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NE Multi-species Buyback

Fishing Capacity Reduction under Section 312(b)-(e) of the Magnuson-Stevens ActLeo Erwin, Chief, NE Financial Services, NMFS/NOAA, Gloucester, MAMike Sturtevant, Financial Assistance Specialist, Silver Spring, MD

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Topics of Discussion

Types of Buyback ProgramsHistory of NOAA Buyback effortsOverview of Industry Funded Buyback ProgramWhat are the steps in 312 (b)-(e)How long does it take?

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Types of Buybacks

General Concept: Removal of Most Fishing Capacity for the Least AmountDisaster Assistance vs. Capacity Reduction (MSA 312 (b)-(e))Subsidized vs. Industry FundedMSA 312(b)-(e) vs. Special Legislation

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History of NOAA Buyback efforts

NOAA has funded $46MM in Buybacks as disaster assistance since 1994 in Pacific Salmon, NE Multi-species, Texas Shrimp, and LI LobsterNE Multi-species Buybacks, 1995-97, 2001-2NOAA completed a $90MM Buyback in BSAI Pollock authorized by special legislation which used MSA framework and was 83% financed

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History of NOAA Buyback efforts continued

Congress has authorized under special legislation $146MM of pending programs in Bering Sea Crab (100% financed) and Pacific Coast Groundfish (78% financed)Pending Multi-species Buyback will be 83% industry financed and will be the first buyback attempted fully under MSA 312 (b)-(e)

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Industry Funded Buybacks

Program is designed by industry and recommended by FMCProgram must prevent over fishing or contribute to stock rebuilding and prevent any capacity removed from being replacedPlan specifications and the results of bidding must be approved by 2/3rds of permits holders who vote in a referendumIf approved, Congressionally authorized loan is issued, bidders are paid, and a fee system to repay the loan is implemented

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What are the steps in a MSA 312 (b)-(e) Buyback?

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Business Plan

The business plan is prepared by or for knowledgeable harvesters in the reduction fishery.The plan is a “roadmap” of the Buyback methodology.The plan contains the reduction specifications.The plan contains analyses based on historic and projected fishing revenues that demonstrates that the post reduction fishery can: repay the reduction loan, improve harvesting economics, and that the Buyback does not adversely affect other fisheries.

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Business Plan continued

The plan must contain details of the buyback participants, including fish buyers.The plan must demonstrate that any capacity removed cannot be replaced and request appropriate reduction amendments to the FMP if required.

Most importantly, the plan must demonstrate through a survey of potential participants that there is wide support for the business plan and its feasibility.

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FMC Request to NOAA

The request is based on and includes the business plan.The request specifies the reduction fishery, projects the amount of reduction and what will be achieved, and details sources of funding.The request demonstrates how the FMP, after appropriate reduction amendment, will achieve required conservation goals and prevent removed capacity from being replaced.

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FMC Request to NOAA

continued

The request must include the actual reduction amendment , if required, or the FMC’s endorsement in principal of the reduction amendment specifications.The request must specify who the permit holders/harvesters are, and what their landings have been individually and in aggregate over the past five years.The request must specify the criteria for determining the types and number of fishing permits or permits and vessels that will be eligible under the program.

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NOAA Fisheries accepts or rejects the request

NOAA accepts the request if it conforms to buyback requirements of section 600.1003.NOAA publishes Federal Register Notice requesting public comment which also lists the eligible voters.NOAA initiates the Buyback process after review of public comments and after it determines that the program will attain conservation objectives, will prevent removed capacity replacement, will be cost effective, and that the program has a realistic prospect of succeeding and repaying the reduction loan.NOAA rejects the request and provides guidance if the request does not comply with these goals.

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NOAA develops Implementation Plan

NOAA publishes proposed implementation plan for public comment and holds public hearings in each affected state.Proposed implementation plan is based on business plan.Proposed implementation plan contains extensive detail on all aspects of program including eligibility, bidding, referendum, fees, and all other procedures.Final Implementation plan is published after review of public comments.

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NOAA Conducts Referendums

NOAA issues ballots to permit holders.If 2/3rds of voters that vote approve program NOAA invites bids.If referendum rejects program, NOAA ceases process or requests that business plan be amended.If results of bids do not conform to buyback specifications NOAA may conduct a post-bidding referendum.

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Bids

NOAA requests bids in accordance with implementation plan if results of referendum are positive.Bids are scored and ranked in accordance with the implementation plan.Bids are irrevocable and will be accepted if bidding results are within approved plan specifications.If bidding is successful, payments are tendered, fishing permits revoked, vessel titles are restricted or in some cases the vessels are scrapped and the fee system is implemented.

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Fee System

Maximum fee is 5% of delivery value.Fees are reviewed and adjusted annually.Fees are collected by fish dealers and remitted to NOAA.Fees are collected to repay reduction loan over 20 years.Fees cease when reduction loan is fully repaid.Loan interest rate equals U.S. Treasury rates plus 2%.

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How long does it take?

Time/ Days Min. Avg. Max.

Business Plan 180 270 360 FMC Request 180 270 360 NOAA Accept or Reject 60 90 120 Develop Implementation Plan 100 150 200 Conduct Pre-Bidding Referendum 30 30 30 Final Implementation Plan 90 135 180 Bidding 30 30 30 Payment and Cancel Permits 30 60 90 Implement Fee System 30 60 90

Total Days 730 1125 1520