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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

======================================================================




        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).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       By fiscal year, in millions of dollars--
                                                             -------------------------------------------------------------------------------------------
                                                               2015   2016   2017   2018   2019   2020   2021   2022   2023   2024  2015-2019  2015-2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               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
--------------------------------------------------------------------------------------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

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
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2014   2015   2016   2017   2018   2019   2020   2021   2022   2023   2024  2014-2019  2014-2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT

Statutory Pay-As-You-Go Impact.......................      0      7      0      0      0      0      0      0      0      0      0         7          7
--------------------------------------------------------------------------------------------------------------------------------------------------------

    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.