[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
WESTERN ALASKA AND WESTERN PACIFIC COMMUNITY DEVELOPMENT QUOTA
PROGRAMS, AND H.R. 553, THE WESTERN ALASKA COMMUNITY DEVELOPMENT QUOTA
PROGRAM IMPLEMENTATION IMPROVEMENT ACT OF 2001
=======================================================================
HEARING
before the
SUBCOMMITTEE ON FISHERIES CONSERVATION, WILDLIFE AND OCEANS
of the
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
July 19, 2001
__________
Serial No. 107-50
__________
Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
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COMMITTEE ON RESOURCES
JAMES V. HANSEN, Utah, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska, George Miller, California
Vice Chairman Edward J. Markey, Massachusetts
W.J. ``Billy'' Tauzin, Louisiana Dale E. Kildee, Michigan
Jim Saxton, New Jersey Peter A. DeFazio, Oregon
Elton Gallegly, California Eni F.H. Faleomavaega, American
John J. Duncan, Jr., Tennessee Samoa
Joel Hefley, Colorado Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland Solomon P. Ortiz, Texas
Ken Calvert, California Frank Pallone, Jr., New Jersey
Scott McInnis, Colorado Calvin M. Dooley, California
Richard W. Pombo, California Robert A. Underwood, Guam
Barbara Cubin, Wyoming Adam Smith, Washington
George Radanovich, California Donna M. Christensen, Virgin
Walter B. Jones, Jr., North Islands
Carolina Ron Kind, Wisconsin
Mac Thornberry, Texas Jay Inslee, Washington
Chris Cannon, Utah Grace F. Napolitano, California
John E. Peterson, Pennsylvania Tom Udall, New Mexico
Bob Schaffer, Colorado Mark Udall, Colorado
Jim Gibbons, Nevada Rush D. Holt, New Jersey
Mark E. Souder, Indiana James P. McGovern, Massachusetts
Greg Walden, Oregon Anibal Acevedo-Vila, Puerto Rico
Michael K. Simpson, Idaho Hilda L. Solis, California
Thomas G. Tancredo, Colorado Brad Carson, Oklahoma
J.D. Hayworth, Arizona Betty McCollum, Minnesota
C.L. ``Butch'' Otter, Idaho
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
Allen D. Freemyer, Chief of Staff
Lisa Pittman, Chief Counsel
Michael S. Twinchek, Chief Clerk
James H. Zoia, Democrat Staff Director
Jeff Petrich, Democrat Chief Counsel
------
SUBCOMMITTE ON FISHERIES CONSERVATION, WILDLIFE AND OCEANS
WAYNE T. GILCHREST, Maryland, Chairman
ROBERT A. UNDERWOOD, Guam, Ranking Democrat Member
Don Young, Alaska Eni F.H. Faleomavaega, American
W.J. ``Billy'' Tauzin, Louisiana Samoa
Jim Saxton, New Jersey, Neil Abercrombie, Hawaii
Vice Chairman Solomon P. Ortiz, Texas
Richard W. Pombo, California Frank Pallone, Jr., New Jersey
Walter B. Jones, Jr., North
Carolina
------
C O N T E N T S
----------
Page
Hearing held on July 19, 2001.................................... 1
Statement of Members:
Young, Hon. Don, a Representative in Congress from the State
of Alaska.................................................. 1
Prepared statement of.................................... 3
Underwood, Hon. Robert A., a Delegate in Congress from Guam.. 4
Prepared statement of.................................... 5
Statement of Witnesses:
Alstrom, Ragnar, Executive Director, Yukon Delta Fisheries
Development Association.................................... 118
Prepared statement of.................................... 119
Asicksik, Eugene, President and Director, Norton Sound
Economic Development Corporation........................... 91
Prepared statement of.................................... 93
Balsiger, Dr. James W., Administrator, Alaska Region,
National Marine Fisheries Service, U.S. Department of
Commerce................................................... 6
Prepared statement of.................................... 9
Bush, Jeffrey, Deputy Commissioner, Department of Community
and Economic Development, State of Alaska.................. 28
Prepared statement of.................................... 30
Cotter, Larry, Chief Executive Officer, Aleutian Pribilof
Island Community Development Association................... 50
Prepared statement of.................................... 53
Crow, Morgen, Executive Director, Coastal Villages Region
Fund....................................................... 85
Prepared statement of.................................... 87
Elfring, Chris, Study Director, Committee to Review the
Community Development Quota Program, National Research
Council, and Director, Polar Research Board, National
Academy of Science......................................... 20
Prepared statement of.................................... 22
Merculief, Patience, Administrative Director and CDQ Quota
Manager, Central Bering Sea Fishermen's Association........ 78
Prepared statement of.................................... 79
Samuelsen, H. Robin, Jr., President and CEO, Bristol Bay
Economic Development Corporation........................... 61
Prepared statement of.................................... 63
Additional materials supplied:
Benton, David, Chairman, North Pacific Fishery Management
Council, Letter submitted for the record................... 46
Guthertz, Judith, Chair, Western Pacific Fishery Management
Council, Statement submitted for the record................ 40
OVERSIGHT OF THE WESTERN ALASKA AND WESTERN PACIFIC COMMUNITY
DEVELOPMENT QUOTA PROGRAMS, AND H.R. 553, THE WESTERN ALASKA COMMUNITY
DEVELOPMENT QUOTA PROGRAM IMPLEMENTATION IMPROVEMENT ACT OF 2001
----------
Thursday, July 19, 2001
U.S. House of Representatives
Subcommittee on Fisheries Conservation, Wildlife and Oceans
Committee on Resources
Washington, DC
----------
The Subcommittee met, pursuant to other business, at 11:06
a.m., in Room 1324, Longworth House Office Building, Hon. Don
Young, presiding.
STATEMENT OF THE HON. DON YOUNG, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF ALASKA
Mr. Young. The Subcommittee will come to order. Because I
have a lengthy opening statement, I will go ahead and read that
statement, and then by that time we hope to have a minority
member here.
I would like to welcome the witnesses for today's hearing,
and especially thank our guests who have traveled from Alaska
for the hearing.
This hearing will focus on three important issues. First,
the Subcommittee will review the success of Western Alaska
Company Development Quota Program. Secondly, we will look at
the progress that has been made in developing a Western Pacific
Community Development Program. And, thirdly, we will hear
testimony on H.R. 553, the Western Alaska Community Development
Quota Program Improvement Act of 2001.
As most of you know, the Western Alaska CDQ Program was
created by the North Pacific Fishery Management Council as part
of the pollock Fishery Management Plan (FMP), which was
implement in 1992. This was done as a means of bringing
economic development to the resource-poor areas of western
Alaska. Other than fisheries resources, the people of this
region did not have access to any other renewable resources.
They could only watch as large factory fleets were able to
harvest the fishery resources because entry into these
fisheries required large amounts of capital.
In 1996, with the passage of the Sustainable Fisheries Act,
the Western Alaska CDQ Program was authorized into law. And I
am pleased to take a certain amount of credit with that, along
with Harold Sparck and his vision a long, long time ago, to try
to bring some type of resource development into these
impoverished areas.
As the CDQ Program grew and proved a success, the North
Pacific Council and the Congress recognized the program's value
and added more fisheries to the CDQ program.
As the program has matured, I have carefully watched the
progress of the CDQ communities as many have become
increasingly integrated into the commercial fisheries of the
Bering Sea. As this integration has occurred, it has become
apparent that if the communities are to continue to invest in
fishing opportunities in the Bering Sea, constraints on their
ability to make timely business decisions must be removed. This
is a growing process, and we must recognize it.
I am concerned that the constraints placed on the program
by the State of Alaska, to ensure compliance with the original
intent of the program, have not kept pace with the program's
growth.
Two issues in particular have constrained the communities'
ability to exercise control over their own financial futures.
The first is the frequency of the review and allocation of
fishing quotas among the six CDQ groups. The uncertainty
surrounding an annual or biennial allocation to each CDQ group
prevents them from making long-term business decisions and is
counterproductive to the goals and intent of the original
program--economic stability for the communities.
The second constraint on the CDQ groups' future success is
the review and required concurrence by the State of Alaska for
any investment, regardless of how small or how large, even the
investment of profits earned through already-approved CDQ
projects. I am unclear where the State of Alaska believes this
authority is granted to the State. I have reviewed this. It is
originally my proposal. Never a thought that was to come to
mind, and in addition, question whether this makes sense for
the future of this program.
And for those reasons, the 106th Congress introduced H.R.
5567 to deal with the problems with the oversight of the
program. While that legislation was introduced too late in the
session to see action, I reintroduced this legislation in the
107th Congress. It had been approximately 1 year and 2 months.
This legislation is not perfect, and I will admit that, but
I believe the need for intensive oversight is here. The program
has matured to the point that neither the State of Alaska, nor
the National Marine Fisheries Service should have the ability
to approve or disapprove everything that the CDQ groups do. It
is time consuming, and allows the approval process to be
controlled by political whims and by individuals who might not
have any interest nor thought, in fact, use their little bully
pulpit for being God and deciding how things shall be done.
The Sustainable Fisheries Act also asked the National
Academy of Sciences to review the current program and to make
recommendations for the future program. I am pleased that a
representative of that review committee is here today, who will
present those recommendations. I am a little concerned that
these recommendations were made in 1999, and very frankly,
little attention has been paid to them by the agencies of the
State, which claim oversight authority for the program.
I think everyone here today understands I feel very
strongly about this program, and understand it has matured to
the point that intrusive oversight by any agency, Federal or
State, is unnecessary and should be eliminated.
This CDQ program has been incredibly successful in giving
the people of this region access to the fisheries off their
shores, in Federal waters, and has provided economic
development and educational opportunities. While the program is
beginning to show success, we are a long way from providing
long-term stable economic development for this region. This
program can get us there if allowed to continue and to mature.
I want to work with everyone here to make sure it happens.
I look forward to hearing the testimony. You can be sure I
will have questions to get this discussion moving forward, to
continue the greatness of this program.
[The prepared statement of Mr. Young follows:]
Statement of The Honorable Don Young, a Representative in Congress from
the State of Alaska
I would like to welcome our witnesses for today's hearing and
especially thank our guests who have traveled from Alaska for the
hearing.
This hearing will focus on three important issues. First, the
Subcommittee will review the successes of the Western Alaska Community
Development Quota Program.
Secondly, we will look at the progress that has been made in
developing a Western Pacific Community Development Program.
Thirdly, we will hear testimony on H.R. 553, the Western Alaska
Community Development Quota Program Implementation Improvement Act of
2001.
As most of you know, the Western Alaska CDQ program was created by
the North Pacific Fishery Management Council as part of the pollock
Fishery Management Plan (FMP), which was implemented in 1992. This was
done as a means of bringing economic development to the resource-poor
areas of western Alaska. Other than fishery resources, the people of
this region did not have access to other renewable resources. They
could only watch as the large factory fleets were able to harvest the
fishery resources because entry into these fisheries required large
amounts of capital.
In 1996, with the passage of the Sustainable Fisheries Act, the
Western Alaska CDQ program became authorized in law. I am pleased to
take a certain amount of credit for that action.
As the CDQ program grew and proved its success, the North Pacific
Council and Congress recognized the program's value and added more
fisheries to the CDQ program.
As the program has matured, I have carefully watched the progress
of the CDQ communities as many have become increasingly integrated into
the commercial fisheries of the Bering Sea. As this integration has
occurred, it has become apparent that if the communities are to
continue to invest in fishing opportunities in the Bering Sea,
constraints on their ability to make timely business decisions must be
removed.
I am concerned that the constraints placed on the program by the
State of Alaska, to ensure compliance with the original intent of the
program, have not kept pace with the program's growth.
Two issues in particular have constrained the communities' ability
to exercise control over their own financial futures. The first is the
frequency of the review and allocation of fishing quotas among the six
CDQ groups. The uncertainty surrounding an annual or biennial
allocation to each CDQ group prevents them from making long-term
business decisions and is counter productive to the goals and intent of
the original program - economic stability for the communities.
The second constraint on the CDQ groups' future success is the
review and required concurrence by the State of Alaska for any
investment, even the investment of profits earned through already
approved CDQ projects. I am unclear where the State of Alaska believes
this authority is granted to the State, and in addition, question
whether this makes sense for the future of the CDQ program.
For these reasons, in the 106' Congress, I introduced H.R. 5565, to
deal with some of the problems with the oversight of the CDQ program.
While that legislation was introduced too late in the Congress to see
action, I reintroduced the legislation in the 107` Congress - H.R. 553.
This legislation may not be perfect, but I believe the need for
intensive oversight is gone. The program has matured to the point that
neither the State of Alaska nor the National Marine Fisheries Service
should have the ability to approve or disapprove everything that the
CDQ groups do. It is time consuming, it allows the approval process to
be controlled by political whims, and is unnecessary.
The Sustainable Fisheries Act also asked the National Academy of
Sciences to review the current program and to make recommendations for
the future of the program. I am pleased that a representative of that
review committee is here today and will present these recommendations.
I am a little concerned that these recommendations were made in 1999
and little attention has been paid to them by the agencies which claim
oversight authority over the program.
I think everyone here today understands that I feel the CDQ program
has matured to the point that intrusive oversight by any agency -
Federal or State - is unnecessary and should be eliminated.
This CDQ program has been incredibly successful in giving the
people of this region access to the fisheries off their shores, and has
provided economic development and educational opportunities. While the
program is beginning to show success, we are a long way from providing
long-term, stable economic development for this region. This program
can get us there if allowed to continue and to mature. I want to work
with everyone here to make sure that happens.
I look forward to hearing, the testimony and you can be sure I will
have questions to get this discussion moving forward for the good of
the CDQ program.
______
Mr. Young. I will now recognize the ranking member, Mr.
Underwood, to make a statement, and then I will welcome the
first panel.
Mr. Underwood.
STATEMENT OF THE HON. ROBERT A. UNDERWOOD, A DELEGATE IN
CONGRESS FROM GUAM
Mr. Underwood. Thank you, Mr. Chairman.
It is no secret that I am a firm supporter of local rights
and capabilities when it comes to resources management and
uses. When the Sustainable Fisheries Act was passed in 1996,
the creation of the Alaska and Western Pacific Community
Development Programs gave us all hope that native people would
be able to benefit from, and gain access to, natural resources,
access that has been slowly denied to them, for a variety of
reasons, over time.
The North Pacific Fishery Management Council took the
mandate given to it and began a program bringing new access and
rights to the native people in the region. The State of Alaska
took an interest and also became involved in the program. A
study by the National Academy of Sciences, which has been
commissioned by Congress, has been completed, and finds the
Alaska program to be, in general, working successfully to
achieve the goals set for it, except for Mr. Young's comment,
which I accept. Money is being brought into the native
communities, reinvestment is taking place in the fishing
industry, and education and prospects are increasing for the
young people.
But what about the Western Pacific Program? This was
authorized as well in the Sustainable Fisheries Act, but no
program has been created, no money has been brought into the
native communities, no reinvestment in fishing capability has
taken place. What is this about? I hope that NMFS is prepared,
in testifying today, to talk not only about the success and the
problems associated with the Alaska program, but also about the
lack of a program in the Western Pacific.
Western Pacific fisheries are important. The native
communities of the Western Pacific are important as well. A
program should be created which utilizes the knowledge of the
local communities, while allowing them access to traditional
resources and the ability to utilize these resources in a way
that is beneficial to their communities. Any program in Alaska
or the Western Pacific must have a mechanism for community
input and for adapting to new situations and to new needs, both
within and outside the program.
Thank you, Mr. Chairman, and I look forward to hearing from
these witnesses.
[The prepared statement of Mr. Underwood follows:]
Statement of The Honorable Robert Underwood, a Delegate in Congress
from Guam
Thank you, Chairman Gilchrest. It is no secret that I am a firm
supporter of local rights and capabilities when it comes to resources
management and uses. When the Sustainable Fisheries Act was passed in
1996, the creation of the Alaska and Western Pacific Community
Development Programs gave us all hope that native people would be able
to benefit from, and gain access to, natural resources. Access that had
been slowly denied to them, for a variety of reasons, over time.
The North Pacific Fishery Management Council took the mandate given
to it and began a program, bringing new access and rights to the native
people in the region. The State of Alaska took an interest and also
became involved in the Program in a positive way. The Study by the
National Academy of Sciences, which had been commissioned by Congress,
has been completed and finds the Alaska program to be, in general,
working successfully to achieve the goals set out for it. Money is
being brought into the native communities, reinvestment is taking place
in the fishing industry, and education and prospects are increasing for
the young people.
But what about the Western Pacific Program? This was authorized as
well in the Sustainable Fisheries Act. But no program has been created,
no money has been brought into the native communities, no reinvestment
in fishing capability has taken place. Why is this? I hope that NMFS is
prepared, in testifying today, to talk not only about the success of
the Alaskan program, but also about the lack of a program in the
Western Pacific.
Western Pacific fisheries are important. The native communities of
the Western Pacific are important. A Program should be created which
utilizes the knowledge of the local communities while allowing them
access to traditional resources and the ability to utilize these
resources as they see fit. Any program in Alaska or the Western Pacific
must have a mechanism for community input and for adapting to new
situations and to new needs both within and outside the Program. Thank
you, Mr. Chairman, and I look forward to hearing from these witnesses.
______
Mr. Young. I thank the gentleman. Thanks to Bob for being
here too. I appreciate it very much. And by the way, you have a
good point, and we will see if we can, as we review this, maybe
crank them up a little bit on the Western Pacific.
Mr. Underwood. Appreciate it.
Mr. Young. All right, thank you.
We will now call Panel Number 1. Dr. Jim Balsiger, Ms.
Chris Elfring, and Mr. Jeffrey Bush. And I bet you, Mr. Bush,
is that Jeb Bush? Is that--I think we had better leave at
Jeffrey, all right? That would be good enough. And we will
start out in the order which I announced them. Doctor, you are
first.
STATEMENT OF JIM BALSIGER, ALASKA REGIONAL ADMINISTRATOR,
NATIONAL MARINE FISHERIES SERVICE
Mr. Balsiger. Mr. Chairman and members of the Subcommittee,
thank you for inviting the National Marine Fisheries Service to
this hearing on the amendment of the Magnuson-Stevens Fishery
Conservation and Management Act regarding the community
development programs.
I am Jim Balsiger, Alaska Regional Administrator for the
National Marine Fisheries Service and the National Oceanic and
Atmospheric Administration in the Department of Commerce.
The Western Alaska Community Development Quota Program was
created in 1992 to provide fishermen, who resided in Western
Alaska an opportunity to participate on more favorable terms in
the Bering Sea and Aleutian Island fisheries, and to diversify
their local economies.
Currently, 65 communities with 27,000 inhabitants located
near the Bering Sea coast or on islands in the Bering Sea, are
eligible to participate in the CDQ program. These 65
communities have formed six nonprofit corporations called CDQ
groups.
In the last decade CDQ operations have increased
significantly. Several species other than pollock are now
managed under CDQs. Specific allocations of Bering Sea and
Aleutian Islands groundfish and crab have been assigned to the
CDQ Program. And in 1998, pollock CDQ allocation was increased
from 7-1/2 percent to 10 percent. As a result, by 2000, the
year 2000, about 180,000 tons of groundfish, halibut and crab
were allocated to the CDQ program, and the six CDQ groups had
total revenues of about $63 million. CDQ groups have
accumulated assets worth approximately $187 million, including
ownership of small processing plants, catcher vessels, and
catcher processors that participate in the groundfish, crab,
salmon and halibut fisheries.
The CDQ groups have used their CDQ allocations to develop
local fisheries, invest in a wide range of fishing businesses
outside the communities, and to provide residents with
education, training and jobs in the fishing industry.
Thus the CDQ Program has grown and matured. But for some of
the CDQ groups, this maturity also has brought the desire for
increased autonomy and reduced government oversight. Congress
recognized the need to evaluate the CDQ Program, and in its
1999 report, the Natural Resource Council concluded that the
CDQ Program appears on track to accomplishing the goals set out
in the authorizing legislation. The NRC report made a number of
recommendations, the most important of which deal with the role
and the extent of government oversight in the CDQ Program, the
CDQ allocation process, and the ability to invest in non-
fisheries related projects.
More recently, the North Pacific Council recognized the
need to evaluate the CDQ Program and appointed a CDQ Policy
Committee early in 2001. The committee will prepare an analysis
of a number of issues, including many of the same issues
addressed in the NRC report and in H.R. 553.
The CDQ Program is jointly managed by the State of Alaska
and NMFS, with the State primarily responsible for the day-to-
day administration and oversight of the economic development
aspects of the program, and for recommending CDQ allocations.
NMFS and the Council, on the other hand, are primarily
responsible for management of the groundfish and halibut CDQ
fisheries, and for general oversight of allocations and
economic development issues.
H.R. 553 would change the relationship between the State
and NMFS in making CDQ allocation decisions and in the
management of the economic development portion of the CDQ
Program. Specifically, it would give more direct responsibility
to NMFS for determining harvest shares, and would reduce the
authority and responsibility of the State.
The CDQ allocation process is the subject of debate in a
number of forums, including here in Congress with H.R. 553. In
addition, the CDQ allocation process will be addressed in
Federal Court, possibly sometime later this fall or winter. In
this case, NMFS is being sued by APICDA, one of the CDQ groups,
who contend that NMFS cannot defer authority for CDQ
allocations to the State, that the evaluation criteria used for
CDQ allocations must be published in NMFS regulations, and that
NMFS much make an independent judgment about how to apply
specific evaluation factors to make CDQ allocations.
H.R. 553 would limit government oversight to investments
funded by revenues received as royalties from CDQ allocations.
However, current regulations require government oversight over
all CDQ investments made, regardless of the source of funds.
NMFS regulations currently require that CDQ groups invest in
fisheries-related projects. In addition, H.R. 553 would specify
that the purpose of the CDQ Program is to afford eligible
communities a fair and equitable opportunity to participate in
Bering Sea fisheries, and to assist eligible communities to
achieve sustainable long-term, diversified local economic
development.
H.R. 553 would amend the community eligibility criteria to
remove the requirement that a community meet criteria developed
by the Governor of Alaska, approved by the Secretary, and
published in the Federal Register. In addition, the bill would
limit CDQ Program eligibility in communities that meet all of
the current MSA eligibility criteria and were members of a CDQ
group at the time that H.R. 553 is signed into law.
NMFS supports the CDQ Program. Through this program,
economic opportunities available to residents of Western Alaska
have been improved in an area of Alaska that desperately needed
that economic opportunity. We can work with the existing
program, or if in its wisdom, Congress change the program, we
can work with that. However, this program has significant
implications to Western Alaska communities, and we believe it
is well worth the time and effort to carefully consider all
aspects of the program.
The Council is currently--the North Pacific Fishery
Management Council is currently engaged in an ongoing review
process, which we support. A full analysis of all the issues
regarding implementing and managing the program will serve to
identify major problems and alternative solutions to ensure
that the program meets it goals.
We will work with the Council in every was possible to
ensure that their analysis and recommendations comply with
legal requirements, and can be effectively implemented by NMFS
and the State.
The Council is considering all major aspects or questions
about the program, such as appropriate roles for NMFS and the
State, criteria for allocations, the number and content of
evaluation criteria, CDQ group generated criteria, and
investment in non-fisheries related projects.
Mr. Chairman, that concludes my testimony. Again, I want to
thank you for the opportunity to talk to you today and discuss
this issue. The administration looks forward to working with
you and other members of the Committee on this and other
fisheries-related issues in the 107th Congress. Prepared to
respond to any questions you might have.
[The prepared statement of Mr. Balsiger follows:]
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Mr. Young. Thank you, Doctor. And when the panel is
finished, we do have some questions, but thank you very much.
Chris, you are up. Thanks for appearing today too.
STATEMENT OF CHRIS ELFRING, STUDY DIRECTOR, NATIONAL RESEARCH
COUNCIL'S COMMITTEE TO REVIEW THE COMMUNITY DEVELOPMENT QUOTA
PROGRAM
Ms. Elfring. Good morning, Mr. Chairman and members of the
Subcommittee. I would also like to thank you for the
opportunity to speak about the Community Development Quota
Program.
My name is Chris Elfring. I am both the Director of the
Polar Research Board, and a Study Director with the Ocean
Studies Board at the National Academy of Sciences.
In the Magnuson-Stevens Fishery Conservation and Management
Act of 1996, Congress mandated that the academies review the
CDQ Program. I served as the staff person supporting the
Committee that was put together to accomplish the task. The
Committee consisted of 10 volunteers with expertise in fields
ranging from marine ecology to fisheries economics. The
Committee's members spent about 18 months in 1998 and '99,
talking with people, gathering data, and deliberating on the
strengths and weaknesses of the program. They released their
report, as you noted, in 1999. My testimony today is an
overview of the main findings of that study. My written
testimony provides more detail, and I have also given staff a
number of additional copies of the full report.
When the CDQ Program was implemented in late 1992, it
allocated a portion of the annual harvest of certain commercial
fish species directly to coalitions or villages, which because
of geographic isolation and dependence on subsistence
lifestyles, it had limited economic opportunities. Our
Committee's task was to judge whether the program was making
progress in accomplishing its goals.
Based on our study, the Committee concluded that the CDQ
Program is an innovative attempt to encourage community
development in Western Alaska's coastal communities. although
the program is not perfect, the Committee believes that most of
the problems can be attributed to the newness of the program
and the inexperience of participants. We came away optimistic
that overall the program was on the right track.
