Second Fishing Capacity Reduction Program for the Longline Catcher Processor Subsector of the Bering Sea and Aleutian Islands Non-Pollock Groundfish Fishery, 58775-58781 [2012-23494]

Agencies

• DEPARTMENT OF COMMERCE
• National Oceanic and Atmospheric Administration

[Federal Register Volume 77, Number 185 (Monday, September 24, 2012)]
[Rules and Regulations]
[Pages 58775-58781]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-23494]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 600

[Docket No. 110819517-2456-02]
RIN 0648-BB06


Second Fishing Capacity Reduction Program for the Longline 
Catcher Processor Subsector of the Bering Sea and Aleutian Islands Non-
Pollock Groundfish Fishery

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

ACTION: Final rule.

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SUMMARY: NMFS hereby establishes regulations to implement a second 
fishing capacity reduction program (also commonly known as ``buyback'') 
and an industry fee system to repay a $2.7 million loan for a single 
latent permit within the Longline Catcher Processor Subsector of the 
Bering Sea and Aleutian Islands (BSAI) non-pollock groundfish fishery 
(Reduction Fishery). The purpose of this action is to permanently 
reduce the greatest amount of fishing capacity at the least cost. This 
should result in increased harvesting productivity for the permit 
holders remaining in the fishery. The loan for this program will be 
added to the previous program loan of $35,700,000 authorized by the FY 
2005 Appropriations Act (the Appropriations Act). For purposes of this 
regulation, the terms license and permit are used interchangeably.

DATES: Effective October 24, 2012.

ADDRESSES: Copies of the Environmental Assessment/Regulatory

[[Page 58776]]

Impact Review/Final Regulatory Flexibility Analysis (EA/RIR/FRFA) 
prepared for this action may be obtained from Paul Marx, Chief, 
Financial Services Division, NMFS, Attn: SE Alaska Purse Seine Salmon 
Rulemaking, 1315 East-West Highway, Silver Spring, MD 20910 or by 
calling Michael A. Sturtevant (see FOR FURTHER INFORMATION CONTACT).
    Send comments regarding the burden-hour estimates or other aspects 
of the collection-of-information requirements contained in this final 
rule to Michael A. Sturtevant at the address specified above and also 
to the Office of Information and Regulatory Affairs, Office of 
Management and Budget (OMB), Washington, DC 20503 (Attention: NOAA Desk 
Officer) or email to OIRA_Submission@omb.eop.gov, or fax to (202) 395-
7825.

FOR FURTHER INFORMATION CONTACT: Michael A. Sturtevant at (301) 427-
8799, fax (301) 713-1306, or michael.a.sturtevant@noaa.gov.

SUPPLEMENTARY INFORMATION: 

Statutory and Regulatory Background

    In 1996, in response to the finding that many U.S. fisheries have 
excess fishing capacity, Congress provided for fishing capacity 
reduction programs. The intent of a program is to decrease the number 
of harvesters in the fishery, increase the economic efficiency of 
harvesting, and facilitate the conservation and management of fishery 
resources in each fishery in which NMFS conducts a reduction program. 
Typically, permit holders are paid to voluntarily surrender their 
fishing permits including relevant fishing histories for that fishery, 
or surrender all of their fishing permits and cancel their fishing 
vessels' fishing endorsements by permanently withdrawing the vessels 
from all fisheries. The cost of the program is paid either by the 
remaining harvesters through a loan or by taxpayers through a direct 
appropriation from Congress. Section 312(b)-(e) (16 U.S.C. 1861a(b)-
(e)) was added to the Magnuson-Stevens Fishery Conservation and 
Management Act (Magnuson-Stevens Act) to authorize such programs. 
Congress also amended Title XI of the Merchant Marine Act, 1936 (Title 
XI), adding new sections 1111 and 1112 to finance capacity reduction 
costs. The Title XI provisions involving fishing capacity reduction 
loans have been codified at 46 U.S.C. 53735.
    To implement capacity reduction programs, NMFS promulgated 
regulations published as subpart L to 50 CFR part 600, which contain a 
framework rule for buyback programs generally. For each individual 
program, NMFS promulgates regulations at subpart M to 50 CFR part 600 
to implement the specific terms of that particular buyback. NMFS 
publishes these regulations in order to undertake this second round of 
capacity reduction for the BSAI Longline Catcher Processor Subsector.

