1. Agenda Item G.3.
Supplemental Staff Presentation 1
November 2018
Agenda Item G.3 Five-Year Catch Share Follow-on Action FMP And Regulatory Amendments – final Action
Good afternoon…we are here to talk about the actions that are follow-on from the five-year catch review.
November, 2018
PFMC

2. Action
1. Adopt final preferred alternatives (FPA) for the five‐year catch share program follow‐on actions.
2. Adopt FMP amendment language for FPA related to at-sea whiting fishery bycatch needs, including housekeeping changes, as appropriate.
3. Provide other guidance, as necessary.
Your specific tasks for this meeting are to …..
To help you through these tasks you have
Agenda Item G.3 Attachment 1
Supplemental GMT Report
Supplemental GAP Report
And there is one supplemental written comment from the PWCC.

3. Agenda Item G.3 Attachment 1
In attachment 1, you’ll find the a description of the issues, alternatives, and analysis.
Table 1 in that document provides, in one place, a list of the alternatives for you to consider. However, you’ll need to look at the text to see the full language of the alternatives.
This is basically the same document that you had in September with three changes of substance: first, the addition of designations for your preliminary preferred alternative,
second, the removal of southern blackgill vessel QP limits (which you will take final action on when you address the updated Amendment 26 analysis next spring), and
third the addition of specific FMP amendment language related to the at-sea set-aside issue and some proposed housekeeping changes.
Agenda Item G.3 Attachment 1
Alternatives listed in Table 1 but look to text

4. Issues At-sea Fishery Set Asides (FPA – Including FMP Am)
Shorebased Sector Needs (FPA)
CP Accum Lim (FPA)
New Data Collections
Catcher Processor (FPA)
QS Account Holders (FPA)
The specific follow-on action issues that you will be addressing here are
At-sea Fishery Set Asides
Shorebased Sector Needs
CP Accum Lim
New Data Collections
Catcher Processor
QS Account Holders
Pause here to see if there are any questions about expectations and process. If not, I’ll move into the follow-on package materials.

5. At-sea Set-asides Background Alternatives Analysis
Briefly review each of these issues and your preliminary preferred alternatives along with the analysis highlights.
These slides are largely the same as you saw in September, so for a number of them I will just be providing high level summaries and we can come back to them if you want to dig in further.
At-sea Set-asides
Background
Alternatives
Analysis

6. Background: Original Co-op Bycatch Cap Species
Managed as set asides starting in 2017
Formulas remained
in FMP
Darkblotched Rockfish – allocated in FMP
Pacific Ocean Perch (POP) – allocated in FMP
Widow Rockfish – allocated in FMP
Canary Rockfish – allocated biennially
In addition to whiting, the original at-sea co-op programs covered four overfished bycatch species that were allocated to the co-ops. The co-ops managed the bycatch limits as hard caps, which brought an end to fishing for the year once they were reached.
Those cap species were
Darkblotched, POP, Widow, Canary
All of these are allocated thru formulas in the FMP except canary, which is handled during the biennial specifications.
[click]
Beginning in 2017, Darklotched and POP were shifted to set-aside management.
But the formulas determining the set-aside amounts remained in the FMP.

7. At-Sea Alternatives (Pg. 12)
Which bycatch species will be managed with caps?
Which species will be allocated by FMP formulas?
Alt 1
No Action
Set Asides for POP and Darkblotched
Quota for Canary and Widow
Allocations in FMP for POP, Darkblotched and Widow
Alt 2
No Change
Remove Allocation Formulas for POP and Darkblotched
Alt 3
Set-asides all 4 spp
Leave Allocation Formulas in the FMP
Alt 4
(PPA)
Remove FMP formulas from for all spp
The alternatives address the question of which of these species will be managed as caps and which as set as-ides and which species will be allocated through formulas specified in the FMP.

8. FMP Amendment Language
Language for Alternatives Starts on pg. 13
One page for each alternative
Related Housekeeping Changes on pg. 17
Updates descriptive parts of the FMP.
Updates list of FMP amendments
Updates history of the FMP
Correct and updates description of shoreside allocation used for initial IFQ issuance
This slide just points you to where the FMP language is located in the attachment.
Also, there are related housekeeping changes which would update descriptive parts of the FMP By
Updating the list of FMP amendments
Updating the history of the FMP
And making some corrections and updates to the descriptions of the shoreside sector allocation used for initial IFQ issuance.

