Fisheries of the Caribbean, Gulf of Mexico, and South Atlantic; Reef Fish Fishery of the Gulf of Mexico; Amendment 29, 20134-20153 [E9-9546]

Agencies

• DEPARTMENT OF COMMERCE
• National Oceanic and Atmospheric Administration

[Federal Register Volume 74, Number 82 (Thursday, April 30, 2009)]
[Proposed Rules]
[Pages 20134-20153]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-9546]



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Part III





Department of Commerce





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National Oceanic and Atmospheric Administration



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50 CFR Part 622



Fisheries of the Caribbean, Gulf of Mexico, and South Atlantic; Reef 
Fish Fishery of the Gulf of Mexico; Amendment 29; Proposed Rule

Federal Register / Vol. 74, No. 82 / Thursday, April 30, 2009 / 
Proposed Rules

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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 622

[Docket No. 090206140-9191-01]
RIN 0648-AX39


Fisheries of the Caribbean, Gulf of Mexico, and South Atlantic; 
Reef Fish Fishery of the Gulf of Mexico; Amendment 29

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

ACTION: Proposed rule; request for comments.

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SUMMARY: NMFS issues this proposed rule to implement Amendment 29 to 
the Fishery Management Plan for Reef Fish Resources of the Gulf of 
Mexico (FMP), as prepared and submitted by the Gulf of Mexico Fishery 
Management Council (Council). This proposed rule would implement a 
multi-species individual fishing quota (IFQ) program for the grouper 
and tilefish component of the commercial sector of the reef fish 
fishery in the Gulf of Mexico exclusive economic zone (Gulf EEZ). In 
addition, the proposed rule would allow permit consolidation and dual 
classifications to the shallow water and deepwater management units for 
speckled hind and warsaw grouper and would modify some provisions of 
the Gulf red snapper IFQ program for consistency with this proposed 
rule. The proposed rule is intended to reduce effort in the grouper and 
tilefish component of the Gulf reef fish fishery.

DATES: Written comments on this proposed rule must be received no later 
than 5:00 p.m., eastern time, on June 15, 2009.

ADDRESSES: You may submit comments, identified by RIN 0648-AX39, by any 
one of the following methods:
     Electronic Submissions: Submit all electronic public 
comments via the Federal eRulemaking Portal https://www.regulations.gov
     Mail: Susan Gerhart, Southeast Regional Office, NMFS, 263 
13th Avenue South, St. Petersburg, FL 33701
    Instructions: All comments received are a part of the public record 
and will generally be posted to https://www.regulations.gov without 
change. All Personal Identifying Information (for example, name, 
address, etc.) voluntarily submitted by the commenter may be publicly 
accessible. Do not submit Confidential Business Information or 
otherwise sensitive or protected information.
    To submit comments through the Federal e-Rulemaking Portal: https://www.regulations.gov, enter ``NOAA-NMFS-2008-0223'' in the keyword 
search, then select ``Send a Comment or Submission.'' NMFS will accept 
anonymous comments (enter N/A in the required fields, if you wish to 
remain anonymous). You may submit attachments to electronic comments in 
Microsoft Word, Excel, WordPerfect, or Adobe PDF file formats only.
    Copies of Amendment 29, which includes a draft environmental impact 
statement (DEIS), an initial regulatory flexibility analysis (IRFA), 
and a regulatory impact review (RIR) may be obtained from the Gulf of 
Mexico Fishery Management Council, 2203 North Lois Avenue, Suite 1100, 
Tampa, FL 33607; telephone 813-348-1630; fax 813-348-1711; e-mail 
gulfcouncil@gulfcouncil.org; or may be downloaded from the Council's 
website at https://www.gulfcouncil.org/.
    Comments regarding the burden-hour estimates or other aspects of 
the collection-of-information requirements contained in this proposed 
rule may be submitted in writing to Jason Rueter, Southeast Regional 
Office, NMFS, and to David Rostker, OMB, by e-mail at David_Rostker@omb.eop.gov, or by fax to 202-395-7285.

FOR FURTHER INFORMATION CONTACT: Susan Gerhart, telephone: 727-824-
5305, fax: 727-824-5308.

SUPPLEMENTARY INFORMATION: The reef fish fishery of the Gulf of Mexico 
is managed under the FMP. The FMP was prepared by the Council and is 
implemented through regulations at 50 CFR part 622 under the authority 
of the Magnuson-Stevens Fishery Conservation and Management Act 
(Magnuson-Stevens Act).

Background

    Current regulatory measures used to manage the commercial grouper 
and tilefish component of the reef fish fishery in the Gulf EEZ include 
a license limitation system, quotas, trip limits, minimum size limits, 
area and gear restrictions, and seasonal closures. Nonetheless, the 
commercial grouper and tilefish component has become overcapitalized, 
which has resulted in increasingly restrictive commercial regulations. 
One result of these restrictions is intensifying derby conditions, 
under which fishermen race to harvest as many fish as possible before 
the quota is reached. The intensification of derby conditions has led, 
in recent years, to early-season closures of the fisheries. Under the 
current management structure, the commercial grouper and tilefish 
component is expected to continue to have higher than necessary levels 
of capital investment, increased operating costs, increased likelihood 
of shortened seasons, reduced safety at-sea, wide fluctuations in 
grouper and tilefish supply, and depressed ex-vessel prices.

Permit Consolidation

    Permit consolidation would allow the owner of multiple Gulf of 
Mexico reef fish commercial vessel permits to consolidate some or all 
of such permits into one. The consolidated permit would have a catch 
history equal to the sum of the catch histories associated with the 
individual permits; the other permits involved in the consolidation 
would be permanently eliminated. The permits to be consolidated would 
have to be valid and not expired, and would have to be issued under the 
same name. This action could contribute to a faster reduction in the 
number of permits and ease permit renewal requirements. Fishermen would 
benefit by having to maintain and pay for fewer permits while still 
retaining their total landings history.

Establishment of an IFQ Program for Groupers and Tilefishes

    The Council chose a multi-species IFQ program for all groupers, 
except Goliath grouper and Nassau grouper, and all tilefish species 
managed in the Gulf EEZ as the preferred alternative for effort 
management. The Magnuson-Stevens Act stipulates the Council may not 
submit, and the Secretary of Commerce may not approve, an IFQ program 
that has not first been approved by a majority of voters in a 
referendum. To be eligible to vote in the Gulf of Mexico grouper and 
tilefish IFQ referendum, an individual needed to possess an active or 
renewable Gulf reef fish vessel permit with combined average annual 
grouper and tilefish landings of at least 8,000 lb (3,629 kg) during 
1999-2004 (with the allowance of dropping one year). Referendum ballots 
were mailed on December 5, 2008, to 301 eligible voters. Ballots were 
due to NOAA Fisheries Service by 4:30 p.m. on January 5, 2009. A total 
of 274 ballots were returned with a vote of 220 to 50 in favor of the 
IFQ program (four returned ballots were declared invalid).
    To implement an IFQ program, several design features would need to 
be specified. This proposed rule contains many of these design 
elements, as well as major requirements for limited access privilege 
programs listed in the Magnuson-Stevens Act.

