[Senate Report 113-251]
[From the U.S. Government Publishing Office]
113th Congress Report
SENATE
2d Session 113-251
_______________________________________________________________________
Calendar No. 556
REVITALIZING THE ECONOMY OF FISHERIES IN THE PACIFIC ACT
__________
R E P O R T
of the
COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
on
S. 1275
September 10, 2014.--Ordered to be printed
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
one hundred thirteenth congress
second session
JOHN D. ROCKEFELLER IV, West Virginia, Chairman
BARBARA BOXER, California JOHN THUNE, South Dakota
BILL NELSON, Florida ROGER F. WICKER, Mississippi
MARIA CANTWELL, Washington ROY BLUNT, Missouri
MARK PRYOR, Arkansas MARCO RUBIO, Florida
CLAIRE McCASKILL, Missouri KELLY AYOTTE, New Hampshire
AMY KLOBUCHAR, Minnesota DEAN HELLER, Nevada
MARK BEGICH, Alaska DAN COATS, Indiana
RICHARD BLUMENTHAL, Connecticut TIM SCOTT, South Carolina
BRIAN SCHATZ, Hawaii TED CRUZ, Texas
ED MARKEY, Massachusetts DEB FISCHER, Nebraska
CORY BOOKER, New Jersey RON JOHNSON, Wisconsin
JOHN WALSH, Montana
Ellen Doneski, Staff Director
John Williams, General Counsel
David Schwietert, Republican Staff Director
Nick Rossi, Republican Deputy Staff Director
Rebecca Seidel, Republican General Counsel
Calendar No. 556
113th Congress Report
SENATE
2d Session 113-251
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REVITALIZING THE ECONOMY OF FISHERIES IN THE PACIFIC ACT
_______
September 10, 2014.--Ordered to be printed
_______
Mr. Rockefeller, from the Committee on Commerce, Science, and
Transportation, submitted the following
R E P O R T
[To accompany S. 1275]
The Committee on Commerce, Science, and Transportation, to
which was referred the bill (S. 1275) to direct the Secretary
of Commerce to issue a fishing capacity reduction loan to
refinance the existing loan funding the Pacific Coast
groundfish fishing capacity reduction program, having
considered the same, reports favorably thereon with an
amendment (in the nature of a substitute) and recommends that
the bill (as amended) do pass.
Purpose of the Bill
S. 1275 would direct the Secretary of Commerce to issue a
fishing capacity reduction loan to refinance the existing loan
funding the Pacific Coast groundfish fishing capacity reduction
program.
Background and Needs
The Pacific Coast groundfish fishery, also referred to as
the West Coast groundfish fishery, is a multi-species fishery
for various species of rockfish and flatfish, Pacific whiting,
sablefish, lingcod, Pacific cod, and several species of skates
and sharks. The fishery is one of the oldest fisheries on the
West Coast, with commercial harvesting of rockfish having begun
in California in the first half of the 19th century. In the
late 19th and early 20th centuries, as demand for fish began to
grow, commercial fishing operations expanded to other
groundfish species such as halibut and sablefish.
Trawling has been the dominant method of harvest in the
fishery for the past several decades. Historically, domestic
landings from the fishery averaged roughly 30,000 metric tons
annually until the early 1970s when landings began to steadily
increase. Several factors contributed to this trend. The
Fishery Conservation and Management Act of 1976 (subsequently
renamed the Magnuson-Stevens Fishery Conservation and
Management Act) was signed into law on April 13, 1976. A
central purpose of that Act was to regulate, and ultimately
eliminate, foreign commercial fishing activity in the waters
contiguous to the territorial seas of the United States, and to
``Americanize'' fisheries through a number of fishing and
vessel construction programs and incentives. These programs and
incentives produced significant growth in domestic commercial
fishing. In 1978, fishing grounds in Canadian waters were
closed to U.S. fishermen, bringing added fishing pressure on
U.S. groundfish stocks from Washington State trawlers that had
previously trawled off the coast of British Columbia. By 1982,
when the fishery management plan for the groundfish fishery was
first implemented by the Pacific Fishery Management Council,
total domestic landings from the fishery had soared to 116,000
metric tons, valued at the time at $71.5 million.
The substantial buildup of harvesting capacity that
occurred in the 1970s and 1980s greatly exceeded the
sustainable production capacity of the groundfish resource. The
number of trawlers in the fishery rose from 286 to 472 in just
the three-year period from 1977 through 1979. Additionally,
technological improvements in navigation and fish-finding
equipment significantly increased the efficiency of the fleet.