Initial Reduction Program

    The measures contained in this final rule to establish the capacity 
reduction program are authorized by the Appropriations Act. The 
Appropriations Act authorizes the establishment of fishing capacity 
reduction programs for catcher processor subsectors within the Alaska 
groundfish fisheries (i.e., the longline catcher processor subsector, 
the American Fisheries Act (AFA) trawl catcher processor subsector, the 
non-AFA trawl catcher processor subsector, and the pot catcher 
processor subsector) based on capacity reduction plans and contracts 
developed by industry and approved by NMFS. Additionally, Public Law 
108-199 provided the initial $500,000 subsidy cost to fund a $50 
million loan, and Public Law 108-447 provided an additional $250,000 
subsidy cost to fund $25 million more (in addition to providing for the 
buyback program itself). Under the Authorization Act, each subsector 
was allocated a specific amount of the total loan authority.
    In 2007, NMFS approved and implemented a $35.7 million fishing 
capacity reduction loan program for the Longline Catcher Processor 
Subsector, which represented the full amount authorized for that 
subsector. The initial program removed three fishing vessels and 12 
fishing licenses and permits for a loan amount of $35 million. All 
long-line catcher processors harvesting non-pollock groundfish were 
required to pay and forward a fee to NMFS to repay the loan. The 
original fee assessment was $0.02 per pound caught with payment and 
collection beginning on October 24, 2007. That rate has since been 
reduced to $0.0145 per pound.
    None of the other subsectors have expressed an interest in 
implementing a capacity reduction program for their subsector. A 
provision in the Appropriations Act permits the Secretary of Commerce 
to make available any of the unused loan amounts, originally allocated 
for each subsector, for capacity reduction programs in any of the 
subsectors after January 1, 2009.

Program Summary

    Members of the BSAI Longline Catcher Processor Subsector informed 
NMFS that they wished to access the remaining loan amounts to undertake 
a second buyback. To implement this next buyback, the Freezer Longline 
Conservation Cooperative (FLCC) on behalf of the Reduction Fishery was 
required by the Appropriations Act to draft and submit to NMFS a 
Reduction Plan. On August 27, 2010, the FLCC submitted a Reduction Plan 
to access $2.7 million of the remaining funds. A Reduction Agreement, 
Reduction Contract, and application of the statutes and regulations 
referred to above are the basis for the Reduction Plan. The FLCC's 
Reduction Plan involves just one permit.
    The Reduction Agreement and the Reduction Contract are the two key 
components of the Reduction Plan and this final rule. Substantive 
provisions of the Reduction Agreement and the Reduction Contract would 
be codified at 50 CFR 600.1108.

Summary of Comments

    NMFS received two comments in response to the proposed rule. One 
was from an individual and the other from the FLCC. The individual 
generally expressed opposition to NMFS management of fisheries. The 
comment did not reference any issues specific issues with respect to 
the proposed rule. Therefore, no response is necessary. The FLCC 
expressed its support of the proposed rule noting that removing this 
last inactive permit removes future uncertainty in a cost effective 
manner and provides the ability to fish in a voluntary cooperative. 
NMFS made two minor corrections to the proposed rule.

Reduction Program--Overview

    All permit holders in the Longline Subsector who wished to 
relinquish their fishing permits were welcome to participate in the 
Reduction Program. The Program was divided into four phases: (1) 
Enrollment; (2) offer selection; (3) plan submission; and (4) 
implementation, after approval by referendum. The first three phases 
have been completed. Thus, this rule concerns itself only with the 
implementation phase of the program.

Reduction Program: The Capacity Reduction Agreement

Reduction Agreement Terms and Definitions

    Capitalized terms used in the Reduction Agreement are defined in 
Schedule A to the Reduction Agreement; other terms are defined

[[Page 58777]]

within the text of the Reduction Agreement. Reduction Agreement terms 
that are essential to understanding the regulatory provisions are set 
forth in Sec.  600.1108(b).

Reduction Agreement: Major Sections

    There are three major sections of the Reduction Agreement: 
Qualification and Enrollment of Subsector Members; Selection of Offers 
to Remove Fishing Capacity by the Reduction Plan; and Submission of the 
Reduction Plan, including the repayment requirements. Identical 
provisions previously codified in 50 CFR 600.1105 are incorporated into 
this section by reference. This rule includes a fee collection system 
similar to the one codified at Sec.  600.1106.

Qualification and Enrollment

    The FLCC received four offers from the Subsector Members. Each of 
the four offerors executed a Reduction Agreement and submitted 
specified supporting documents evidencing an applicant's status as a 
Subsector Member. The FLCC Auditor reviewed all documents for strict 
compliance with the regulatory provisions in Sec.  600.1105.

Selection of Offers To Remove Fishing Capacity by the Reduction Plan

    The selection process was consistent with the buyback previously 
codified at Sec.  600.1105(d) except that the funding source for the 
loan comes from the residual funds outlined above. In accordance with 
the previously developed procedures, the FLCC completed the selection 
process to rank the offers. Following completion of the selection 
process, the FLCC accepted only one latent permit to be bought out for 
$2,700,000.