Because the program was still relatively new at the time of
our evaluation, we didn't have the data necessary to do any
kind of long-term trend analysis, and thus our evaluation was
more of a snapshot of the status of the program.
We found the six CDQ groups to be of varying sizes and
philosophies, and they took fairly different approaches to
harvesting their quota and allocating the returns. Although the
six groups were not equally successful, the Committee found
significant examples of benefits accruing to the communities.
Benefits included direct revenues from the fishery, as well as
employment and the development of fishing infrastructure such
as docks.
All six CDQ groups incorporated some education and training
component for residents, although to differing degrees and with
different emphases.
The State of Alaska also has played its part relatively
effectively. It was efficient in reviewing the community
development plans, monitoring how the communities progressed in
responding to problems. Some of these responses, like
reallocating quota share among communities, have been
controversial, as might be expected.
Perhaps the greatest weakness of the CDQ Program was a lack
of open consistent communication between the CDQ groups and the
communities they represent, particularly a lack of mechanisms
for substantial input from the communities into the governance
structures. There has also been a lack of outreach by the State
to the communities to help ensure that the communities and
residents were aware of the program and how to participate.
Some debate centered on uncertainty about intended
beneficiaries of the program. It is unclear whether the program
is intended primarily for the native Alaskan residents of the
participating communities, or if not, whether the governance
structure should be modified to ensure that non-native
participation is possible. Similarly, there is some
dissatisfaction among people within the fishing industry who
are not involved, either directly or as partners of CDQ groups,
and who believe that the program unfairly targets a particular
population for benefits.
The Committee also commented on the requirement that all
reinvestment of profits be only in fishery-related activities.
Although this is a logical initial requirement, since the
objective is to help the communities establish a viable
presence in a capital-intensive industry, the Committee
concluded that over time there could be more flexibility in the
rules governing allocation of benefit.
The main goal of the CDQ Program, community development, is
by definition a long-term goal. Thus, there is a need for a set
and dependable program duration and the certainty that this
brings to oversight and management. This would allow CDQ groups
to develop sound business plans and reduce pressures to seek
only short-term results.
Another long-term issue is environmental stewardship. The
CDQ Program is in large part about economic development, but
economic sustainability is dependent on long-term assurance of
a sound resource base. To be successful over the long term, the
program will need to give more emphasis to conservation issues.
Finally, while our report reviewed the CDQ Program in a
broad way, there is a need for periodic detailed review of the
program, perhaps every 5 years. This could be done by the State
of Alaska. Such a review would look in depth at what each group
had been doing, the nature and extent of the benefits, and how
funds were used. Care must be taken not to use strictly
financial measures of success. Profits gained from harvest and
numbers of local people trained are valuable measures, but they
must be seen within the full context of the program.
In summary, the CDQ Program, like any new program with
complex goals, had some problems in its start-up period. The
Committee's review found a need for continued attention to
establishing clear goals, defining eligible participants, and
intended benefits, setting an appropriate duration and
establishing rules for participation. But overall, the
Committee's evaluation of the program was positive. For a
relatively new program, it appears to be en route to
accomplishing the goals set out in the authorizing legislation,
development of increased commercial fishing activities in the
participating communities, creation of job opportunities, and
improvement of the local fishing infrastructure.
Thank you for your attention.
[The prepared statement of Ms. Elfring follows:]
Statement of Chris Elfring, Polar Research Board, Ocean Studies Board,
Division on Earth and Life Studies, National Academy of Sciences
Good morning Mr. Chairman and members of the Subcommittee. Thank
you for this opportunity to speak to you about the Community
Development Quota program. My name is Chris Elfring and I am Director
of the Polar Research Board at the National Academies. In addition to
my role as director of the PRB, I served as the study director (lead
staff person) for the National Research Council's Committee to Review
the Community Development Quota Program, which was conducted in under
the oversight of the NRC's Oceans Studies Board. As you know, the
National Research Council is the operating arm of the National Academy
of Sciences, National Academy of Engineering, and Institute of
Medicine, and was chartered by Congress in 1863 to advice the
government on matters of science and technology.
In the Magnuson-Stevens Fishery Conservation and Management Act of
1996, Congress mandated that the National Academy of Sciences review
the CDQ program in Alaska and evaluate its applicability in the western
Pacific. In response, we put together a committee of 10 volunteer
experts who spent about 18 months talking with people, gathering data,
and deliberating on the strengths and weaknesses of what was then a
relatively new program. The committee produced its final report,
complete with conclusions and recommendations, in 1999. My testimony
today provides an overview of the findings of that study. My written
testimony provides additional detail and I've also provided staff with
copies of the full final report.
STRENGTHS AND WEAKNESSES OF THE CDQ PROGRAM
The Community Development Quota (CDQ) program was implemented in
December 1992 by the North Pacific Fishery Management Council. The CDQ
program allocates a portion of the annual fish harvest of certain
commercial species directly to coalitions of villages, which because of
geographic isolation and dependence on subsistence lifestyles have had
limited economic opportunities. The program is an innovative attempt to
accomplish community development in rural coastal communities in
western Alaska, and in many ways it appears to be succeeding. The CDQ
program has fostered greater involvement of the residents of western
Alaska in the fishing industry and has brought both economic and social
benefits. The program is not without its problems, but most can be
attributed to the newness of the program and the inexperience of
participants. Overall the program appears on track to accomplishing the
goals set out in the authorizing legislation: to provide the
participating communities with the means to develop ongoing commercial
fishing activities, create employment opportunities, attract capital,
develop infrastructure, and generally promote positive social and
economic conditions.
Because the program was still relatively new at the time of our
evaluation (1998-1999), the data necessary for detailed evaluation were
limited and it was not yet possible to detect long-term trends. The six
CDQ groups, organized from the 56 eligible communities (later expanded
to 57), were of varying sizes and took varying approaches to harvesting
their quota and allocating the returns generated. Although not all
groups have been equally successful, there were significant examples of
real benefits accruing to the communities. All six groups saw creation
of jobs as an important goal and stressed employment of local residents
on the catcher-processor vessels and shoreside processing plants. All
incorporated some kind of education and training component for
residents, although to different degrees and with different emphases.
Another benefit of the program is that the periodic nature of
employment in the fishing industry preserves options for the local
people to continue some elements of their subsistence lifestyles. The
CDQ program generates resources that give local communities greater
control of their futures. The State of Alaska also has played its part
relatively effectively it was efficient in reviewing the Community
Development Plans, monitoring how the communities progressed, and
responding to problems. Some of these responses, like reallocating
quota share among communities, have been controversial, as might be
expected.
Perhaps the greatest weakness of the CDQ program as implemented is
a lack of open, consistent communication between the CDQ groups and the
communities they represent, particularly a lack of mechanisms for
substantial input from the communities into the governance structures.
There has also been a lack of outreach by the state to the communities
to help ensure that the communities and their residents are aware of
the program and how to participate. For the CDQ program to be effective
there must be a clear, well-established governance structure that
fosters exchange of information among the groups' decisionmakers, the
communities they represent, and the state and federal personnel
involved in program oversight.
Some debate has centered on uncertainty about the intended
beneficiaries of the program. It is unclear whether the program is
intended primarily for the Native Alaskan residents of the
participating communities or, if not, whether the governance structures
should be modified to ensure that non-Native participation is possible.
Similarly, there has been dissatisfaction among segments of the fishing
industry that are not involved, either directly or as partners of CDQ
groups, who believe that the program unfairly targets a particular
population for benefits. This conflict is inevitable, given that the
CDQ program is designed to provide opportunities for economic and
social growth specifically to rural western Alaska. This policy choice
specifically defines those to be included and cannot help but exclude
others.
Although it is logical to require initially that all reinvestment
of profits be in fishery-related activities because the initial
objective of the CDQ program is to help the participating communities
to establish a viable presence in this capital intensive industry, over
time there should be more flexibility in the rules governing allocation
of benefits perhaps still requiring most benefits to be reinvested in
fishing and fisheries-related activities but allowing some portion to
go to other community development activities. This will better suit the
long-term goal of the program, which is development of opportunities
for communities in western Alaska.
The main goal of the CDQ program community development is by
definition a long-term goal. Thus there is a need for a set and
dependable program duration and the certainty that brings to oversight
and management. This will allow CDQ group decisionmakers to develop
sound business plans and will reduce pressures to seek only short-term
results. However, calling for the program to be long-term does not mean
it must go on indefinitely nor that it must never change. Periodic
reviews should be conducted, and changes made to adapt rules and
procedures as necessary. There can be a balance between certainty and
flexibility if the program is assured to exist for some reasonable time
(e.g., ten years) and if major changes in requirements are announced in
advance with adequate time to phase in new approaches (e.g., five
years). The appropriate time scales will of course vary with the nature
of the change, with minor changes requiring little notice and major
changes requiring enough time for decisionmakers and communities to
plan and adjust.
Another long-term issue is environmental stewardship. The CDQ
program as currently structured is, in large part, about economic
development, but economic sustainability is dependent upon long-term
assurance of a sound resource base the fisheries. Thus, to be
successful over the long-term the CDQ program will need to give more
emphasis to environmental considerations. While this report reviews the
CDQ program in a broad way, there remains a need for periodic, detailed
review of the program over the long term (perhaps every five years),
most likely conducted by the State of Alaska. Such a review should look
in detail at what each group has accomplished the nature and extent of
the benefits and how all funds were used. For a program like this, care
must be taken not to use strictly financial evaluations of success.
Annual profits gained from harvest and numbers of local people trained
are valuable measures, but they must be seen within the full context of
the program. It is a program that addresses far less tangible elements
of ``sustainability,'' including a sense of place and optimism for the
future.
LESSONS FOR OTHER REGIONS
What emerges from a review of the western Alaska CDQ program is an
appreciation that this program is an example of a broad concept adapted
to very particular circumstances. In Alaska, where there were clearly
definable communities, the fishery was already managed by quota with a
portion of the quota held in reserve, and the communities had previous
experience working within corporate-like structures. Others interested
in the application of CDQ-style programs are likely to have different
aspirations and different contexts. Wholesale importation of the Alaska
CDQ program to other locales is likely to be unsuccessful unless the
local context and goals are similar.
One region where the expansion of the CDQ concept has been
considered is in the western Pacific, but such an expansion would need
to be approached cautiously because the setting and communities are
very different.
The major differences between the fisheries and communities of the
two regions are: the general lack of management by quota or total
allowable catch (TAC) in the western Pacific; the pelagic nature of the
valuable fisheries in the region; and the lack of clear, geographically
definable ``native'' communities in most parts of the region.
Application of the CDQ program to the western Pacific would require the
Western Pacific Regional Fishery Management Council to define realistic
goals that fit within council purposes and plans. Definitions of
eligible communities would need to be crafted carefully so the
potential benefits accrue in an equitable fashion to native fishermen.
Any new program, especially one with the complex goal of community
development, should be expected to have a start-up period marked by
some problems. During this early phase, special attention should be
given to working out clear goals, defining eligible participants and
intended benefits, setting appropriate duration, and establishing rules
for participation. There should be real efforts to communicate the
nature and scope of the program to the residents of any participating
communities, and to bring state and national managers to the villages
to facilitate a two-way flow of information. In addition to these
operational concerns, those involved the residents and their
representatives must develop a long-term vision and coherent sense of
purpose to guide their activities.
CONCLUSIONS AND RECOMMENDATIONS
Here are the detailed conclusions and recommendations as presented
in the committee's final report, ``The Community Development Quota
Program in Alaska'' (National Research Council, 1999).
Conclusion 1: Community Development Strategies
Although the Community Development Plans developed by the different
CDQ groups are similar in some important respects, the specific
elements included vary considerably. Each CDQ group derives income from
the large-scale pollock fishery through royalties and employment, and
each seeks to develop nearshore fisheries using smaller vessels. The
diversity of infrastructural investments, training programs, and
financial strategies adopted by the CDQ group does, in our judgment,
appropriately reflect varying circumstances and reasoned approaches to
diverse problems. To some extent the development plans were shaped by
uncertainty about the duration of the CDQ program and by the
restriction that the CDQ plans must focus on fishery development. For
example, the uncertainty may have encouraged at least one CDQ group to
seek a quick financial gain through sale of their processing quota
rights in perpetuity. We found this permanent conveyance to be
inconsistent with the philosophy and intent of the CDQ program.
Finally, the economic and cultural development of these communities may
at times be advanced through non-fishery employment or investments.
Hence, we found no strong reason to require communities to use funds
generated from their CDQs to invest only in fisheries.
Recommendations
LWe recommend that the State of Alaska prohibit permanent
conveyance of community development quotas into the hands of commercial
enterprises outside the communities. An important aspect of the
community development sought in western Alaska is the continuing and
direct involvement of local people in fisheries of the Bering Sea. Sale
of the CDQs to commercial interests outside the communities will create
an inappropriate separation of the people from the regional resources.
LWe recommend that the restriction that CDQ revenues to be
invested only in fishery-related activities should be removed, at least
for some portion of the revenues. Many of the communities will find
that fishery investments are still the ones they wish to undertake.
However, since community development is broader than fishery
development, funds should also be available for other activities that
will enhance community infrastructure or land-based economic activity.
This broadening of the allowed investments would also remove
uncertainty about whether particular investments are indeed ``fishery
related'' and thus allowable under current rules.
Conclusion 2: Participation and Benefits
The CDQ program has had an important positive economic impact on
western Alaskan communities. Significant revenues have been generated
and employment has been enhanced, especially for the mobile members of
the community. In addition, the general educational and training
programs have been as beneficial as specific fisheries employment.
Recommendations
LThe Community Development Plans (CDPs) should be careful
to balance the mix of local fishing with wage-earning opportunities
with fishing partners. This is important because local fishery
development can occupy less mobile village residents, while wage-
earning opportunities in the industrial fleet are especially important
for younger adults. A focus on local fisheries opportunities, where
they exist, for permanent village residents will more closely tie the
CDQ program to the village economics.
LTo improve the effectiveness of developing a well-trained
workforce, the CDQ groups need a strategic plan for education and
training programs. This would include internships and technical
training for direct employment with the industrial fishing partners of
the CDQ groups, formal university education in fields pertinent to the
development goals of native residents, and training of administrators
and board members of CDQ organizations. The ultimate objectives would
be to develop both the business acumen and labor productivity of
village residents.
Conclusion 3: Governance and Decision-Making
The CDQ groups were given a unique governance structure that
includes elements of both State and federal oversight, which is
appropriate given the goals of the program. But the extensive and
variable criteria used by the State and federal governments in
allocating quota among the groups causes decisionmaking to be
inconsistent and difficult to evaluate. That the lists of evaluation
criteria are not entirely consistent with one another in either content
or order of listing presents additional opportunity for confusion among
the CDQ groups and the public in evaluating the logic and fairness of
the decisions made by the governor and ratified by the Secretary of
Commerce.
Recommendations
LState and federal criteria for the allocation of quota
based on performance and plans should be less complicated than they are
and should also be consistent with one another. We recommend that
changes be made to simplify the criteria, in consultation with the CDQ
groups.
LThe committee notes that the criteria currently are used
for two purposes: to allocate quota equitably and to encourage good
management. One way to clarify some of the confusion created by using
the criteria in this way would be to separate these two purposes into
two allocations of quota. A ``foundation quota'' would address issues
of equity and a ``performance quota'' would address issues of
performance. The foundation quota (likely more than half of the
allocation) would be allocated on measures of population, income,
employment, and proximity to the fishery being allocated. The
performance quota (the remainder) would be allocated based on clearly
defined performance measures such as accomplishments of the CDP goals,
compliance with fishing regulations (e.g., regarding bycatch), quality
of community development plans, and so forth.
LOne way to improve responsiveness of the CDQ groups'
managers to the communities would be to improve communication. Although
the idea of locating the headquarters of the CDQ groups near potential
business partners and the State government may have made sense in the
early years of the program, as it matures and the management proves its
business capability, relocation of the headquarters to the communities
may have significant benefits in terms of responsiveness to the desires
of the community members.
LCommunication would be further improved if the
confidentiality rules and the rules for making information available to
constituents were improved. NMFS and the state needs to collaborate to
resolve any potential conflicts between state laws regarding the
confidentiality of financial data and the evaluation of the CDQ program
objectives. Information on the number of people employed by the program
and the earnings in each of the communities should be provided.
LAlthough some of the CDQ groups have created newsletters,
a requirement that newsletters to communicate with constituents, town
meetings, or other forms of communication appropriate to reach
community members might be a helpful step in improving communication in
the communities.
Conclusion 4: Development of Human Resources
Education, training, and other activities to develop human
resources in the participating communities are an explicit part of the
CDQ program mandate and a key element in ensuring the program's success
because stable, healthy communities depend as much on people as on
economics.
Recommendations
LTo be truly effective, the CDQ groups must have education
and training elements. These elements should not be haphazard, but
carefully planned and coordinated so they meet community needs. Both
vocational training and support for higher education will help members
of the community acquire the skills and knowledge needed for more
advanced technical and managerial positions. The number of people
receiving education and training should be provided.
LCDQ groups need to do a better job disseminating
information that describes the educational and training opportunities
open to the use of program funds. They also need to improve their
recordkeeping of education and training initiatives so the results can
be monitored over time. A common framework for recording and reporting
their efforts would be useful.
Conclusion 5: Program Duration
The CDQ program must be a long-term program because it deals with a
long-term issue: development of healthy, sustainable communities in
coastal Alaska. Long-term economic development requires stability in
the underlying policy base so decision-makers can make choices that
balance current and future needs.
Recommendations
LThe original CDQ program was a three-year trial. It was
subsequently extended and then made a more permanent part of the
fishery management system with the passage of the Magnuson-Stevens
Fishery Conservation Act reauthorization in 1996. This program has been
successful in bolstering community development in western Alaska. It
has passed a crucial point in its evolution and we should expect the
allocation of harvests to the CDQ groups to become a long-standing, if
not permanent, feature of the federal fishery management system in the
North Pacific.
LThe committee recommends that the CDQ program should be
reviewed on a periodic basis to determine if the preliminary trends
observed by the committee continue in the future. Reviewing the CDQ
program in another five years may provide important additional
information on the effects of the program and provide valuable
suggestions for its management.
Conclusion 6: Economic Sustainability and Environmental Stewardship
Economic sustainability implies programs and policies that offer
the greatest assurance of economic options over the long-term to a
population that chooses to remain in specific locations. That is, given
alternative economic futures for a people (or for a community),
economic sustainability would entail choosing that future with the
lowest probability of inducing economic decline as measured by a range
of indicators. Economic sustainability is but one part of the larger
problem of ecological and socio-cultural sustainability. Clearly,
communities that squander their local environmental resources (or that
fail to maintain cultural and social processes and structures) will be
incapable of economic sustainability. Large-scale commercial fishing
activities can have negative impacts on ecosystems, either
independently or through interaction with natural fluctuations. Because
the CDQ program is designed specifically to increase participation in
fisheries activities and at the same time improve the long-term
economic conditions of the participating communities, greater emphasis
should be given to environmental stewardship.
Recommendations
LConcern for the long-term health of the Bering Sea
ecosystem needs to feature more prominently in the CDQ program. Local
concerns about environmental stewardship need to be able to be
expressed in a meaningful way throughout the program's management
structure, beginning with effective communication of local concerns to
the CDQ group management and continuing on up through the Council
process. The quota allocation process can be used to increase the
emphasis on environmental stewardship.
LEconomic sustainability is dependent upon sound
environmental stewardship. In order for the CDQ program to help build a
sustainable economy in the region, it is imperative that the underlying
resource base-the fisheries-be used in ways that are sustainable over
the long-term. This will require explicit, in-depth, continuing
analysis of the condition or health of the fishery resource and
management that can respond and adapt to changes in this condition.
Conclusion 7: Relevance of the CDQ Experience to the Western Pacific
The CDQ program was designed specifically to address the issues and
environment of western Alaska and thus is not appropriate, in its
current form, for the Western Pacific Region. If similar goals such as
inclusion of native communities in fisheries are desired in the region,
a program could be tailored to the conditions of the western Pacific,
although fisheries in the region are not now generally managed by
quota. There should be real efforts to communicate the nature and scope
of the program to the residents of the participating villages to
facilitate a two-way flow of information. In addition, geographic
criteria for eligibility would be difficult to apply because the
communities are widely dispersed. As the Western Pacific Regional
Fishery Management Council considers the Alaskan CDQ experience and the
differential performance of the CDQ groups, it should recognize that
CDQs constitute only one possible model for community-development in
fisheries. But if CDQ-type programs are seriously considered for the
western Pacific the committee recommends:
LCDQ-type programs in the western Pacific would need to
define realistic goals that fit within Council purposes and plans, and
definitions of eligible communities would need to be crafted carefully.
LTo assist in the design of such programs, lessons can be
learned from detailed study of the Alaskan experience related to
program structure, costs, oversight, performance evaluation, and other
administration issues.
FINAL THOUGHTS
What emerges from a review of the western Alaska CDQ program is an
appreciation that the program is an example of a broad concept adapted
to very particular circumstances. Other interested in the application
of CDQ-style programs are likely to have different aspirations and
different contexts. Wholesale importation of the Alaskan CDQ program to
other locales is likely to be unsuccessful unless the local context and
goals are similar.
Any new program, especially one with the complex goal of community
development, should be expected to have a start-up period marked by
some problems. During this early phase, special attention needs to be
given to work out clear goals, define eligible participants and
intended benefits, set appropriate duration, and establish rules for
participation. In addition to these operational concerns, those
involved--the residents and their representatives--must develop a long-
term vision and coherent sense of purpose to guide their activities.
For the CDQ program to be effective there must be a clear, well-
established governance structure that fosters exchange of information
among the groups' decision-makers, the communities they represent, and
the state and federal personnel involved in program oversight. Greater
openness of information is critical, as is regular detailed review.
Although it is logical to require initially that all reinvestment
of profits be only in fishery-related activities because the initial
objective of the CDQ program is to help the participating communities
establish a viable presence in this capital-intensive industry, over
time there should be more flexibility in the rules governing allocation
of benefits--perhaps still requiring most benefits to be reinvested in
fishing and fisheries-related activities but allowing some portion to
go to other community development activities. This will better suit the
long-term goal of the program, which is development of opportunities
for communities in western Alaska.
The main goal of the CDQ program--community development--is by
definition a long-term goal. Thus, there is a need for a set and
dependable program duration and the certainty that it brings to
oversight and management. This will allow CDQ group decision-makers to
develop sound business plans and reduce pressures to seek only short-
term results. However, calling for the program to be long-term does not
mean it must go on indefinitely nor that it must never change. Periodic
reviews should be conducted, and changes made to adapt rules and
procedures as necessary. There can be a balance between certainty and
flexibility if the program is assured to exist for some reasonable time
and if major changes in requirements are announced in advance with
adequate time to phase in new approaches. The appropriate time scales
will of course vary with the nature of the change, with minor changes
requiring little notice and major changes requiring enough time for
decision-makers and communities to plan and adjust.
______
Mr. Young. Thank you very much.
Mr. Bush.
STATEMENT OF JEFFREY BUSH, DEPUTY COMMISSIONER, DEPARTMENT OF
COMMUNITY AND ECONOMIC DEVELOPMENT, STATE OF ALASKA
Mr. Bush. Thank you, Mr. Chairman, and members of the
Subcommittee. My name is Jeffrey Bush, and I am the Deputy
Commissioner of the Alaska Department of Community and Economic
Development.
First of all, I wish to thank you for holding this hearing
on the status of the Western Alaska Community Development Quota
or CDQ Program. As I hope will become apparent from my remarks
today, and those of others, this is an exciting and very
successful program, bringing many benefits to the people and
communities of Western Alaska.
I have served since 1995 as a member of the State's CDQ
Team, which implements the CDQ Program on the State's behalf.
Because oversight and administration of the CDQ Program is
within the Alaska Department of Community and Economic
Development, Governor Knowles asked me to prepare testimony and
appear before this Subcommittee.
I will limit my current comments to significant policy
issues facing the CDQ Program that are potentially impacted by
H.R. 553. The bulk of my testimony, which contains a history of
the program, and more detailed State comments on H.R. 553, I
have submitted in writing for inclusion in the record.
Allocation of CDQ quota is a harvest privilege that expires
upon the expiration of each allocation period. Although pollock
remains the mainstay of the program, representing over 80
percent of the royalties received by the groups, a total of 25
species with an annual royalty value of approximately $40
million are allocated to the groups under the program. As shown
in the graphs submitted with my written testimony, pollock
royalties have grown from $20 million in 1998 to $33 million in
the year 2000. And the growth in the total net worth for the
groups is even more impressive, having doubled in the last 2
years, with total assets for the groups now in excess of $150
million.
The State and the North Pacific Fishery Management Council
recognize that there must be changes in the government's
oversight role as the CDQ Program evolves. In response to the
issues raised in H.R. 553, the Council formed a CDQ Policy
Committee in March 2001 to review the appropriate role of
government oversight of the CDQ Program, including criteria
used in the allocation process. The Committee, consisting of
representatives from all CDQ groups, from private industry, and
from the State and Federal oversight agencies, met for four
full days in April and May of this year, and reported its
findings to the Council at the June 2001 Council meeting.