9. Canary & Widow As Set-Asides - Impacts
Bootstrap modeling – very low risk of overage
Assuming future similar to past
Very low average benefit in terms of whiting harvest
Increased operational flexibility every year
Reduced costs
Salmon avoidance
Change in avoidance incentives
With respect to the analysis,
Recall that the bootstrap modeling showed a very low risk of exceeding the set-asides in order to catch all the whiting.
That assumes future fishery conditions are similar to the past.
That also means that there is low average benefit in terms of higher whiting harvest
But reduction of the cap constraint would provide greater flexibility every year with some associated benefits.
The policy change itself may have an effect on future conditions, in terms of changing the bycatch avoidance incentives but it is not expected to result in a substantial increase in risk due to remaining avoidance incentives.

10. Shorebased IFQ Sector Harvest Complex Needs
Background
Alternatives
Analysis

11. Background Attainment of most species under 50%
Only 5 of 30 have exceeded 80%:
Canary Rockfish
Pacific Whiting
Petrale Sole
Sablefish North
Sablefish South
As you know the shoreside IFQ fishery has been underattaining its allocation. And these alternatives are intended to improve that.

12. Shorebased Alternatives (Pg. 52)
No Action
Vessels Cannot Trade QP After End of Year
Vessels Held to Annual
Vessel QP Limits Indefinitely
September 1st QP Expiration
Alt 2
(PPA)
Allow Post Season QP Trading
Alt 2 (SubOpt)
After End of Year Allow Vessels to Cover Deficits
> Vessel QP Limits
Alt 3
Eliminate Sept 1st QP Expiration
Under status quo/no action
Vessels cannot trade QP after the end of the year, so they have to use current year QP to clean up any previous year deficits, reducing QP available in the current year.
Vessels are held to the annual vessel QP limit indefinitely, so we have seen situations where vessels have had lightning strike tows that caught far in excess of the annual vessel QP limit, potentially requiring them to be off the water for several years in order to cover the deficit. Just the fear of this happening has probably led to more conservative fishing than might be necessary, depressing attainment.
Finally, there is the expiration of any QP that have not been transferred to a QP account by September 1st.
Your PPAs.

13. Alternative 2 Suboption – Regulatory Effect
Vessel must stop fishing if it either
Exceeds the amount of QP it has available
Exceeds the annual vessel QP limit
Violations
Fails to cover its catch with QP within the time allotted
Exceeds the annual vessel QP limit
The Lightning Strike Problem
If the overage is substantially greater than the vessel QP limit
off the water for several years
I want to focus in for a moment on the regulatory effect of the Alternative 2 suboption.
Under current regulations, a participating vessel must stop fishing if it either
Exceeds the amount of QP it has available
Exceeds the annual vessel QP limit
It can be found in violation of the program if it either
Fails to cover its catch with QP within the time allotted
Exceeds the annual vessel QP limit by more than 10%
We’ve already talked about the lightning strike problem. This action would just make it so the vessel would not have to be off the water for several years but it would not change the rule about needing to stay within the limit, so the vessel would still have been in violation of the program during the fishing year.

14. Analysis
Currently, post-season deficits (deficit carryovers) must be covered with following year QP
Reduces QP available in following year (Table 43)
Surplus QP available far exceeds the deficits (Table 49)
Every year, at least one vessel catches more than the annual vessel QP limit (Table 44)
Concern about exceeding limits may contribute to conservative fishing and under attainment.
Every year some QP expires without being transferred to a vessel account (Table 45)
Analysis available here is primarily descriptive indicating the size of the problems and amounts of quota affected and potentially available. This slide provides you the table numbers that you can go to if you want to see those values.

15. CP Sector Accumulation Limits
Background
Alternatives
Analysis

16. Background
MSA: Ensure that holders do not acquire an excessive share…by
(1) establishing a maximum share…; and
(2) establishing any other limitations necessary to prevent …inequitable concentration….
The current CP co-op program was
Based on the existing PWCC (1997)
Did not include maximum share or other limits on accumulation
The MSA requires that catch share programs include provisions to prevent participants from acquiring excessive shares but that was not explicitly included as a provision for the at-sea co-op.

