FISHING CAPACITY REDUCTION DEMONSTRATION PROGRAM (FCRDP)
I. Introduction
This concept paper describes a proposed Department of Commerce $2 million demonstration program for permanently reducing existing fishing capacity in the Northeast multi-species groundfish fishery. NOAA's Office of Sustainable Development is responsible for overseeing the design and implementation of the demonstration program. Working with the fishing industry and others knowledgeable in the fisheries, NOAA has tailored the FCRDP for the Northeast groundfish fishery. Upon completion of this program NOAA will work with interested parties to assess its effectiveness.
The Northeast groundfish fishery is in a state of crisis, with traditional stocks of cod, haddock, and flounder at dangerously low levels. Increasing demand for fish and advances in fishing technology have fueled a tremendous growth in fishing power and effort in the fishery. The current capacity of the fleet far exceeds that which is needed to harvest the stocks of groundfish available in the near future. Overfishing has been recognized as a major contributing factor to the collapse of the fishery.
The demonstration program seeks to reduce permanently the maximum effective fishing capacity within the groundfish fishery at the least cost and in the shortest period of time through the removal of vessels and permits from the fishery.
Capacity in this program is measured by past vessel performance. The goal of the program is to demonstrate that a vessel removal program can be successfully designed and implemented and that such a program can be a viable tool in the conservation and management of the fisheries. By reducing the size of the fishing fleet and imposing tough fishing restrictions, recovery of the groundfish stocks could be accelerated.
The FCRDP is a voluntary program which is intended to target full time groundfish vessels. Consequently, for the demonstration project ONLY NORTHEAST MULTI-SPECIES LIMITED ACCESS INDIVIDUAL DAYS AT SEA, FLEET DAYS AT SEA, and GILLNET VESSEL (Categories I, II, VI) permit holders are eligible. The FCRDP application requests information on vessel ownership, catch history, and other financial information. The project also incorporates the reverse bid concept, which means that the vessel owner will be required to submit a bid on the application for the amount of money for which the vessel and all Federal fishing permits will be surrendered. A vessel selected to participate in this program must be scrapped by the owner. The owner must provide proof that the vessel has been scrapped.
II. Eligibility
The vessel must satisfy the following conditions in order to be eligible to participate in the Demonstration Program:
1. Federal Northeast Multi-Species Limited Access Fishing Permit (Category I, II, VI)
The vessel must have a valid Northeast Multi-Species Limited Access Individual DAS, Fleet DAS or Gillnet Vessel fishing permit. If the vessel is chosen to participate in the Demonstration Program, the owner will be required to surrender this permit along with ALL other Federal fishing permits.
2. Active and Functioning Fishing Vessel
The vessel must be active in 1995 and functioning at the time the vessel owner submits a bid. An active vessel is one which has made a minimum of two (2) trips (of any duration, for any species) between March 1, 1995, and May 1, 1995. A functioning vessel is one which is capable of fishing in Federal waters under its own power.
3. Full-Time Groundfish Vessels
The Demonstration Program is designed to remove active full-time groundfish vessels from the fishery. The vessel must have derived 65 percent or more of its gross annual income from groundfish regulated under the multi-species plan in each of 3 of the last 4 years. This means that in 1991, 1992, 1993 and 1994, the owner must be able to prove that 65 percent or more of the owner's gross income in each of 3 of those years was from the sale of regulated groundfish. Under the Northeast Multi-Species Fishery Management Plan, the regulated groundfish species are: cod, haddock, pollock, yellowtail flounder, winter flounder, gray sole, American plaice, Windowpane flounder, white hake, and redfish.
III. How To Participate In the Program?
All Federal NE Multi-Species Limited Access Individual DAS, Fleet DAS, and Gillnet Vessel Fishing Permit holders will be mailed a copy of the application and instructions. They will also be made available at The Fishing Family Assistance Centers and the Gloucester office of the National Marine Fisheries Service. Permit holders will be given 75 days from publication of the Federal Register notice to complete and submit the application.