Plan Submission

    After the Selection Process was completed, the FLCC developed the 
Reduction Plan. The Reduction Plan was submitted to NMFS for its 
approval on behalf of the Secretary of Commerce. As required by the 
Appropriations Act, the FLCC has notified the North Pacific Fishery 
Management Council. Only one License Limitation Program (LLP) license 
and its fishing history are being submitted for removal from the 
Reduction Fishery. This latent LLP license is not associated with a 
vessel. Therefore, no vessel is being removed from the fishery under 
this Reduction Program. Fees to repay the loan will be collected as set 
forth in Sec.  600.1108.

Approval of the Reduction Plan

    The criteria for NMFS, on behalf of the Secretary, to approve any 
Reduction Plan are specified in Sec.  600.1108(k). Among other things, 
the Assistant Administrator of NMFS must find that the Reduction Plan 
is consistent with the Appropriations and the Magnuson-Stevens Acts, 
and that it will result in the maximum sustained reduction in fishing 
capacity at the least cost and in the minimum amount of time.
    The Reduction Plan includes the LLP license selected through the 
offer process as the asset to be purchased in the Reduction Program. 
The Reduction Plan also includes the FLCC's supporting documents and 
rationale for establishing that the current offer represents the 
expenditure of the least money for the greatest capacity reduction. 
Acceptance of the offer is at the sole discretion of NMFS.
    The FLCC may be required to revise and resubmit the Reduction Plan 
to conform to the provisions of this final rule.

The Referendum

    NMFS will conduct a referendum to determine the industry's 
willingness to repay a fishing capacity reduction loan to purchase the 
license and fishing rights identified in the Reduction Plan. A 
successful referendum by a majority of all members of the Reduction 
Fishery would bind all parties and complete the reduction process.
    The current Fishing Capacity Reduction Framework regulatory 
provisions at Sec.  600.1010 stipulate the procedural and other 
requirements by which NMFS shall conduct referenda on fishing capacity 
reduction programs. Section 600.1108(l) makes those framework 
referendum requirements applicable to this Reduction Program. Only 
after approval of the Reduction Program via a referendum will the 
Reduction Program be implemented.

Loan Repayment

    Upon completion of a successful referendum to approve a fishing 
capacity reduction loan, the repayment plan, amortized over a 30-year 
term, will be implemented. Once the Reduction Program is implemented, 
repayment of the loan by monthly collection of fees from the remaining 
Subsector Members operating in the Reduction Fishery will be initiated.
    In accordance with Sec.  600.1013, the fees for each individual 
program should not exceed 5 percent of the average ex-vessel production 
value of the Reduction Fishery. Thus, the total possible fee from the 
two programs will not exceed 10 percent of the average ex-vessel 
pacific cod revenues for one year. In the event that the total 
principal and interest due for this program exceeds this level, an 
additional fee for the season will be assessed. This temporary fee 
assessment will be $0.01 per pound round weight for pollock, arrowtooth 
flounder, Greenland turbot, skate, yellowfin sole and rock sole.
    The fee will be calculated on an annual basis as: The principal and 
interest payment amount necessary to amortize the loan over a 30-year 
term, divided by the Reduction Fishery portion of the BSAI Pacific cod 
initial total allowable catch (ITAC) allocation in metric tons 
(converted to pounds). NMFS estimates that the actual fees for this 
program will be $0.001 per pound, based upon the estimated fishery 
revenue from 2010 amortized over a 30-year loan. This program, coupled 
with the previously codified program in Sec.  600.1105, will bring 
total fish catch fees to approximately $0.016 per pound.
    For more specific information on submission of the Reduction Plan, 
including fees to repay the Reduction Loan, see Sec.  600.1108(e). For 
specific information on the fee payment and collection system, see 
Sec.  600.1108(k).

The Reduction Program: Other Matters Relating to the Reduction 
Agreement and Reduction Plan Review/Disputes

    The Reduction Agreement provided for an expedited process to review 
any decision by the Auditor and for settlement of disputes utilizing an 
expedited review process by pre-selected legal counsel and, if 
necessary, binding arbitration. However, this provision was not 
activated as no disputes occurred during the selection process of this 
proposed buyback.

Other Provisions of the Reduction Agreement

    Proposed regulatory provisions mirroring the Reduction Agreement's 
provisions for Specific Performance, Miscellaneous, Amendment, and 
Warranties are specified at Sec.  600.1108(g), (h), (i), and (j), 
respectively.

The Fee Payment and Collection System

    The payment and collection system will remain the same for the loan 
the subsector previously approved in 2007. Under this rule, Sec.  
600.1108(k) outlines the requirements for repayment of this loan. This 
provision mirrors the fee system codified in Sec.  600.1106 for the 
2007 loan, except in total amount. The amount of the loan in this rule 
is $2,700,000.