Issues addressed by the CDQ Policy Committee, and now
subject to Council staff analysis, include whether CDQ
allocations should continue to be periodic or become permanent,
and the frequency of those allocation periods; whether some
portion of the CDQ quota should be a fixed foundation quota
based on each group's demographic characteristics, such as
population; whether to adopt revised criteria for the State to
use in analyzing applications and whether to require the State
to score each group on each defined criteria before making
allocation recommendation; whether to adopt an administrative
appeal process for any group dissatisfied with an allocation;
the extent of government oversight over various group
activities, including investments by subsidiary corporations;
and whether to expand allowable activities of CDQ groups to
include non-fisheries related investments.
The Council is scheduled to review this analysis and adopt
any appropriate changes to the program at a December 2001
meeting.
The State believes that the Council remains the best forum
to address, in the first instance, issues regarding the
operation and management of the CDQ Program. The Council
process will ensure that all interested parties are able to
voice their positions, and will result in a product that will
be best for the program and the people it serves.
The quota given to the six CDQ groups constitutes a grant
of a public resource to achieve a government-sanctioned goal of
fostering economic development in Western Alaska. The net
effect of H.R. 553 would be to shift the focus of the program
away from a community-centered program to a more profit-making
regime. In its 1999 report on the CDQ Program, the National
Research Council stated, quote: ``The Committee warned that for
a program like this, care must be taken not to use strictly
financial evaluations of success.'' Unquote. The challenge for
all of us is to strike the right balance between profit
motivation and fostering local economic development.
I would briefly like to comment on three specific
provisions proposed in H.R. 553.
H.R. 553 would remove the current program requirement that
group investments be fisheries related. This issue has garnered
much debate in recent years among program participants.
Recognizing that the opportunities for fisheries-related
investments in the region are limited, the State has long
supported some loosening of the current limitations.
However, although it is important that some allowance now
be made for investing in non-fisheries-related activities, it
is equally important that this allowance be done in a manner
that maintains the program's integrity. Each group is under
pressure from its member communities to provide other benefits
to their residents who have many serious and very worthwhile
needs. But we must ensure that this program is not used as a
replacement for education or other state-funded
responsibilities in this region.
The majority of the CDQ groups and the CDQ Policy Committee
have recommended that the Council allow each group to invest up
to $500,000 annually in non-fisheries-related economic
development projects. This appears to be a rational approach to
the issue, and the State is supportive of the Committee's
recommendation.
H.R. 553 would remove from government oversight projects
undertaken by subsidiaries of CDQ groups. The State feels the
need for accountability to the program and to the region's
residents does not end with a group's initial investment in a
subsidiary, many of whom are wholly owned and virtually
indistinguishable from their parent group. We understand that
some of the CDQ groups support increased flexibility in their
investments at the subsidiary level. However, it is critically
important that we continue to meet the public policy goal that
the benefits derived from the program continue to flow to the
region's residents.
In addition, concerns have been raised in the past by some
CDQ groups and fishing industry representatives, that
constraints placed upon the CDQ groups under the current
program might cost the groups business investment
opportunities. Although the State is unaware of any such lost
investment opportunities, we are committed to minimizing even
the potential for them.
We welcome the current efforts of the Council to address
this issue and identify those situations where State oversight
it appropriate and those where it is not. The Council's CDQ
Policy Committee has identified this as a significant issue for
analysis, and we anticipate the Council will review this issue
carefully when it considers recommendations to the program.
H.R. 553 proposes to give primary allocation responsibility
to the National Marine Fisheries Service. By implication, the
role of the State in making allocation recommendations would be
reduced or eliminated. The State believes that it is in the
best position to work with the CDQ groups to identify the needs
and opportunities in Western Alaska, as well as maximize
benefits to the residents of the region. The Alaska Department
of Community and Economic Development has several local
government and community development people on staff who work
directly with the communities throughout the State, including
those in this program, on a regular basis. Department experts
in fisheries development and marketing work directly with
industry players to promote Alaska's fisheries economy. Other
State departments handle State fisheries management, local
transportation infrastructure development, and water and sewer
projects. In short, we believe that State Government personnel
are better able to respond to the issues that affect our
residents than Federal agency representatives, most of whom are
located at a great distance from the State.
In conclusion, I wish to again thank you, Mr. Chairman, for
the opportunity to address this Subcommittee regarding this
exciting and very successful program. Congress, the North
Pacific Fishery Management Council, the State, and the people
of Western Alaska, can all be proud of the benefits realized as
a result of the CDQ Program. Thank you.
[The prepared statement of Mr. Bush follows:]
Statement of Jeffrey Bush, Deputy Commissioner, Alaska Department of
Community and Economic Development
Mister Chairman and members of this Subcommittee:
Thank you for the opportunity to comment on the current status of
the Western Alaska Community Development (CDQ) program and the proposed
federal legislation, H.R. 553, regarding that program. My name is
Jeffrey Bush, and I am the Deputy Commissioner of the Alaska Department
of Community and Economic Development. In that capacity, I have served
since 1995 as a member of the State of Alaska's ``CDQ Team'', which
implements the CDQ program on the state's behalf. Because oversight and
administration of the CDQ program is within the Alaska Department of
Community and Economic Development, Governor Knowles asked me to
prepare testimony and appear before this subcommittee.
I will limit my oral comments to policy issues currently facing the
CDQ program that would be impacted by H.R. 553, including program
purpose and accountability and the role of state and federal
governments in oversight of the program. The bulk of my testimony,
which contains a history of the program and more detailed State
comments on H.R. 553, is hereby submitted in writing for the record.
History of program
Under the CDQ program, a portion of the annual fish harvest in the
Bering Sea/Aleutian Island (BS/AI) groundfisheries is allocated to six
coalitions of western Alaska villages, known as ``CDQ groups''.
Allocation of CDQ quota is a harvest privilege that expires upon the
expiration of each allocation period.
The CDQ program is an innovative attempt to accomplish community
development in western coastal Alaska, which is in one of the more
impoverished regions in the United States. In many ways the program is
succeeding. During its short tenure, the CDQ program has created
significant employment opportunities in the BS/AI groundfisheries for
residents of Western Alaska, and CDQ groups are steadily increasing
their equity ownership in Seattle and foreign-based harvesting
companies. However, the challenge of creating contemporary economic
stability in remote villages, whose residents have been reliant on
subsistence lifestyles for centuries, is a long-term undertaking.
With the passage of the Magnuson Act in 1976 the groundwork was
laid for domestic participation in the fisheries. The concept of
allocating part of the total allowable catch directly to disadvantaged
western Alaskan communities was discussed by the North Pacific Fishery
Management Council (NPFMC) beginning in the mid-nineteen eighties.
Based on recommendations from the NPFMC, the Secretary of Commerce
first approved CDQ pollock allocations in early 1992. 1 The
allocation to CDQ groups was set at 7.5% of the overall pollock Total
Allowable Catch (TAC) for the Bering Sea and Aleutian Islands
management areas. The allocations were for the two-year period of 1994-
95.
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\1\ The final regulations implementing the program actually were
not published until December 1992.
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During the last half of 1992, communities and fishermen's groups
along the Bering Sea coast began to organize in response to the pending
CDQ regulations.
The program began with 55 communities that were determined eligible
by criteria developed by the NPFMC in conjunction with the State of
Alaska and NMFS. By 1999, the total number of eligible communities had
grown to 65. 50 C.F.R. 679.30 lists the eligibility criteria:
LThe community is located within 50 nautical miles of the
Bering Sea, provided it is not located on the Gulf of Alaska coast.
LThe community is certified by the Secretary of the
Interior pursuant to the Alaska Native Claims Settlement Act to be a
native village.
LThe Community's residents conduct more than half of their
current commercial or subsistence fishing effort in the waters of the
BS/AI.
LThe community has not previously developed harvesting or
processing capability sufficient to support substantial groundfish
fisheries participation in the BS/AI, unless the community can show
that benefits from an approved CDP would be the only way to realize a
return from previous investments. The community of Unalaska is excluded
under this provision.
According to the 2000 U.S. Census, there are approximately 27,000
people residing in the 65 CDQ communities. The boundaries of the
program extend from the northernmost community of Little Diomede in the
Norton Sound Region to the southwest community of Atka in the Aleutians
Islands. The CDQ quota is divided among six community organizations,
which were self-determined and were based primarily on geographical
proximity and cultural boundaries. All six of the organizations are
non-profit corporations organized under Alaska law.
The CDQ groups are:
LAleutian Pribilof Island Community Development
Association (6 communities)
LBristol Bay Economic Development Association (17
communities)
LCentral Bering Sea Fishermen's Association (1 community)
LCoastal Villages Region Fund (20 communities)
LNorton Sound Economic Development Corporation (15
communities)
LYukon Delta Fisheries Development Association (6
communities)
In June of 1995, the NPFMC approved a three-year extension of the
pollock CDQ program as part of the inshore-offshore debate. In 1996,
the CDQ program gained permanency when it was placed into law during
the reauthorization of the Magnuson Act. Senator Stevens was
instrumental in the reauthorization of the Act and the establishment of
the CDQ program in perpetuity. He was recognized for his work by the
renaming of the Act, which became the Magnuson-Stevens Act.
In 1998, Congress passed the American Fisheries Act (AFA), which
included provisions to permanently extend the allocations of pollock to
the CDQ program and increase the CDQ pollock allocation to 10 percent
of the TAC through December 31, 2004. 2 Another major impact
of AFA was the requirement that virtually all vessel-owning entities in
the BS/AI fisheries be at least 75 percent owned and controlled by U.S.
citizens by October 1, 2001. This meant that foreign-owned companies
needed to divest their majority ownership interests in vessels engaged
in Bering Sea fisheries. This opened the door for CDQ groups to acquire
equity interests in top performing seafood companies that otherwise
would not have been available. The groups became sought after business
partners for the Seattle and foreign dominated owners, not only because
of their quota but also because of the political capital the groups
brought as Alaskan partners. By the end of 2000, all CDQ groups had
acquired ownership interests in the offshore pollock processing sector.
---------------------------------------------------------------------------
\2\ If no action is taken by the end of 2004 to extend the 10
percent allocation, the CDQ pollock allocation will revert to 7.5
percent.
---------------------------------------------------------------------------
Although pollock remains the mainstay of the program, representing
over 80 percent of the royalties received by the groups, other BS/AI
groundfisheries have been added to the program since its inception and
are allocated out to the groups. Halibut and sablefish were first
allocated for the 1995 fishing season, and crab and the so-called
multi-species fisheries, including pacific cod, Atka mackerel and
others, began in 1998. At present, 25 species, with an annual royalty
value of approximately $40 million, are allocated to the groups under
the program. Pollock royalties alone totaled nearly $33 million in
2000.
[GRAPHIC] [TIFF OMITTED] T3962.001
The groups continue to grow in net worth, with current total assets
in excess of $152 million.
[GRAPHIC] [TIFF OMITTED] T3962.002
Government Oversight
The U.S. Secretary of Commerce approved the CDQ program regulations
in 1992. Under those regulations, the day-to-day oversight of the CDQ
program was delegated to the State of Alaska, which was charged with
full review of CDQ proposals and making allocation recommendations to
the Secretary. NMFS is tasked with implementing federal regulations and
providing final allocation recommendations to the Secretary, who
retains overall authority over the allocation process.
The federal and state governments have each added staff to respond
to monitoring needs. Approximately five federal and three state
positions are dedicated to CDQ program administration. Federal
responsibilities include daily monitoring of catch, debriefing of
fishery observers, writing regulations, and review of the overall
program. As in the open-access fishery, federal funds support the
fishery management and allocation decision-making process.
The State is responsible for the ongoing monitoring of each CDQ
group's performance, ensuring compliance with CDQ plans and
regulations, providing professional assistance, reviewing quarterly and
annual reports, and participating in the allocation process. Beyond
requiring quarterly reports, the state also conducts regular meetings
with each group, requires annual audit and compliance reports, and
retains the right to conduct an internal or management audit of any CDQ
group. With this unique combination of federal and state agency
oversight, a thorough regulatory environment has been developed.
As part of the CDQ program allocation process, the state CDQ Team,
comprised of the governor's designees, establishes a schedule for the
receipt of applications, initial application evaluation, public
hearings and final application review. Each group must decide which
activities are best suited for its region and constituents and submit a
Community Development Plan (CDP) application. The CDP must include the
allocation requested for each species, a description of the goals and
objectives of the CDP, the length of time necessary to achieve these
goals, the number of individuals expected to be employed through the
program, and a description of vocational and educational training
programs the CDP will generate. The CDP details the fishery-related
infrastructure in the applicant's region and describes how the CDQ
group plans to enhance existing harvesting and processing capabilities.
After taking the CDP applications and public testimony into
consideration, and applying the criteria set out in state regulation,
the state develops the recommended allocations. The state must then
consult with the NPFMC before the recommendations can be submitted to
NMFS, who conducts a separate review to ensure that the state complied
with applicable federal procedural requirements in making its
allocation recommendations. NMFS then provides their recommendations to
the Secretary of Commerce for final approval and implementation.
Current Review of Government Oversight
The state recognizes that there must be changes in the state's
oversight role as the CDQ program evolves. As the program has grown,
state CDQ regulations have been revised on several occasions. The last
revision took place in August of 1999. More recently, in response to a
few of the CDQ groups' concerns, the state began working with the CDQ
groups in early 2000 to recommend program changes to further streamline
and simplify the CDP amendment process. After review and approval of
the state's conceptual changes by the NPFMC, NMFS drafted proposed
federal regulatory changes to provide the groups more discretionary
authority in their business transactions. These proposed changes were
presented to the NPFMC in October 2000. During this period, Congressman
Young introduced H.R. 5565, proposing to make substantial changes to
governments' oversight roles regarding the program; that bill was
subsequently reintroduced this session as H.R. 553.
In response to the issues raised in H.R. 553, the NPFMC formed a
CDQ Policy Committee in March 2001 to review the appropriate role of
government oversight of the CDQ program, including criteria used in the
allocation process. The committee, consisting of representatives from
all CDQ groups, private industry, and the state and federal oversight
agencies, met for four full days in April and May, and reported its
findings and recommendations to the Council during the June 2001
meeting. The Council accepted the report and has now tasked its staff
with preparing a comprehensive analysis of the various options
identified by the committee. Issues addressed by the CDQ Policy
Committee and now subject to NPFMC staff analysis include:
LWhether CDQ allocations should continue to be done
periodically, or made permanent
LWhether some portion of the CDQ quota should be a fixed
``foundation'' quota based on each group's demographic characteristics,
such as population
LWhether to adopt revised criteria for the state to use in
analyzing applications, and whether to require the state to ``score''
each group on each defined criteria before making allocation
recommendations
LWhether to adopt an administrative appeal process, either
within the state allocation process or through NMFS or the NPFMC,
whereby any group dissatisfied with an allocation could appeal
LThe extent of government oversight over various group
activities, including investments by subsidiary corporations
LWhether to expand the allowable activities of CDQ groups
to include non-fisheries related investments
The NPFMC is scheduled to review this analysis and adopt any
appropriate changes to the program at its December 2001 meeting.
The NPFMC has repeatedly expressed support for the CDQ program. The
Council is the best forum to address, in the first instance, issues
regarding the operation and management of the CDQ program. The Council
process will ensure that all interested parties are able to voice their
positions and will result in a product that will be best for the
program and the people it serves.
Specific Comments Regarding H.R. 553
The quota given to the six CDQ groups constitutes a grant of a
public resource to achieve a government-sanctioned goal of fostering
economic development in western Alaska. As such, the CDQ program was
not designed as a direct allocation of quota to businesses, but rather
was set up with government oversight to ensure accountability that the
public resources were being used to achieve certain social and economic
goals. This legislation would shift the focus of the program from a
community-centered program to a profit-making regime. The state
endorses individual initiative, however we do not want to lose sight of
the original purpose of the CDQ program. As you know, the 1999 report
from the National Research Council, The Community Development Quota
Program in Alaska, stated, ``The committee warns that for a program
like this, care must be taken not to use strictly financial evaluations
of success.'' NRC Report, page 3. The challenge for all of us is to
find the right balance between the profit motive and fostering local
economic development in these regions.
I would like to briefly comment on three specific provisions
proposed in H.R. 553.
H.R. 553 would remove the current program requirement that group
investments be ``fisheries related.'' H.R. 553 sec. 2, Proposed M-S Act
sec. 305(6)(j)(1)(B) and sec. 305(6)(j)(8)(B)(ii).
This issue has garnered much debate in recent years among program
participants. The goal of the CDQ program, as set out by the NPFMC at
the program's formation and codified in federal regulations, is to
provide fishery related economic opportunities for western Alaska
residents. The National Research Council stated, ``We recommend that
the restriction that CDQ revenues [are] to be invested only in fishery-
related activities should be removed, at least for some portion of the
revenues.'' NRC Report, page 76. Recognizing that the opportunities for
fisheries-related investments in the region are limited, the state has
long supported some loosening of the current limitations. 3
---------------------------------------------------------------------------
\3\ On January 18, 2000, before the U.S. Senate Subcommittee on
Oceans and Fisheries, I testified that the state would support an
expansion of allowable investments to include some non-fisheries
related activities, provided the expansion was done carefully and
within well-defined regulatory parameters.
---------------------------------------------------------------------------
However, although it is important that some allowance now be made
for investing in non-fisheries related activities, it is equally
important that this allowance be done in a manner that maintains the
program's integrity. Each group is under pressure from its member
communities to provide other benefits to their residents, who have many
serious and very worthwhile needs. But we need to ensure that current
government program funding levels are maintained and that this program
is not used as a replacement for education or other state-funded
responsibilities in these regions.
The majority of the CDQ groups and the CDQ Policy Committee have
recommended that the Council allow each group to invest up to $500,000
annually in non-fisheries related, economic development projects. This
appears to be a rational approach to the issue and the state is
supportive of the committee's recommendation.
H.R. 553 would remove from government oversight projects undertaken
by subsidiaries of CDQ groups. H.R. 553 sec. 2, Proposed M-S Act sec.
305(6)(j)(8)(C)(ii).
The state feels the need for accountability to the program and to
the region's residents does not end with a group's initial investment
in a subsidiary. Thus, whether the CDQ group acts through its CDQ
royalties or through its investment returns, and whether it acts
directly or through one or more of its subsidiaries (many of whom are
wholly owned and virtually indistinguishable from their parent group),
the group needs to remain accountable to its communities. We understand
that some of the CDQ groups support increased flexibility in their
investments at the subsidiary level. However, it is critically
important that the public policy goal that the benefits derived from
the program continue to flow to the region's residents continues to be
met.
In addition, concerns have been raised in the past by some CDQ
groups and fishing industry representatives that constraints placed
upon the CDQ groups under the current program might cost the groups
business investment opportunities. Although the state is unaware of any
CDQ business investment opportunity that has been lost as a result of
federal or state regulatory constraints, we agree that there is a need
for quick review of all CDP amendments, and we are committed to
minimizing even the potential for lost business opportunities.
Beginning with the consolidation of all state CDQ staff in a central
location in the Department of Community and Economic Development in
1999, the state has placed a high priority on the expeditious
processing of CDP amendments. Our success in these efforts is clear:
for example, when Coastal Villages Region Fund sought state approval of
its multi-million dollar investment in American Seafoods Company, the
state CDQ Team was able to review and approve the amendment in just
three working days.
In addition, we welcome the current efforts of the NPFMC to address
this issue and identify those situations where state oversight is
appropriate and those where it is not. The Council's CDQ Policy
Committee has identified this as a significant issue for analysis, and
we anticipate the Council will review this issue carefully when it
considers recommendations to change the program.
H.R. 553 proposes to give primary allocation responsibility to
NMFS. By implication, the role of the state in making allocation
recommendations would be reduced or eliminated. H.R. 553 sec. 2,
Proposed M-S Act sec. 305(6)(j)(6).
The state believes that it is in the best position to work with the
CDQ groups to identify the needs and opportunities in Western Alaska,
as well as maximize benefits to the residents of the region. The Alaska
Department of Community and Economic Development has several local
government and community development people on staff who work directly
with communities throughout the state, including those in this program,
on a regular basis. Department experts in fisheries development and
marketing work directly with industry players to promote Alaska's
fisheries economy. Other state departments handle state fisheries
management, local transportation infrastructure development, and water
and sewer projects. In short, we believe that state government
personnel are better able to respond to the issues that affect our
residents than federal agency representatives, most of whom are locate
at a great distance from the state.
In conclusion, I wish to again thank you, Mister Chairman, for the
opportunity to address this committee regarding this exciting and very
successful program. Congress, the NPFMC, the state of Alaska, and the
people of Western Alaska can all be proud of the benefits realized as a
result of the CDQ program.
______
Mr. Young. I thank you, Mr. Bush. I only have--I have a
series of questions for you and the other members, but I always
get sort of tickled, because I am reading one of your comments
in your presentation. It says: in June 1995 the NPFMC approved
a 3-year extension of pollock CDQ Program as part of the
inshore debate. In 1996, the CDQ Program gained permanency and
was placed in law during the reauthorization of the Magnuson
Act. Quote: ``Senator Stevens was instrumental in reauthorizing
of the Act and the establishment of the'' program.
You just made a very bad error. I don't know who wrote this
for you, but it passed out of this Committee a year and a half
before Senator Stevens ever got his hands on it. I made this
permanent. And whoever wrote this for you, if you wrote it,
shame on you. If you didn't write it, shame on the person who
wrote it for you. Because there is a little bit of--well, we
take pride in authorship. This whole idea came right from
Harold Sparck. And I took it and ran with it with the help of a
lot of people, and that is why I am so intensely passionate
about the program, and why I want to make it succeed. So after
that little slight chastisement, I will ask you some more
questions.
Mr. Bush, the National Academy of Sciences' report
recommends that groups be allowed to invest earnings in
businesses outside of the fishing industry. This is 1999. In
some cases because of poor returns, there are no local
fisheries for the groups to invest in. What other options are
available under the current rules, and why hasn't the State
been willing to discuss expanding the use of the monies for
other community economic developments outside the fisheries?
That is the second question.
And how can they create a diverse economy, which you state
in your testimony, when you only allow investment in fisheries?
Mr. Bush. Mr. Chairman, if I may, first of all, with
respect to the current rules relating to fisheries-related
investments, those rules were placed in the Act or--excuse me--
in the regulations at the time that the Council created this
program or created the details of the program through the
regulatory process. Those restrictions are in Federal
regulations. The State, and actually, myself personally, have
argued actually for several years that those restrictions need
to be loosened up, that other economic development activities
in the region need to be supported through this program
particularly because, as you state, there are limited
investment opportunities in fisheries in some of the areas and
communities of this region. Therefore, the State has long
supported it, and I think that it is safe to say that--Mr.
Balsiger may be better equipped than I am to answer the rest of
the question regarding the Council's approach--but I think the
Council is becoming more open to the possibility of allowing
non-fisheries-related activities now than they have in the
past, and therefore--and I am very happy about that and
supportive of that--the CDQ Policy Committee that the Council
created has recommended that loosening up of investment
opportunity or the investment restrictions, and we are
supportive of that as well.
Mr. Young. Have you ever recommended that to the Council?
Mr. Bush. Yes, Mr. Chairman. I first recommended it--I am
going to say it was 1998. It may have been 1999 was the first
time I recommended it to the Council.
Mr. Young. Well, my concern, I don't think there would be
any action by the State or the Council if I hadn't introduced
this bill, because I saw total stagnation and rejection in the
idea that these actual groups have grown. Some of them have
not, some of them have. And this is really my driving force
behind this because I don't believe that we ought to be the
parental fathers of these groups, as the BIA has been, as the
Government has been with both my native groups. They say, ``Oh,
you can't do it because you don't have the capability of doing
it. We know what is best for you. Don't question our wisdom
because you are really a child.'' That is really where I am
coming from, I want you to know that. And so I am going to be
watching that, you know, as we go through this process, how we
will be following the actions of the State.
And one of my criticisms of State oversight has been that
the annual allocations do not allow the groups any long-term
certainty--I think I heard that in your testimony--for making
business decisions. I can't understand how, if I had 14 percent
this year and then I might only have 10 percent next year
because of a shift in population or some other reason, how can
they make any long-term recommendation? In fact, I do believe
the State wouldn't be responding to this right now if I hadn't
introduced this bill. How can they make a long-term economic
decision with the uncertainty which is placed upon them by the
State?
Mr. Bush. Mr. Chairman, if I might respond. I think that
part of the problem, at least during my tenure with this
program, in terms of the allocation periods, has been that we
have had several different species added to the program over
the years, and those came online in different allocation
cycles. We have most recently reached the point--and I think it
was in the year 2000--where the allocation cycles finally came
together, and we allocated for a 2-year cycle.
Mr. Young. Is that consistent now, you are on a 2-year
cycle?
Mr. Bush. We are on a 2-year cycle, Mr. Chairman, yes. In
fact, if we were not, right now we would be in the midst of an
allocation cycle, but we are not. We are on a 2-year cycle.
Mr. Young. Has there been any thought about extending that,
say, to a 5 or 10-year, the length of the Magnuson Act?
Mr. Bush. Mr. Chairman, that has been discussed. The
Council's Policy Committee is recommending a 3-year allocation
cycle set, a fixed 3-year allocation cycle. The State is
supportive of that. The issue, of course, with longer
allocation cycles--it is a tradeoff--the longer the allocation
cycle, the argument becomes the less accountable the group
becomes in terms of its potential successes or failures. And so
you have to--and the other problem that I believe exists with
longer allocation cycles, is adjustments that may become
necessary based upon changing conditions.