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Scope and Duration of the IFQ program

    The provisions of the IFQ program would apply to Gulf grouper and 
tilefish species in or from the Gulf EEZ and for a fisher or dealer in 
the IFQ program, these provisions would apply to Gulf groupers and 
tilefishes regardless of where harvested or possessed. The species 
include deepwater groupers (DWG), i.e., yellowedge grouper, misty 
grouper, warsaw grouper, snowy grouper, speckled hind, plus scamp under 
certain circumstances; red grouper, gag, and other shallow water 
groupers (other SWG) including black grouper, scamp, yellowfin grouper, 
rock hind, red hind, yellowmouth grouper, plus warsaw grouper and 
speckled hind under certain circumstances; and tilefishes (goldface 
tilefish, blackline tilefish, anchor tilefish, blueline tilefish, and 
tilefish).
    The IFQ program would remain in effect until it is modified or 
terminated by an FMP amendment; however, the Council would evaluate the 
program every 5 years.

IFQ Shares and Allocation

    An IFQ share is the percentage of the commercial quota or allowance 
for a species or species group issued to each eligible participant 
based on landings data. The five share categories are DWG, gag, red 
grouper, other SWG, and tilefish. Allocation is the actual poundage 
(gutted weight) in each share category that an IFQ shareholder is given 
the opportunity to land during each fishing year. The allocation issued 
to each IFQ shareholder would be calculated by multiplying their share 
times the annual commercial quota or allowance for each category. 
Annual allocation expires at the end of each year.

Multi-use Allocation

    At the beginning of each fishing year, 4 percent of each 
participant's initial red grouper shares and 8 percent of each 
participant's initial gag shares would be converted to multi-use 
allocation. Multi-use allocation could be used to possess, land, or 
sell red groupers and gag under certain conditions. Red grouper multi-
use allocation could only be used for red groupers after an IFQ account 
holder's entire red grouper allocation has been landed and sold, or 
transferred, and could be used for gag only after both gag and gag 
multi-use allocation have been landed and sold, or transferred. Gag 
multi-use allocation could only be used for gag after an IFQ account 
holder's entire gag allocation has been landed and sold, or 
transferred, and could be used for red groupers only after both red 
grouper and red grouper multi-use allocation have been landed and sold, 
or transferred.

Warsaw Grouper, Speckled Hind, and Scamp Classification

    Warsaw grouper and speckled hind are currently considered DWG 
species. Amendment 29 proposes also including these species as SWG 
under certain circumstances. For the purposes of the grouper and 
tilefish IFQ program, once an IFQ account holder's DWG allocation has 
been landed and sold, or transferred, or if an IFQ account holder has 
no DWG allocation, then other SWG allocation could be used to land and 
sell warsaw grouper and speckled hind.
    Scamp is considered a SWG species and a DWG under certain 
circumstances. For the purposes of the grouper and tilefish IFQ 
program, once an IFQ account holder's other SWG allocation has been 
landed and sold, or transferred, or if an IFQ account holder has no SWG 
allocation, then DWG allocation could be used to land and sell scamp.

Initial IFQ Share Eligibility and Share Calculation

    To be eligible to receive initial IFQ shares, a person would need 
to possess a valid (active or renewable) Gulf reef fish commercial 
vessel permit as of October 1, 2009. The calculation of initial shares 
by the RA would be based on the highest average annual landings 
associated with each permit during the best 5 out of 6 years for each 
share category, during the applicable landings period, 1999 through 
2004. If a participant wishes to exclude a different year of landings 
history than was chosen by the RA, the participant would submit that 
information to the RA postmarked no later than December 1, 2009.
    All landings associated with a valid Gulf reef fish commercial 
vessel permit for the applicable landings period would be attributed to 
the current owner, including landings reported by a person who held the 
permit prior to the current owner. Only legal landings reported in 
compliance with applicable state and Federal regulations would be 
accepted. Each participant's initial share in each category would be 
calculated by dividing his/her highest average annual landings by the 
sum of the highest average annual landings of all participants during 
the applicable landings period. Initial shares distributed in the gag 
and other SWG share categories would be based on landings that have 
been adjusted for gag and black grouper misidentification. Initial 
shares in each share category would not be issued in units less than 
the percentage equivalent to 1 lb (.45 kg) of the grouper or tilefish 
species, based on that share category's quota or allowance.

Appeals Process

    The only items subject to appeal under this IFQ program would be 
initial eligibility for shares based on ownership of a reef fish 
commercial vessel permit, the accuracy of the amount of landings, 
correct assignment of landings to the permit owner, and correct 
assignment of gag versus black grouper landings. Appeals would have to 
be submitted to the RA postmarked no later than April 1, 2010, and 
would have to contain documentation supporting the appeal. The RA would 
review, evaluate, and render final decisions on appeals. Hardship 
arguments would not be considered.
    Appeals regarding landings data for 1999 through 2004 would be 
based on NMFS' logbook records. If NMFS' logbooks were not available, 
the RA could use state landings records or data that were submitted in 
compliance with applicable Federal and state regulations, on or before 
December 31, 2006. This date was chosen because it is 2 years after the 
end of the qualifying period for the IFQ program, and 2 years is the 
maximum amount of time from purchase or renewal of a permit until 
further action must be taken to prevent termination of the permit. 
Prior to initial distribution of shares, the RA would reserve 3-percent 
of IFQ shares to be used to resolve appeals. Any portion of the 3-
percent share reserve remaining after the appeals process was completed 
would be proportionately distributed back to the initial recipients as 
soon as possible that year. If resolution of appeals requires more than 
3-percent of shares, the shares of all initial IFQ shareholders would 
be reduced proportionately to accommodate the required shares in excess 
of the reserve.

Adjustments in Commercial Quota and Allocation

    The Council periodically adjusts commercial quotas when they change 
the total allowable catch or the sector allocation in response to new 
data and information. If quotas are adjusted, then adjustments in IFQ 
allocation would be based on the percentage of the quota each IFQ 
shareholder possessed at the time of the adjustment.

Redistribution of Shares Resulting from Permit Revocation

    If an IFQ shareholder's reef fish commercial vessel permit has been 
permanently revoked, at the beginning

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of the next fishing year the RA would redistribute the shares held by 
that shareholder proportionately among remaining shareholders based 
upon the amount of shares each held just prior to the redistribution. 
Shares would not be distributed in such a way as to violate any share 
cap.