The Contract

    An appendix to Sec.  600.1108 sets forth the Contract component of 
the Reduction Program for the Longline Subsector. The appendix, or 
Contract,

[[Page 58778]]

was previously codified as an appendix to the regulatory text of Sec.  
600.1105. This rule references the appendix without reprinting it.

Classification

    Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the 
NMFS Assistant Administrator has determined that this final rule is 
consistent with the provisions of the Magnuson-Stevens Act, and other 
applicable law.
    This final rule has been determined to be not significant for 
purposes of Executive Order 12866.
    In compliance with the National Environmental Policy Act, NMFS 
prepared an environmental assessment for this rule. The assessment 
discusses the impact of this final rule on the natural and human 
environment and integrates a Regulatory Impact Review (RIR) and a Final 
Regulatory Flexibility Analysis (IRFA). NMFS will send the assessment, 
the review, and the analysis to anyone who requests a copy (see 
ADDRESSES).
    NMFS prepared a FRFA, as required by section 604 of the Regulatory 
Flexibility Act (RFA), to describe the economic impacts that this rule, 
if adopted, would have on small entities. NMFS intends the analysis to 
aid us in considering regulatory alternatives that could minimize the 
economic impact on affected small entities. The rule does not duplicate 
or conflict with other Federal regulations.

Summary of FRFA

    The Small Business Administration (SBA) has defined small entities 
as all fish harvesting businesses that are independently owned and 
operated, are not dominant in their field of operation, and have annual 
receipts of $4 million or less. In addition, processors with 500 or 
fewer employees for related industries involved in canned or cured fish 
and seafood, or preparing fresh fish and seafood, are also considered 
small entities. Small entities within the scope of this rule include 
individual U.S. vessel owners and fish dealers. There are no 
disproportionate impacts between large and small entities.

Description of the Number of Small Entities

    The FRFA uses the most recent year of data available to conduct the 
analysis (2009-2010). The vessel owners that might be considered large 
entities were either affiliated with owners of multiple vessels or were 
catcher processors. In the Reduction Fishery, 17 of the 36 vessel 
owners meet the threshold for small entities based on gross revenue. 
However, these vessels are not considered small entities for purposes 
of the RFA because of their affiliations with the larger fishing 
entities through the FLCC. All vessels in the Longline Subsector would 
benefit from a permit buyback because there will be less potential 
competition for the harvest. Because the potential action would not 
result in changes to allocation percentages and participation is 
voluntary, net effects are expected to be minimal relative to the 
status quo.
    Implementation of the buyback program will not change the overall 
reporting structure and recordkeeping requirements of the vessels in 
the BSAI Pacific cod fisheries. However, this program will impose 
collection of information requirements totaling 16 hours 10 minutes.
    The final rule's impact would be positive for both the selected 
Offeror and for the post-reduction catcher processors whose landing 
fees repay the reduction loan because the Offeror and a majority of the 
remaining catcher processors will have voluntarily assumed the impact:
    1. The Offeror voluntarily made an offer of $2,700,000. Presumably, 
no Offeror would volunteer to make an offer with an amount that is 
inconsistent with the Offeror's interest; and
    2. Reduction loan repayment landing fees would be instituted, and 
NMFS will complete the Reduction Program, only if a majority of all 
Subsector Members vote in favor of the Reduction Plan in a referendum. 
Presumably, Subsector Members will not vote in favor of the Reduction 
Plan unless they conclude that the Reduction Program's prospective 
capacity reduction will be sufficient to enable them to increase their 
revenues enough to justify the fee.
    Those participants who remain in the fishery after the buyback will 
incur additional fees of up to 5 percent of the ex-vessel production 
value of post-reduction landings. However, the additional costs would 
likely be mitigated by increased harvest opportunities for those 
remaining in the fishery.
    NMFS believes that this rule would not affect authorized BSAI 
Pacific cod ITAC or other non-pollock groundfish harvest levels nor 
harvesting practices.
    NMFS rejected the no action alternative considered in the EA 
because if adopted NMFS would not be in compliance with the mandate of 
section 219 of the Appropriations Act to establish a buyback program. 
In addition, the Longline Catcher Processor Subsector of the non-
pollock groundfish fishery would remain overcapitalized. Although too 
many vessels compete to catch the current subsector's total allowable 
catch (TAC) allocation, fishermen remain in the fishery because they 
have no other means to recover their significant capital investment. 
Overcapitalization reduces the potential net value that could be 
derived from the non-pollock groundfish resource by dissipating rents, 
driving variable operating costs up, and imposing economic 
externalities. At the same time, excess capacity and effort diminish 
the effectiveness of current management measures (e.g. landing limits 
and seasons, bycatch reduction measures). Overcapitalization has 
diminished the economic viability of members of the fleet and increased 
the economic and social burden on fishery-dependent communities.
    This final rule contains information collection requirements 
subject to the Paperwork Reduction Act (PRA). The Office of Management 
and Budget (OMB) previously approved this information collection under 
OMB Control Number 0648-0376 with requirements for 878 respondents with 
a total response time of 38,653 hours.
    NMFS estimates that Sector Members would require an average of four 
hours to vote in a referendum. Persons affected by this rule would also 
be subject to other collection-of-information requirements referred to 
in the rule and also approved under OMB Control Number 0648-0376. These 
requirements and their associated response times are: Completing and 
filing a fish ticket (10 minutes), submitting monthly fish buyer 
reports (2 hours), submitting annual fish buyer reports (4 hours), and 
tendering fish buyer/fish seller reports when a person fails either to 
pay or to collect the loan repayment fee (2 hours).
    These response estimates include the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
information collection. Public comment is sought regarding: Whether 
this 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. Interested persons 
may send comments regarding this burden estimate or any other aspect of 
this data collection requirement, including suggestions for