By 1991, foreign trawl fleets were completely driven out
and the entire West Coast groundfish fishery was fished by U.S.
fishermen. U.S. shore-based processing facilities had continued
to expand up to that time, and landings had continued to reach
new highs. In just a few years, the groundfish fishery had gone
from harvesting generally healthy, even under-fished, stocks to
fishing at or beyond maximum sustainable yield on many species.
While harvest regulations were put in place to address the
depletion of fish stocks, nothing in the Pacific Council's
conservation and management measures addressed the problem of
excess harvesting capacity, a problem with long-term negative
economic, as well as species conservation, implications.
In the late 1980s, fishing industry representatives began
working with the Pacific Council to develop a limited entry
management regime for the groundfish fishery, in order to begin
to address the problem of excess harvest capacity. As a result
of these efforts, a license limitation plan was put in place
for the fishery, effective on January 1, 1994. Despite these
measures, owing both to declining values and low abundance, ex-
vessel revenue from groundfish landings continued to decrease.
In 1994, 14,800 metric tons of rockfish were landed from the
fishery, with a value of $19.3 million. By 2000, landings of
rockfish were down to only 2,800 metric tons with a value of
$5.3 million.
On January 26, 2000, the Secretary of Commerce declared a
fishery disaster in the West Coast groundfish fishery, citing
low stock abundance, an overcapitalized fleet, and historically
overfished stocks as contributing factors. Congress
appropriated $5 million in relief, which was apportioned among
the States of California, Oregon, and Washington. In 2003, to
address the long-term problem of the overcapitalized groundfish
fleet, Congress established the Pacific Coast groundfish
fishing capacity reduction program, and directed the issuance
of a $35.7 million, 30-year ``buyback'' loan to remove vessels
from the fishery. The interest rate of the buyback loan is
fixed at 6.97 percent and the loan is paid back through a fee
of up to 5 percent of the value of groundfish that is landed
from the fishery. The Committee understands that the current
principal owed on the loan is $27,540,000, and that the
principal is currently being paid back at roughly $30,000 per
month, though this value increases as the loan matures.
As a result of several different factors, including the
transition of the commercial fishery to individual fishing
quotas, the cost recovery fees associated with Individual
Fishing Quota programs, fees owed for at-sea observers, and the
requirement to pay 5 percent of the value of groundfish
landings to repay the buyback loan, commercial West Coast
groundfish fishermen are facing up to an 18 percent reduction
in their total gross revenue for the foreseeable future. This
threat to their financial viability comes just as landings and
values are beginning to go up as a result of improved
conservation and management measures in the fishery.
There is a clear need to refinance the current buy-back
loan so that participants in the West Coast groundfish fishery
can afford the terms of repayment and the Federal Government
can recoup its investment.
Summary of Provisions
S. 1275 would, if enacted, require the Secretary of
Commerce to issue a loan to refinance the existing debt
obligation funding the West Coast groundfish fishery capacity
reduction program. It would change the loan term from 30 years
to 45 years and have the effect of lowering the annual interest
rate on the loan from 6.97 percent to roughly 3.5 percent. It
would also set a maximum of 3 percent on the landing fees
collected for repayment of the loan, prescribe certain
requirements regarding the calculation and accuracy of the
landing fees, and impose a 75-day deadline to conduct a
referendum of fishery participants to agree to the terms of the
refinanced loan.
Legislative History
S. 1275, the REFI Pacific Act, was introduced by Senator
Cantwell on July 10, 2013, with Senators Begich, Boxer,
Feinstein, Merkley, Murray, and Wyden as original cosponsors,
and referred to the Committee on Commerce, Science, and
Transportation. On April 9, 2014, the Committee met in open
Executive Session and, by a voice vote, ordered S. 1275
reported with an amendment in the nature of a substitute.
Estimated Costs
In accordance with paragraph 11(a) of rule XXVI of the
Standing Rules of the Senate and section 403 of the
Congressional Budget Act of 1974, the Committee provides the
following cost estimate, prepared by the Congressional Budget
Office:
S. 1275--Revitalizing the Economy of Fisheries in the Pacific Act
Summary: S. 1275 would direct the Secretary of Commerce,
upon an affirmative vote in a referendum, to amend the terms
for repayment of an advance made by the government in 2003 to
buy back fishing permits in the Pacific Coast fishery for
groundfish. The bill also would set a new limit on fees that
are assessed on members of the affected fishery to repay the
advance.
CBO estimates that implementing S. 1275 would increase
direct spending by $7 million over the 2015-2024 period;
therefore, pay-as-you-go procedures apply. CBO estimates that
implementing S. 1275 would have an insignificant effect on
spending subject to appropriation; enacting the bill would not
affect revenues.