Annual Recalculation and Notification of IFQ Shares and Allocation

    On or about January 1 each year, IFQ shareholders would be 
notified, via the IFQ website, of their shares and allocation for the 
new fishing year. The share values would be updated to include any 
share transfers and redistribution of shares. Allocation amounts would 
reflect any change in IFQ shares, any change in the annual commercial 
quota or allowance, and any debits incurred as a result of overages 
during the previous fishing year (see below).

Electronic System Requirements, Account Setup, and Information

    The administrative functions associated with this IFQ program, such 
as account setup, landing transactions, and transfers, are designed to 
be accomplished online; therefore, all participants would need access 
to a computer and the Internet to participate. Assistance with online 
functions would be available from IFQ Customer Service, 1-866-425-7627, 
Monday through Friday between 8 a.m. and 4:30 p.m. eastern time.On or 
about October 1, 2009, the RA would mail an information package to 
eligible IFQ participants. The package would include historical 
landings, initial shares and allocation, information for accessing the 
online IFQ system and establishing an online account, and general 
instructions related to online transaction procedures and requirements. 
Anyone who is eligible to participate in the IFQ program, but who does 
not receive initial shares, may contact IFQ Customer Service to obtain 
information necessary to set up the required IFQ online account.

IFQ Vessel Accounts

    An IFQ vessel account would be required for a person aboard a 
vessel to land grouper or tilefish species. Before a landing 
notification for the vessel was submitted, the vessel account 
associated with that vessel would need to have enough allocation in the 
appropriate share categories for the fish on board. A person who has 
established an IFQ account online would establish a vessel account 
through that IFQ account for each vessel. Each vessel account would 
have a unique personal identification number (PIN) to be used during 
landing transactions. Only one vessel account could be established per 
vessel, but multiple vessel accounts could be established under each 
IFQ account. No fee would be charged to set-up a vessel account. The 
vessel account would remain valid as long as the vessel permit remained 
valid and the vessel owner was in compliance with all Gulf reef fish 
and IFQ reporting requirements, had paid all IFQ fees, and was not 
subject to sanctions. The vessel account could not be transferred to 
another vessel.
    Vessel accounts could only hold allocation for use in landing and 
selling IFQ species. Vessel accounts could not hold shares. Allocation 
could be transferred into a vessel account from any IFQ account; 
however, allocation could only be transferred out of a vessel account 
to the IFQ account under which it was established. This restriction is 
intended to ensure that an IFQ account holder maintains control of the 
allocation in his/her account.

IFQ Share/Allocation Transferability

    During the first 5 years of the IFQ program, shares or allocation 
could only be transferred to a person with a valid Gulf reef fish 
commercial vessel permit. After 5 years, shares and allocation could be 
transferred to any U.S. citizen or permanent resident alien. However, a 
valid reef fish commercial vessel permit would still be required to 
fish for Gulf groupers and tilefishes under the IFQ program.
    Both share and allocation transfers would be accomplished online 
via the IFQ website. The online system would verify the information 
entered and, if the information was not accepted, the online system 
would send an electronic message explaining the reason(s). Once the 
transaction is complete, the online system would send a transfer 
approval code to both the transferor and transferee confirming the 
transaction. An IFQ shareholder who is subject to a sanction would be 
prohibited from initiating a share transfer. If a transferor is subject 
to a pending sanction, he/she would be required to disclose in writing 
any pending sanction at the time of the transfer of shares or 
allocation. No transfers would be allowed that violate the share or 
allocation caps.
    For share transfers, approval would be required from both the 
transferor and transferee. If the information from the transferor was 
accepted, the online system would send an electronic message of the 
pending transfer to the transferee. The transferee would approve the 
share transfer by electronic signature. If the transferee approved the 
share transfer, the online system would send a transfer approval code 
to both the transferor and transferee confirming the transaction. The 
minimum share amount that could be transferred would be 0.000001 
percent.
    Transfer of shares and associated allocation are independent; to 
transfer both shares and allocation, the transferor must complete both 
a share transfer and an allocation transfer. At the beginning of the 
year after a share transfer, allocation would automatically be issued 
to the current shareholder. Share transfers would be permanent, and 
would remain in effect until subsequently transferred. Allocation 
transfers would be valid only for the remainder of the current fishing 
year; allocation transfers would not carry over to the next fishing 
year.
    Red grouper multi-use allocation could only be transferred after 
all of an IFQ account holder's red grouper allocation had been landed 
and sold, or transferred. Gag multi-use allocation could only be 
transferred after all an IFQ account holder's gag allocation had been 
landed and sold, or transferred.
    All electronic IFQ transactions would have to be completed by 
December 31 at 6 p.m. eastern time each year. Electronic functions 
would resume on January 1 at 6 a.m. eastern time the following fishing 
year.

IFQ Share and Allocation Caps

    The Magnuson-Stevens Act requires an IFQ program to prevent any 
entity from obtaining an excessive share of the total limited access 
privileges in the program. To accomplish this, both share and 
allocation caps would be established. No person, including a 
corporation or other entity, could individually or collectively hold 
IFQ shares in any share category greater than the maximum share 
initially issued to a person at the beginning of the IFQ program, as of 
the date appeals are resolved and shares are adjusted accordingly. 
Further, no person could individually or collectively hold, 
cumulatively during any fishing year, allocation in excess of the total 
allocation cap. The total allocation cap would be the sum of the 
allocations associated with the share caps for each share category. The 
allocation cap would be calculated annually based on the current quota 
or allowance associated with each share category.
    An individual's total IFQ shares/allocation would be determined by 
adding the IFQ shares/allocation held independently by the individual 
and the applicable IFQ shares/allocation from any corporation in which 
the individual has ownership. Those applicable

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corporate IFQ shares/allocation would be calculated by multiplying the 
IFQ shares/allocation owned by the corporation times the percent of 
ownership the individual has in the corporation. During initial 
implementation of the IFQ program, a corporation would provide the 
identity of the shareholders of the corporation and their percent of 
ownership in the corporation to NMFS. This information would be updated 
within 30 days of when changes occur. This information would also be 
required any time a reef fish vessel permit is renewed or transferred.

Dealer Requirements

    On or about October 1, 2009, the RA would mail information 
pertinent to the IFQ program to each dealer with a valid Gulf reef fish 
dealer permit. A dealer, or a person aboard a vessel with an IFQ 
account wishing to sell groupers and tilefishes directly to an entity 
other than a dealer, would need an IFQ dealer endorsement to receive 
groupers and tilefishes from the Gulf EEZ. An IFQ dealer endorsement 
could be downloaded from the NMFS IFQ website. If a dealer did not have 
an IFQ online account, they could contact IFQ Customer Service. No fee 
would be charged for obtaining this endorsement. The endorsement would 
remain valid as long as the reef fish dealer permit remained valid and 
the dealer was in compliance with all Gulf reef fish and IFQ reporting 
requirements, had paid all IFQ fees, and was not subject to any 
sanctions. The endorsement could not be transferred.