[[Page 58779]]

reducing the burden, to both NMFS and OMB (see ADDRESSES).
    Notwithstanding any other provision of law, no person is required 
to respond to, and no person is subject to a penalty for failure to 
comply with, an information collection subject to the PRA requirements 
unless that information collection displays a currently valid OMB 
control number.
    This action would not result in any adverse effects on endangered 
species or marine mammals.

List of Subjects in 50 CFR Part 600

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

    Dated: September 18, 2012.
Alan D. Risenhoover,
Director, Office of Sustainable Fisheries, performing the functions and 
duties of the Deputy Assistant Administrator for Regulatory Programs, 
National Marine Fisheries Service.

    For the reasons set out in the preamble, NMFS amends 50 CFR part 
600 to read as follows:

PART 600--MAGNUSON-STEVENS ACT PROVISIONS

Subpart M--Specific Fishery or Program Fishing Capacity Reduction 
Regulations

0
1. The authority citation for 50 CFR part 600, subpart M, is revised to 
read as follows:

    Authority:  5 U.S.C. 561, 16 U.S.C. 1801 et seq., 16 U.S.C. 
1861a(b) through (e), 46 App. U.S.C. 53735, section 144(d) of 
Division B of Pub. L. 106-554, section 2201 of Pub. L. 107-20, and 
section 205 of Pub. L. 107-117, Pub. L. 107-206, Pub. L. 108-7, Pub. 
L. 108-199, and Pub. L. 108-447.


0
2. Section 600.1108 is added to subpart M to read as follows:


Sec.  600.1108  Longline catcher processor subsector of the Bering Sea 
and Aleutian Islands (BSAI) non-pollock groundfish fishery program.