And I will use as an example what happened with opillio
crab in the Bering Sea when the crab stocks collapsed a couple
of years ago. The State had, at that point, allocated a great
deal of opillio crab to one of the CDQ groups because it was
located where most of the opillio crab was caught. And that was
a significant percentage of its allocation returns on an annual
basis. When those crab stocks collapsed, it was, I think, to
everyone's advantage, for the State to be able to take another
allocation look, and in fact, we adjusted other species to that
group in order to make up for the fact that its crab allocation
had collapsed.
But I think that that is the only significant issue that I
see with longer allocations, and I believe that is something
that can be dealt with, and that is why the State is supportive
of a 3-year allocation cycle at this time.
Mr. Young. The other thing--and then I will let the
gentleman from Guam ask some question in a moment, and then I
will come back to you, back to the rest of the panel.
Has there been any thought about--because I notice you
mentioned in your testimony about the quotas being set because
of population, which is very controversial by certain groups
and very accepted by other groups. Has there been any other
criteria such as location, proximity, and a total equation of
the end results; has that been thought of at all?
Mr. Bush. Yes, Mr. Chairman. The State regulations have, I
believe the last count was 21 different criteria. The first--
there is no question--the first criteria on the list is
demographic criteria, which includes population.
Mr. Young. But is that the dominant factor?
Mr. Bush. No, not at all, Mr. Chairman. Locale is a
significant one, and essentially proximity to the resource. And
the crab example I just gave you is a perfect example. Halibut
is another one.
Mr. Young. And sections of Pribilof would be another one?
Mr. Bush. Yes. The Pribilof Islands, for example, we have
always given crab allocations and significant halibut
allocations to those, irrespective of their size, because of
their locale in the region or nearness to the resource.
Mr. Young. Okay. My time is up. I do apologize. Mr.
Underwood?
Mr. Underwood. Thank you very much, Mr. Chairman.
Perhaps as I have indicated, and this is a very fortuitous
opportunity for those of us from the Western Pacific, to learn
a little bit more about the implementation of the program as it
occurs in Alaska.
Maybe unbeknownst to you, but certainly as we are looking
at this report, you know, it has been retitled here in the
inside page, The Community Development Quote Program in Alaska
and Lessons for the Western Pacific. And so--
[Laughter.]
Mr. Underwood. So at least all the members have that up
here.
Perhaps, Ms. Elfring, if you could, tell us a little--I
know this is a little bit perhaps outside the scope of your
study, but if you could give us a couple of suggestions about
how this program would work better in the Western Pacific, or
highlight some of the issues which you thought were
particularly difficult in implementing the program in Alaska.
Ms. Elfring. Well, we did actually try--and by the way, I
will blame that on our press. They like covers to be nice and
neat and clean. If we give them too many words, they stick them
on the inside.
But basically we did try, and after looking at it in
Alaska, say, ``Well, how would this work in the Western Pacific
or how would it not work?'' And the Committee's main conclusion
there was a big caution, that essentially the CDQ Program was
very specifically designed to meet conditions in Alaska, and
not all of those same conditions apply in the Western Pacific.
And the were careful not to say you couldn't design something
that would work, but you can't pick this program up and apply
it.
The two main things that they were worried about were--one
was your current fisheries management is not by quota. Alaska
already managed by quota, and there was a way of working within
that to make this program work. Similarly, Alaska already had
sort of a natural geographic way of breaking people into
groups, and that is more difficult in your setting as well. And
the third one may have to do with fisheries technology in terms
of the scale. There is already a lot of industrial-sized
fisheries going on in Western Alaska. Smaller scale in much of
the Western Pacific.
So I think their main recommendation on that is if you
choose to go that route, go very, very carefully, and decide
what the goals are there and set the program up to those goals.
Mr. Underwood. Well, thank you very much for those
insights.
Dr. Balsiger, in my earlier statement I drew attention to
the fact that NMFS has not facilitated the process for the
Western Pacific. Do you have any knowledge as to why that is
the case?
Mr. Balsiger. Mr. Congressman, I know that the rules and
regulations have been slow in development, but I understand
that there are, either published this week or very close to it.
I can certainly get back to you with the specifics on the
status of the regulations that we are waiting for.
The agency is supportive of CDQ programs. We are anxious to
make it work in the Western Pacific as well as it has in
Alaska, but for specific details, I will get back if I can.
Mr. Underwood. Well, apparently it is more anxious in
Alaska than it is in the Western Pacific because the
regulations have taken some time.
And, Mr. Bush, I would just like to ratify the comments
made earlier by the Chairman, because it was one of the pieces
of legislation that I was trying to work some amendments on,
and I know that early on, that the Western Pacific part of
this, the establishment of the program for offshore territories
as well, was another element of that legislation as we were
working to it. You know, in the interest of, for all of you who
may testify in front of Committees, be mindful of who you are
testifying in front of, because it will always be perhaps to
your benefit or to your detriment.
What is the--if you could encapsulate just in a few words,
what is the problem with the communities making a decision
about the resources that they obtained from these activities to
go beyond fisheries? After all, the whole idea of engaging in
these activities is to provide economic benefit to the
communities, and this is a resource issue for them. This is
meant to diversify. But what is the issue at stake there?
Mr. Bush. Mr. Congressman, the issue with respect to non-
fisheries-related investments, as I understand it, is that the
resources at stake in this program, when the program initially
began, were given to the communities with the understanding
that they would be used for fisheries-related development only.
Mr. Young. Will the gentleman yield?
Mr. Underwood. Sure.
Mr. Young. The CDQ means for what?
Mr. Bush. It stands for Community Development Quota.
Mr. Young. It does not say anything about Community
Development Fisheries. It says ``quota'' and means development.
And that is my contention that the State has misinterpreted
what was the intent, that you have to use, if it is possible,
to bring back development of that community, if they use the
resources from the--money from the resources which they have
harvested. And that is my difference with the state. Thank you.
Mr. Underwood. Please continue.
Mr. Bush. And, Mr. Chairman, if I might respond very
briefly to what you just said. I mean, the State is only
implementing the program as it has been presented to us by the
Council and the Federal regulations, which have that
restriction in it. As I said, the State is very supportive of
expanding it to other community economic development
activities. But as I understand it, that was part of the, sort
of the political equation when the program initially began,
because there were some very strong opponents to essentially
taking the resource away from their private interests and
giving it to the communities, and there were some people who,
from a political perspective, felt that that should be used
only for fisheries development. I am not saying that that
decision, from a policy perspective, was correct, and in fact,
I think I agree with the Chairman, that in fact it was not.
Mr. Underwood. All right. Thank you for that. And I ask
unanimous consent to submit a statement for the record from the
Chair of the Western Pacific Fishery Management.
Mr. Young. Without objection, so ordered.
[The statement of Ms. Guthertz follows:]
Statement of Judith Guthertz, Chair, Western Pacific Fishery Management
Council, on H.R. 553
Chairman Gilchrest and Members of the Subcommittee, I begin my
testimony by greeting you and the Members of the Subcommittee on
Fisheries Conservation, Wildlife and Oceans, with a heartfelt aloha,
hafa adai, talofa. I am Dr. Judith Guthertz, Chair of the Western
Pacific Fishery Management Council and Council member representing the
Territory of Guam.
The Council supports H.R. 553. Although the bill makes no
substantial changes to the Western Pacific Community Development
Program, it gives separate recognition to native Alaskans in the
development of Community Development Programs. There are, however,
technical changes that are contained in an addendum to this testimony.
Managing the resources of Pacific Islands communities has always
been based on consensus building, an approach given recognition by
Congress when it reauthorized the Magnuson-Stevens Act in 1996. Section
305 of the Act which supports the Council's community-based approach to
fishery management in the Western Pacific serves as a perfect
illustration.
However, forces beyond the control of the Council have effected
major changes in this region's fisheries, most of which have not
suffered the same overfishing as on the mainland. Nevertheless, our
fishermen and the Council have continued to pursue every opportunity to
adapt to new fishing and management opportunities during a period of
great uncertainty. The Western Pacific Community Development Program
and Demonstration Project are ways in which the Council can help
fishermen respond, adapt to and ensure their survival through
community-based management.
While we have no problems with the Western Pacific Community
Development Program, we are very concerned and frustrated by the
failure of the National Marine Fisheries Service to implement this
program in a timely manner. Since 1996, the Council has worked
diligently with the Fisheries Service, our advisory bodies and leaders
within the indigenous communities on the eligibility criteria for
participation in the Development Program and Demonstration Projects.
These criteria, however, have not been implemented to date. We are
deeply disappointed. In a letter received by the Council in April, the
Fisheries Service is only now willing to publish the eligibility
criteria in the Federal Register. These criteria were transmitted to
the agency in June 1998, the same year Demonstration Project funding
became available.
Over the past five years, indigenous U.S. Pacific Islanders could
have benefitted from several fishery opportunities had the Development
Program and Demonstration Projects been operational. For example, in
August 1998, the Council completed an amendment to the Bottomfish
Fishery Management Plan to reserve twenty percent of the limited entry
permits for part of the Northwestern Hawaiian Islands for use by
eligible indigenous communities. Delays in the approval of the
eligibility criteria for the Development Program have prevented the
awarding of these permits. This program and other related initiatives,
such as a Native Observer Program, could be of immense value in
establishing greater participation of Pacific islanders in fishing and
fishery management in the region.
The Council is also working with American Samoa, Guam and the
Northern Mariana Islands to include similar programs for the U.S. EEZs
surrounding these islands. For example, in 1997 the Council recommended
the establishment of a 50 nautical mile area closure around the
American Samoa archipelago in which only pelagic fishing vessels
smaller than 50 feet could operate. These closed areas were designed to
protect an emerging small-vessel longline fishery in American Samoa
from competition by large longline and purse seine vessels.
Unfortunately, the National Marine Fisheries Service disapproved this
management measure in 1999, citing the lack of need for the closed
areas.
With almost predictable inevitability, however, there has been
significant expansion in the number of large vessel longliners
operating in American Samoa, from 3 in 1997 to 20 as of July 2001, and
more are expected by the end of 2001. The continuing expansion and
evolution of the fishery has now prompted the Council to begin working
on a limited entry program for longline fishing in American Samoa. Both
the limited entry program and area closures would be ideal candidates
for consideration under the aegis of the Community Development Programs
and Demonstration Projects. However, these opportunities are being lost
through bureaucratic negligence, resulting in a loss of faith by
American Samoan fishermen in the management process and frustrating the
Council in developing measures to protect and foster the emerging
American Samoa longline fishery.
The situation in Guam and the Northern Mariana Islands is likewise
stifled by the National Marine Fisheries Service disregard of the needs
and unique situation of U.S. Pacific Islanders. When the Fisheries
Service closed the Hawaii swordfish fishery, by banning shallow set
longline fishing in the entire North Pacific, an unreasonable
constraint was placed on fishery development in Guam and the Northern
Mariana Islands. This gear type is used throughout the tropical Pacific
to catch yellowfin tuna. This method of fishing is now denied to U.S.
Pacific islanders in Guam and the Northern Mariana Islands. There is no
site-specific data to support such a ban in these waters. Further,
these U.S. Pacific Islanders cannot avail themselves of the Development
Programs and Demonstration Projects which might provide assistance in
developing new fishing opportunities.
Similarly, the Council and the U.S. Pacific Islands have not been
able to make use of parallel provisions under the Magnuson-Stevens Act
that permit foreign fishing nations to negotiate access to U.S. EEZs in
this region. It was expected that revenues from these Pacific Insular
Area Fishing Agreements (PIAFAs) would support research to develop and
implement the Development Programs and the Demonstration Projects. This
research is outlined in Marine Conservation Plans for each of the
island areas, which were transmitted to the Fisheries Service in 1998-
2000. The MCPs were approved by the Southwest Regional Administrator
and forwarded to NMFS HQ where they currently languish. It is ironic
that this very same Regional Administrator is now the Acting Assistant
Administrator, with whom the final approval authority lies.
The Western Pacific Region covers a vast area of the Pacific and a
political composition unique in the United States with its melange of
territories, uninhabited and military controlled islands, a state and
commonwealth. Unlike the mainland U.S. and Hawaii, our people in the
territories cannot vote for a President, have no voting representation
in the House of Representatives, and have no representation at all in
the U.S. Senate. The Council process allows all our people direct
participation in federal fishery management. The uniqueness of our area
was addressed in the 1996 reauthorization in several key areas. To
quote from the Act itself: ``the Pacific Insular Areas contain unique
historical, cultural, legal, political, and geographical circumstances
which makes fisheries resources important in sustaining their economic
growth.'' Despite these important and potentially beneficial
provisions, we remain frustrated at the indecision of a disinterested
bureaucracy stemming, in part, to the political uncertainties of who
will be appointed as the new Assistant Administrator, but primarily the
result of poor leadership and lack of management accountability. Mr.
Chairman, although the Magnuson-Stevens Act is up for reauthorization,
due to the intransigence of the Fisheries Service the people of the
Pacific island community have no experience by which to evaluate the
performance of these provisions. We hope that during the upcoming
hearings, we will be able to provide reports of some activity.
Thank you for this opportunity to speak candidly with you and the
Committee on our attempts to achieve the goals and intent of the
Magnuson-Stevens Fishery Conservation and Management Act, particularly
those sections which refer to the U.S. Pacific Islands.
Addendum: Technical changes to Magnuson Act and H.R. 553:
In H.R. 553, the new subsection (k), paragraph (2) makes reference
to ``a community development quota program that is not in compliance
with this subsection'' which refers to substantive conditions under the
original subsection 305 (i). The reference ``this subsection'' should
be revised to read ``subsections (i) through (k) of this section.''
In the note section of 305 establishing Western Pacific
Demonstration Projects (Section 111(b) of the Sustainable Fisheries
Act, Public Law 104-297), the statutory reference in paragraph (6)
might be revised to read ``section 305(i)(1)(B)(i) through (iv)''.
Attachments:
September 30, 1997 Letter to OHA trustees from Simonds
March 17, 1998 Memorandum from Simonds to interested parties
June 18, 1998 Letter to Mr. Rolland Schmitten from Kitty Simonds
December 9, 1998 Memorandum from Simonds to C. Karnella
December 29, 1998 Letter to A. Stayman from Governor P. Tenorio
January 6, 1999 Letter to K. Simonds from C. van Bergeijk
June 22, 1999 Letter to R. McInnis from Simonds
August 12, 1999 Letter to G. Matlock from K. Simonds
August 20, 1999 Letter to K. Simonds from G. Matlock
October 1, 1999 Letter to P. Dalton from K. Simonds
August 28, 2000 Letter to R. Ziobro from K. Simonds
April 20, 2001 Letter to Kitty Simonds from R. Lent
May 18, 2001 Letter to W. Hogarth from J. Guthertz
May 18, 2001 Letter to W. Hogarth from R. Shiroma
June 7, Letter from W. Hogarth to R. Shiroma
[NOTE: The attachments have been retained in the Committee's
official files.]
______
Mr. Underwood. I certainly would like the opportunity to
talk with you, Ms. Elfring, about some of the issues attached
to implementation in the Western Pacific.
Mr. Young. Doctor, you mentioned the purpose of the program
is to diversify their local economies. How can the communities
do that in areas where the fisheries have been closed? I asked
the same question of Mr. Bush. What is your answer to that?
Mr. Balsiger. Mr. Chairman, I agree with Mr. Bush on this
issue, and I think he is correct that the policy was developed
through the Council, where there was a lot of public testimony,
which was summed up in the Council's recommendation and NMFS
regulations, initially restricting investments to fishery-
related programs, but we have no problem or difficulty with
seeing that expansion and diversification. I agree it is an
appropriate time to consider that now.
Mr. Young. Secondly, Doctor, the National Academy of
Sciences report has been out for 2 years, and yet was not
looked at until my bill was introduced in Congress, by the
State or by the Council. They did not look at the
recommendations. And while I understand the Council has been
busy with other things like stellar sea lions, and you have
been that busy too, what is your estimate of why the State
ignored that?
Mr. Balsiger. Well, Mr. Chairman, thank you. I don't
believe that the report was ignored. We actually--I know that
the State, as well as the National Marine Fisheries Service,
spent some time reviewing that, and it took us a couple of
years, I guess, perhaps a year and a half, to get the Council
CDQ Policy Committee together, but it is a relatively, very
public process, and that would be the reason I think. The
process now is fully engaged. They have a lot of--
Mr. Young. Do you think it would be engaged if I had not
introduced this bill?
Mr. Balsiger. The bill was certainly very inspirational in
terms of accelerating it.
Mr. Young. Thank you.
[Laughter.]
Mr. Young. Why I say that, neither the State nor the
Council had the time to review it. You know, why should the
Congress, why should I be comfortable in leaving all the
oversight authority and all the decisions being made, why
should I be comfortable leaving it with the Council or with the
State? Two years is a long time, especially when it affects
decisions on how certain groups want to advance the development
of their communities.
I heard testimony yesterday about need for water and
sewer--I heard Mr. Bush say this--things in the community. That
is what it is all about. That is community development, you
know. So, again, I am hoping that you understand--and I am not
picking on you, Doctor, at all, or you, Mr. Bush--that report
that Chris put out was a good report, and it sat on the shelf
and there was very little attention paid to it until we got
interested in introducing this legislation, because we are up
for renewal, as you know. The Magnuson Act will be renewed this
year, if not this year, next year, but this term. And this is a
crucial part of the Magnuson Act, a CDQ Program. And we will
have testimony from other witnesses later on, and difference of
opinion. I understand that. Again, I feel very passionately
about this program, and I want it to succeed.
Mr. Underwood, I am going to do things I get in trouble
with, but would you chair this meeting, and if you have any
other questions, which I believe you will have, because I had
some written here that I haven't asked, and if you will ask
some of those question. And if I am not back immediately, you
will bring up the next panel and I will be back as soon as I
can. But unfortunately, or fortunately, I have to go vote, and
you don't have the opportunity to vote. So if you would do
that, I deeply appreciate it.
Mr. Underwood. Okay. I will let you go if you vote no on
this.
Mr. Young. Well, I don't know. This is the Commerce report.
I don't think you want me to vote no.
[Laughter.]
Mr. Young. All right, see you later.
Mr. Underwood. [Presiding] All right. Thank you very much.
Just to finish off this panel, go back to Dr. Chris
Elfring. In your report, the study results led your team to the
conclusion that there is a gap in communication between the CDQ
groups and the communities they represent, that is part of
that. How can that be if these groups are made up of people
from the communities? Perhaps you could explain some of that. I
mean, it is a natural human phenomena, I know, to have
disagreements, but--
Ms. Elfring. I was going to say, that is how people work
when they form groups. Sometimes people feel excluded from
those groups.
Some of the Committee's members would be better able and
could go into this more depth with you than I can, but
essentially, as you talk to local people, there is always a
filtering down of knowledge, and what gets to residents and
local people is always less than the people who were in the key
decision-making circles, and I think the Committee was feeling
some sense that--and maybe again, it could be attributed to
newness of the program, word wasn't out yet--but that there
really needed to be more effect, that there weren't just a
select group of decision makers making what were really
community decisions. And again, that is probably not
insurmountable, and it may already have changed somewhat in the
2 years since our report has come out.
Mr. Underwood. Well, how were the groups selected? Did they
vary from community to community?
Ms. Elfring. I actually think some of the other folks here
might be better able to answer that than I am, because I am
not--
Mr. Underwood. Mr. Bush?
Mr. Bush. Mr. Chairman, I am not an expert on this, but I
understand that there are a variety of methods. They range from
elections to appointments by the communities, but they do come
from the communities directly. I should also point out that, as
a response I think in part to the report, the communication
issue was placed within State regulations that were adopted in
1999 after the report came out, specifically putting in as a
criteria the groups' communications--an allocation criteria,
the groups' communication efforts with their communities. And
so we do look at how the communications go to the communities
by the groups when we make allocation decisions. And I can say
that in response to this report, there have been changes made,
and you could hear directly from the groups, but the groups are
making an effort, I believe, to try to communicate with the
residents of the communities, not just with the single members,
in many cases, from each community, who sit on their board.
Mr. Underwood. Dr. Elfring, you are appropriately placed
between the Federal and the State representative, so perhaps
you could--although the report didn't go into any commentary on
this, do you have any suggestions or comments on the problems
and the differences associated between State regulation and
Federal regulation?
Ms. Elfring. Yes. The main Committee conclusion related to
that really was that we had no problem with there being both
State and Federal oversight, but the Committee was concerned
about inconsistency. There was inconsistency in the evaluation
criteria. There was some inconsistency in other issues. And
that that made business planning really difficult, and that was
probably the main issue that the Committee had with those
different oversight roles.
Mr. Underwood. Was there any specific issue in the
evaluation criteria or--
Ms. Elfring. At the time--and again, I think some of this
has evolved--in the book is two tables, and one is the State
criteria, one is the Federal criteria. And one had a list of, I
think, it is 20 or so items, and the other had summarized them
down to 7. And it is just that different. If you are trying to
plan, who do you plan for? Which of these two oversight layers
do you pay the most attention to?
Mr. Underwood. Well, I guess that is also an important
question to ask the community groups themselves.
Dr. Balsiger, Mr. Bush has indicated a couple of times in
his response to the question about the use of the revenue or
the income, to be free to use for purposes beyond fisheries.
Mr. Bush has stated that this was pursuant to Federal
regulations. It that consistent with your understanding?
Mr. Balsiger. Mr. Congressman, yes, sir, it is. Of course,
that Federal regulation was designed to implement the program
that the North Pacific Fishery Management Council had derived,
and there was--that was the result of a lot of public
testimony, and as it filters through that semi-political
process, the Council, at that time, wanted those investments to
be in fisheries-related industries, and that is why the
regulations were so written.
As I mentioned earlier, the Fishery Service has no policy
against expanding or diversifying those kinds of investments,
and of course, as one of the things that the Council analysis,
which is ongoing right now, is looking at, and the Council
would address in the near future--
Mr. Underwood. Well, since you work with the Council a
great deal--I assume you work with the Council a great deal--is
there a shift in thinking on this particular issue over time?
Mr. Balsiger. Mr. Chairman, we did have public testimony on
this issue in Kodiak in June, and there was public testimony on
both sides of the issue. And so I think that we are giving it
the fullest analysis we could. I can't predict what the Council
decision would be when it makes its final decision, but there
certainly is a lot of interest in that particular issue.
Mr. Underwood. So would it be fair to say that what--in Mr.
Young's proposed legislation here, he specifically authorizes
that it could go beyond fisheries. I just want to make sure I
understand this entirely. You indicated that Mr. Bush was
correct in saying that the restrictions were pursuant to
regulations. The regulations in turn were based on a period of
commentary on the regulations made earlier. Is it your
assumption that that is not specifically restricted in existing
legislation? In other words, is there really a need for this
particular part of the proposed legislation?
Mr. Balsiger. Mr. Congressman, if the Council process,
which I have suggested is one way to proceed or to go through,
there is no guarantee that the Council recommendation would
ultimately change its opinion on how the investments of CDQ
monies ought to be made. And so, if your ultimate goal is to
ensure with 100 percent certainty that investments are not
restricted to fisheries, that probably is important to get in
the bill, because the Council is going to consider that in its
political process and may reach a slightly different
conclusion.
Mr. Underwood. Well, I understand the Council is free to
make a different conclusion, but I am saying that if they
concluded, for example, today without this legislation, that
diversification is entirely supportable, can they do that and
still be consistent with the law as it is written today? That
is what I am asking.
Mr. Balsiger. I am sorry. I understand your question. I
believe that the current legislation would allow the Council to
recommend a broad diversification of investments, and if they
did that, the agency would write regulations to that respect.
Mr. Underwood. In your statement you mention funded fishway
demonstration project proposals. Could you please describe what
these are and what their purposes are?
Mr. Balsiger. I am sorry, Mr. Chairman. My parochial hat
doesn't have that information with me. I certainly would be
happy to get back to you with those.
Mr. Underwood. Okay. I have also three other questions. I
know that it is a little bit out of your scope, but pertaining
to the development of the Western Pacific Community Development
Group, just lastly, Dr. Elfring, you mentioned that there were
the--when I asked you about the implementation of this in the
Western Pacific--and correct me if I am wrong--I am
understanding that there are problems associated with this that
would be different from Alaska because I suppose the
communities that are being assisted by this activity are less
diverse than they are in the Western Pacific. I mean, I am
trying to understand exactly what that particular concern is.
Maybe you could elaborate on that.
Ms. Elfring. Yes. I think the Committee's concern there
wasn't so much about the diversity of the communities, but the
broad geographic extent. I mean, there is a sort of natural
grouping to the Alaska communities and how they were put
together. And again, I think the Committee didn't believe that
was insurmountable, but it made it a different scenario, and
some of the procedures that you go through to form these groups
would need to suit your geography basically.
Mr. Underwood. And what the other concern you mentioned?
Ms. Elfring. The first concern was how fisheries are
allocated in general. I mean, Alaska was at an advantage, if
you want to call it that, in how the program was initially set
up because it already managed by quota. And so thus you could
say, well, we are going to take a part of this quota, and it
won't be individual, it will be community. You know, there was
already a reserve portion, so instead of having to eat into
someone else's part of that quota, you had a part that was
unclaimed--put quotes around that--so there was already an
existing management scheme that this fit very well into.