Electronic Reporting of IFQ Landing Transactions

    The dealer would be responsible for completing a landing 
transaction report for each landing and sale of groupers and tilefishes 
through his/her IFQ account. The landing transaction would be completed 
at the time of sale. The fisherman would validate the dealer 
transaction report by entering the unique PIN for the vessel account 
when the transaction report was submitted. After the dealer submitted 
the report and NMFS verified the information, the online system would 
send a transaction approval code to the dealer and the allocation 
holder. This approval code would be necessary to verify the transaction 
was legal and the vessel account had the correct amount of grouper and 
tilefish allocation. The dealer endorsement would have to accompany any 
fish from the landing location through possession by a dealer. Fish 
could not be transported on land by any means without a transaction 
approval code and a copy of the dealer endorsement.
    If a discrepancy regarding the landing transaction report was 
discovered after approval, the dealer or vessel account holder (or his 
or her authorized agent) could initiate a landing transaction 
correction form to correct the landing transaction. This form would be 
available via the IFQ website. Both parties would validate the landing 
correction form by entering their respective PINs. The dealer would 
then print out the form, both parties would sign it, and the form would 
be mailed to NMFS. The form would need to be received by NMFS no later 
than 15 days after the date of the initial landing transaction.

Limited Landings Overage Allowance

    A person on board a vessel with an IFQ vessel account landing the 
IFQ shareholder's only remaining allocation could legally exceed, by up 
to 10 percent, the amount of the allocation remaining on that last 
fishing trip. Under current interpretation of the Council's intent, 
allocation from all share categories must be exhausted to use the 
overage, and the overage would be allowed only one time per fishing 
year for each shareholder. Another interpretation of the Council's 
intent would be to allow the use of the 10 percent overage once per 
year for each category. In that case, a person on board a vessel with 
an IFQ vessel account landing the IFQ shareholder's only remaining 
allocation in a share category could legally exceed, by up to 10 
percent, the amount of the allocation remaining in that share category 
on that fishing trip. The Council will be asked to clarify their 
intention on this issue at their April 2009 meeting. NMFS is 
specifically seeking comment from the public on which approach best 
serves the objectives of the overage provision.
    If additional allocation is purchased after a shareholder uses his 
overage privilege, no additional overage would be allowed. Overages 
would be deducted from the next year's allocation associated with the 
shareholder's IFQ share. Share transfers would not be allowed that 
would reduce the shareholder's IFQ shares lower than the amount needed 
to pay back the overage. A person who only possessed allocation and no 
IFQ shares would not be allowed an overage. That person might not 
receive allocation in the following year and therefore, could not pay 
back the overage.

Cost Recovery

    The Magnuson-Stevens Act requires the Secretary of Commerce to 
establish a fee to assist in recovering the actual costs directly 
related to managing and enforcing an IFQ program. This fee may not 
exceed 3 percent of the ex-vessel value of fish harvested under the IFQ 
program. Cost recovery fees must be in addition to any other fees 
charged under the Magnuson-Stevens Act and must be deposited in the 
Limited Access System Administration Fund. Initially, the fee for the 
Gulf of Mexico grouper and tilefish IFQ would be 3 percent of the 
actual ex-vessel value of groupers and tilefishes landed under the IFQ 
program as documented in each landings transaction report. NMFS is 
currently analyzing the expected costs for the first year to determine 
if the 3-percent fee is appropriate. The RA would review the cost 
recovery fee annually to determine if an adjustment is warranted. If 
the RA determined that a fee adjustment is warranted, the RA would 
publish a notification of the fee adjustment in the Federal Register.
    The participant whose allocation is used for a grouper or tilefish 
landing would be responsible for paying the associated IFQ cost 
recovery fees. The IFQ dealer who receives the fish would be 
responsible for collecting the fee from the participant and submitting 
the fee to NMFS using pay.gov via the IFQ system. The fee would be due 
at the end of each calendar-year quarter, but no later than 30 days 
after the end of each calendar-year quarter. Authorized payment methods 
would be credit card, debit card, or automated clearing house (ACH), or 
by check if the RA has determined that the geographical area or 
individual(s) is affected by catastrophic conditions. Fees not received 
by the deadline would be considered delinquent. Failure to resolve 
payment of delinquent fees could result in suspension of the IFQ 
endorsement which would prevent a dealer from completing any IFQ 
landing transactions. Continued failure to resolve payment could result 
in submission of the matter to appropriate authorities for resolution.

Measures to Enhance Enforceability

    Fishermen participating in the IFQ program would be required to 
offload their grouper and tilefish landings to permitted IFQ dealers 
only between 6 a.m. and 6 p.m., local time. For the purpose of this 
program, landing means to arrive at a dock, berth, beach, seawall, or 
ramp. Any person landing groupers or tilefishes would be required to 
notify NMFS 3 to 12 hours in advance of landing. The landing 
notification would include the time and location of landing, the name 
and address of the dealer where the fish would be received,

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the vessel identification number (Coast Guard registration number or 
state registration number), and the estimated pounds (gutted weight) of 
fish to be landed in each share category. The fisherman could supply 
this notification by calling NMFS at 1-866-425-7627, by completing and 
submitting the notification form provided through the VMS unit, or by 
accessing the web-based form available on the IFQ website. The vessel 
account associated with the vessel landing groupers or tilefishes must 
have sufficient allocation in the appropriate share category or 
categories (except for any overage allowed on the last fishing trip) 
from the time of the landing notification through landing.
    Possession of IFQ groupers or tilefishes from the time of transfer 
from a vessel through possession by a dealer would be prohibited unless 
accompanied by a transaction approval code verifying a legal 
transaction of the amount of IFQ groupers or tilefishes in possession 
and a copy of the dealer endorsement. This requirement also applies to 
IFQ fish possessed on a vessel that is trailered for transport to a 
dealer. If groupers or tilefishes are offloaded to a vehicle for 
transportation to a dealer or are on a vessel that is trailered for 
transport to a dealer, on-site capability to accurately weigh the fish 
and to connect electronically to the online IFQ system to complete the 
transaction and obtain the transaction approval code would be required. 
At-sea or dockside vessel-to-vessel transfers of fish would be 
prohibited.

Approved Landing Locations

    NMFS' Office for Law Enforcement would have to approve landing 
locations prior to landing or offloading groupers and tilefishes at 
these sites. Proposed landing locations could be submitted online via 
the IFQ website or by calling IFQ Customer Service at any time. 
However, new landing locations would be approved only at the end of 
each calendar-year quarter. To have a landing location approved by the 
end of the calendar-year quarter, it would have to be submitted at 
least 45 days before the end of the calendar-year quarter. Landing 
locations would have to be publicly accessible by land and water, and 
they must have a street address. If a particular landing location has 
no street address on record, global positioning system (GPS) 
coordinates for an identifiable geographic location must be provided. 
Other criteria could also be applied.