    (a) Purpose. This section implements the capacity reduction program 
that Title II, section 219(e) of Public Law 108-447 established for the 
longline catcher processor subsector of the Bering Sea and Aleutian 
Islands (BSAI) non-pollock groundfish fishery.
    (b) Definitions. Unless otherwise defined in this section, the 
terms defined in Sec.  600.1000 of subpart L and Sec.  600.1105 of 
subpart M of this part expressly apply to this section. The following 
terms have the following meanings for the purpose of this section:
    Reduction fishery means the Hook & Line, Catcher Processor 
(Longline Subsector); sometimes referred to as the ``H&LCP Subsector) 
portion of the BSAI Pacific cod ITAC (in metric tons) set by the North 
Pacific Fishery Management Council (NPFMC) in December of each year 
multiplied by 2,205 (i.e., the rounded number of pounds in a metric 
ton)or the Longline Subsector of the BSAI non-pollock groundfish 
fishery that Sec.  679.2 of this chapter defined as groundfish area/
species endorsement.
    (c) Capacity Reduction Program. As a result of the completion of 
the Selection Process, written notification from the FLCC to NMFS 
identifying the selected offeror, and submission of the reduction plan, 
the capacity reduction program is implemented as follows:
    (1) Loan repayment--(i) Term. As authorized by section 219(B)(2) of 
the Appropriations Act, the capacity reduction loan (the Reduction 
Loan) shall be amortized over a thirty (30) year term. The Reduction 
Loan's original principal amount may not exceed the amount approved by 
the subsector. The subsector has currently approved a loan of two 
million seven hundred thousand dollars ($2,700,000). Subsector Members 
acknowledge that in the event payments made under the Reduction Plan 
are insufficient to repay the actual loan, the term of repayment shall 
be extended by NMFS until the loan is paid in full. Repayment 
calculations and records will be kept separately for each program.
    (ii) Interest. The Reduction Loan's interest rate will be the U.S. 
Treasury's cost of borrowing equivalent maturity funds plus 2 percent. 
NMFS will determine the Reduction Loan's initial interest rate when 
NMFS borrows from the U.S. Treasury the funds with which to disburse 
reduction payments. The initial interest rate will change to a final 
interest rate at the end of the Federal fiscal year in which NMFS 
borrows the funds from the U.S. Treasury. The final interest rate will 
be 2 percent plus a weighted average, throughout that fiscal year, of 
the U.S. Treasury's cost of borrowing equivalent maturity funds. The 
final interest rate will be fixed, and will not vary over the remainder 
of the reduction loan's 30-year term. The Reduction loan will be 
subject to a level debt amortization. There is no prepayment penalty.
    (iii) Fees. The Reduction Loan shall be repaid by fees collected 
from the Longline Subsector. The fee amount will be based upon: The 
principal and interest due over the next twelve months divided by the 
product of the Longline Subsector. In the event that the Longline 
Subsector portion for the ensuing year is not available, the Longline 
Subsector portion forecast from the preceding year will be used to 
calculate the fee.
    (A) The fee will be expressed in cents per pound rounded up to the 
next one-tenth of a cent. For example: If the principal and interest 
due equal $2,900,000 and the Longline Subsector portion equals 100,000 
metric tons, then the fee per round weight pound of Pacific cod will 
equal 1.4 cents per pound. [2,900,000/(100,000 x 2,205) = .01315]. The 
fee will be assessed and collected on Pacific cod to the extent 
possible and if not, will be assessed and collected as provided for in 
paragraph (c)(1)(iii)(B) of this section.
    (B) Fees must be assessed and collected on Pacific cod used for 
bait or discarded. Although the fee could be up to 5 percent of the ex-
vessel production value of all post-reduction Longline Subsector 
landings, the fee will be less than 5 percent if NMFS projects that a 
lesser rate can amortize the fishery's reduction loan over the 
reduction loan's 30-year term. In the event that the total principal 
and interest due exceeds 5 percent of the ex-vessel Pacific cod 
revenues, a standardized additional fee will be assessed. The 
additional fee shall be one cent per pound round weight, which is 
calculated based on the latest available revenue records and NMFS 
conversion factors for pollock, arrowtooth flounder, Greenland turbot, 
skate, yellowfin sole and rock sole.
    (C) To verify that the fees collected do not exceed 5 percent of 
the fishery revenues, the annual total of principal and interest due 
will be compared to the latest available annual Longline Subsector 
revenues. In the event that any of the components necessary to 
calculate the next year's fee are not available, or for any other 
reason NMFS believes the calculation must be postponed, the fee will 
remain at the previous year's amount until such a time that new 
calculations are made and communicated to the post-reduction fishery 
participants.
    (D) It is possible that the fishery may not open during some years 
and no Longline Subsector portion of the ITAC is granted. Consequently, 
the fishery will not produce fee revenue with which to service the 
reduction loan during those years. However, interest will continue to 
accrue on the principal balance. When this happens, if the fee rate is 
not already at the maximum 5 percent, NMFS will increase the fishery's 
fee rate to the maximum 5 percent of revenue for Pacific cod, apply all 
subsequent fee revenue first to the payment of accrued interest, and 
continue the maximum fee rates until

[[Page 58780]]