S. 1275 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
Estimated cost to the Federal Government: The estimated
budgetary effect of S. 1275 is shown in the following table.
The costs of this legislation fall within budget function 370
(commerce and housing credit).
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By fiscal year, in millions of dollars--
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2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-2019 2015-2024
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CHANGES IN DIRECT SPENDING
Estimated Budget Authority.................................. 7 0 0 0 0 0 0 0 0 0 7 7
Estimated Outlays........................................... 7 0 0 0 0 0 0 0 0 0 7 7
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Basis of estimate: S. 1275 would direct the Secretary of
Commerce to hold a referendum that would allow eligible members
of a Pacific Coast fishery to vote to assess themselves at a
lower rate to repay an advance that the government made in
2003. At that time, the National Marine Fisheries Service
(NMFS) provided $46 million in funds to buy out certain fishing
permits in an effort to remove excess fishing capacity in the
fishery. Of that amount, $36 million was considered a loan to
the remaining members of the Pacific Coast fishery, which was
made after a referendum in which eligible members of the
fishery agreed to assess themselves to repay the advance based
on the value of the catch (``ex-vessel'' value) in the affected
fishery.
Direct spending
Assuming that the lower rate for assessments would be
approved in the referendum, and based on information from NMFS,
CBO expects that enacting S. 1275 would result in a change in
cash flows associated with the advance made to fishery members
in 2003. Under current law, CBO expects the members of the
fishery to remit about $2.5 million per year to fully repay the
advance under the original terms. Under S. 1275, CBO expects
the annual assessment would fall to about $1.5 million and that
the advance would be repaid over the next 45 years (compared
with 30 years under current law).
Consistent with the way the original advance and subsequent
repayments have been treated in the budget, CBO considers those
effects to be a modification to the terms of an existing
loan.\1\ Hence, the net cost to the government is measured as
the difference between the discounted present value of the
stream of assessment payments anticipated under current law and
the stream of payments that would occur under the bill. Because
the payments would be stretched out over a longer period of
time, their value to the government on a present-value basis
would be smaller. Therefore, CBO estimates that enacting S.
1275 would increase the cost of the original advance by $7
million, which would be recorded in the budget in the year of
enactment. Because the modification to the repayment agreement
can be made without a subsequent appropriation, the cost of
this legislation would be an increase in direct spending.
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\1\ Although the original advance was treated as a loan in the
budget, CBO considers that treatment inappropriate. Under the Federal
Credit Reform Act, a direct loan is defined as a disbursement of funds
to a nonfederal borrower under a contract that requires repayment. A
disbursement by the government should not be considered a direct loan,
however, if the duty to repay the government arises from an exercise of
sovereign power, tort liability, or some other noncontractual
obligation.
Therefore, in CBO's view, such an advance should be recorded as an
outlay when it is made, and the subsequent stream of annual repayments
should be shown in the budget on a cash basis as federal revenues
because the requirement to pay the assessment is compulsory. The
government's sovereign power is used to establish and enforce this
assessment, which must be paid by all members of the fishery regardless
of how they voted in the referendum. If the 2003 advance had been
recorded in the budget to reflect these circumstances, then the
proposed change to the repayment schedule under S. 1275 would be
reflected in the budget as a change in revenues.
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Spending subject to appropriation
The bill would direct the Secretary of Commerce to conduct
a referendum that would allow members of the affected fishery
to agree to a new, lower assessment rate to repay the advance.
Based on information from NMFS, CBO estimates that the costs of
conducting that referendum would not be significant.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays that are subject to those
pay-as-you-go procedures are shown in the following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 1275 AS ORDERED REPORTED BY THE SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION ON APRIL 9, 2014
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By fiscal year, in millions of dollars--
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2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2014-2019 2014-2024
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NET INCREASE IN THE DEFICIT
Statutory Pay-As-You-Go Impact....................... 0 7 0 0 0 0 0 0 0 0 0 7 7
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Intergovernmental and private-sector impact: S. 1275
contains no intergovernmental or private-sector mandates as
defined in UMRA.
Estimate prepared by: Federal Costs: Susan Willie; Impact
on state, local, and tribal governments: Melissa Merrell;
Impact on the private sector: Amy Petz.
Estimate approved by: Peter H. Fontaine, Assistant Director
for Budget Analysis.