Paper-based reporting during catastrophic conditions

    The RA would provide paper-based components for basic required 
functions of the IFQ program as a backup only during catastrophic 
conditions. The RA would determine when catastrophic conditions exist, 
the duration of the catastrophic conditions, and which participants or 
geographic areas are affected by the catastrophic conditions. The RA 
would provide timely notice to affected participants and would 
authorize the affected participants' use of paper-based components for 
the duration of the catastrophic conditions. NMFS would provide each 
IFQ dealer the necessary paper forms. No paper-based mechanism for 
transfers of shares or allocation would be available. Assistance in 
complying with the requirements of the paper-based system would be 
available via IFQ Customer Service, Monday through Friday between 8 
a.m. and 4:30 p.m. eastern time.

Changes in the Red Snapper IFQ Program

    Several changes to the red snapper IFQ program would be made to 
align that program with the grouper and tilefish IFQ program. One 
change would be the requirement for an IFQ vessel account for a person 
aboard a vessel to land red snapper. Before a landing notification for 
the vessel was submitted, the vessel account associated with that 
vessel would need to have enough allocation for the fish on board. To 
improve enforceability of the IFQ program, the estimated pounds (gutted 
weight) of red snapper on board would be included in the landing 
notification.
    A person who has established an IFQ account online would establish 
a vessel account through that IFQ account for each vessel. Only one 
vessel account could be established per vessel, but multiple vessel 
accounts could be established under each IFQ account. No fee would be 
charged to set-up an IFQ vessel account. The vessel account would 
remain valid as long as the reef fish vessel permit remained valid and 
the vessel owner was in compliance with all Gulf reef fish and IFQ 
reporting requirements, had paid all IFQ fees, and was not subject to 
sanctions. The vessel account could not be transferred to another 
vessel.
    The requirement for vessel accounts would eliminate the need for 
IFQ vessel endorsements; therefore the vessel endorsement requirement 
would be eliminated from the red snapper IFQ program.

Changes in the Red Snapper IFQ Program Relating to Dealer Requirements

    Currently, no method exists to correct errors to landing 
transactions. Through this rule, if a discrepancy regarding the landing 
transaction report was discovered after approval, the dealer or vessel 
account holder (or his or her authorized agent) could initiate a 
landing transaction correction form to correct the landing transaction. 
This form would be available via the IFQ website. Both parties would 
validate the landing correction form by entering their respective PINs. 
The dealer would then print out the form, both parties would sign it, 
and the form would be mailed to NMFS. The form would need to be 
received by NMFS no later than 15 days after the date of the initial 
landing transaction.
    Two items would be eliminated to ease the administrative burden 
associated with dealer requirements. The first would be the annual ex-
vessel value report because the information in the report is readily 
available on the IFQ website. The second would be the notice of 
annulment sent on or about the 61st day after the end of each calendar-
year quarter for a dealer whose cost recovery fee payment remains 
delinquent. This notice did not accompany any new action on the part of 
NMFS to curtail the dealer's activities, and so is unnecessary.

Changes to Share Transfer Process for the Red Snapper IFQ Program

    Currently share transfers can only be accomplished by submitting a 
form signed by both the transferor and transferee to NMFS. With the 
proposed regulatory change, both share and allocation transfers would 
be accomplished online via the IFQ website. Approval would be required 
from both the transferor and transferee. If the information from the 
transferor was accepted, the online system would send an electronic 
message of the pending transfer to the transferee. The transferee would 
approve the share transfer by electronic signature. If the transferee 
approved the share transfer, the online system would send a transfer 
approval code to both the transferor and transferee confirming the 
transaction.
    An IFQ shareholder who is subject to a sanction is prohibited from 
initiating a share transfer. If a transferor is subject to a pending 
sanction, he/she would be required to disclose in writing the existence 
of any pending sanction at the time of the transfer to the prospective 
transferee. The minimum share amount

[[Page 20139]]

that could be transferred would be 0.0001 percent.

Changes to Approval of Landing Locations for the Red Snapper IFQ 
Program

    Currently, an IFQ participant can enter any location during the 
landing notification, and approval is only needed to place the location 
on the drop-down menu. This proposed rule would require landing 
locations be approved by NMFS' Office for Law Enforcement prior to 
landing or offloading at these sites. Proposed landing locations could 
be submitted via the IFQ website or by calling IFQ Customer Service at 
any time. However, new landing locations would be approved only at the 
end of each calendar-year quarter. To have a landing location approved 
by the end of the calendar-year quarter, it would need to be submitted 
at least 45 days before the end of the calendar-year quarter. Landing 
locations would have to be publicly accessible by land and water, and 
would have to have a street address. If a particular landing location 
has no street address on record, global positioning system (GPS) 
coordinates for an identifiable geographic location would have to be 
provided. Other criteria could also be applied.

Availability of Amendment 29

    Additional background and rational for the measures discussed above 
are contained in Amendment 29. The availability of Amendment 29 was 
announced in the Federal Register on April 8, 2009 (74 FR 15911). 
Written comments on Amendment 29 must be received by June 8, 2009. All 
comments received on Amendment 29 or on this proposed rule during their 
respective comment periods will be addressed in the preamble of the 
final rule.

