tyonek
            Native Village of Tyonek

            Yakutat
            City of Yakutat

      [FR Doc. 03-26074 Filed 10-15-03; 8:45 am]
      BILLING CODE 3510-22-S