Mr. Underwood. Very good. Okay, thank you. This panel is
excused. Thank you very much for your testimony.
I ask unanimous consent that the testimony from the North
Pacific Fishery Management Council be inserted into the record
at this point.
[The information referred to follows:]
July 13, 2001
Honorable Wayne Gilchrest, Chairman
Subcommittee on Fisheries Conservation, Wildlife, and Oceans
U.S. House of Representatives
Room H-2-187 Ford House Office Building
Washington, D.C. 20515
Dear Chairman Gilchrest:
Thank you for your invitation to Mr. Rick Lauber, Chair of our
Council's CDQ Policy Committee. Unfortunately, he is unable to attend
the CDQ hearing on July 19. In lieu of his participation I would like
to briefly describe the recent activities of our Council regarding CDQ
issues, and highlight some of the specific issues raised through our
CDQ Policy Committee process. A full copy of that Committee's report to
the Council at our recent June meeting is attached.
First of all, I would like to take this opportunity to assure you
and the Resources Committee that this Council fully supports the CDQ
program, noting the myriad social and economic benefits the program has
created for rural, Western Alaska coastal communities. The Council
originated this program in 1992 through the pollock allocations
associated with our inshore/offshore amendments and the allocations
which were created as part of the halibut and sablefish IFQ program. In
1995 the Council extended the program to all BSAI groundfish and crab
species, as part of our license limitation program (LLP). The
Sustainable Fisheries Act of 1996 institutionalized that program as
part of the BSAI Fishery Management Plans. We recognize its permanence
in statute and vigorously support its continuation. The Council has
consistently supported this program and its limitation to the BSAI
fisheries and communities. Of recent interest to the Council are
certain administrative and policy issues associated with the CDQ
program. These are seen as a fine-tuning of the program and in no way
detract from our overall support.
The Council formed the CDQ Policy Committee in December 2000 to
address issues related to CDQ oversight responsibilities of the State
of Alaska and National Marine Fisheries Service (NMFS). The committee
is comprised of representatives from each of the six CDQ groups, two
CDQ industry partners, one member each from the State and NMFS, and is
chaired by former Council Chairman Rick Lauber. The committee was
tasked with providing policy recommendations to the Council on changes
that may be needed to regulations governing the role of NMFS and the
State in program oversight, the CDQ allocation process, and the
administration of the program. The Council requested a report from the
committee no later than June 2001. The committee met on April 26-27 and
May 24 - 25 of this year and identified nine priority policy issues and
several alternatives and options under each issue which the committee
felt warranted analysis. This list was eventually narrowed to eight
issues within the committee process. The committee also made specific
recommendations to the Council on each of these issues, in an effort to
provide the Council with more information on the committee's priorities
and preferences for future modifications to the CDQ Program. The
attached report lists each of the issues as identified and addressed by
the committee, as well as the relevant committee discussion, motion,
and final vote on each of the recommendations.
The Council received the committee's report in June 2001 and
adopted the committee's recommended suite of alternatives and options
for analysis, with a few additional alternatives provided by NMFS. The
Council is scheduled to review the draft analysis, prepared
cooperatively by Council staff and NMFS, in December 2001, with a final
decision scheduled for February 2002. The Council would receive public
testimony on the draft analysis at both the December 2001 and February
2002 meetings, prior to making a final decision.
While the committee did not reach consensus on several issues, the
majority/minority opinions are represented in the attached committee
report. Several of the issues and recommendations are related to
government oversight responsibilities and stem from issues raised in
Congressman Young's proposed legislation (H.R. 553, the Western Alaska
CDQ Program Implementation Improvement Act of 2001). Please note again
that while the committee has provided specific recommendations to the
Council on some of these issues, the full suite of alternatives and
options identified by the committee and NMFS will be analyzed and
reviewed before the Council makes its formal recommendations. The
comprehensive list of alternatives and options under consideration is
attached. A summary of the key issues, and the CDQ Policy Committee's
initial recommendations to the Council, are listed below.
LIssue 1: Periodic or Permanent CDQ Allocations
LThe State currently makes periodic, competitive allocations
among the CDQ groups. This issue addresses whether to continue this
practice, establish a fixed allocation cycle in regulation, or make
permanent allocations to the CDQ groups. The committee recommended
establishing a fixed allocation cycle of 3 years, with a clause
provided for mid-cycle changes in extraordinary circumstances.
LIssue 2: Define the Role of Government in Oversight of the
CDQ Program
LThe current BSAI FMP references that the CDQ Program is a joint
program between NMFS and the State of Alaska, and NMFS regulations
specify requirements for the State in overseeing the CDQ allocation
process, contents of the CDPs, the process for amending the CDPs, and
periodic reports. The committee noted that significant confusion exists
regarding the oversight roles of NMFS and the State because there is
not explicit language in the current regulations outlining those
responsibilities. Given that concern, the committee recommended
specifically identifying and limiting government oversight to the
following purposes in regulation:
1. LEnsure community involvement in decision-making;
2. LDetect and prevent misuse of assets through fraud,
dishonesty, or conflict of interest by verifying CDP milestone
compliance and financial performance;
3. LEnsure that internal investment criteria and policies are
established and followed;
4. LEnsure that significant investments are the result of
reasonable business decision, i.e., made after due diligence
and with sufficient information to make an informed investment
decision; and
5. LEnsure compliance with legal program requirements.
Please note the Council's addition of the general, overarching
issue of further defining the respective oversight roles of NMFS and
the State of Alaska (described in the attached list of Council issues
and alternatives for analysis). While the committee identified Issue 2
to limit the specific roles of government in the oversight of the CDQ
Program, the Council added a fundamental issue which pertains to the
respective roles of the Federal and State agencies that jointly oversee
the program. Issue 2 and the general issue are thus related; the
committee recommended government oversight duties in Issue 2, and the
general issue addresses which government agency should be responsible
for these duties and ultimately approving the CDPs and the final
allocations to the CDQ groups. In addition to status quo, the following
alternatives will be analyzed: modifying the current responsibilities
of NMFS and the State to include NMFS regulations to guide the State's
process in making allocation decisions; eliminating NMFS'' role in the
allocations and allocating the CDQ reserve to the State for direct
allocation to the CDQ groups; and revising the FMP and regulations so
that NMFS has primary responsibility for the CDQ allocations.
Issue 3: CDQ Allocation Process - Type of Quotas
LCurrently the CDQ and prohibited species quota (PSQ) are
specified by species, area, and gear type, and each CDQ group is
eligible to receive a percentage allocation of each CDQ or PSQ reserve
as recommended by the State of Alaska and approved by the Secretary of
Commerce. The committee recommended continuing this competitive
process, as opposed to making some portion of the CDQ allocations fixed
or based on demographic characteristics.
Issue 4: CDQ Allocation Process - Evaluation Criteria
LThe State has published a list of evaluation criteria in
regulation (6 AAC 93, included in the committee report) and decides how
to apply that criteria in making CDQ allocations. The State explains
its application of the criteria in its written allocation
recommendations to the Council and NMFS. No specific criteria are
published in NMFS regulations. The committee recommended a specific
list of nine evaluation criteria to use in determining the CDQ
allocations, several of which mirror the current State criteria. These
criteria are included in the attached committee report. Because the
committee is comprised of representatives from all six CDQ groups, the
process by which the committee developed and agreed to these criteria
(noting two objections) is similar to the process proposed in H. R.
553, whereby the CDQ groups would be tasked to develop and agree on the
evaluation criteria, which must then be used by the State and NMFS.
Issue 5: Public Comment on Allocation Recommendations: Appeals Process
LThe State currently issues its CDQ allocation recommendations a
few days before the Council meeting at which the State consults with
the Council. The CDQ groups may testify to the Council about the
State's allocation recommendations, and the Council must take comments
into consideration in deciding whether to support the State's
recommendations. If the State's allocation recommendations change as a
result of these comments, they must re-consult with the Council. NMFS
issues a final agency decision if it approves the State's allocation
recommendations. NMFS regulations do not require a public comment
period on the State's allocation recommendations after they are
submitted to NMFS; they also do not require publishing the agency
decision in the Federal Register. Noting concerns with the lack of an
appeals process, the committee recommended developing a comment period
for the State's allocation recommendations such that the State is
required to, among other things: 1) upon issuing the initial
recommendations, provide an explanation of changes from the previous
year's allocations; 2) accept pubic comments on the initial
recommendations; and 3) issue final recommendations and provide a
written response to public comments, including any changes from the
initial allocation recommendations.
Issue 6: Extent of Government Oversight (definition of a CDQ project)
LThe current NMFS regulations are not explicit on the extent of
government oversight authorized by the definition of a CDQ project.
This issue primarily addresses whether government oversight extends
only to the activities of the CDQ group, or whether it also extends to
businesses that the CDQ groups own. H.R. 553 also addresses this issue,
and proposes that oversight would only apply to the activities of the
CDQ group itself.
LThe committee recommended a proposal by the State of Alaska to
reduce the requirements for expenditures that require review and prior
approval by the State and NMFS and to clarify that oversight of the CDQ
Program includes the activities of businesses that the CDQ groups own.
The committee also recommended including a rebuttable presumption in
regulation, such that if a CDQ group owns 50% or more of a subsidiary
company, the burden is on the CDQ group to prove that it does not
exercise effective management control over that subsidiary (as defined
by control of the daily operations and management of the company). If
it is determined that they do not exercise effective management
control, then any activity of that entity is treated as a standard
investment (not as a CDQ-owned business) and thus subject to lower
oversight and reporting requirements.
Issue 7: Allowable Investments by CDQ Groups (fisheries-related
projects)
LNMFS regulations (50 CFR 679.1(e)) implement what NMFS
understands as the Council's intent - that the revenue generated by the
CDQ allocations is to be spent only on ``fisheries-related'' projects
to benefit the communities in the CDQ groups. Current regulations do
not include specific investment guidelines or a list of allowable
investments, and some decisions about acceptable investments have been
based on policy or practical considerations (scholarships, stocks,
etc.). H. R. 553 also addresses this issue and would expand the type of
investments that could be made with CDQ royalties and assets.
LThe committee recommended modifying the regulations to
incorporate some flexibility in the type of project in which the CDQ
group can invest. The committee recommended that CDQ groups be allowed
to invest up to 20% or a maximum of $500,000 of their pollock royalties
in non-fisheries related projects, and that those projects must be
economic development projects in the region of Alaska represented by
the CDQ group. To date the Council has supported the concept of
fisheries-related projects only, but will be considering possible
adjustments when they take final action on these issues.
Issue 8: Other CDQ Administrative Issues
LThe committee noted that the State has proposed several minor
administrative changes, primarily related to streamlining the reporting
and CDP amendment process. The committee supported incorporating these
changes in the analysis.
The committee was initially created on the basis that it would be
disbanded upon completion of its task to address the priority policy
issues and provide recommended changes to the Council. Upon receiving
the committee report, however, the Council decided to keep the
committee intact for a minimum of one year, in order to address on-
going and upcoming CDQ policy issues on an as-needed basis. One
potential responsibility of that committee may be to review the draft
analysis before it is submitted to the Council in December 2001, and
make final recommendations to the Council on these issues.
The Council recognizes the importance of this program to the rural
communities of western Alaska, and continues to support its
implementation. Given the rapid growth and evolving nature of the
program since its inception in 1992, the Council also supports moving
ahead with an analysis of the policy issues surrounding the program. A
review of these issues will help ensure that the program is
appropriately structured to adapt to changes in the fisheries, and will
continue to benefit these communities to the fullest extent possible.
Thank you for considering these comments relative to your upcoming
hearings.
Sincerely,
David Benton
Chairman
cc: LDave Whaley, Legislative staff
LRobin Samuelsen, Council member
Attachments:
Report and Recommendations of the NPFMC CDQ Policy Committee (June
2001)
Draft Issues and Alternatives for CDQ Policy Analysis (June 2001)
[NOTE: The attachments have been retained in the Committee's
official files.]
______
Mr. Underwood. We can have the second panel come up. The
second panel: Mr. Larry Cotter, Mr. Robin Samuelsen, Ms.
Merculief, Mr. Crow, Mr. Asicksik and Mr. Alstrom.
Good afternoon, and welcome to the Committee, and we will
start off with Mr. Cotter.
STATEMENT OF LARRY COTTER, CHIEF EXECUTIVE OFFICER, ALEUTIAN
PRIBILOF ISLAND COMMUNITY DEVELOPMENT ASSOCIATION
Mr. Cotter. Good afternoon, Mr. Chairman. I would like to
thank you for inviting me to testify today.
I have been involved in the CDQ Program since its
inception. In fact, I was a voting member of the North Pacific
Fishery Management Council when the program was initiated and
development and adopted.
I currently serve as the Chief Executive Officer for the
Aleutian Pribilof Island Community Development Association,
otherwise known as APICDA.
The CDQ Program is arguably the most important economic
development program ever implemented in Western Alaska. APICDA
is proud of its accomplishments since its formation some 8-1/2
years ago in December 1992. On an annual basis APICDA provides
in excess of 170 jobs to local residents from our member
communities, generating a local resident payroll of
approximately $2.5 million a year. In addition, APICDA has
provided nearly $1 million in training and education
scholarships for over 200 residents. APICDA's focus has been on
shore-side economic development in our member communities. We
have invested in excess of $20 million in infrastructure and
business development in our communities during the last years.
We have also invested in several large Bering Sea class
harvesting and processing vessels that operate as profit
centers and generate revenue that we use in support of our
shore-side operations.
None of this would have been possible without the CDQ
Program. The CDQ Program, however, is not without its problems,
although most of them can be attributed simply to growing
pains. Federal CDQ regulations delegate substantial
responsibility to the State of Alaska as part of the CDQ
allocation process. The State develops a recommended allocation
for each of the groups, and the Secretary of Commerce
ultimately approves or disapproves the allocation. The intent
of the regulations are to insure that a fair and equitable
allocation process is used by the State when making its
recommendations.
In our opinion, there is no credibility to the current
State decision-making process on allocations. Decisions made by
the State are made behind closed doors. Although there is 20
some criteria, there is no ranking or relative weight
associated to those that we are aware of, and the groups
ultimately, simply have no idea how allocations are made or
what thinking process is used in making them.
Unfortunately, the Secretary of Commerce appears to have
delegated his or her responsibility in the allocation process,
to the State. National Marine Fishery Service and NOAA, acting
on behalf of the Secretary, maintain that the Federal
Government's role is essentially ministerial, that is, the
State will make the decisions, and the Secretary will simply
determine whether or not the State followed the process
outlined in the regulations.
As a result, the Secretary has abrogated its responsibility
to determine whether or not the State is making fair and
equitable allocation recommendations. At the very least, since
this is a Federal program, we would expect that NMFS would
ensure that the process used by the State is fair and equitable
and not arbitrary and capricious.
The position adopted by NMFS and NOAA results in a denial
of due process to any CDQ group who wishes to object to or
challenge allocation recommendations developed by the State.
Since the State of Alaska CDQ regulations do not provide for an
appeal of its recommendations, and NMFS has withdrawn from the
process, there is no one to appeal to except the courts.
We believe that it is now in the best interest of the CDQ
groups, their members, their partners and the public, for each
group to receive a fixed CDQ allocation that extends for the
life of the program. The CDQ Program, in each of the six
groups, has matured sufficiently that it is no longer necessary
or in the best interest of the program itself, in our opinion,
for the groups to compete against each other for CDQ
allocations.
Individually and collectively the groups need financial
stability. Fixed allocations will eliminate politics from the
allocation process, reduce costs for both the Government and
the CDQ groups, allow each of the groups to better utilize
their personnel, and increase financial stability for each of
the groups since we will know in advance what our allocation
will be for the future.
Rules and regulations exist for the purpose of outlining
the boundaries of acceptable behavior. The concept of oversight
as a simple mechanism to ensure that rules and regulations are
adhered to is an appropriate and acceptable tool in our
opinion. However, when oversight results in micro management or
unnecessarily burdens those being overseen, it creates an
unnecessary bureaucracy which increases costs and reduces the
efficiency of the corporation.
In APICDA's opinion, it is inappropriate to continue
requiring the different groups to receive approval from the
State of Alaska and the Secretary of Commerce before a group
can make an investment or make adjustments in its budgets or
operating plans. Why should the State of Alaska or the
Secretary of Commerce be able to substitute their decision in
place of the decision made by a group of board of directors
from a CDQ organization? If the decision is within the scope of
the program and adheres to the rules and regulations regarding
investments, the current oversight requirements are
unnecessary, costly, inefficient and inhibiting.
Our proposal on oversight is very simple. The CDQ groups
should be required to operate within the law and live within
the rules and regulations of the program, to amend their
community development plans when appropriate, to provide timely
copies of the amendment to the State and to the National Marine
Fishery Service, and to provide reasonable advance notification
to the State of Alaska and/or NMFS when new investments are to
be made. Nothing else is really necessary. The State and/or
NMFS can do an annual audit to ensure that the groups have
operated with the law.
Another issue of significance is the extent of allowable
investments by CDQ groups. When establishing the CDQ Program,
the North Pacific Council limited the scope of investments to
those that are directly or indirectly related to the fishing
industry. There are increasing calls by different CDQ groups
for this policy to be modified to allow limited or unlimited
investments in non-fishery-related projects investments. APICDA
and one other CDQ group, Central Bering Sea, are unique among
the six CDQ groups, in that our communities are located
immediately adjacent to the groundfish and shellfish fishing
grounds, and the other four CDQ groups are not. As a result, we
are in a position to use our CDQ allocations to develop local
economies in our member villages that are based upon and rely
upon those fisheries. That is the focus of our program. By
virtue of our location, APICDA is required to expend
substantial sums on infrastructure. Anyone familiar with the
Bering Sea realizes that development is expensive and risky.
The intent of the CDQ program is to provide a mechanism to
support that. We could support providing the necessary
flexibility for the other CDQ groups to develop non-fishery-
related resources adjacent to their communities, and to develop
outside investments using CDQ funds, if sufficient CDQ
allocations are set aside for those CDQ groups who have the
capability to reasonably complete the development of
sustainable local economies.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Cotter follows:]
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Mr. Underwood. Thank you for your testimony.
Mr. Samuelsen. I am going to have to try to insist that we
try to stick within the 5 minutes, although Mr. Cotter squeezed
an addition of 2-1/2 minutes out of this. Go ahead, Mr.
Samuelsen.
STATEMENT OF H. ROBIN SAMUELSEN, JR., CHAIRMAN, BOARD OF
DIRECTORS, BRISTOL BAY ECONOMIC DEVELOPMENT ASSOCIATION
Mr. Samuelsen. Thank you, Mr. Chairman. That is the nature
of Mr. Cotter.
For the record, my name is Robin Samuelsen. I am from the
Bristol Bay Economic Development Corporation. Behind me I have
Hazel Nelson, who is our vice president.
Mr. Chairman, I make up--BBEDC makes up 17 villages within
the Bristol Bay Region. I am also a tribal chief, Mr. Chairman,
and I want to make one clarification. The CDQ Program is not a
Alaska Native program. We represent everybody that lives within
our communities, regardless of ethnic background.
The CDQ Program is entering its tenth year, and I can
honestly say that no one thought this program would survive,
let alone thrive. We were against adversity like never seen
before in the Alaska fishing community. Outside interests were
united in destroying the community development program.
We are from isolated villages. The lowest prices I could
find in the Bristol Bay Region for gasoline was $3.00 a gallon
just before I came down. Heating fuel was 2.45, and the lowest
price I could find for a gallon of milk was $6.18. In 1997 and
1998 the Federal and State Government declared my region an
economic disaster. Our salmon did not return. This year we are
missing 12 million salmon to ocean fish. We are facing another
disaster in the year 2001, not only from a biological
standpoint, but also from the farm-raised Chilean salmon that
is flooding our marketplace.
Our people live in cash plus subsistence economy. They have
done that for thousands of years in Bristol Bay.
Ten years ago not one person from my region was employed in
the Bering Sea. Today we have over 350 people working from our
communities. These are not slime-line positions. These are
upward mobility positions. People are in upper management and
are working their way up.
We have invested in pollock, crab, cod, halibut with
partners from Alaska to Washington. These investments have
proven themselves very valuable. BBEDC's primary focus has been
in-region development, increasing the skills of our residents.
We have teamed up with the University of Alaska, Fairbanks, and
many of our people do not have high school diplomas. In order
to enter into a slime-line position, they need a GED. We have
gotten many people their GEDs. Our dropout rate in our high
schools is reversing, and things are finally looking up.
We haven't forgotten about our elementary kids. You need to
teach them young. So we have introduced our kids to the 9 to 5
work world, and we have got all four school districts signed
on.
Bristol Bay used to be the salmon capital of the world, but
then again, our salmon prices have plummeted. Our internships
are very important. We employ these young people both inside
the region and outside the region. There has never been a
program like the CDQ Program. Combined, it has helped my people
like no other program has, and I believe that if it were not
for the competitive nature of this program, between us, the CDQ
groups, and the need to live up to our community development
plans, coupled with strong Federal and State oversight, we in
the CDQ Program will not have come as far as we have.
This leads me to the oversight issues. State, Federal and
the North Pacific Fishery Management Council have all done a
good job of ensuring that this use of a public resource is
doing what it is supposed to do. The Council and NMFS
specifically put the State of Alaska into lead oversight day-
to-day management role, and they are the most qualified for the
job. Neither NMFS nor the Council wants to take on this
responsibility.
The CDQ groups have a lengthy process to go through before
any allocations of resources are made to them. We must submit a
CDP, provide quarterly and annual reports, participate in
public hearings.
I won't read through all my testimony because I don't have
the time, but, yes, Chairman Young has been successful. If it
wasn't for Chairman Young introducing H.R. 553, I don't think
the Council would have taken this issue, I don't think the
State would have looked at this issue, and the CDQ groups have
been crying out, but because of other issues such as stellar
seal lions, the American Fisheries Act, a whole host of
lawsuits and putting the North Pacific Fishery Management
Council, as well as NMFS, under a regulatory lawsuit siege, the
priorities were set forth by the courts. And if it wasn't for
you, Mr. Young, and introduction of this bill, I don't think
the Council would have looked at the problems of the CDQ
community that they are having in oversight, but thanks to you
and the introduction of this bill, I think that the Council is
moving forward. We are going to look at--the Council formed a
Committee that has brought forth recommendations. The Council
will take the recommendations in October, and ship them out for
final analysis, and hopefully will act on them in December.
I just got lectured about time. Mr. Chairman, thank you.
[The prepared statement of Mr. Samuelsen follows:]
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Mr. Young. [Presiding] Thank you, and thanks for--you
stayed right in time. In fact, you had 15 seconds left. That is
all right.
Ms. Merculief, you are up next.
STATEMENT OF PATIENCE MERCULIEF, ADMINISTRATIVE DIRECTOR AND
CDQ QUOTA MANAGER, CENTRAL BERING SEA FISHERMEN'S ASSOCIATION
Ms. Merculief. Thank you, Mr. Chairman, for the opportunity
to be here today. It is an honor to be here on behalf of the
members of the CBSFA community. I apologize for the fact that
Mr. Phillip Lestenkof, President of CBSFA, is not here today
because he is in fact in the middle of our halibut fishery.
I first ask that our written testimony be included in the
record in its entirely, and second, we have provided you with a
portfolio of the CBSFA halibut fishery in action, and I hope
that the members of the Committee and the staff can improve
their understanding by looking at pictures of our halibut fleet
and harbor in action. A picture is often worth a thousand
words.
It is the CDQ Program and almost 1-1/2 million pounds of
CDQ and IFQ halibut that has allowed the St. Paul fleet to
develop. It allows access to the fish, provides the resources
to finance individual CBSFA fishermen, to purchase boats and
also purchase additional IFQ halibut in Area 4C, the area
surrounding St. Paul. Without the CDQ Program, this would be
another situation where the residents of St. Paul would have
sat by in poverty, and watched people from Seattle, Anchorage,
Kodiak, or Dutch Harbor, benefit from the halibut resource in
the waters around St. Paul. Whatever improvements are
necessary, the bottom line is that this program is a success.
In the community of St. Paul, a community of about 600
people, 120 people are making at least a portion of their
living fishing. There are 20 boats fishing and at least 10
captains are netting more than $30,000. Five of those are
netting over 50,000 a year from the halibut fishery. The total
gross revenue to the community of St. Paul from the halibut CDQ
fishery is approximately $3 million. All of this has happened
in the last decade because of the CDQ Program. 55 percent of
the United States commercial fishing industry catches their
fish within 65 miles of St. Paul Island. Yet there would not be
an economically viable in-shore fishing fleet in the community
without the CDQ Program.
The future depends on the CDQ Program too. If CBSFA
receives adequate allocations and is not burdened with
excessive regulation by the State, there is potential for:
No. 1. Icicle Seafoods moving a processor to the harbor to
process cod, pollock and other flat fish. CBSFA, Icicle and the
City of St. Paul have signed an MOU to allow this to happen;
and
No. 2. With the eventual return of crab, the continued
harvest and processing of crab for the benefit of the CDQ
groups that are not located near the resource. CDQ crab
harvesting and processing on St. Paul benefits all of the CDQ
groups;
No. 3. The ability of the community to develop the
necessary infrastructure, such as construction of the local
authorized small-boat harbor, so that CBSFA can upgrade its
boats and other groups can take advantage of the immense
resource surrounding St. Paul;
No. 4 The revenues to finance individual fisherman's
acquisition of larger vessels and additional fish quotas so
that fishermen can expand and diversity into other fisheries;
and
No. 5. The training, internship and other educational
programs to allow the local residents to participate
successfully in these programs.