1. Complete Application Form
Those interested in participating in the program will need to fully respond to the questions on the application and return it to the Financial Services Branch of the National Marine Fisheries Service Office in Gloucester, Massachusetts.
Proof of receipt of application may be obtained by sending the application by certified mail, return receipt requested. Applicants should be prepared to submit additional information if the application is successful.
2. Review of Applications
After the closing date all completed applications will be reviewed by the National Marine Fisheries Service and a score will be assigned to each application. The score for each vessel will indicate the cost of removing that vessel's capacity or performance from the fleet. The formula used to determine scores measures the cost of removing a vessel compared to its past performance. NOAA believes that past fishing history or performance is a reasonable overall measure which takes into account vessel size, engine horsepower, fishing capacity, and fishing effort. All scores will be determined using the following method:
STEP A. Identify Bid
The bid is the dollar amount indicated by the vessel owner on the application.
STEP B. Calculate Vessel Performance
Vessel performance will be determined by averaging the annual gross income or revenues from regulated groundfish species of the highest 3 of the last 4 years. Owners may use annual revenues from regulated groundfish species from any three years between 1991 through 1994.
STEP C. Determine Vessel Score
Vessel scores will be determined using the following formula:
Score= (bid)
------------------------------------
(average annual revenues from regulated groundfish species of
highest 3 of last 4 years)*
* Only those years in which the owner can prove 65 percent or more of a vessel's gross income was from the sale of regulated groundfish may be used.
Provided below are three examples of how vessels will be scored.
Example 1.
The owner of vessel A submits a bid for $200,000. The average annual revenues from regulated groundfish species for the best 3 out of 4 years were $225,000.
Step A. Bid = $200,000.
Step B. Ave. Rev.= $200,000 + $225,000 + $250,000 ö 3 =
$225,000
Step C. Score = $200,000 ö $225,000 = .888
The score for vessel A is .888
Example 2.
The owner of vessel B submits the same bid as vessel A, $200,000. However, the average annual revenues from regulated groundfish species for vessel B are $283,333.
Step A. Bid = $200,000,br>
Step B. Ave. Rev. = $200,000 + $300,000 + $350,000 ö 3 =
$283,333
Step C. Score = $200,000 ö $283,333 = .705
The score for vessel B is .705
Example 3.
The owner of vessel C submits a bid in the amount of $350,000. The average annual revenues from regulated groundfish species are $600,000.
Step A. Bid = $350,000
Step B. Ave. Rev. = $500,000 + $600,000 + $700,000 ö 3 =
$600,000
Step C. Score = $350,000 ö $600,000 = .583
The score for vessel C is .583
Even though the bid for vessel C is higher than that of vessels A and B, vessel C scored lower because of its bid to performance ratio. Consequently, vessel C would be selected over vessel A or B and vessel B would be selected before vessel A.
REMEMBER: Lower scores will be given preference over higher scores.
3. Preliminary Determinations and Public Notification
NOAA personnel will rank the scores, compile a list of eligible bids and make a preliminary selection within 30 days after the closing date. Bids will be selected based on the vessel's score, starting with the lowest score and selecting as many vessels for which there are sufficient funds. Once a preliminary selection is made, vessel owners as well as the public will be notified. Only the names of the selected vessels and their owners--not the amount of the bids--will be made public at this time. Selected applicants will then be given 15 working days to WITHDRAW their offer. After the 15-day window for withdrawal has expired, all remaining selected bids will be considered final.
In the event that a selected bid is withdrawn, the owner of the vessel with the next lowest score on the eligible list for which there are sufficient funds will be notified (as well as the public) and given a 15-working-day window to withdraw the bid. This process will continue until there are sufficient bids to use the $2 million available for this program.
4. Calls for Additional Bids
If there are not enough satisfactory scores to exhaust the funds, another call for bids will go out and all previous bids not selected will be rejected. NOAA reserves the right to reject any and all bids.
IV. What Happens When A Bid Is Selected?
Vessel owners selected to participate in the program will be notified in writing and will have 15 working days to withdraw their bid. If vessel owners do not withdraw their bid within the 15-working-day period, the bids will be considered final and owners will be requested to submit all the necessary supporting information and documentation. An official from the National Marine Fisheries Service will contact the vessel owner to make arrangements for the closing process, for which the owner will be expected to retain a trustee.
