Testimony of Margaret F. Hayes, Assistant General Counsel for Fisheries, NOAA, on protecting small business right: SBREFA on its 5th Anniversary, US Senate Small Business Committee (Chair Sen. Christopher Bond, R-MO), April 24, 2001

TESTIMONY OF

MARGARET F. HAYES

ASSISTANT GENERAL COUNSEL FOR FISHERIES

NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION

U.S. DEPARTMENT OF COMMERCE

ON PROTECTING SMALL BUSINESS RIGHTS: SBREFA ON ITS 5th ANNIVERSARY

BEFORE THE

COMMITTEE ON SMALL BUSINESS

U.S. SENATE

April 24, 2001

Mr. Chairman and members of the Committee, thank you for inviting me to testify before the Committee today on the Regulatory Flexibility Act (RFA), including revisions to the RFA made by the Small Business Regulatory Enforcement Act (SBREFA), and the new procedures my agency has implemented to deal with the impacts of regulations on small entities. I am Margaret Hayes, Assistant General Counsel for Fisheries.

The National Oceanic and Atmospheric Administration (NOAA) is deeply and unequivocally committed to the sustainable stewardship of marine resources and to the economic health of the fishing industry and dependent communities. Virtually all of the businesses we regulate are categorized under the RFA as "small entities." We realize that agency actions implemented under the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act), the Endangered Species Act, the Marine Mammal Protection Act, and other statutes we administer have far-reaching effects on commercial and recreational fisheries and on the environment. We take seriously our mandate under the RFA and SBREFA to consider the economic impacts of conservation and management measures on small entities; we seek to minimize them whenever possible.

Since passage of the RFA in 1980, NOAA Fisheries has integrated the analytical requirements of the Act into its decisionmaking processes. We are continually reviewing and revising our policies and guidance to ensure that the best possible economic analysis of agency actions is incorporated into the regulatory process, using the best scientific data available. We are proud that the Office of Advocacy of the Small Business Administration (SBA) recognized NOAA Fisheries' efforts with an "honorable mention" in its 2000 Annual Report to Congress.

Working Closely with the Chief Counsel for Advocacy and the Regional Councils

We have some important partners in our implementation of the RFA. Our progress to date has relied on a close working relationship with the SBA since 1980 to prepare agency guidelines for the preparation of Regulatory Flexibility Act analyses. Our current guidelines describe a "small entity" based on Part 121 of Title 13, Code of Federal Regulations, and provide general criteria for determining "significant economic impact" and "substantial number of small entities." They also emphasize the need for a full description of each alternative considered, including the "no action" alternative. We have worked with the SBA to resolve issues regarding the nature and level of economic impacts on small entities.

NOAA Fisheries has also worked with the eight Regional Fishery Management Councils to ensure that they explore a full range of proposed alternative measures during the development of fishery management plans (FMPs) and FMP amendments. The Councils were established several years before the RFA was enacted, but they were created in part for the same reason the RFA was passed -- to provide a way for small businesses to have direct input into the regulatory process. Many of the Council members work for, or represent, small entities in the fishing industry.

In reviewing proposed alternatives, NOAA Fisheries works to ensure that the selected alternatives minimize the economic impacts on small entities while meeting the conservation goals and objectives of the FMPs. These alternatives are presented at a large number of public hearings in the affected regions so that small businesses and other local groups have an opportunity to comment. The Councils consider those comments before making recommendations to NOAA Fisheries for approval and implementation.

Improving the Quality of Regulatory Flexibility Analyses

NOAA Fisheries has had guidelines for regulatory flexibility analyses in place for more than 15 years. We substantially revised these guidelines in August 2000 to better reflect current requirements and analytical approaches. The revision of the guidelines was a very deliberate process to ensure that they were as thorough as possible, and represented the best thinking of the Agency on preparing adequate analyses. In fact, the revision was a team effort involving NOAA Fisheries economists, Council staff, attorneys from the Offices of General Counsel in NOAA and in the Department of Commerce, and staff members from the SBA and the Bureau of Economic Analysis.