There are two impediments, first the State's focus on
population in allocating quotas, rather than commercial fishery
development potential; and secondly, the over regulation that
diverts revenues and focus of the CDQ groups from the market in
commercial fishery to bureaucratic administrative activities.
Allocation is always a tough issue. CBSFA admits that there
is justification for the State concentrating to some extent on
population as the criteria. However, there are other equally
important criteria. These are: (1) proximity of the community
to the resource, (2) the commercial fishing development
potential in a community, (3) the need of a communities'
fishermen to have access to a portion of the resource, and (4)
the infrastructure required to allowed participation in the
commercial fisheries in the waters around the community. These
are all legitimate policy criteria, and are, CBSFA contends,
the purposes for the program, they should be considered on an
equal basis as population.
As the St. Paul developing halibut fleet demonstrates,
access to the resources, financing and education, and
infrastructure and markets are all important benefits that
allow Alaskans in Western Alaska to participate in the private
sector economy. It is time to follow the Alaskan Native Claims
Settlement Act, rather than the old BIA model. ANCSA started
with Government oversight, but succeeded by allowing the
corporations to become successful in the market like other non-
native corporations. The initial CDQ oversight may be
justified, but now it is time to move toward the ANCSA model.
In conclusion, the CDQ Program is one of the most
innovative and successful economic development programs that
creates economic opportunities in rural areas in those
communities adjacent to our fishery resources. As the National
Resource Council and this hearing demonstrate, there are areas
which needed improvement, and we urge the community to pass
H.R. 553 with changes, and make the improvements needed. The
improvements, however, only make a great program even better.
Chairman Young, CBSFA thanks you for your leadership in
creating the program and your continued leadership in
introducing legislation to make some mid-course corrections. We
also thank you for conducting this hearing. With your
consistent involvement, the CDQ Program will reach its
potential. It will continue to be the model program we all
want. On behalf of all the people on St. Paul Island in the
Pribilofs, thank you.
[The prepared statement of Ms. Merculief follows:]
Statement of Patience Merculief and Tony Smith on behalf of the Central
Bering Sea Fishermen's Association (CBSFA)
Good morning. My name is Patience Merculief and with me is Tony
Smith, CBSFA's legal representative, who has been involved with the CDQ
program since its inception on St. Paul's behalf and who will assist me
with this testimony. I was born and raised on St. Paul Island and
currently work for the Central Bering Sea Fishermen's Association
(CBSFA). It is an honor for me to be present today on this issue of
critical importance to my community.
First, Mr. Chairman, I would like to apologize for the fact that
Mr. Phillip Lestenkof, President of the Central Bering Sea Fishermen's
Association, is unable to be here in person to present the views of
CBSFA. As my testimony will demonstrate, the CDQ Program has given the
fishermen on St. Paul Island, Alaska, an opportunity to be very
successful commercial fishermen. Without the CDQ Program, it is
doubtful that the Aleut Natives on St. Paul Island would be anywhere
near as successful as they are, but this hearing is in the middle of
the most important commercial fishing season (the halibut season) for
Mr. Lestenkof and the members of CBSFA. As we speak, Mr. Lestenkof is,
weather permitting, on the waters of the Bering Sea fishing for halibut
in a very small vessel as a day boat commercial fisherman. He is able
to do this because of the CDQ Program. Mr. Lestenkof has a record of
being one of the successful fishermen on St. Paul Island, and it is
commercial fishing, not his position as CBSFA President, that is his
past and future livelihood.
While I ask that Mr. Smith discuss CBSFA's main concerns before
this body, I wanted to state that the CDQ program is critical to the
livelihoods of many residents on St. Paul Island and has played a key
role in our community's development. While recognizing the positive
impacts of the CDQ program, CBSFA also acknowledges that the program,
its needs, and the needs of its beneficiaries have evolved, and
therefore, adjustments are required to reflect the new realities.
The fact is that because of the CDQ Program, I will become an
intern at a major seafood company this fall, my brother is able to
support himself and his family as one of the top halibut fishermen in
the fleet and my father, as City Manager of St. Paul Island, is
constantly working with the CDQ Program to develop the commercial and
public infrastructure that benefits the Aleuts in the community and all
the commercial fishermen fishing in the Bering Sea. I can assure the
Subcommittee, the Congress, the Administration and anyone interested
that the CDQ Program works and has made a difference in our lives. For
this, I personally want to thank Chairman Young and the others who have
developed this program.
I will now turn this over to Tony Smith for more detailed comments
on the program and what CBSFA views as its future. Thank you.
Thank you. Good morning. My name is Tony Smith. I have attached a
current resume summarizing my experience as it pertains to the subject
matter of the hearings. Suffice it to say that I have been involved in
the development of the CDQ Program since it first was conceived both as
a government official and as counsel to communities, CDQ organizations
and associations of CDQ groups. In the course of my testimony, I will
point out some areas where we believe the program needs improvement,
but in terms of sound public policy benefiting the ecosystem of the
Bering Sea and the coastal communities in Western Alaska, this program
is a winner. It is a program that, in my view, should be a model for
coastal communities worldwide, and especially on the Russian side of
the Bering Sea.
As this testimony will demonstrate, the CDQ Program has given the
fishermen on St. Paul Island, Alaska, an opportunity to become
successful commercial fishermen. Without the CDQ Program, the Aleut
Natives on St. Paul Island would not have had this opportunity as the
fisheries were fully utilized by others. The program has also allowed
this remote coastal village located in the middle of one of the world's
richest fisheries, to participate in the fishery off its shores. While
55% of the United States' commercial fisheries is within 65 miles of
St. Paul Island, without the CDQ Program, the residents could not have
commercially participated or been able to develop the necessary
infrastructure. CBSFA and St. Paul demonstrate the benefits of the
program noted by the National Research Council.
The idea of giving the local residents an opportunity and a stake
in the sustainability of the commercial resources in their coastal
areas is also one of the most effective ways to assure that the
resource is well-managed. Unlike the distant water commercial fleet,
which can move to other fishing grounds around the world if the
resource is over fished, the residents of St. Paul Island, Alaska, and
the other Western Alaska coastal communities, are not able to pick up
their communities and move to distant grounds when a fishery declines
as a result of mismanagement, or otherwise.
This alone is an important benefit of the CDQ Program.
The CBSFA Success Story.
The community of St. Paul Island, Alaska, consists of approximately
800 Aleut Natives. It is the largest Aleut community in the world and
97 percent of the residents are Aleut Natives. In the short period of
time that the CDQ Program has been in existence, the community has been
given the opportunity by the program to develop an inshore day boat
commercial halibut fishery. The result is a fleet of locally-owned
vessels that is a major source of employment and is the major
livelihood of a substantial number of the residents of St. Paul.
CBSFA, with the implementation of the CDQ Program, began training
and financing CBSFA members in acquiring commercial fishing boats.
Eventually, when the opportunity presented itself with the 1995
allocations of halibut in area 4C around the Island, this program was
expanded to include acquiring IFQ halibut allocations when the halibut
IFQ program began. CDQ funds were used to finance CBSFA members in
buying IFQ halibut allocations from other commercial fishermen for the
surrounding waters, on the open market. This program is ongoing, but
the results are remarkable and Aleut fishermen have been able to buy
IFQ allocations on the open market so that they can benefit from the
resource around their home.
On St. Paul Island, one hundred eighty Aleuts now earn all, or a
portion, of their living from the halibut fishery. CBSFA and its
members have received over 900,000 pounds of CDQ allocations in Area 4C
and approximately 600,000 pounds of IFQ allocations. Thus, St. Paul
residents have access to catch approximately 1.5 million pounds of
halibut off their shores. At the recent ex-vessel price of $1.50 a
pound, this is $3.00 million dollars of revenue for a community of 600
from a fishery off their shore that use to go to fishermen from all
over the world. It is also a three month fishery, that can be harvested
by small boats fishing during the day when the weather is acceptable.
There are twenty captains of commercial day fishing vessels on St.
Paul. Five of those captains are earning over $50,000 per year after
expenses and a number of others are earning more than $30,000 per year
from the halibut fishery. The halibut fishery is a day fishery where
the CBSFA fishermen fish on 20 to 36-foot boats. Some of the most
successful captains are now trying to upgrade their boats to larger
vessels in order to participate in other commercial fisheries for
additional species where the fishermen have to venture further from
port.
As a result of the CDQ Program, St. Paul has been able to attract
commercial processors and fish buyers to the Island to process the
approximately 2.0 million pounds of halibut available in Area 4C. For
example, CBSFA and the City of St. Paul presently have entered into an
MOU with Icicle Seafoods, another processor, to move one of their
processors to St. Paul in order to process cod, pollock and other
species, if certain improvements to the harbor are made. The CDQ funds
will be critical to allow their small Native community to make those
improvements. When it happens, all of the catcher vessels in the Bering
Sea will benefit.
Congress has authorized a small boat harbor as part of the St. Paul
Harbor Improvement Project. Right now, there is no mooring area in the
harbor. As a major portion of the small boat harbor facilities are non-
navigation facilities which the Corps of Engineers will not construct,
the CDQ Program provides the funds so these facilities can be built.
When completed, St. Paul will be a dynamic small boat commercial
fishery in the middle of America's most productive commercial fishery.
The local Native people will be a part of this--all because of the CDQ
Program.
Not only this, but for the first time in its history, the CDQ
Program has given the Aleut residents of St. Paul an opportunity to
earn their livelihood, and take care of their families, in the private
sector based on their skill, determination and ability as commercial
fishermen. Prior to the CDQ Program, the residents of St. Paul depended
on the fur seal harvest, government employment, and employment with
various non-governmental organizations (NGOs) that are active in the
Pribilofs because of the importance of the wildlife located there. The
CDQ program has offered the alternative opportunity of real
participation in the private sector. The transformation of the economy
from politics to individual initiative and market forces is another
substantial benefit of the CDQ Program.
The Establishment of the CDQ Program.
The CDQ Program was initially established by the North Pacific
Fishery Management Council (NPFMC) in 1991 to allow fishermen residing
in Western Alaska communities an opportunity to participate in the
Bering Sea/Aleutian Islands ground fisheries and other near-shore
fisheries as part of the Council's Pollock Fishery Management Plan. The
reason given was to provide a means to initiate or support commercial
fisheries activities which will result in sustainable, regionally based
commercial fisheries economies. The National Research Council notes the
``... program was designed to improve social and economic conditions
... by helping communities build their capacity to engage in commercial
fishing.''
When the NPFMC program was statutorily incorporated into the
Sustainable Fisheries Act (Magnuson-Stevens) in 1996, the purpose was
expressed as creating an opportunity for the residents of the coastal
communities to participate commercially in the Bering Sea fisheries.
The regulations implementing Magnuson-Stevens state that the goal is:
''... to allocate CDQ (Community Development Quota in certain
species) to eligible Western Alaska communities to provide the
means for starting or supporting commercial fisheries business
activities that will result in an ongoing, regionally based,
fisheries related economy.'' 50 C.F.R. 679.1(e)(N).
The regulations are consistent with the initial intent of the NPFMC
in establishing the CDQ Program.
Thus, Magnuson-Stevens codified the NPFMC's CDQ Program for the
Bering Sea. In the House Committee Report, accompanying the House-
passed version of Magnuson-Stevens in October 1995, the Committee
recommended the continuation of the NPFMC's program pointing out that
Western Alaska is one of the poorest, most underdeveloped areas in the
United States. Located on the Bering Sea coast, the residents of the
area, predominantly Native, have historically watched valuable marine
resources exploited by both foreign and American distant water fleets.
The CDQ Program provides a means to develop the local economies and to
give the Native people an opportunity to participate in the commercial
fisheries for each species.
While begun in 1991 as part of the NPFMC pollock management plan,
in 1992 the NPFMC, in conjunction with a limited access plan for
halibut and cod, expanded the CDQ Program. Eligible communities were
authorized to expand their participation by allowing them to harvest 20
percent of the total allowable catch of Bering Sea cod and
approximately 20 percent of the Bering Sea halibut. The plan was
implemented in 1995 and has been the basis for developing the halibut
and cod fishery at St. Paul Island.
The 1996 Magnuson-Stevens Act reauthorization codified the
additional pollock, cod and halibut fisheries and expanded the program
to include a percentage of each species of the Bering Sea fishery. To
accomplish this objective, the Act amended Section 313 of the Magnuson-
Act to require the NPFMC to establish, and the Secretary of Commerce to
adopt, regulations implementing the Western Alaska CDQ Program as a
permanent, independent program.
The House Committee Report specifically states that:
``The Committee expects that, for each Bering Sea fishery, the
NPFMC, with the final approval of the Secretary, will allocate
to the communities participating in the program a percentage
that is adequate to ensure their significant and sustainable
economic participation in the fishery.''
The CDQ Program was considered, by both houses of Congress, to be
very important for the coastal communities in order to provide the
opportunity for their commercial and subsistence fishermen to ensure
healthy coastal communities. The program is essential for providing
access to the resources in order to develop self-sustaining fisheries-
based economies and infrastructures to support continued development.
In addition, by becoming stakeholders in the nearby commercial fishery
resource, the program creates the incentive among coastal community
residents to work for the protection and sustainable management of the
resources on which they, their families, and their communities depend
for economic and cultural survival. 1
---------------------------------------------------------------------------
\1\ As the 1999 National Academy of Sciences suggests, because a
portion of the fishery resources are now local profits, these coastal
communities are positioned to be the natural protectors of the
environment particularly of the Bering Sea and the sustainability of
the underlying resource base--the fishery.
---------------------------------------------------------------------------
In implementing the federal regulations contained in 50 C.F.R.
679.30, the State promulgated regulations in 6 AAC 93. State
regulations have been issued and the State has been managing the
program, but there are clearly areas of the program administration that
need to be reviewed and, from the CBSFA perspective, improved.
Administration of the Program.
In the State regulation of the CDQ Program, the State of Alaska has
followed the path of constant and intense oversight. Budgets need to be
reviewed in detail and constantly updated. Business plans are subject
to revision by the State and must be followed, and formats are often
more important than results. While standards may be ambiguous, the
evaluation process is bureaucratic, intrusive, and extremely detailed.
Government officials, through their oversight, decide what companies,
vessels or infrastructure should be purchased, operated or sold by CDQ
organizations. The intrusive, bureaucratic program requires substantial
amounts of administrative time and burdens.
In addition, quota allocations to CDQ groups are awarded mostly on
a calculation of the population in a region and the number of jobs that
are provided, rather than on the issue of whether a sustainable,
profitable, long-term commercial fisheries business is being developed.
The result is that consideration of population and the pressure for
low-end jobs ends up as a higher priority than (1) long-term investment
in a sustainable business enterprise, (2) infrastructure that creates
opportunities for the coastal communities to participate in a
sustainable fishery, or (3) in St. Paul's case, the development of a
new fleet of commercial fishermen succeeding in a day boat halibut and
cod fishery because they have access to the fish and the capital.
Criteria for Administration.
Generally CBSFA agrees with the 1999 National Academy of Sciences
study on the CDQ Program in Alaska that by making a long-term
commitment to the CDQ Program, simplifying the criteria used in the
allocation of quotas and reducing the high administrative expenses, the
CDQ Program will run much more effective.
CBSFA does not contend that there should be no oversight by the
State of Alaska, nor that it is inappropriate to consider employment/
jobs as one of the factors in allocating CDQ quotas. What CBSFA
contends, and urges Congress to consider as you look at the CDQ Program
and at the Young bill, H.R. 533, are revisions that will ensure that
the initial purposes of the CDQ Program are followed, that the CDQ
organizations be allowed to make long-term financial commitments and
that access to fish and development of enterprises and infrastructure
are placed on an equal footing as are the creation of low end jobs and
subsidies.
We should learn from the Alaska Native Claims Settlement Act
(ANCSA). At the beginning of ANCSA there was government budget and
programmatic oversight. However, after the Native corporations were up
and running, the oversight was reduced to a minimum. Governmental
oversight of the CDQ Program should follow the highly successful ANCSA
model, which allowed the Native village and regional corporations to
make their decisions and carry out their goals.
CDQ groups should be allowed to submit business records maintained
in the ordinary course with a minimum of supporting reference the same
as non-native businesses, so that they can devote their time to
management of CDQ Programs. For example, the required submittal of
Community Development Plan amendments for bureaucratic review becomes
more important than adjusting a CDQ group's program to market forces.
Allocations.
The administration of the CDQ Program by short-term periodic,
competitive allocations among the CDQ groups, particularly when the
principal requirement is creation of jobs (of whatever nature),
undermines the program. The competition process does not further the
original intent of the CDQ Program and should be reconsidered. CBSFA,
for example, has suffered significant losses under the competitive
allocation process (CBSFA lost 60% of their original allocation)
despite the fact that CBSFA is one of the CDQ groups that is and has
excellent prospects for continuing to develop the infrastructure and
the processing capacity to allow all Alaska and Northwest residents and
its member fishermen to process species close to the resource.
CBSFA believes that if the Federal Government, through the National
Marine Fisheries Service, were involved in the allocation decisions,
this would improve the administration of the program. The CDQ Program
is, since 1996 and the passage of the Magnuson-Stevens Act, a creature
of federal legislation and deals with the federal fisheries resource.
NMFS'' responsibility as a commercial fishery manager is to manage and
supervise the commercial fishery in the Bering Sea and this
responsibility should not be wholly delegated to the State of Alaska.
The sustainable development of the commercial fishery in the Bering Sea
is a federal responsibility.
The State of Alaska, as a government entity, however, has different
responsibilities. Part of those responsibilities is spreading benefits
throughout the State. Sometimes this responsibility conflicts with the
intent of the CDQ Program which is supposed to develop sustainable
commercial fisheries in local coastal communities. NMFS therefore
should try to strike a balance in the management of this federal
program with the political goals of the State. For example, the tension
between allocating CDQ to be used for access to the fishery with the
CDQ as a source of cash to meet State responsibilities and create jobs
must be managed.
At least a portion of the commercial fisheries resource should be
allocated to the coastal communities that are next to the fishery. This
is good public policy. It ensures local interest in the management of
coastal resources. It ensures that residents of Alaska and the Bering
Sea are not condemned to poverty as they watch a distant water fleet
harvest and process the resource. The opportunity for coastal
communities to be stakeholders is important and needs to have a
priority role. The need to continue to develop the commercial fishery
should be a priority. A CDQ group that has profits and only needs
subsidization should lose quota to one that is building commercial
fishing infrastructure.
CBSFA does not contend CDQ allocations may not be used to subsidize
jobs in some rural villages, even if the commercial fishery has
declined or has never been significant in that village. This also may
be good public policy. However, both should be balanced and
administered to make long-term commercial fisheries development the
most important criteria.
Part of this can be accommodated by changing the length of the
allocation cycle. At present, a CDQ group receives an allocation for a
two-year period, which is then subject to competition at the end of the
cycle. The size of the allocation depends on bureaucratic discretion
and whether the CDQ group has done what the State wants, coupled with
the group's population and number of jobs created, irrespective of what
those jobs are. This is not consistent with the intent of the program
and ignores the long-term need to have the allocation available so that
the communities can compete in the commercial fisheries. A minimum wage
job on the processing line is not the same as the captain of a small
day boat that successfully catches and sells halibut.
The CDQ allocation is also more than just dollars. It is access to
the resource. It is the opportunity of the coastal communities to
participate in the Bering Sea commercial fishery. At the outset, the
allocation may be converted to dollars in order to develop and maintain
the infrastructure, or capitalize the business. However, the allocation
ultimately is worth more. It is critical to the coastal communities'
ability to participate in the commercial fisheries, just as the
allocations that are currently given to harvesters or processors allow
them to participate in the commercial fishery.
A portion of the CDQ resources awarded to a CDQ Program should be
available to be used to develop and maintain public infrastructure in
coastal communities on the Bering Sea. If public infrastructure is not
supported in these communities, eventually the entire industry will be
off-shore, a negative development for the State and for conservation.
In furtherance of community development, the National Academy of
Sciences study on the CDQ Program in Alaska recommends the need for
education and training. The study suggests that educational and
training monies should be spent two-fold: scholarship money to send
young adults to universities and training programs to enable the
communities to become more self-sufficient. Education and training
reinforces the infrastructure and furthers the investment in these
communities. It has helped CBSFA build its fleet.
The commercial fisheries outside of three miles is a federal
resource, but the harbors, the small boat facilities, the outfalls, and
other infrastructure that a community needs to participate in a
fishery, requires a substantial investment of local resources. The
federal resource should support access to the federal commercial
fishery.
Conclusion.
On behalf of CBSFA, we stand ready and willing to assist the
Subcommittee, the Congress, the National Marine Fisheries Service, and
the State of Alaska in revising the CDQ Program to carry out its
intent. This program is a winner and has been crucial to the
development of St. Paul Island's halibut and cod fishery. It clearly
has worked on St. Paul, but there is much to be done.
For example, on St. Paul the Corps of Engineers' Federal Project,
including a small boat harbor for fifty vessels, requires Local Share
and the CDQ resource allocation should be available for this. The
expansion of processing capabilities so that the local fishermen, and
the Northwest fleet can process at St. Paul Island is beneficial to the
United States, the State of Alaska, and the entire Northwest and should
be a priority of the program. It requires a viable CDQ partnership in
order for this to happen.
In the longer term, the CDQ Program is critical to the development
of waste facilities, outfalls, and other infrastructure necessary to
allow the most important ecosystem in the Northern Hemisphere to
develop in a sustainable, environmentally friendly manner.
The Pribilof Islands are known as the ``Galapagos of the North''
because of their environmental diversity and importance. In the
Galapagos in Ecuador, there is no CDQ Program and the rampant expansion
of the tourism and fish economy to satisfy large groups of Ecuadoreans
who moved there from other parts of the country and the activities of
distant water fleets stand in stark contrast to St. Paul and the other
Western Alaska communities who have the CDQ Program. By giving the
coastal communities an allocation of resource, the same as we do to
harvesters and processors, the community has a stake in the management
of that resource. This ensures that we will have an environmentally
sensitive, sustainable program supported by the people of the coastal
communities. The CDQ program works, it only needs an adjustment in its
administration.
Thank you for the opportunity to testify.
______
Mr. Young. Thank you for the testimony. And where did you
go to school?
Ms. Merculief. I went to school at Mount Edgecumbe High
School and the University of Alaska Fairbanks, and also a year
I studied in Japan.
Mr. Young. I appreciate that, and one of the reasons I say
that, is that Mount Edgecumbe is--you know, they closed it, and
I was instrumental in getting it reopened. Probably one of the
better things we did. I mean, I think you have done well. Good
job.
Ms. Merculief. Thank you.
Mr. Young. Mr. Morgen Crow.
Mr. Crow. Thank you, Mr. Chairman. Patience is a hard act
to follow.
Mr. Young. You will do well, believe me.
STATEMENT OF MORGEN CROW, EXECUTIVE DIRECTOR, COASTAL VILLAGES
REGION FUND
Mr. Crow. First of all, let me thank our congressman from
Alaska, the Honorable Don Young, and his staff, for initiating
a review of how Federal legislation might improve the Western
Alaska Community Development Program. I hope that my comments
will help to develop this trusting relationship between the CDQ
groups and the oversight agencies to improve the governance of
this wonderfully successful program.
My name is Morgen Crow. I am the Executive Director of
Coastal Villages Region Fund, the organization managing the CDQ
on behalf of 20 communities in our region. Our communities
represent 30 percent of the total population eligible to
participate in the CDQ Program.
With me are Simeon John of Toksook Bay, our President, and
Howard Amos of Mekoryuk, CVRF's Vice-President. These
gentlemen, in addition to their service on the board of CVRF,
first fished commercially for salmon, herring and halibut.
Our region is a land of limited resources. Operating
dollars for health, education, and our Government programs
amount to tens of millions each year, yet our region remains at
the top of the list for unemployment, addiction, suicide and
other social problems that are typical of third-world
environment, imprisoned and in poverty, because there are no
opportunities.
I believe this program, the CDQ Program, can make a
difference because of its access to the resources of the Bering
Sea. In our region, where social programs are well funded,
societal problems still abound. A key part of the answer is the
CDQ Program with an appropriate level of oversight that will
accommodate the changes in the industry, region, and the
program.
We want to be a successful group in a successful program so
that we can continue to provide hope for those in our region
that want to exercise their right to work and be rewarded for
their efforts. We want to set out to accomplish this by looking
in the mirror to assess our strengths and our weaknesses to
determine how we can fit in. It is from this experience that we
ask for modifications in the CDQ regulations through the
Council process.
In regard to our salmon business, minimal infrastructure
and small communities, poor marketing conditions arising from
competition from farmed salmon, limit the extent to which it is
prudent to invest further in fisheries. As a result, CVRF is
seeking to expand the category of economic development projects
in which it can participate. For the CVRF region, it is
critical to explore each and every feasible project as the
locally available resources simply do not contain enough value
by themselves to meet the major goal of the CDQ Program, which
is to create a self-sustaining economy in the 60 plus eligible
communities.