all principal and interest payments become current. Once all principal 
and interest payments are current, NMFS will make a determination about 
adjusting the fee rate.
    (iv) Reduction loan. NMFS has promulgated framework regulations 
generally applicable to all fishing capacity reduction programs in 
subpart L of this part. The reduction loan shall be subject to the 
provisions of Sec.  600.1012, except that: the subsector members' 
obligation to repay the reduction loan shall be discharged by the owner 
of the Longline Subsector license regardless of which vessel catches 
fish under this license and regardless of who processes the fish in the 
reduction fishery in accordance with Sec.  600.1013. Longline Subsector 
license owners in the reduction fishery shall be obligated to collect 
the fee in accordance with Sec.  600.1013.
    (v) Collection. The LLP License holders of vessels harvesting in 
the post-capacity reduction plan Longline Subsector shall be 
responsible for self-collecting the repayment fees owed by the LLP 
License holder. Fees shall be submitted to NMFS monthly and shall be 
due no later than fifteen (15) calendar days following the end of each 
calendar month.
    (vi) Recordkeeping and reporting. The holder of the LLP Licenses on 
which vessels harvesting in the post-capacity reduction plan Longline 
Subsector is designated shall be responsible for compliance with the 
applicable recordkeeping and reporting requirements.
    (2) Agreement with Secretary. The Selected Offeror shall complete 
and deliver to the FLCC for inclusion in the Reduction Plan submitted 
to NMFS, designee for the Secretary, a completed and fully executed 
Reduction Contract. The LLP License set forth on the Selected Offer 
shall be included as Reduction Fishing Interests in such Reduction 
Contract.
    (d) Decisions of the Auditor and the FLCC. Time was of the essence 
in developing and implementing a Reduction Plan and, accordingly, the 
Offeror is limited to, and bound by, the decisions of the Auditor and 
the FLCC.
    (1) The Auditor's examination of submitted applications, Offers, 
Prequalification Offers and Rankings was solely ministerial in nature. 
That is, the Auditor verified whether the documents submitted by 
Subsector Members were, on their face, consistent with each other and 
the Database, in compliance with the requirements set forth in the 
Reduction Agreement, and signed by an Authorized Party. The Auditor 
presumed the validity of all signatures on documents submitted. The 
Auditor made no substantive decisions as to compliance (e.g., whether 
an interim LLP License satisfies the requirements of the Act, or 
whether a discrepancy in the name appearing on LLP Licenses and other 
documents was material).
    (2) [Reserved]
    (e) Specific performance. The parties to the Reduction Agreement 
have agreed that the opportunity to develop and submit a capacity 
reduction program for the Longline Subsector under the terms of the 
Appropriations Act is both unique and finite and that failure of the 
Selected Offeror to perform the obligations provided by the Reduction 
Agreement will result in irreparable damage to the FLCC and the 
Subsector Members. Accordingly, the parties to the Reduction Agreement 
expressly acknowledge that money damages are an inadequate means of 
redress and agree that upon the failure of the Selected Offeror to 
fulfill their obligations under the Reduction Agreement that specific 
performance of those obligations may be obtained by suit in equity 
brought by the FLCC in any court of competent jurisdiction without 
obligation to arbitrate such action.
    (f) Miscellaneous-- (1) Termination. The Reduction Agreement may be 
terminated at any time prior to approval of the Reduction Plan by NMFS, 
on behalf of the Secretary, by written notice from 50 percent of 
Subsector Members.
    (2) Choice of law/venue. The Reduction Agreement shall be construed 
and enforced in accordance with the laws of the State of Washington 
without regard to its choice of law provisions. The parties submit to 
the exclusive personal jurisdiction of the United States District Court 
located in Seattle, Washington, with respect to any litigation arising 
out of or relating to the Reduction Agreement or out of the performance 
of services hereunder.
    (3) Incorporation. All executed counterparts of the Reduction 
Agreement, Application Forms and Offers constitute the agreement 
between the parties with respect to the subject matter of the Reduction 
Agreement and are incorporated into the Reduction Agreement as if fully 
written.
    (4) Counterparts. The Reduction Agreement may be executed in 
multiple counterparts and will be effective as to signatories on the 
Effective Date. The Reduction Agreement may be executed in duplicate 
originals, each of which shall be deemed to be an original instrument. 
All such counterparts and duplicate originals together shall constitute 
the same agreement, whether or not all parties execute each 
counterpart.
    (i) The facsimile signature of any party to the Reduction Agreement 
shall constitute the duly authorized, irrevocable execution and 
delivery of the Reduction Agreement as fully as if the Reduction 
Agreement contained the original ink signatures of the party or parties 
supplying a facsimile signature.
    (ii) [Reserved]
    (g) Amendment. All Subsector Members acknowledge that the Reduction 
Agreement, the Reduction Contract, and the Reduction Plan may be 
subject to amendment to conform to the requirements for approval of the 
Reduction Plan by NMFS on behalf of the Secretary. The Auditor shall 
distribute to each Subsector Member in electronic format the amended 
form of the Reduction Agreement, the Reduction Contract, and the 
Reduction Plan, which amended documents in the form distributed by the 
Auditor and identified by the Auditor by date and version, the version 
of each such document then in effect at the time of any dispute arising 
or action taken shall be deemed binding upon the parties with respect 
to such dispute and/or action.
    (h) Warranties. The Offeror must expressly warrant and represent in 
the Reduction Agreement that:
    (1) The Offeror has had an opportunity to consult with an attorney 
or other advisors with respect to the Reduction Agreement, the 
Reduction Contract, and the Act and the ramifications of the 
ratification of the Reduction Plan contemplated therein;
    (2) The Offeror has full understanding and appreciation of the 
ramifications of executing and delivering the Reduction Agreement and, 
free from coercion of any kind by the FLCC or any of its members, 
officers, agents and/or employees, executes and delivers the Reduction 
Agreement as the free and voluntary act of the Offeror;
    (3) The execution and delivery of the Reduction Agreement, does not 
and will not conflict with any provisions of the governing documents of 
the Offeror;
    (4) The person executing the Reduction Agreement has been duly 
authorized by the Offeror to execute and deliver the Reduction 
Agreement and to undertake and perform the actions contemplated herein; 
and
    (5) The Offeror has taken all actions necessary for the Reduction 
Agreement to constitute a valid and binding obligation, enforceable in 
accordance with its terms.
    (i) Approval of the Reduction Plan. Acceptance of the Offer is at 
the sole discretion of NMFS on behalf of the