Regulatory Impact
In accordance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee provides the
following evaluation of the regulatory impact of the
legislation, as reported:
number of persons covered
S. 1275 as reported does not create any new programs or
impose any new regulatory requirements, and therefore would not
subject any individuals or businesses to new regulations.
economic impact
Enactment of S. 1275 is not expected to have any adverse
impact on the Nation's economy. Failure to authorize the
refinancing of the West Coast groundfish fishery buyback loan
on manageable terms for participants in the fishery would
likely cause participants to exit the fishery, resulting in
lost jobs and economic productivity and a reduced likelihood
that the Federal Government's buyback loan would be repaid.
privacy
S. 1275 would not impact the personal privacy of
individuals.
paperwork
S. 1275 would have no impact in paperwork requirements for
individuals or businesses.
Congressionally Directed Spending
In compliance with paragraph 4(b) of rule XLIV of the
Standing Rules of the Senate, the Committee provides that no
provisions contained in the bill, as reported, meet the
definition of congressionally directed spending items under the
rule.
Section-by-Section Analysis
Section 1. Short title
This section would provide that the legislation may be
cited as the ``Revitalizing the Economy of Fisheries in the
Pacific Act'' or the ``REFI Pacific Act''.
Section 2. Findings; purpose
This section would set forth findings of Congress and
provide that the purpose of the legislation is to refinance the
Pacific Coast groundfish fishing capacity reduction program to
protect and conserve the West Coast groundfish fishery and the
coastal economies in California, Oregon, and Washington that
rely on it.
Section 3. Refinancing of Pacific Coast groundfish fishing capacity
reduction program
Subsection (a) of this section would require the Secretary
of Commerce, upon receipt of such assurances as the Secretary
considers appropriate to protect the interests of the United
States, to issue a loan to refinance the existing debt
obligation funding the fishing capacity reduction program for
the West Coast groundfish fishery implemented under section 212
of the Department of Commerce and Related Agencies
Appropriations Act, 2003 (title II of division B of Public Law
108-7; 117 Stat. 80).
Subsection (b) would provide that, except as otherwise
provided in this section, the Secretary shall issue the loan
under this section in accordance with subsections (b) through
(e) of section 312 of the Magnuson-Stevens Fishery Conservation
and Management Act (16 U.S.C. 1861a) and sections 53702 and
53735 of title 46, United States Code.
Subsection (c) would provide generally that,
notwithstanding section 53735(c)(4) of title 46, United States
Code, a loan under this section shall have a maturity that
expires at the end of the 45-year period beginning on the date
of issuance of the loan. Notwithstanding this general
requirement, if there is an outstanding balance on the loan
after the period described in paragraph (1) of subsection (c),
it would permit the Secretary to extend the loan under the
terms provided in this section.
Subsection (d) would provide that, notwithstanding section
312(d)(2)(B) of the Magnuson-Stevens Fishery Conservation and
Management Act (16 U.S.C. 1861a(d)(2)(B)), the fee established
by the Secretary with respect to a loan under this section
shall not exceed 3 percent of the ex-vessel value of the
harvest from each fishery for where the loan is issued.
Subsection (e) would provide generally that,
notwithstanding section 53702(b)(2) of title 46, United States
Code, the annual rate of interest an obligor shall pay on a
direct loan obligation under this section is the percent the
Secretary must pay as interest to borrow from the Treasury the
funds to make the loan. It would also provide that an
individual who holds a subloan under the loan authorized by
this section shall receive the interest rate described above on
the subloan, and may pay off the subloan at any time
notwithstanding the loan term specified in subsection (c).
Subsection (f) would prescribe certain requirements
regarding the ex-vessel landing fees charged for repayment of
the loan made under this section. It would require that the
Secretary shall set the ex-vessel landing fee as low as
possible, based on recent landings value in the fishery, to
meet the requirements of loan repayment; that the Secretary set
the fee upon issuance of the loan in accordance with the 60-day
deadline established infra; and that the Secretary set the fee
on a regular interval not to exceed every 5 years, beginning on
the date of issuance of the loan. Not later than 60 days after
the date of issuance of the loan under this section, the
Secretary would be required to recalculate the ex-vessel
landing fee based on the most recent value of the fishery.
Subsection (g) would provide that there is authorized to be
appropriated to the Secretary of Commerce to carry out this
section an amount equal to 1 percent of the amount of the loan
authorized under this section for purposes of the Federal
Credit Reform Act of 1990 (2 U.S.C. 661 et seq.).
Section 4. Deadline for referenda
This section would provide that, not later than 75 days
after the date of enactment of this Act, the National Oceanic
and Atmospheric Administration shall have completed the
referenda under section 600.1010 of title 50, Code of Federal
Regulations.
Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, the Committee states that the
bill as reported would make no change to existing law.