Many agencies and companies have attempted this goal. To
date, none have been successful. The CDQ Program provides the
best opportunity because it provides a continuous source of
revenue, and when properly managed, will achieve this goal.
Since the ultimate authority for management rests with the
Congress, we appreciate your interest in holding this hearing,
making your determination as the proper role and level for
Government oversight. Based on our experience in the program
over the past 10 years, we have determined that it is time for
changes in the regulations governing CDQ oversight. The changes
we propose are intended to maintain a balance between the
Federal Government's need to protect the public interest in the
fishery resources of the Bering Sea, and to allow the
beneficiaries of the program to determine their own future. We
believe this balance can be best achieved with continued
participation of the State of Alaska as the primary oversight
entity, subject to the limitations that have been agreed to by
the North Pacific Council.
The CDQ Committee of the North Pacific Council has made
recommendations to the Council to change the level of oversight
by the State and by NMFS. CVRF participated in these
recommendations, and has come up with three additions to those
recommendations, which I would like to go through at this time.
The first recommendation is to allow up to a million
dollars per year in non-fisheries-related in-region economic
development, an increase from the $500,000 limit proposed by
the CDQ Policy Committee. While one group consists of a single
community, and a second of six communities, CVRF has 20
communities spread along a coastline of nearly 300 miles. Up-
front costs for a single project alone may cost $500,000 in the
first year. With 20 communities and a limited number of
sensible fisheries-related investments available, CVRF believes
that the limit for non-fisheries-related investments be a
minimum of $1 million annually.
We have also asked that we be allowed to invest $200,000
per year for community grants, grants to support village
activities, from sobriety conferences to bladder festivals, are
important to the social welfare in our communities. The CDQ
Program should be able to contribute to these efforts. For
Coastal Villages, a program of $200,000 annually equals an
average of only $10,000 per community per year. Certainly the
CDQ Program can participate to this extent without losing focus
on economic development. Coastal Villages wants to be a good
corporate citizen in our own community via this mechanism.
With respect to H.R. 553, I think all the CDQ groups agree
on the issue of by-catch. This proposal is currently before the
Council. We will be advocating for its adoption in time for the
2002 season. We do not support the proposal of having the
Secretary of Commerce in charge of CDQ allocations rather than
the State of Alaska. While we have seen the ups and downs of
allocation, we believe the state has done a relatively good job
weighing various criteria in coming up with rational decisions
that have been endorsed by NMFS and the Council. Consequently,
we do not endorse locking in allocations at any certain levels.
Much of our experience is based on the current management
process. We respectfully request that the Subcommittee not make
any dramatic changes at this time.
Mr. Chairman, I want to thank you and the Subcommittee for
this opportunity to provide our testimony on this very
important topic.
[The prepared statement of Mr. Crow follows:]
Statement of Morgen Crow, Executive Director, Coastal Villages Region
Fund
Mr. Chairman and members of the Subcommittee:
First, let me thank our Congressman from Alaska, the Honorable Don
Young and his staff for initiating a review of how federal legislation
might improve the Western Alaska Community Development (``CDQ'')
Program. I hope that my comments will help to develop a trusting
relationship between the CDQ groups and the oversight agencies to
improve the governance of this wonderfully successful program.
My name is Morgen Crow. I am the Executive Director of the Coastal
Villages Region Fund (``CVRF''), a not-for-profit organization managing
the CDQ program on behalf of the twenty communities in our region. I
have held this position for just over a year and a half. Our
communities represent 30% of the total population eligible to
participate in the CDQ program. With me are Simeon John of Toksook Bay,
CVRF President, and Howard Amos of Mekoryuk, CVRF's Vice-President.
These gentlemen, in addition to their service on the Board of CVRF,
fish commercially for salmon, herring, and halibut. Additionally, each
of us is a shareholder in our regional native corporation as well as
shareholders in our respective village corporations.
History of Coastal Villages
Of the six groups in the western Alaska CDQ program, Coastal
Villages has had the most tumultuous past. Our group began in 1992 as
Coastal Villages Fishing Cooperative (``CVFC'') a for-profit
cooperative, which, as an investor in the Imarpiquamiut Partnership,
owned the factory trawler, the F/V Brown's Point. The partnership
arrangement, even though approved by CDQ oversight, turned out to be
unprofitable. The State of Alaska recommended to the National Marine
Fisheries Service (``NMFS'') that it terminate the CDQ pollock
allocation if CVFC did not, among other things, dissolve the
partnership. CVRF was formed to supercede CVFC and to manage the CDQ
allocation for the twenty-village region. CVRF contributed enough money
to wrap up the affairs of CVFC. As an attachment, I have included an
excerpt from the report on the CDQ program by the National Research
Council completed near the end of 1998.
Between 1996 and 1998, the State oversight body cut our CDQ pollock
allocation by nearly 20%. After CVFC was dissolved by the efforts of
the new company in 1998, CVRF signed royalty agreements licensing its
rights to harvest Bering Sea and Aleutian Islands pollock with several
large processors from both the in shore and the off shore sectors,
ultimately buying into the largest of the at-sea catcher/processors,
American Seafoods. Ironically, that company, now owned in part by
Coastal Villages scrapped the F/V Brown's Point. That action
symbolically represents the turning point at Coastal Villages.
Economic Condition of the CVRF Region
Our region is a land of limited resources. This limitation and its
effect on commerce of the area can be seen in the performance of our
regional for-profit Native Corporation. All of the 13 regional
corporations created by the Alaska Native Claims Settlement Act
(``ANCSA'') have experienced growing pains in the form of operating
losses as Alaska's first people learned the fundamentals of business
and capitalism. Most have overcome these initial losses and become
successful corporations due in part to the strength of their natural
resources. One that has not is the regional native corporation that
overlaps our CDQ region. Over the last 30 years of ANCSA, most of the
approximately 80 million dollars of the original contributed capital to
this regional entity has been lost, and the corporation lacks the
resources to overcome its history. Recently, its board faced a recall
by shareholders.
Social Condition of the CVRF Region
Operating dollars for health, education, and other government
programs amount to tens of millions each year. Yet our region remains
at the top of the list for unemployment, addiction, suicide, and other
social problems that are typical of a third world environment
imprisoned in poverty because there are no opportunities. I believe
this program, the CDQ program, can make a difference because of its
access to the resources of the Bering Sea. Indeed our region, our
company, and our CDQ program, have undergone dramatic changes. In our
region, where social programs are well funded, societal problems still
abound. A key part of the answer is the CDQ program with an appropriate
level of oversight that will accommodate changes in the industry,
region, and the program. We want to be a successful group in a
successful program so that we can continue to provide hope for those in
our region that want to exercise their right to work and be rewarded
for their efforts. We want to learn from our mistakes. We have set out
to accomplish this by looking in the mirror to assess our strengths and
weaknesses to determine how we can fit into this program. It is from
this experience that we ask for the modifications in the CDQ
regulations.
CDQ Program in the CVRF Region
We view the CDQ program as a unique opportunity to bring the
benefits from the offshore fisheries directly into the communities, by
taking a systems approach to economic development that effectively
addresses the unique social, cultural, environmental, and political
complexities of our region. For us, the CDQ program represents an
enormous opportunity for those willing and able to better themselves.
Locally, residents can choose to fish and sell their catches to the
only remaining salmon buyer in the entire region owned and operated by
Coastal Villages Seafoods, a subsidiary of CVRF in conjunction with one
of our member communities - Quinhagak. Residents from Quinhagak can
choose to work in this village's processing plant and sleep in their
own beds at the end of their workday. Similar opportunities are
available in Toksook Bay, Tununak, Mekoryuk, and Chefornak, where CVS
operates halibut plants in cooperation with these communities. Region
residents can work at these plants within our region or in the Bering
Sea fishing industry if they choose to work outside the region.
While the CDQ program has provided the means for CVRF and the other
CDQ groups to invest in the Bering Sea fisheries and to return the
proceeds of the investments into the member communities, this limited
focus cannot address all of the economic development challenges that we
face. There is a limit to the amount of investment that makes sense in
our region's fisheries. For example, in regard to our salmon business,
minimal infrastructure in small communities and poor market conditions
arising from competition from farmed salmon limit the extent to which
it is prudent to invest further. As a result, CVRF is seeking to expand
the category of economic development projects in which it can
participate. For the CVRF region, it is critical to explore each and
every feasible project as the locally available resources simply do not
contain enough value by themselves to meet the major goal of the CDQ
Program--to create a self-sustaining economy in the 60-plus eligible
communities.
Many agencies and companies have attempted this goal. To date, none
have been successful. The CDQ Program provides the best opportunity
because it provides a continuous source of revenue, that when properly
managed, will achieve this goal.
CDQ Oversight
As described above, the first critical piece of the puzzle is the
CDQ Program itself. The second is having a properly managed
organization that is in a position to obtain the available benefits and
to make sure that they are used to benefit the communities and their
residents. The third piece is the management of the program by the
State of Alaska, NMFS, and the North Pacific Fishery Management Council
(``North Pacific Council''). Since the ultimate authority for
management rests with the Congress, we appreciate your interest in
holding this hearing and making your determination as to the proper
role and level for government oversight.
Based upon our experience in the program over the past ten years,
we have determined that it is time for changes to the regulations
governing CDQ oversight. The changes we propose are intended to
maintain a balance between the Federal Government's need to protect the
public interest in the fishery resources of the Bering Sea and the need
to allow the beneficiaries of the program to determine their own
future. The goal of governance should be to provide enough scrutiny to
ensure that the groups are acting in accordance with established
procedures without impeding the internal governing bodies' ability to
decide on paths of actions and set policy that reflect their view of
the regions' needs.
We believe that this balance can be best achieved with the
continued participation of the State of Alaska as the primary oversight
entity, subject to the limitations that have been agreed to by the
North Pacific Council, as well as those others that we have proposed
and are discussed later in my testimony.
Current Course of CDQ Oversight
The CDQ Policy Committee of the North Pacific Council has made
recommendations to the Council to change the level of oversight by the
State and NMFS, the allocation process and criteria, and allowable uses
of funds received by CDQ groups through the CDQ program. In summary,
the recommendations include the following:
LEstablish a 3 year CDQ allocation cycle
LLimit government oversight
LClarify allocation criterion
LProvide for an appeals process for CDQ allocations to the
Council
LMake other changes that will simplify the administration
of the program's reporting requirement.
CVRF participated in the development of these recommendations and
continues to support their adoption at the earliest possible time.
Additionally, as I have described previously, CVRF sees the need for
additional flexibility in the program in order to develop a
comprehensive program for economic development that better fits our
region. Consequently, CVRF makes the following three recommendations:
LAllow $1,000,000 per year in non-fisheries related, in-
region economic development, an increase from the $500,000 limit
proposed by the CDQ Policy Committee. While one CDQ group consists of a
single community and a second of six communities, CVRF has twenty
member communities spread along a coastline of nearly 300 miles. Up
front costs for a single project alone may cost $500,000 in the first
year. With twenty communities and a limited number of sensible
fisheries-related investments available, CVRF believes that the limit
for allowable non-fisheries related investments be a minimum of $1
million annually.
LAllow $200,000 per year for community grants. Another
method of providing direct benefits to communities is through a
community grant program. Grants to support village activities, from
sobriety conferences to bladder festivals, are important to the social
welfare of the communities. The CDQ Program should be able to
contribute to these efforts. For CVRF, a program of $200,000 annually
equals an average of only $10,000 per community per year. Certainly,
the CDQ Program can participate to this extent without losing its focus
of economic development.
LRequest an exemption from amendment approval for
investments by fishing industry companies that are partially owned or
wholly owned by a CDQ group, as long as the investments are fishing
industry-related by the partners and do not require any new CDQ money.
This recommendation is not related directly to the effect of the
program on individual communities, but is important in regard to
relationships between industry and the CDQ groups. This relationship
must be a mutually beneficial one if the program is to be able to
generate the benefits that are in turn provided to the communities.
CVRF believes that its industry partners should be able to conduct
their businesses with little interference from government entities. The
real test is whether the CDQ groups are providing benefits back to
their communities not having the government mettle in actions of our
industry partners.
To date, these requests have not been adopted for analysis by the
North Pacific Council, but I am certain that there is enough time for
the Council to adopt all these improvements as part of their review of
the CDQ program so that they can be implemented in time for the 2003-
2005 allocation process that will be completed in the fall of 2002.
Proposed Course of CDQ Oversight--H.R. 553
As I stated at the beginning of my testimony, CVRF greatly
appreciates the interest that the Subcommittee is taking in the
governance of the CDQ Program. There are several parts of H.R. 553 that
we wholeheartedly support. However, a considerable amount of
disagreement remains to some elements of the current language in H.R.
553 among the CDQ groups.
LOne issue that does need attention is that of bycatch.
The CDQ Program has been at the forefront of fisheries conservation.
Regulations requiring two observers on the large vessels,
accountability for each species harvested, scales to weigh the catch,
are all measures that the CDQ groups have not only accepted, but, in
many cases, have promoted. However, except for certain aspects of the
CDQ pollock fishery, the CDQ fisheries are extremely vulnerable to
disruption because of the requirement that a CDQ group not exceed any
of its small quotas for individual bycatch species. For example, CVRF
has an allocation of 33,000 metric tons of pollock with an allowance of
1.6 metric tons of other red rockfish. One tow could use the entire
quota of other red rockfish resulting in the shut down of the CDQ
pollock fishery. The remainder of the fleet does not have these
constraints. I believe that I can say with certainty that most groups
agree that this is a problem and that the solution is to allocate a
specified amount of quota to the target species (e.g., Pacific cod,
sablefish, turbot, Atka mackerel, rock sole, yellowfin sole, etc.) and
treat the other bycatch species similar to how they are dealt with by
the regulations governing the remainder of industry. This proposal
currently is before the North Pacific Council and we will be advocating
for its adoption in time for the 2002 season.
LWe do not support the proposal of having the Secretary of
Commerce in charge of CDQ allocations rather than the State of Alaska.
While we have seen the ups and downs of allocations, we believe that
the State has done a good job of weighing the various criteria and
coming up with rational decisions that have then been endorsed by NMFS
and the North Pacific Council. Consequently, we also do not endorse
locking in allocations at any certain levels.
LAs to agreement on allocations among the CDQ groups, we
find it difficult to envision a situation where this might occur. Each
group has different experiences, geography, poverty levels, history,
and probably most of all--expectations.
LAs I have discussed above, work is in progress on
addressing the fisheries-related, non-fisheries-related economic
development issues.
LFinally, in regard to the ``CDQ project'' definition, all
parties have learned that the fast moving pace of business must be part
of the reality of CDQ oversight. In our recent experience, programs and
investments that either directly benefit and meet the needs of
residents of our region or maximize the economic value of the CDQ
allocations have been fast-tracked and approved without exception. We
have made huge in-roads into this industry with the cooperation of the
oversight entities and the Council. Still, we do support removing
fisheries-related investments by our industry partners from the
definition of a ``CDQ project'' for the reasons outlined previously.
Recommendation / Conclusion
Coastal Villages Region Fund has come a long way over the past
decade. Changes to the CDQ governance regulations are needed to
accommodate the new position of our company, our investments, and the
program. The CDQ Program will continue to evolve, which in turn will
require additional refinements to the program. The rate in which these
changes take place is probably the largest of all questions. While
there is still a lot of work to be done to implement the first round of
improvements, there is progress being made.
I believe that the current process of governance and management has
led to the best managed fishery on earth and created a unique program
that can bring needed economic benefits back to our region. We should
continue to make the changes necessary to respond to the results of the
past decade and protect the dynamic nature of this program. Through the
efforts of the CDQ groups, in cooperation with the North Pacific
Council, the State of Alaska, and NMFS, this program has achieved far
beyond what was envisioned at its inception. For us, it is a unique
opportunity to bring a special kind of benefit to our region: the
chance to move ahead in the process of creating economic benefit from
the resources in the Bering Sea. I believe that we have the knowledge,
experience, vision, and passion to compete on behalf of this company in
the evolving world of the fishing industry. I believe that we have
these same qualities when it comes to creating the economic future of
our communities. I do not believe that we will be the next big idea to
fail the people of our region if we are allowed to utilize the
abilities that we bring to the table. Knowing that much of our
experience is based on the current management process, we respectfully
request that the Subcommittee not make dramatic changes at this time.
Mr. Chairman, I want to thank you and the Subcommittee for this
opportunity to provide our testimony on this important topic.
______
Mr. Young. Thank you, Morgen. And you did well.
Mr. Gene.
STATEMENT OF EUGENE ASICKSIK, CEO AND PRESIDENT, NORTON SOUND
ECONOMIC DEVELOPMENT CORPORATION
Mr. Asicksik. Mr. Chairman and members of the Subcommittee,
I am Eugene Asicksik, President and Chief Executive Officer of
Norton Sound Economic Development Corporation. I also have
Janis Ivanoff, my Vice-President, with me here today.
NSEDC represents 15 Western Alaskan villages located on
Seward Peninsula and the Norton Sound Region, and on St.
Lawrence Island. NSEDC has participated in the program since
1992, and is very familiar with, and in some cases has been at
the forefront of the issues that have come up as the program
has grown.
On behalf of NSEDC's board of directors, I would like to
thank Congressman Young for introducing H.R. 553. The bill's
enactment will resolve a number of important policy issues that
relate to the administration and implementation of the CDQ
Program. Resolutions of these issues are provided in H.R. 553,
will help the program fulfill its potential for the residents
of NSEDC, its members, and its communities.
Before moving to specific measures in the bill, let me
briefly explain NSEDC's approach to long-term sustainable
economic development. NSEDC has pursued a mixture of
activities, some of which are oriented toward immediate
benefits for our residents such as fishery development
projects, vocational training and academic scholarships.
Another group of activities are oriented toward developing a
sustainable income stream for the organization that will help
support its programs. The needs of NSEDC's communities are
immense since our communities have a high percentage of
residents living below the poverty level and a high incidence
of substance abuse and suicide. This mix of immediate programs
and long-term investments is very significant to our
communities. We are developing external financial strength, and
we are developing internal strength in our communities as our
workforce benefits from vocational and academic education, and
the community's economic infrastructure benefits from in-region
projects, whether they are business projects or not.
H.R. 553 will enhance our ability to make long-term income-
producing investments, and it will enhance the range of ways in
which we can benefit our communities. I believe a fundamental
difference reflected in H.R. 553 compared to the regime the CDQ
Program has operated under during the first 9 years of its
existence is philosophy. H.R. 553 reflects a willingness to let
communities decide for themselves, internally, what is best for
their community, in contrast to the requirement in current
regulations for advance external review and approval:
essentially, any major activity that a CDQ group wishes to
undertake reflects a premise of superiority to or mistrust of
the ability of these communities. The State and North Pacific
Fishery Management Council wants to decide, for us, what the
proper mix of fishery-related and non-fishery-related projects
will be. For anything significant, the State wants the CDQ
groups to come to them for advance review and approval before
the group purchases it, builds it or changes the operation of
it. Further, for companies into which the CDQ groups have
invested, the State wants advance review and approval before
those companies make any purchase over $1 million.
The reforms in H.R. 553 will allow NSEDC to optimize its
development programs for its residents by allowing a more
broad-based set of possibilities, and will allow NSEDC to
develop a more diverse and therefore more sustainable source of
funds to support those programs. Further, the reforms will
place more responsibility in the hands of the communities
themselves and the board of directors and the communities
represented by a CDQ managing organization.
With the reforms in H.R. 553, NSEDC still will be very
willing to comply with reasonable safeguards regarding the
award of CDQ allocations, such as ensuring that management
capabilities are in place to harvest the allocation in an
environmentally appropriate manner, and that a proper
governance structure is in place to ensure that the use of the
allocation or the royalty money derived from it is controlled
by the community participating in the program. Also, NSEDC is
willing to subject itself to after-the-fact audit, just as it
does now, regarding its performance and results.
I need to say something about allocation. The NRC confirms
what most or all CDQ groups will tell you: that the allocation
process is a significant source of instability in the program.
The possibility of change in allocation is never far from any
group's mind as they decide what program to undertake or what
position to take on questions regarding oversight. Because it
is a zero sum game, achieving consensus on allocation is very
difficult.
H.R. 553 describes a process for getting to a long-term
resolution on allocation by first encouraging the groups to
work it out amongst themselves, and if that fails, describing a
process to come to more transparent and less subjective
allocations. We support the process described in H.R. 553.
In closing, let me reemphasize how much I believe in the
potential of the CDQ Program. With the reform presented in H.R.
553, the program will be set to realize its full potential.
Already my organization is a real participant in the Bering Sea
Fisheries, owning 50 percent of the company with two pollock
factory trawlers, one factory long-liner, and other harvesting/
processing/marketing capabilities. The second-generation
revenues from our investment, which supplement our CDQ
royalties, are becoming material even within the first decade
of the existence of the program. We are proud of what we have
accomplished. While NSEDC has far to go to fill its potential
to meet the chronic needs in our communities, over the next
decade we look forward to reporting steady and substantial
progress.
In my written testimony I explain in more detail the
effects of H.R. 553 and the reasons for our support. Thank you
very much for the opportunity to testify.
[The prepared statement of Mr. Asicksik follows:]
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Mr. Young. Thank you, Eugene.
Mr. Alstrom.
STATEMENT OF RAGNAR ALSTROM, EXECUTIVE DIRECTOR, YUKON DELTA
FISHERIES DEVELOPMENT ASSOCIATION
Mr. Alstrom. Mr. Chairman, my name is Ragnar Alstrom. I
serve as Executive Director of the Yukon Delta Fisheries
Development Association. With me in the audience is John
Lamont, who is the President of Yukon Delta. We are the
community development quota group representing the villages of
Alakanuk, Emmonak, Grayling, Kotlik, Mountain Village and Numan
Iqua at the mouth of the Yukon River. I am here to offer
comments on proposed legislation, H.R. 553, the Western Alaska
Community Development Quota Program Implementation Improvement
Act of 2001.
I would like to begin by emphasizing the importance of the
community development quote program to the people I represent.
The population of the delta, which according to the U.S. Census
Bureau, is the youngest in the United States, consists of
approximately 95 percent Yupik Eskimo or Athabascan Indian. The
residents live largely a subsistence hunting lifestyle. For the
last 85 years the people of this region have relied on a small
commercial salmon fishery to supplement this subsistence
lifestyle. Beginning in 1998, and continuing to the present
day, the salmon returns to the Yukon River have collapsed. This
has resulted in the complete closure of the commercial fishery
in 2001 and severe restrictions being placed on the subsistence
fishery.
The Federal and State Governments have worked to alleviate
hardships caused by the loss of this small salmon based cash
economy. Public works projects such as airport improvements,
water and sewer projects, school renovations and other such
public projects have been undertaken in this region. Although
these projects are much needed and appreciated, there are only
so many health clinics, head-start schools and post offices
that can be built in a village. We now see these Government
projects winding down and very few projects slated for the
future. Residents have very few opportunities available to them
in which to generate an income. Our local, regional and village
native corporations generate very few jobs in region.
The CDQ Program, through Yukon Delta Fisheries Development
Association, has become the largest private resource for
providing jobs and training to the residents of its member
villages. There is no other nongovernmental entity out there
that can provide the access to jobs and training that is being
provided through the CDQ Program.
In regard to H.R. 553, Yukon Delta Fisheries Development
Association offers the following comments.
We are in support of primary oversight of the CDQ Program
to continue to be the State of Alaska's responsibility,
including making the primary allocation recommendations,
oversight of a group's ongoing CDQ projects, and approval of
proposed CDQ projects.
Yukon Delta Fisheries Development Association believes that
when changes are to be made as to oversight and regulation of
the CDQ Program, those changes should be analyzed and approved
by the North Pacific Fisheries Management Council.
Specifically, those changes should first be debated and
formulated within the North Pacific Fisheries Management
Council's CDQ Policy Committee prior to submitting to the
Council. To ensure input from all parties involved, the
Committee is made up of a representative from each CDQ group
along with members from the State of Alaska and Federal
Government. The concerned parties are at the present time
successfully working toward democratic resolution of the
issues.
Yukon Delta Fisheries Development Association believes that
the CDQ regulation requiring that all of a group's investments
be fisheries related, be amended to allow for some investment
in non-fisheries-related projects in region. Yukon Delta
Fisheries Development Association is in support of the North
Pacific Council's CDQ Policy Committee recommendation of
allowing up to $500,000 annually to be spent on in-region non-
fisheries-related projects. For Yukon Delta, this is a very
important amendment that is needed in this regulation. With the
collapse and closure of the salmon fishery on the lower Yukon
River, there are no fisheries-related projects in-region we can
invest in properly. If we are to bring jobs to this region we
need a regulation amended to allow for other types of
profitable in-region investments.
Yukon Delta Fisheries Development Association would once
again like to emphasize the importance of this program to
Western Alaska, and recommend that any proposed changes as to
regulation be done at a local level through the North Pacific
Fisheries Management Council.
Mr. Chairman, if I could continue for another 20 seconds. I
come from a village where the population's--half the
population's below the age of 19. There is nothing else out
there for us to do. We are willing to--we think this program is
so important that we are willing to suffer some discomfort in
oversight to keep the program in place. We don't want to see
the program disappear. That is how important that is to us. You
know, what is left out there, for this young population, what
else do we have? We don't want to stay on welfare for the rest
of our lives. It is just a very, very important program. I just
wanted to emphasize that. Thank you.