The guidelines emphasize the importance of including economic analyses of the expected impacts of the alternatives in draft regulatory documents for public comment, and revise the criteria for determining "significant" economic impact on a "substantial" number of small entities to be more consistent with the spirit of the RFA. They also recommend preparing a preliminary regulatory economic evaluation to assess the expected impacts of the proposed alternatives early in the regulatory process. This analysis can be used to determine whether the threshold criteria are triggered for conducting a regulatory flexibility analysis (RFA). Finally, the guidelines encourage preparation of an RFA, unless the management action proposed is minor and there is a factual basis to conclude that the threshold criteria would not be triggered. In an effort to fully implement the guidelines as quickly as possible, we have already had three regional workshops this year to assist Councils and NOAA Fisheries staff in using the guidelines, and will have four more workshops in the next two months.
Utilizing an Important Tool for Decisionmaking
As mentioned earlier, these analyses are an important decisionmaking tool, and complement work done in preparing Regulatory Impact Reviews, Fishery Impact Statements and the assessment of impacts on fishing communities in compliance with National Standard 8 of the Magnuson-Stevens Act. RFA considerations play a major role in the selection of management actions, and therefore significantly shape fishery conservation and management. Based on information derived from RFA analyses, fisheries managers may select a particular management action such as seasonal closures or gear restrictions, or may choose to institute changes over several years, rather than all at once. For instance, the New England Council and NOAA Fisheries decided to phase in the days-at-sea program over two years instead of one in the Northeast multispecies fishery, because we feared vessel owners and crews would have economic difficulty with such a sudden decrease in effort. As a result of the RFA and other analyses, economic, social, and biological considerations are integrated to assist fisheries managers in making the best possible decisions for the resource, as well as for the well-being of the Nation, the fishing industry, and dependent communities.

Obtaining the Best Possible Economic Data and Improving Our Analyses

We have ongoing data collection programs (e.g., logbooks, dealer reporting) that provide data on ex-vessel prices and landings for various categories of vessels, gear types, and fishing modes for certain fisheries. Ad hoc economic surveys also provide useful data for doing these analyses. In recent years, we have made improvements in both the breadth and quality of data collected in some fisheries. For example, the Marine Recreational Fishery Statistical Survey now collects economic data that include the charter boat sector. Other efforts are underway that will provide more and better economic data in the future. Such efforts include a partnership with the Atlantic Coastal Cooperative Statistics Program for collecting costs and earnings and other socioeconomic data from fisheries along the Atlantic coast. On the Pacific Coast, PACFIN is working to improve the adequacy of economic data for regulatory flexibility analysis.

NOAA Fisheries has also invested in new agency-wide analytical tools such as IMPLAN, an Input/Output economic model and database, to assess the impacts of regulations on fishing communities as required under National Standard 8. Some gaps remain, however, such as complete costs and earnings data for fishing firms (harvesting sector), recreational charters and party boats, and processing firms. We continue to work to resolve those gaps. One obstacle is our primary statute (the Magnuson-Stevens Act) limits our ability to require the submission of economic data by some user groups.

We are thankful that Congress appropriated $3.0 million for economic analysis in the FY 2001 Appropriations Bill. This money has provided the ability to hire additional staff support to field offices, allowed us to collect more cost and earnings data, funded contracts for agency-wide impact models, and given us access to census and sectoral databases. This will greatly enhance our ability to analyze thoroughly the impacts of management actions on small entities, and provide a better basis for decisionmaking.

Assisting Small Entities in Complying with our Regulations

NOAA Fisheries prepares "Small Entity Compliance Guides" for regulations that were the subject of a final regulatory flexibility analysis. They are distributed widely through our web pages or electronic bulletin boards, or along with copies of the regulations sent via mail or fax, or as inserts in industry publications. Some appear within the preamble to a final rule in the Federal Register, and others are published on laminated cards suitable for use on fishing boats. As the statute requires, these guides are written in plain language; we often use a question-and-answer format that simplifies complicated regulatory text in a user-friendly fashion.