The closing process will involve the submission of requested documentation to the Financial Services Branch, Northeast Regional Office, NMFS in Gloucester, MA. Listed below is some of the information and documentation that the vessel owner will be required to submit to NMFS.
Federal multi-species limited access individual DAS, fleet DAS, or gillnet vessel fishing permit - The vessel owner may initially provide a copy of the permit to NMFS, but the actual permit must be surrendered at the closing. Also at the closing, all other Federal fishing permits attached to the vessel must be surrendered.
Proof of Income - NMFS will require proof that 65 percent or more of a vessel's gross income came from the sale of regulated groundfish species in each of 3 of the last 4 years (1991, 1992, 1993, and 1994). Landing slips or sales tickets may be used for documentation of income.
Sworn Affidavit - Vessel owners will be required to provide NMFS with an affidavit, signed under oath, that will hold the individual liable for all outstanding debts on the vessel. NMFS will have a sample form that will provide guidance. The purpose of this form is to ensure that there will be an individual who is responsible and liable for any debts associated with the fishing vessel after it is removed from the fleet.
Creditors Agreement - Vessel owners must also execute a creditors agreement that identifies all the outstanding debts on the vessel. Owners will need to receive assurances from each creditor that upon payment of an agreed upon amount, the creditor will release any and all claims. Creditors will be required to sign this Agreement. The purpose of the Agreement is to ensure that, to the extent practicable, all known outstanding claims or liens have been satisfied when the government makes payment to the vessel owner. Subsequent to closing, the vessel or the vessel owner shall remain liable for the payment of any claims or liens made against, or which could have been made against, the vessel, the vessel owner or the cash proceeds escrowed at closing.
Scrapping Contract - Vessel owners will also need to provide proof that the vessel has been scrapped or a signed and notarized contract from a scrapping company that it possesses the vessel and is in the process of scrapping it. Only the vessel itself needs to be scrapped. Vessel owners may retain removable gear and equipment for private disposition.
V. Additional Considerations For Vessel Owners
*How Much To Bid? Determining bid amount is extremely important, since this will be key in calculating whether one is selected for the Demonstration Program. Vessel owners should be careful to take into account all outstanding debts on the vessel since as a condition for receiving payment, all of these must be satisfied. Federal assistance funds cannot be used to pay a Federal debt. Owners should also consider the scrapping cost of their vessel and whether or not they will be able to recover some money from selling vessel equipment, fishing gear and other items of value associated with the vessel (engine, PTO, auxiliary engines, etc.).
*Tax Liability - Income that a successful vessel owner receives from participating in the Demonstration Program will be taxed by the Federal Government. Vessel owners should consult their tax advisors in the development of their bid.
*Delinquent Federal Debts - No award of Federal funds shall be made to an applicant or to its sub-recipients who have an outstanding delinquent Federal debt or fine until either:
a. The delinquent account is paid in full;
b. A negotiated repayment schedule is established and at least
one payment is received; or
c. Other arrangements satisfactory to the Department are
made.
VI. Vessel Reuse
Under the demonstration project, successful applicants must scrap their vessels. However, NOAA encourages all vessel owners that want to surrender their fishing permits, but retain their vessels for non-fisheries uses, to submit a bid. Although these bids will be ineligible for the demonstration project, the information generated by these applications will be useful for any future program. Permit holders should clearly indicate on their application that their bid is for the permit only and identify, if known, the future reuse of the vessel.
VII. Confidentiality
The application is a public document. Please be advised that the information submitted may be shared with other government agencies. Any statistic submitted pursuant to the FCRDP shall be confidential and shall not be disclosed except to: (1) federal program officials who are responsible for program management plan development and monitoring, or (2) when required by court order.
VIII. Additional Information
Questions, should be addressed to NOAA's Office of Sustainable Development and Intergovernmental Affairs in Washington, D.C. at (202) 482-1846.