Classification

    Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the 
NMFS Assistant Administrator has determined that this proposed rule is 
consistent with Amendment 29, other provisions of the Magnuson-Stevens 
Act, and other applicable law, subject to further consideration after 
public comment.
    This proposed rule has been determined to be not significant for 
purposes of Executive Order 12866.
    NMFS prepared a Draft Environmental Impact Statement (DEIS) for 
this amendment. A notice of availability for the DEIS was published on 
July 3, 2008 (73 FR 38204).
    NMFS prepared an IRFA, as required by section 603 of the Regulatory 
Flexibility Act, for this proposed rule. The IRFA describes the 
economic impact this proposed rule, if adopted, would have on small 
entities. A description of the action, why it is being considered, and 
the objectives of, and legal basis for this action are contained at the 
beginning of this section in the preamble and in the SUMMARY section of 
the preamble. A copy of the full analysis is available from the Council 
(see ADDRESSES). A summary of the IRFA follows.
    This proposed rule would implement an IFQ program in the commercial 
grouper and tilefish fisheries; allow a single owner of multiple 
commercial reef fish permits to consolidate his (her) permits into one, 
with the consolidated permit having a catch history equal to the sum of 
the catch histories associated with the individual permits; maintain 
the current composition of the multi-species DWG unit and revise the 
SWG unit to include speckled hind and warsaw grouper; restrict initial 
eligibility to valid commercial reef fish permit holders; distribute 
initial IFQ shares proportionately among eligible participants based on 
the average annual landings from logbooks associated with their current 
permit(s) during the time period 1999 through 2004 with an allowance 
for excluding one year; establish IFQ share types as follows: red 
grouper, gag, other SWG, DWG, and tilefish shares; convert 4 percent of 
each IFQ participant's red grouper individual species share into multi-
use red grouper allocation valid for harvesting red or gag groupers, 
and convert 8 percent of each IFQ participant's gag grouper individual 
species share into multi-use gag grouper allocation valid for 
harvesting gag or red groupers; allow transfers of IFQ shares or 
allocations only to commercial reef fish permit holders during the 
first five years of the IFQ program and all U.S. citizens and permanent 
resident aliens thereafter; set a cap on any one person's ownership of 
IFQ shares to no more than the maximum percentage issued to the 
recipient of the largest shares at the time of the initial 
apportionment of IFQ shares, with the cap(s) calculated as separate 
caps for each type of share; set a total allocation cap calculated as 
the sum of the maximum allocations associated with the share caps for 
each individual share category; allocate adjustments in the commercial 
quota proportionately among eligible IFQ shareholders based on their 
respective shareholdings at the time of the adjustments; let the RA 
review, evaluate, and render final decision on appeals, without 
consideration of hardship arguments; set aside 3 percent of the current 
commercial quota or allowance to resolve appeals, with any remaining 
amount proportionately distributed back to initial IFQ shareholders 
after the appeals process has been terminated; impose an IFQ cost 
recovery fee based on actual ex-vessel value at the time of sale of 
fish, with the payment of the fee being the responsibility of the 
recognized IFQ shareholder and collection/remittance of the fee being 
the responsibility of the dealer; and establish certified landing sites 
for all IFQ programs in the commercial reef fish fisheries, with the 
sites selected by fishermen but certified by NMFS Office of Law 
Enforcement.
    The Magnuson-Stevens Act provides the statutory basis for the 
proposed rule. No duplicative, overlapping, or conflicting Federal 
rules have been identified.
    This proposed rule would introduce new or additional reporting, 
record-keeping and other compliance requirements. Details of these 
requirements would be spelled out before implementation of the program. 
A summary of the general requirements of the grouper and tilefish IFQ 
program follows.
    An IFQ dealer endorsement would be required of any dealer 
purchasing groupers or tilefishes subject to this IFQ program. The IFQ 
dealer endorsement would be issued at no cost to those individuals who 
possess a valid reef fish dealer permit and request the endorsement. 
Although the current reef fish dealer permit must be renewed annually 
at a cost of $60 for the initial permit ($12.60 for each additional 
permit), the IFQ dealer endorsement would remain valid as long as the 
individual possesses a valid Gulf reef fish dealer permit and abides by 
all reporting and cost recovery requirements of the IFQ program. This 
requirement would affect all 159 existing dealers (as of November 2008) 
of groupers or tilefishes.
    An electronic reporting system would serve as the main vehicle for 
tracking IFQ activities. The electronic nature of the reporting system 
would render the reporting of most IFQ activities practically on a real 
time basis. For example, to effect a sale of grouper or tilefish 
landings, the purchasing dealer would have to log into the electronic 
reporting system and enter all the required information about the 
grouper or tilefish sale. The required information includes, but is not 
limited to, the name of the dealer and that of the fisherman, 
identification number of the harvesting vessel, and the pounds and ex-
vessel values of groupers and tilefishes. Electronic validation of the

[[Page 20140]]