Once regulations are implemented, NOAA Special Agents and officers begin an information outreach campaign by boarding vessels and visiting fish dealers to explain the new regulations and answer questions regarding compliance. Special Agents and officers educate the regulated community on the technical aspects of the regulations and the conservation value of the management plan and regulations. This effort is part of the NOAA Community-Oriented Policing and Problem Solving Program (COPPS). Increasing constructive communication, honing community problem-solving skills, and providing education to help the regulated community understand NOAA's regulations are key to the success of COPPS. For example, in the Southwest region, NOAA provided training to the drift gillnet fishery on newly enacted gear requirements to promote compliance. Another example is an industry workshop in the Northwest region that provided a forum for NOAA and groundfish fishery supply manufacturers and retailers to discuss issues related to enforcement of net size regulations. In the Southeast region, NOAA met with Gulf of Mexico shrimp fishermen and processors to discuss regulatory compliance issues.

Program offices also hold informational workshops to explain new regulations and answer questions raised by the industry concerning compliance. Fishermen, who make up much of the regulated community, often speak directly with NOAA's individual fishery plan coordinators to receive guidance in response to specific factual situations described by the fishermen. In fisheries requiring permits, letters explaining regulatory changes, and providing the name of a person to contact for additional information and guidance, may be sent to each permit holder. Our Office of Protected Resources answers questions posed by the marine mammal public display community with respect to statutory and regulatory requirements. NOAA also has public affairs personnel in its regional offices who specialize in community outreach.

NOAA has effectively utilized internal offices that work with small businesses to inform small businesses about their rights to regulatory fairness. We posted information regarding the availability and function of the National Small Business and Agriculture Regulatory Ombudsman and ten Regional Small Business Fairness Boards on the NOAA website. In addition, one of my colleagues provided information on NOAA's programs for reduction and waiver of penalties at a public meeting sponsored by the SBA. This public meeting and an international conference she attended also served the purpose of publicizing NOAA's innovative methods for promoting compliance to other federal agencies and foreign governments, many of whom expressed great interest in adopting similar programs that could greatly benefit small businesses regulated by those agencies or doing business in those countries.

Implementing Regulatory Enforcement Reforms

NOAA has established a Fix-It Notice (FIN) program for the reduction or waiver of civil penalties under several of the natural resource protection statutes NOAA enforces. Under the FIN program, dozens of minor, first-time violations of a technical nature, which do not have a direct natural resource impact, and in which no serious injury or harm occurred, receive a Fix-It Notice in lieu of a penalty. The Fix-It Notice identifies the violation and allows the violator a specified amount of time to "fix" the violation. At this time, there are more than 140 types of violations that have been included in the FIN program. Since 1996, approximately 300 Fix-It Notices have been issued in lieu of penalties, many to small entities. The FIN program has helped NOAA achieve compliance and has had a positive response from the regulated community, most of whom are small entities.

NOAA also issues written warnings rather than penalties for many minor violations. Since 1996, NOAA has issued approximately 1,750 written warnings. In addition, NOAA has a "Summary Settlement System" that allows violators, including small entities, to choose not to contest an alleged violation and to pay a reduced penalty within a specified time period following receipt of the Summary Settlement Notice. Since 1996, NOAA has extended approximately 2,000 Summary Settlement offers.

NOAA's procedural regulations and practice allow small businesses to expeditiously raise the concern that an enforcement action threatens the economic viability of the business. One regulation provides that "NOAA will take into account a respondent's ability to pay when assessing a civil penalty for a violation of any of the statutes that NOAA administers." In the charging document that NOAA issues, NOAA specifically informs the respondent that they may contact the enforcement attorney and seek to have the assessed penalty modified on the basis that the respondent does not have the ability to pay. NOAA routinely modifies civil penalty assessments based upon the respondent's lack of financial resources.

In addition to modifying the civil penalty assessment, NOAA enforcement attorneys have broad authority to enter into settlement agreements that accommodate a small business' financial concerns. NOAA enforcement attorneys are authorized to offer alternative payment arrangements, such as time payments that may extend as long as 18 months, "balloon" payments, and suspended penalties. In certain enforcement cases, NOAA has agreed to sanction respondents' permits in lieu of some or all of a civil penalty. NOAA enforcement attorneys also have the authority to reduce penalties in exchange for community service.

Thank you, Mr. Chairman, for this opportunity to review the progress we've made at NOAA Fisheries in meeting the requirements of these important statutes. We are committed to carrying out the laws that govern our Nation's fisheries, as well as those that rightly protect our citizens in their efforts to make a decent living. Mr. Chairman, this concludes my testimony. I am prepared to respond to any questions members of the Committee may have.