[[Page 58781]]

Secretary of Commerce. To be approved by NMFS, on behalf of the 
Secretary, any Reduction Plan developed and submitted in accordance 
with this section and subpart M of this part must be found by the 
Assistant Administrator of NMFS, to:
    (1) Be consistent with the requirements of section 219(e) of the FY 
2005 Appropriations Act (Pub. L. 108-447);
    (2) Be consistent with the requirements of section 312(b) of the 
Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 
1861(a)) except for the requirement that a Council or Governor of a 
State request such a program (as set out in section 312(b)(1)) and for 
the requirements of section 312(b)(4);
    (3) Contain provisions for a fee system that provides for full and 
timely repayment of the capacity reduction loan by the Longline 
Subsector and that it provide for the assessment of such fees;
    (4) Not require a bidding or auction process;
    (5) Result in the maximum sustained reduction in fishing capacity 
at the least cost and in the minimum amount of time; and
    (6) Permit vessels in the Longline Subsector to be upgraded to 
achieve efficiencies in fishing operations provided that such upgrades 
do not result in the vessel exceeding the applicable length, tonnage, 
or horsepower limitations set out in Federal law or regulation.
    (j) Referendum. The following provisions apply to the Reduction 
Plan of this section to the extent that they do not conflict with 
subpart L of this part including Sec. Sec.  600.1009, 600.1010, 
600.1013, and 600.1014 or 16 U.S.C. 1861a; except where the referendum 
is successful if a majority of all permit holders within the fishery 
vote in favor of the Reduction Program is accordance with 18 U.S.C. 
1861a(d)(1)(B).
    (k)(1) Fee payment and collection system. Upon successful 
completion of the Referendum discussed above as authorized by Public 
Law 108-447 and in accordance with 16 U.S.C. 1861a and Sec.  600.1012 
this fee collection system establishes:
    (i) The subsector members' obligation to repay the reduction loan, 
and
    (ii) The loan's principal amount, interest rate, and repayment 
term; and
    (iii) In accordance with Sec. Sec.  600.1013 through 600.1016, 
implements an industry fee system for the reduction fishery.
    (2) Reduction loan amount. The reduction loan's original principal 
amount is $2,700,000.
    (3) Interest accrual from inception. Interest begins accruing on 
the reduction loan from the date which NMFS disburses such loan.
    (4) Interest rate. The reduction loan's interest rate shall be the 
applicable rate which the U.S. Treasury determines at the end of fiscal 
year in which loan is disbursed plus 2 percent.
    (5) Repayment terms. For the purpose of determining fee rates, the 
reduction loan's repayment term is 30 years from the date NMFS 
disburses the loan. However, fee collections shall continue 
indefinitely until the loan is fully repaid.
    (6) Reduction loan repayment. The subsector members shall repay the 
reduction loan in accordance with Sec.  600.1012. Both fish buyers and 
fish sellers are considered subsector members for purposes of fee 
collection, deposit, disbursement, and accounting in accordance with 
Sec.  600.1013.
    (i) Subsector members in the reduction fishery shall collect and 
pay the fee amount in accordance with Sec.  600.1105;
    (ii) Subsector members in the reduction fishery shall deposit and 
disburse, as well as keep records for and submit reports about, the 
applicable fees in accordance with Sec.  600.1014, except the 
requirements under paragraphs (c) and (e) of this section. All 
collected fee revenue a fish buyer collects to repay the loan 
identified in paragraph (c) of this section shall be made to NMFS no 
later than fifteen (15) calendar days following the end of each 
calendar month. The annual reports identified in paragraph (e) of this 
section shall be submitted to NMFS by February 1 of each calendar year.
    (iii) The reduction loan is, in all other respects, subject to the 
provisions of Sec. Sec.  600.1012 through 600.1017.
    (l) Enforcement for failure to pay fees. The provisions and 
requirements of Sec.  600.1016 (Enforcement) shall also apply to fish 
sellers and fish buyers subject to this fishery.

[FR Doc. 2012-23494 Filed 9-21-12; 8:45 am]
BILLING CODE 3510-22-P