dealer-supplied information by the selling fisherman is necessary to 
complete the sale. Also, transfer of IFQ allocations and shares would 
have to be effected and recorded through the electronic reporting 
system. Holders of IFQ allocations could also access the system to 
check on the outstanding IFQ allocations remaining in their account/
possession. In this connection, an IFQ shareholder account, IFQ vessel 
account, and IFQ dealer account would have to be established with NMFS. 
There would be no charge to establishing any of these accounts.
    By the very nature of the reporting system, IFQ dealers would be 
required to have access to computers and the Internet. If a dealer does 
not have current access to computers and the Internet, he/she may have 
to expend approximately $1,500 for computer equipment (one-time cost) 
and $300 annual cost for Internet access. Dealers would need some basic 
computer and Internet skills to input information for all grouper and 
tilefish purchases into the IFQ electronic reporting system.
    Dealers also would have to remit to NMFS, on a quarterly basis, the 
cost recovery fees initially set at 3 percent of the ex-vessel value of 
groupers and tilefishes purchased from IFQ share/allocation holders. 
Although IFQ share/allocation holders would have to pay this fee, it 
would be the responsibility of dealers to collect and remit these fees 
to NMFS. Dealers would be required to remit fees electronically by 
automatic clearing house (ACH), debit card or credit card. There is 
currently no available information to determine how many of the 159 
grouper or tilefish dealers have the necessary electronic capability to 
participate in the IFQ program. However, demonstration of this 
capability would be necessary for IFQ program participation. Those 
dealers currently participating in the red snapper IFQ program would 
generally meet most, if not all, of the requirements under the 
electronic reporting system.
    Holders of IFQ shares and allocations would need to have access to 
computers and the Internet to effect allocation transfers through the 
electronic reporting system. These persons would then be subject to the 
same cost and skill requirements as dealers. It is very likely that 
most individuals have access to computers and the Internet. It should 
also be pointed out that in the case of reporting a sale of groupers or 
tilefishes to a dealer, all the fisherman would have to do is to 
validate the sale using the dealer's computer. This requirement would 
affect all those who would initially qualify for, or those who would 
decide to participate in, the grouper and tilefish IFQ program.
    One other compliance issue under the IFQ system would involve 
landing and offloading of IFQ groupers or tilefishes. The owner or 
operator of a vessel landing IFQ groupers or tilefishes would have to 
provide NMFS an advance landing notification at least 3 hours but no 
more than 12 hours before arriving at a dock, berth, beach, seawall, or 
ramp. In addition, offloading of IFQ groupers or tilefishes would be 
allowed only between 6 a.m. and 6 p.m..
    This proposed rule would be expected to directly affect vessels 
that operate in the Gulf of Mexico commercial reef fish fishery and 
reef fish dealers or processors. The Small Business Administration 
(SBA) has established size criteria for all major industry sectors in 
the U.S. including fish harvesters, fish processors, and fish dealers. 
A business involved in fish harvesting is classified as a small 
business if it is independently owned and operated, is not dominant in 
its field of operation (including its affiliates), and has combined 
annual receipts not in excess of $4.0 million (NAICS code 114111, 
finfish fishing) for all affiliated operations worldwide. For seafood 
processors and dealers, rather than a receipts threshold, the SBA uses 
an employee threshold of 500 or fewer persons on a full-time, part-
time, temporary, or other basis, at all affiliated operations for a 
seafood processor and 100 or fewer persons for a seafood dealer.
    A total of 1,209 vessels is assumed to comprise the universe of 
commercial harvest operations in the Gulf reef fish fishery. This total 
includes vessels with active or renewable permits. An examination of 
permits in conjunction with logbook information revealed, however, that 
1,028 permits (as of November 2008) would have some records of landings 
during the Council's chosen period of 1999-2004 for purposes of 
determining initial apportionment of IFQ shares.
    Whereas there is a one to one correspondence between permits and 
vessels, the total number of vessels actually harvesting reef fish, or 
groupers or tilefishes, may be lower or higher than the number of 
permits. Some vessels may remain inactive in the reef fish fishery 
during the entire year, so there would be fewer vessels than permits. 
Because a permit can be transferred from one vessel to another during 
the year, the number of vessels harvesting any of the species in this 
amendment during the year may exceed the number of permits. This 
distinction is important when using logbook information to count 
vessels.
    For the period 1993-2006, an average of 1,123 vessels harvested at 
least 1 pound (0.45 kg) of reef fish, 993 vessels harvested any 
groupers or tilefishes, 765 vessels harvested red groupers, 591 vessels 
harvested gag, 977 vessels harvested shallow water groupers (SWG), 376 
vessels harvested deepwater groupers (DWG), and 212 vessels harvested 
tilefishes. For the period 1999-2004, an average of 1,075 vessels 
harvested at least 1 pound (0.45 kg) of reef fish, 968 vessels 
harvested any groupers or tilefishes, 767 vessels harvested red 
groupers, 655 vessels harvested gag, 958 vessels harvested SWG, 368 
vessels harvested DWG, and 193 vessels harvested tilefishes.
    Vessels harvesting reef fish in general and groupers or tilefishes 
in particular use a variety of gear. Some vessels use only one gear 
type while others use multiple gear types; thus, classification of 
vessels by gear type is not straightforward for some vessels. For the 
period 1993-2006, an average of 805 vessels harvested groupers or 
tilefishes using vertical lines, 171 vessels harvested groupers or 
tilefishes using longlines, and 162 vessels harvested groupers or 
tilefishes using other gear types (diving, trap, unclassified). For the 
period 1999-2004, an average of 790 vessels harvested groupers or 
tilefishes using vertical lines, 167 vessels harvested groupers or 
tilefishes using longlines, and 148 vessels harvested groupers or 
tilefishes using other gear types (diving, trap, unclassified).
    Collection of information regarding vessel operating costs was only 
initiated in mid-2005 and is anticipated to provide trip cost and 
return information once these data are processed and analyzed. 
Information from this survey was used in estimating overall economic 
effects on the commercial sector of an IFQ system in the fishery. This 
was possible as the evaluation was conducted on a trip basis. However, 
vessel-level gross and net revenues could not be readily derived using 
the same trip-based information. For our current purpose, we use cost 
and return information derived from an earlier survey of commercial 
reef fish fishermen in the Gulf of Mexico. High-volume vertical line 
vessels in the northern Gulf grossed an average of approximately 
$110,000 (2005 dollars) and those in the eastern Gulf grossed 
approximately $68,000. Their respective net revenues were approximately 
$28 thousand and $24,000. Low-volume vertical line vessels in the 
northern Gulf grossed approximately $24,000 and those in the eastern 
Gulf grossed

[[Page 20141]]

approximately $25,000. Their respective net revenues were approximately 
$7,000 and $4,000. High-volume longline vessels grossed approximately 
$117,000 while low-volume longline vessels grossed $88,000. Their 
respective net revenues were approximately $25,000 and $15,000. High-
volume fish traps (fish traps have been banned since February 2007) 
grossed approximately $93,000 while their low-volume counterparts 
grossed approximately $86,000. Their respective net revenues were 
approximately $19,000 and $21,000.
    A definitive calculation of which commercial entities would be 
considered large entities and small entities cannot be made using 
average income information. However, based on those data and the permit 
data showing the number of permits each person/entity owns, it appears 
that all of the commercial reef fish fleet would be considered small 
entities. The maximum number of permits reported to be owned by the 
same person/entity was six, additional permits (and revenues associated 
with those permits) may be linked through affiliation rules. 
Affiliation links cannot be made using permit data. If one entity held 
six permits and was a high-volume bottom longline gear vessel, they 
would be estimated to generate about $700,000 in annual revenue. That 
estimate is well below the $4 million threshold set by the SBA for 
defining a large entity.
    Also affected by the measures in this amendment are fish dealers, 
particularly those who receive gag and red groupers from harvesting 
vessels. Currently, a Federal permit is required for a fish dealer to 
receive reef fish from commercial vessels. As of November 2008, there 
were 159 active permits for dealers buying and selling reef fish 
species; but since the reef fish dealer permitting system in the Gulf 
is an open access program, the number of dealers can vary from year to 
year. As part of the commercial reef fish logbook program, reporting 
vessels identify the dealers who receive their landed fish. Commercial 
reef fish vessels with Federal permits are required to sell their 
harvest only to permitted dealers. For the period 2004-2007, these 
dealers handled an average of 10.8 million lb (4.9 million kg) of 
groupers and tilefishes valued at $25.4 million. These dealer 
transactions were distributed as follows: Florida, with 10 million lb 
(4.5 million kg) worth $23.5 million; Alabama and Mississippi, with 
102,000 lb (46,266 kg) worth $222 thousand; Louisiana, with 270,000 lb 
(122,476 kg) worth $592 thousand: and, Texas, with 434,000 lb (196,859 
kg) worth $1.03 million. The rest of transactions were handled by 
dealers outside of the Gulf.
    Average employment information per reef fish dealer is unknown. It 
is estimated that total employment for reef fish processors in the 
Southeast at approximately 700 individuals, both part and full time. It 
is assumed all processors must be dealers, yet a dealer need not be a 
processor. Further, processing is a much more labor intensive exercise 
than dealing. Therefore, given the employment estimate for the 
processing sector, it is assumed that the average dealer's number of 
employees would not surpass the SBA employment benchmark.
    Based on the gross revenue and employment profiles presented above, 
all permitted commercial reef fish vessels and fish dealers directly 
affected by the proposed rule may be classified as small entities.
    Because all entities that are expected to be affected by the 
proposed rule are considered small entities, the issue of 
disproportional impacts on small and large entities does not arise. 
Although some vessel operations are larger than others, they 
nevertheless fall within the definition of small entities.
    The various measures in this proposed rule have varying effects on 
small entities. Adoption of an IFQ program for the grouper and tilefish 
fishery has been estimated to result in variable cost savings to the 
fishing industry of $2.23 to $3.24 million per year. There would also 
be some unknown reductions in fixed costs. In addition, there would 
result possible increases in revenues as improved product quality would 
command higher prices.
    Permit stacking would allow owners to consolidate their multiple 
permits into one with corresponding consolidation of landings history 
for all permits. This may be expected to accelerate the reduction in 
the number of permits, resulting in cost savings to permit owners and 
in administrative cost reductions.
    Dual classification of both speckled hind and warsaw grouper into 
SWG and DWG would tend to reduce discards of both species and allow 
fishermen to keep more of these two species they catch. Also, this has 
been estimated to increase revenues of fishermen by $450,000.
    Restricting the number of participants eligible to receive initial 
IFQ shares to commercial permit holders only would prevent over-
extended distribution of IFQ shares while allowing active participants 
in the fishery to immediately benefit from the implementation of the 
grouper and tilefish IFQ program. This limitation would also tend to 
speed up the process of consolidation in the fishery, a result that 
would allow participants to reap the gains from an IFQ program over a 
relatively short time.
    Initial apportionment of IFQ shares based on landings history for 
the years 1999-2004, with allowance to drop one year, would provide a 
higher likelihood that active participants in the fishery would be 
allotted IFQ shares in accordance with the extent of their 
participation in the fishery. This would tend to preserve the 
historical landings status of eligible participants, so the initial 
impacts on their profits would be at least not be diminished. As the 
IFQ program progresses, their profits may be expected to increase 
whether or not they choose to fish their IFQs or lease or sell them to 
others.
    By defining IFQ shares on a species-specific basis, the eventual 
true value of each species may be generated. This option, however, 
could result in more discards of some species and complicate balancing 
of catch and quota as well as the monitoring of the IFQ program. It 
thus needs to be complemented by flexibility measures to assist IFQ 
participants in balancing their catch and quota holdings. The provision 
for multi-use allocations would introduce certain flexibility as IFQ 
participants would have some leeways in balancing their catch and quota 
holdings.
    The transferability aspect of IFQ shares/allocation provides the 
mechanism to allow the IFQ program to generate greater efficiency and 
higher profitability in the fishery. As such, the lesser the 
limitations on transferability the better the system would be. The 
proposed rule would limit transfers only to reef fish permit holders 
the first five years of the program and to a broader pool of 
participants thereafter. While the five-year limitation would unlikely 
bring about cost increases, it would not allow proper pricing of IFQ 
shares. This condition, however, may be necessary to allow IFQ holders 
to get familiar with the IFQ program before they engage in transfers 
outside of the limited pool of eligible IFQ transfer recipients.
    Establishing a cap on IFQ share holdings is consistent with the 
Magnuson-Stevens Act provision to prevent the acquisition of excessive 
shares in the IFQ program. The proposed rule to set the share cap to 
the maximum assigned to a participant during initial apportionment 
would allow every participant to at least maintain their existing scale 
of operation. Costs of operation and possibly revenues may be expected 
to remain the same. Over time, all