17. CP Sector Accumulation Limits Three Sets of Alternatives
Implementation
Permit Ownership Limits
Processing Limits
This action is divided into three parts,
The first on the process for implementation
The second would be a limit based on permit ownership
The third is a processing limit.

18. CP Sector Accumulation Limits Implementation alternatives (Pg. 65)
No Action
Alt 2
No Accumulation Limits
and
Vacate the
June 13, 2017 control date
Alt 3
(PPA)
Apply Accumulation Limits Immediately
Alt 4
Apply Accumulation Limits only If Co-op Dissolves
With respect to the implementation process, the alternatives are
No action
Not creating accumulation limits and also vacating the June 13, 2017 control date that was adopted in relation to this issue.
Your PPA which would apply the cumulative limits immediately and
An alternative that would delay application until such time as the co-op dissolved, if ever. Recall that the co-op reverts to an IFQ program if one permit drops out of the co-op.

19. CP Sector Accumulation Limits PERMIT OWNERSHIP Limit alternatives (Pg
No Action
Alt 2
(PPA)
Five-Permit Limit
Alt 3
Seven-Permit Limit

20. CP Sector Accumulation Limits Processing Limit alternatives (Pg. 68)
(PPA)
No Action
Alt 2
60% Limit
Alt 3
80% Limit

21. Analysis No company appears to own more than 5 permits
(Alternatives are for a 5 or 7 permit limit)
No company appears to process more than 51%
(Alternatives are for a 60% or 80% limit)
Concentration of CP permit ownership has not changed since 2011
Impacts are primarily distributional but could limit net benefits/efficiency
So the analysis contains some descriptive data that can be used to try to start to assess impacts. Based on the data that we have available and simply looking at who is listed as owners on permit records,
[CLICK]
No company appears to own more than 5 permits
[CLICK] (Alternatives are for a 5 or 7 permit limit)
No company appears to process more than 51%
[CLICK] (Alternatives are for a 60% or 80% limit)
Concentration of CP permit ownership has not changed since 2011
Impacts are primarily distributional but could limit net benefits/efficiency. When limits are set too low they can potentially constrain operational efficiency when they are two high, they can lead to market inefficiency if an entity achieves an excessive degree of control over a market and is able to influence prices. With respect to influencing wholesale prices, this is not generally a problem because of competition across whiting sectors and global competition.

22. New Data Collections – Catcher Processor
Background
Alternatives
Analysis

23. Background Detailed ownership data is Detailed ownership data is
Collected for Shorebased IFQ and MS Co-op sectors
Not collected for the CP sector
Detailed ownership data is
Collected for Shorebased IFQ and MS Co-op sectors
But not collected for the CP sector

24. CP Ownership Data Collection Alternatives (Pg. 72)
No Action
Alt 2
(PPA)
Collect Detailed CP Ownership Data

25. Analysis
Only 1 CP company does not currently submit detailed ownership info
Time estimate for most ownership forms: 0.75 hours
Likely much more for more complicated ownership structures
If accumulation limits are adopted ownership information needed for monitoring
[CLICK] Only 1 CP company does not currently submit detailed ownership info
[CLICK] The average time estimate for most ownership forms is 0.75 hours, however, for most entities the ownership structures are fairly simple.
[CLICK] For owners of at-sea processors, the ownership structures are generally much more complicated and will likely require substantially more time to document.
Note, if CP accumulation limits are implemented, this information collection would likely go forward to provide NMFS with the information needed to monitor the limits. But if that action does not go forward the Council may want to have this provision to monitor future concentration and need for accumulation limits.