[[Page 20142]]

participants, except the highest one, would be able to increase their 
scale of operation they deem most profitable to them. The highest 
holders, however, and presumably the current more efficient producers 
would not have the same opportunity as the others.
    The same reasoning as stated in the preceding paragraph for a share 
cap would also apply to the proposed rule to establish a cap on IFQ 
allocation holdings. In addition, the established cap on IFQ 
allocations could possibly close the loophole allowing some 
participants to circumvent the established cap on IFQ share holdings by 
entering into a long-term contract with other participants.
    Quotas change periodically, so there is a need to address this in 
the IFQ program. The proposed rule would allocate quota adjustments, 
increases or decreases, in proportion to a participant's IFQ share 
ownership at the time of quota adjustments. This may not allocate quota 
adjustments as efficiently as an auction alternative, but it appears to 
be the least costly and least disruptive option.
    The establishment of an appeals process affords participants the 
opportunity to correct any mistakes in the initial allocation of IFQ 
shares. This could result in more costs to participants and the 
administering agency, but such costs are expected to be relatively 
small especially when seen against the potential benefits it would 
generate. The added provision to set aside 3 percent of the quota to 
settle appeals would prevent the possibility of taking back some 
allocations already distributed to participants.
    The cost recovery fee feature of the IFQ program (a requirement 
under the Magnuson-Stevens Act) would undoubtedly impose additional 
cost on fishing participants both in terms of reductions in revenue and 
increases in costs (particularly on dealers) to comply with the 
collection and remittance of the fees to NMFS. A 3-percent cost 
recovery fee based on total revenues could translate into larger 
reductions in profits, particularly for small fishing operations.
    Certified landing sites where fishermen are obligated to land their 
IFQ catches may increase the cost of fishing operations. This could 
happen if for some reasons, such as weather conditions and fishing 
opportunities, fishermen may have to travel far if the nearest landing 
site is not certified. This could, however, enhance the enforcement of 
IFQ rules which may help ensure that benefits from the program are not 
impaired.
    It is expected that the combined effects of the proposed rule would 
result in significant changes to the profitability status of fishing 
operations in the grouper and tilefish fishery. This is especially true 
over the long run when significant benefits, both in terms of revenue 
increases and cost decreases, may be expected to accrue. The net 
economic effects on dealers cannot be readily ascertained.
    Several alternatives were considered by the Council in their 
deliberation of the various measures in this amendment. For purposes of 
the succeeding discussion, each of the Council's preferred alternatives 
is termed proposed action.
    Three alternatives, including no action, were considered for 
establishment of an IFQ program. The first alternative (no action) to 
the proposed action would maintain the incentives to overcapitalize the 
fishery and to promote derby fishing. Such conditions may be expected 
to result in increased operating costs, increased likelihood of 
shortened seasons, reduced at-sea safety, wide fluctuations in domestic 
grouper and tilefish supply, and depressed ex-vessel prices for 
groupers and tilefishes. The other alternative to the proposed action, 
establishment of an endorsement system, would have short-term 
effectiveness in addressing overcapitalization and derby fishing by 
reducing the number of participants. Over the long run, remaining 
participants may be expected to increase their effort either through 
vessel, crew, and equipment upgrades or via additional or longer 
fishing trips.
    The only alternative to the proposed action of consolidating 
multiple commercial reef fish permits is the no action alternative. 
This alternative would not accelerate the reduction in the number of 
permits, thus forgoing the benefits from permit stacking due to cost 
savings by permit owners and reductions in administrative costs.
    Four alternatives, including no action, were considered regarding 
the species composition of DWG and SWG. The first alternative (no 
action) to the proposed action would maintain the composition of the 
SWG and DWG management units. This alternative would neither reduce the 
dis