26. New Data Collections – Quota Share Owner
Background
Alternatives
Analysis

27. Background Economic Data Collection Program (EDC)
Data for monitoring program performance
Vessel owners
First receivers (FR)
Not other quota share owners
Net Profit - costs and revenue related to QP sales
Earnings by QS owner that have sold their vessels
QS owner earnings by geographic distribution of income by QS owners
There is currently an economic data collection program (EDC) that collects data for monitoring program performance from vessel owns and first receivers.
It does not collect information from QS owners that are not also vessel owners or first receivers.
You may recall, that as a result during the catch share review there were questions about
the assessment of net profits because information on costs and revenues related to QP sales is only partial,
And, we were limited in our ability to talk about QP sale revenues earned by QS owners that had sold their vessels or are no longer first receiver
And, limited in our ability to understand the geographic distribution of income for these QS owners
As a result, during the catch share review we found that we had a hard time taking into full account the costs and revenue associated with quota

28. QS Owner Data Collection alternatives (Pg. 75)
No Action
Alt 2
Collect Thru a QS Owner Survey
Alt 3
Collect Thru QS Renewal Form
Alt 4
(PPA)
Collect Thru Best Means as ID’d by NMFS

29. Analysis Improve information on Program performance
New management measure analysis
Specifically
Profitability of fishing enterprises
Participation status of QS owners
Geographic distribution of revenues
Collection of data on QS account owners would improve information on program performance and provide better analysis new management measures.
Specifically, it would address the shortcomings I mentioned in the opening slide by helping with assessment of profitability of fishing enterprises, identifying participation status of QS owners (for example, whether they also participate as a vessel owner), or attributing QP sale revenues to specific geographic areas.

30. Analysis: Existing Collections
Quota Transaction Data (QTD) v.
Economic Data Collection (EDC)
QTD – partially reported but provides per transaction data (market performance analysis)
EDC –
QP purchases (costs) are more fully reported but aggregated on an annual basis (profitability)
Quota earnings from QP sales, less completely reported
I’d like to take a look at our existing data collections to illustrate the degree of the data shortfalls in the data.
First, we have two data sources on QP sale related costs and revenues. First is the Quota Transactions Data maintained at the WCR.
Second we have the EDC data collected by the NWFSC from forms sent to first vessel owners and first receivers.
With respect to the QTD data, for each QP transaction, a transaction form is filled out online, and that form asks for information on the sale price of the QP. Unfortunately, as we will see in a moment, these data are not always provided. Nevertheless, even though it is partial the QTD data has been very useful in assessing the QP market function and has been used by Dan Holland and Erin Steiner in some useful studies.
The EDC data provides information on QP purchases and data is more fully reported but it is aggregated annually. However, because the association between vessel QS accounts and vessels is not well defined and sometimes non-existent, earnings from quota sales are underreported.
So, now lets look at the data.

31. Analysis: Existing Collections - Data
These bars shows what vessels spend on QP in the right two columns and what QP owners earn from leasing QP on the left size. The purple columns are the EDC data and the columns with the yellow base on the QTD data. The bar height shows millions of dollars of revenue and the value for the purple bar on the right is about 26 or 27 million. First, thing to note, if we had complete data these columns would all be the same height, the columns on the left showing costs would match the columns on the right showing revenue. Looking at the purple columns we see a difference of over 10 million dollars. This is because of the QS owners that are not filling out EDC forms that cover those QS shares. Some of those individuals might own vessels but they consider their QS to be owned by a separate company that they control. So they might report the QP costs but not the QP earning.
You’ll note that the QTD data shown by the yellow based columns are the same height, because we have both the cost and earnings side of the transactions. On the right side, for the earnings, we’re capturing more than in the EDC program but on the left for the cost side, the QTD captures less than the EDC.

32. Analysis: Gap Will Grow
As QS owners sell their vessels but keep quota, gap between costs and earnings data will increase (purple bars)

33. Analysis: Better Distributional info
I asked Erin Steiner to provide an example of the type of information that could be produced with the QS owner survey data. In addition to a better assessment of net revenue she provided this prospective graph on the distribution of QS payments among groups in the future. What is important here are the categories showing at the bottom of the graph: they are

34. Analysis: paperwork burden
Will depend on final set of questions
Best guess, an additional 1-2 hours
Finally, with respect to the paper work burden,
It will depend on the final set of questions.
The best guess right now is that it might take an additional 1-2 hours of time including gathering the information and depending on how the individuals organize their information.

35. Action
1. Adopt final preferred alternatives (FPA) for the five‐year catch share program follow‐on actions.
2. Adopt FMP amendment language for FPA related to at-sea whiting fishery bycatch needs, including housekeeping changes, as appropriate.
3. Provide other guidance, as necessary.