[The prepared statement of Mr. Alstrom follows:]
Statement of Ragnar Alstrom, Executive Director, Yukon Delta Fisheries
Development Association
Mr. Chairman:
My name is Ragnar Alstrom, I serve as Executive Director of the
Yukon Delta Fisheries Development Association. The Community
Development Quota (CDQ) Group representing the villages of Alakanuk,
Emmonak, Grayling, Kotlik, Mountain Village and Nunam Iqua at the mouth
of the Yukon River. I am here to offer comments on proposed legislation
H.R. 553, the--Western Alaska Community Development Quota Program
Implementation Improvement Act of 2001''.
I would like to begin by emphasizing the importance of the
Community Development Quota program to the people I represent. The
population of the Delta, which according to the U.S. Census Bureau is
the youngest in the United States, consists of approximately 95% Yupik
Eskimo or Athabascan Indian. The residents live largely a subsistence
hunting lifestyle. For the last 85 years the people of this region have
relied on a small commercial salmon fishery to supplement this
subsistence lifestyle. Beginning in 1998, and continuing to the present
day, the salmon returns to the Yukon River have collapsed. This has
resulted in the complete closure of the commercial fishery in 2001 and
severe restrictions being placed on the subsistence fishery.
The Federal and State governments have worked to alleviate
hardships caused by the loss of this small salmon based cash economy.
Public works projects such as airport improvements, water and sewer
projects, school renovations and other such public projects have been
undertaken in the region. Although these projects are much needed and
appreciated, there are only so many health clinics, headstart schools
and post offices that can be built in a village. We now see these
government projects winding down and very few projects slated for the
future. Residents have very few opportunities available to them in
which to generate an income. The local regional and village native
corporations generate very few jobs in region.
The CDQ program through Yukon Delta Fisheries Development
Association has become the largest private resource for providing jobs
and training to the residents of its member villages. There is no other
non governmental entity out there that can provide the access to jobs
and training that is being provided through the CDQ program.
In regard to H.R. 553 Yukon Delta Fisheries Development Association
offers the following comments:
We are in support of primary oversight of the CDQ program to
continue to be the State of Alaska's responsibility, including making
the primary allocation recommendations, oversight of a group's ongoing
CDQ projects and approval of proposed CDQ projects.
Yukon Delta Fisheries Development Association believes that when
changes are to be made as to oversight and regulation of the CDQ
program, those changes should be analyzed and approved by the North
Pacific Fisheries Management Council. Specifically, those changes
should first be debated and formulated within the North Pacific
Fisheries Management Council's CDQ Policy Committee prior to submitting
to the Council.. To ensure input from all parties involved, the
Committee is made up of a representative from each CDQ group along with
members from the State of Alaska and Federal Government.. The concerned
parties are at the present time successfully working toward democratic
resolution of the issues. Introduction of H.R. 553 at this time would
overrule the current process and be counterproductive.
Yukon Delta Fisheries Development Association believes that the CDQ
regulations requiring that all of a group's investments be ``fisheries
related'' be amended to allow for some investment in ``non fisheries
related'' projects in region. Yukon Delta Fisheries Development
Association is in support of the North Pacific Council's CDQ Policy
Committee recommendation of allowing up to $500,000 annually to be
spent on in region ``non fisheries'' related projects. For Yukon Delta
Fisheries Development Association this is a very important amendment
that is needed in this regulation. With the collapse and closure of the
salmon fishery on the Lower Yukon River there are no ``fisheries
related'' projects in region we can invest in profitably. If we are to
bring jobs to this region we need the regulation amended to allow for
other types of profitable in region investments.
In conclusion, Yukon Delta Fisheries Development Association would
once again like to emphasize the importance of this program to Western
Alaska and recommend that any proposed changes as to regulation be done
at a local level through the North Pacific Fisheries Management
Council.
______
Mr. Young. Thank you. And I thank the panel.
Patience, you brought up something that is interesting. You
mentioned the fact that maybe it is time we pattern this after
the Alaska Native Land Claims Act and the corporations. And
this if for the whole panel. And it goes back to the oversight.
What if we set up it up where there is--under that act itself,
the nonprofits, the profits and the regional all are audited at
least once a year by an independent auditing group. You know,
that is the way it works. And then that is reported, and if we
find out something wrong, well, then the oversight takes place.
Would that work? And go back to the oversight problem. And by
the way, I don't object to the State oversight. I object to how
they have overseen. That is my objection. I want you to know
that. I am not necessarily happy about giving it to the Federal
Government. You know how I feel about that.
But I think all of you--and I mentioned this yesterday to
you in my office--that you ought to sit down and make some
recommendations what the State can be allowed to do and what
you don't want it to do if it is not done by the Council's
Committee. And if the Council doesn't accept what the Committee
recommends, then I need those recommendations. As I told you
yesterday, we are going to proceed in a very nice steady pace,
parallel to what occurs by the Council and the Subcommittee and
what agreements you can come to, so that we don't all of a
sudden wake up 2 years from now and say nothing has changed.
So I want to know, what would be wrong with the idea of
just an audit, period, and let you go about as most all the
village corporations have done? And although some have failed,
some have been quite successful. And the regional corporations,
some have been very successful, some some successful, and very
frankly, only one or two are really in bad shape right now.
What would be wrong with a system like that?
Ms. Merculief. Nothing that I can see. I think that is what
we would prefer, just to be on a system where we have limited
oversight and an annual audit. So we are in support of a system
like that.
Mr. Young. It was just handed to me by my staff, that ANCSA
says that they can pay dividends. I am not asking you to pay
dividends. I think that part of the program is to reinvest and
to build for infrastructure and that type thing.
Robin, go ahead.
Mr. Samuelsen. Thank you, Mr. Chairman. I think the CDQ
Program is a performance-based program versus ANCSA. In my
region, I think we have surpassed the employment of the ANCSA
corporations, and we have only been in existence 9 years.
Because the program says it has go to be community based, you
need to employ people, both in-region and outside the region.
You need to train people. And, you know, although we had grand
conjures that that is what ANCSA was going to do, by and large
it didn't do it.
Mr. Young. With all due respect, Robin, it has done it in
some areas. It may not have been in other areas, but that is
the fault of the corporation itself, I mean, as you know. I
mean, you can change that I believe. Yes.
Mr. Samuelsen. The difference is, is that CDQ groups
represent six geographical areas, and because of the oversight,
because it is performance based, you are having, in all areas
you are having employment, you are having upward mobility
training, and economic development in all communities that are
represented by the CDQ Program.
Mr. Young. All right. Ragnar, I go back to a comment you
made. $500,000 invested outside fisheries, again I ask you and
the rest of the panel, why should one shoe fit all? Because
Morgen has said that is not enough, and I hope you understand,
he is right. If you have got 20 villages, and you--how many
villages do you have?
Mr. Alstrom. Mr. Chairman, I have six villages representing
3,500 people.
Mr. Young. But if you take the recommendation of $500,000
outside investment other than fisheries, $500,000 and six
villages, amounts to about $125,000. In his area it would
amount to--how much is that? $20,000 approximately.
Mr. Alstrom. Mr. Chairman?
Mr. Young. Yes?
Mr. Alstrom. It was a political decision. We actually,
Yukon had supported a larger amount. This is the amount--we
wanted to--the point was we wanted--I don't think we want it
fully blown open, but we wanted an amount to invest in
profitable non-fisheries-related projects in region.
Mr. Young. Now, again, we had this discussion yesterday.
What is wrong with eliminating the cap at all, having no cap at
all? Gene?
Mr. Asicksik. I have no problem with removing the cap. In
fact, I proposed it at the CDQ Policy Committee, and made a
motion, and I lost on a 4-4 split or 6-6 split decision made by
the Chairman to go the other way.
So I believe that it should be up to the CDQ groups and
their board of directors to determine and submit it. You know,
I wouldn't mind submitting it to the state that this is what we
would like to do on a non-fisheries-related project. I am not
asking for a free-for-all, but if we at NSEDC and the board of
directors feel that they need to do something in a community,
they should not be hampered by a $500,000 cap. We might want to
develop a new fishery in one of our communities that might
require more than 500,000. As you well know, processing fish
costs--I mean, you are going to incur safe water and other
issues. We are under construction of a brand new plant in Nome,
Alaska right now, and we have been approached by Nome Joint
Utilities that maybe the amount of crab shells that will be
discharging into their sewer system might be too much for the
system that Nome has. So we are faced with putting in a line
with a grinder. That is going to have to--or shuttling crab
waste and halibut waste out to the ocean. If we had known
earlier that--although we do have copies that they were going
to allow it, but now it might be too much--that is something we
are going to have to look at. And then with that, we have to
probably go back with some substantial amendment to construct
this line or to purchase the grinder.
Mr. Young. Would anyone else like to comment on that?
Because to me, this is one of the crucial points. You are not
all the same. One has six groups. One has 20 groups. One is a
larger percentage, a different flow. And what bothers me, when
there is no sort of flexibility in the State on oversight, on
taking the differences, I don't think they can properly oversee
your groups, because I don't think they have the perspective of
what you are trying to do. I was hoping to ask Mr. Bush, and
later on I may ask him, how large a turnover you have in the
oversight group of the CDQs. But I will get to him later. I
will send that question to him.
Go ahead, Larry.
Mr. Cotter. Mr. Chairman, in the beginning it was the North
Pacific Council that limited CDQ investments to fishery-related
projects.
Mr. Young. That was a regulation from the Council, correct?
Mr. Cotter. Yes, sir. And the reason for that, the program
was controversial as it was being adopted. You know, we had to
force it through. There was concern from the industry, that
they were saying, ``We are giving up fish, so we want to make
sure that the revenues derived from this program are going to
be used to help these communities and these residents
participate in the fishing industry.'' And that is how that
happened.
And I do not dispute at all that the world has changed, and
it is appropriate now for the communities to be able to invest
outside of the fishing industry. Realistically, there is no
other opportunity in many locations for communities in Western
Alaska to develop if they don't find something other than
fisheries.
The only concern that we have from our group is that if the
program is modified so non-fishery-related investments are
allowed, what happens to those of us who still have substantial
fishery development activity to fund and develop? Under the
current allocation formula, we could continue to lose
allocations, and those revenues, those royalties, would flow to
other communities and other regions to develop non-fishery-
related projects. And so we end up sacrificing our fishery
development opportunities for those who have non-fishery-
development opportunities. And that would be fine for us if we
have a fair and equitable allocation that allows us to move
forward in the future and realistically develop our
communities.
In the absence of that, it is very difficult for us to be
able to support it.
Mr. Young. What if we based it--and I want you all--what if
we based the amount of money on the revenue generated from the
fisheries activities, base it on a percentage as far as outside
investment? Anybody got a comment on it? Robin?
Mr. Samuelsen. Thank you, Mr. Chairman. I believe the
Council, Mr. Chairman, is looking at allowing a percentage of
the allocation, of your pollock allocation, or up to $500,000,
is one of the options. There was proposals and recommendations
by the Committee for that. There was support for that. There
was also dissension within the Committee, the CDQ Policy
Committee, that wanted it at a million. I think we have got to
be very careful here, Mr. Chairman, that we are not opening
Pandora's Box. As you well know, that the legislature funding
in Alaska, I think would like to have the CDQ groups pay for
everything, roads, airports, you-name-it.
The State has a responsibility in our communities to
provide certain services, and you know, the CDQ Program came
along, and we are filling a niche that has been always void in
our villages. And I want to caution you, Mr. Chairman, that we
don't create a quasi-social welfare program aiding the State of
Alaska and alleviating duties that the State of Alaska should
be providing to our communities.
Mr. Young. Well, Robin, along those lines, what if we write
in this legislation that that can't occur? I don't believe they
can do that anyway, although the legislature is going to try to
do it, but that is one of my running battles is
reapportionment. Unfortunately, the villages in this group are
going to be less represented than you were in the past, as you
know. That is because of the population growth. But we might
want to look at whether we can--I will have to have staff
look--whether that is a possibility, that none of these monies
are to replace any State requirement and the responsibility of
the State to take service for the good of the communities. And
I don't think--I absolutely agree with you, I don't think that
should be the--you should not be the funder of something the
State should be doing, as they are doing in Anchorage,
Fairbanks, and Juneau and Petersburg and wherever it may be.
But I understand your concern, and I would have the same
concern, but I think if we do something, we possibly can
address that issue. I believe we appreciate it.
Patience?
Ms. Merculief. On the issue we were talking about, our
concern, our communities' concern is our ability--we are still
developing our fisheries infrastructure, and our allocation was
cut from 10 percent to 4 percent, and it really limits our
ability to continue to develop our fishing infrastructure. We
have Icicle Seafoods, who wants to come into the harbor, but we
need to dredge so we can have them there, so they can do the
processing of pollock and cod and other flatfish. And although
our halibut fishery is a success, the people can't launch their
boats without the use of a crane, and if those cranes break
down, they have no way to get their boats in and out of the
water, because we don't have a launching ramp that is adequate.
So while we recognize that other groups need and want to
expand into other areas, we are--boy, we would like some of
that extra money around to develop non-fisheries-related
activities, but we are not there yet. We are still working on
developing our fisheries-related infrastructure.
Mr. Young. When did you go from 10 to 4, or was that a slow
process?
Ms. Merculief. It went from, I believe 10 to 7, down to 4,
and then back up to 5 last year, and then back down to 4 this
year.
Mr. Young. And this is the reason I asked Mr. Bush, how can
you invest with that bouncing up and down of the quotas? And I
know we have got two big quota holders here or three big quota
holders, but what happens to the rest of you if it goes up and
down? I don't know how--even you guy have got to be worried
about this. I mean, what do they base the cut on?
Ms. Merculief. That is an area of great confusion to us,
because we haven't been able to identify specific criteria for
the reasons we were cut so drastically. I mean, over 50 percent
of our revenue was cut, you know, 10 percent to 4 percent on
pollock.
Mr. Young. Okay. This is all pollock, right?
Ms. Merculief. Yes.
Mr. Young. All pollock. Now, again, what if we wrote into
this legislation a criteria for cutting and increasing instead
of leaving it to the discretion of the State?
Ms. Merculief. I think that is needed. I think we would all
support that.
Mr. Young. Anybody else have a comment on that, anybody? Go
ahead. I know you were looking there. I can always tell when
you have something to say.
Mr. Samuelsen. Thank you, Mr. Chairman. I have a comment on
everything.
[Laughter.]
Mr. Young. We know. Go ahead.
Mr. Samuelsen. I think, Mr. Chairman, that, you know, we
have all seen our allocations fluctuate, and as Chairman, I
think it is your prerogative that you--I don't know the rules
down here, but you may be always to call the State NMFS back
up. There is reasons why that happened. And I don't want to get
into that arena because that isn't my area of expertise.
Mr. Young. I won't have them up for the Committee again,
but I am going to have the questions answered. That is part of
this program. You know, I am deeply concerned because I, as a
person that used to try to run a business, I just don't know
how any of you can sit down and plan an investment, increase
your fishing capability. How you can do that when you are at
the will and the whim of two government agencies that can cut
your quota.
See, again, I am rambling. I will go on with my questions.
This still smacks to me as the BIA, the big father, and I just
really have great respect for what has been done in the State
of Alaska by the Alaskan Native people. We have some horror
stories. But that National Native Lands Act is also a success
story. And it was my intent, when we introduced this
legislation, when we work with this legislation with Harold
Sparck, that we would have an economic base in the villages.
And I want to stress ``economic base'' derived from a renewable
resource, not an expendable resource, a renewable resource. Of
course, there is a lot of salmon price dropped, as you know.
Lord help us, I don't know what we are ever going to do with
that again. Maybe we all ought to go in the sport fishing
business and make some money. But we didn't know that was going
to happen.
If I had my way--and I will say this publicly--if I had my
way, I would like to see this group at this table own all the
Bering Sea fisheries. I have never understood why it has to
come out of another state. I think it would be extremely
important to give that area of Alaska, which is impoverished, a
tremendous economic boost and development, because you would
have money to develop it.
Larry, you had something to say there. I am sorry. I get to
rambling on this issue.
Mr. Cotter. Well, Mr. Chairman, I was going to comment on
the allocation issue. And the problem is that it is so
complicated and so murky, that I don't think any of us really
understand what takes place. There are criteria, but we don't
know how those criteria are applied. We don't know whether
there is special weight given to one criteria over another. We
don't have annual meetings with the State where they give us a
report card and tell us, ``You are doing good'' or ``You are
doing bad,'' or ``We think you ought to improve here or
there.'' We move forward with our projects. We have an hour and
a half meeting with the State, mostly where we say what we are
doing during the allocation process, and then the State goes
and makes a recommendation.
When the State publishes its findings, justifying its
recommendation, the information provided is so subjective that
it is impossible to determine whether or not apples to apples
are being compared or it is apples to oranges.
So under the existing process, I think it is virtually
impossible for any group to move forward from one allocation
cycle to the next with any sense of certainty that they are
going to be able to maintain their allocation. And that just
simply is not going to work for the future. We have got to get
a better system where there is some certainty and some
reliability. Otherwise, groups are going to experience some
very significant problems with their investments and with the
banks, and with their program overall.
Mr. Young. Let me follow that, Larry. Why should the State
be involved in at all; why not let the Council do it?
Mr. Cotter. Well, Mr. Chairman, I think in the beginning--
again, in the beginning, the Council didn't want to be involved
in the process, because I think it--
Mr. Young. Chicken Little.
Mr. Cotter. --that it was going to be very political.
I am not sure that they want to be involved in it now. And
my contention is that, really, nobody should be involved in it.
Some type of formula should be developed and applied to the six
groups, and that should be put into law, that says each group
gets this amount, and that is it. And we move forward into the
future knowing what we are going to have.
Now, the argument against that is that the program
allocation should be based on performance. And that is well and
good, but that was more important before than it is important
now. Each of the groups have different investments. Some of
them are working out, some of them aren't working out.
Resources go up and down. A crab investment 3 years ago may
have made a lot of sense. Today it is losing money. Let us just
get the allocations--
Mr. Young. Let me interrupt you. Is there a criteria?
Robin, is there a criteria?
Mr. Samuelsen. Thank you, Mr. Chairman. In the record there
is a draft issues and alternatives for CDQ policy analysis.
Mr. Young. That is coming out of the Committee. There is no
criteria now by the State. They issue quotas based upon the
will and the whim of how they feel that day.
Mr. Samuelsen. No, Mr. Chairman. There is allocation
criteria.
Ms. Merculief. Like the lady mentioned earlier, in the
Natural Resources study, the State has 21 different listed
criteria, but we don't know how they are weighted, or which
criteria--
Mr. Young. There is nothing--what I am going to get to from
the State--and that is one of the question I am going to submit
to them--is why they based the increase or decrease of quotas
for different groups, and what criteria did they use, and was
it uniform? See, because I--this to me looks like somebody
possibly could be playing, as I mentioned before, God, and that
affects your lives, and I think it affects the integrity of
this organization. And what I am looking for is a way to keep
somebody from playing that role. If anybody wants to play it, I
do. And I will guarantee it, it is not going to be, it will be
the devil. But I am just saying, somewhere there has to be,
Larry, Gene, Morgen, Patience, Robin, everybody has to be
treated equal as far as the criteria goes. It cannot be
different. In fact, I am surprised that someone hasn't raised
this question in court before, because there has to be some
difference somewhere.
Gene? By the way, I have got another question to ask you,
Gene. Go ahead.
Mr. Asicksik. Yes. I think what is being missed here is the
other allocations. You know, when you see a decrease in your
allocation, or an increase--in my case, I got an increase, but
I seen a decrease in all other species--the decrease that we
seen, it became harder or sometimes, in some cases, not
feasible for us to go after a targeted species. So there is
other allocations that have affected us, and I think everybody
is just mainly looking at the pollock allocations, and yes,
pollock is 80 percent of all six groups' revenues. And crab was
mentioned earlier, that crab was a big issue sometime ago, but
now it is not. I mean it was a revenue generator, but now it is
not. And in some groups can be a money loser. This year,
hopefully, it will rebound and they can start making money
again.
So there are other allocations. Sometimes there is no
rationale or no explanation of why you have got increased in
rock sole or yellowfin sole, but you don't have enough skates
to go after it, you know.
Mr. Young. Now, along those lines again--I don't want to
get in the allocation program, but it always intrigues me. We
are fighting over a 10 percent of halibut allocation, right?
Mr. Cotter. Pollock.
Mr. Young. Pollock, excuse me, pollock. And the rest are 7-
1/2 for halibut, and 7-1/2 for yellowfin?
Mr. Cotter. All other groundfish.
Mr. Young. All other groundfish.
Mr. Asicksik. Yes.
Mr. Young. I am just running this through my mind now. What
would happen--you know, I think we ought to concentrate on
another effort to raise that 10 percent to 15 percent and the
7-1/2 to 10. And then--and spread it around a little bit, guys.
That is something I think because we even--my goal is really to
have the controlling force in the Bering Sea, but that is
something we can talk about later.
Eugene, has your group ever had a project or investment
rejected by the State?
Mr. Asicksik. Well, early on we had submitted a proposal to
purchase a long liner back in 1993 or '94. And we were told
that we could not invest into it 100 percent, that we had to go
to our harvesting partner, which is Glacier Fish Company, and
see if they would be interested, and that Glacier would have to
own 51 percent and NSEDC--
Mr. Young. What was the reason for that? What reason did
they give you?
Mr. Asicksik. That we didn't have the expertise and the
knowledge of owning a vessel, and that we didn't have the
skippers or, just the expertise.
Mr. Young. But see, that was a decision made by an outside
force about a business community that is really operated by
board members within your organization. Now, that is the thing
I object to. I mean, what right do they have to tell you to do
that? Do you think they had that right to do that?
Mr. Asicksik. Well, they are the oversight, and they are
still currently the oversight, so we did go back to Glacier
Fish Company, and Glacier did agree and meet with the State,
that they would participate in purchasing.
Mr. Young. But they are mini managing your group.
Mr. Asicksik. Yes, or--
Mr. Young. And this is something that I am very, very
frustrated about.
The State's criteria, Larry, that is used to allocate six
groups has been characterized as inconsistent and difficult to
evaluate when the allocations are made every year or every 2
years. Doesn't that leave you, as I said, vulnerable again to
the whims of the State?
Mr. Cotter. Absolutely, Mr. Chairman. It is no secret that
APICDA has the smallest population of all of the CDQ groups.
Quite frankly, we are between 2 and 3 percent of the total
population. So from a perspective of a lot of groups, our
population should mean that we should get a very low
allocation. What that has to do with the allocation process, we
initially received 18 percent of the pollock CDQ allocation.
The State reduced us to 16 percent a few years later, and
explained to the North Pacific Council that the reason they
made the reduction was because of population. They then came
back last year, and they reduced us by another 2 percent, down
to 14 percent. They told us in private that that was based on
population. We then challenged the process, and then the State
changed its opinion and said that it was based on performance.
In their letter to NMFS, describing performance, they made
statements such as we have--APICDA has--the fifth highest
administrative cost, for example, of any of the six groups.
Well, they didn't say whether we were too high or too low. They
didn't provide any information about whether or not that was
justifiable or not. In fact, we have 17 subsidiary
corporations, and probably have far more hands-on costs
incurred in managing personnel, et cetera, then the other
groups, so that might be good.
They had a bunch of criteria like that, or statements, that
allows--makes it impossible for you to know how you compare
against other groups.
We are very concerned that next year when we go through
this allocation process again, that we are going to get cut
primarily because of population or other factors, and that is
why, Mr. Chairman, we filed suit against the State and National
Marine Fisheries Service, over the allocation process.
Mr. Young. Have you had any indication they are going to be
punishing you for that suit?
Mr. Cotter. I don't believe that is going to happen, Mr.
Chairman.
Mr. Young. Well, what about 150 pounds of fish, over
fishing.
Mr. Cotter. Well, it was 1,400 pounds, Mr. Chairman, of
crab and--
Mr. Young. That is about as many fish as Robin lost
yesterday and didn't get shipped down to me.
[Laughter.]
Mr. Cotter. Mr. Chairman, you know, Mr. Bush responded to
me very rapidly after our press release on those charges, and
assured me that the State, the CDQ team was not involved in
that, and I believed him.
Mr. Young. Is there any other comments, Eugene?
Mr. Asicksik. Yes. I would like to go back to that non-
fisheries-related investments. I think that NSEDC's position
was that we just don't want to go out there and invest in
something that, you know, a vocal board member wants, you know.
What we would like is the flexibility--in our region, you know,
we would probably be competing against individuals in a
community for teacher housing, but we do have communities that
have a very--varying needs of teacher housing, and I look at
that as an investment. I look at it as when I was living in
Shaktoolik, personally, I considered building a 4-plex and
leasing it to the school district. The State will not build
housing for its teachers or for the troopers or for doctors.
But the State will provide funds for renting. And they are--I
think it was Robin mentioned it earlier, that, you know, we CDQ
groups have suppressed some of our village corporations, and we
do have revenues that we can invest into a 4-plex or a duplex,
triplex or 6-plex, and provide housing and, you know, create,
or get a agreement with the school district, to where
teachers--yes, we might compete with private individuals, but I
believe if you provide housing and if you have got adequate
housing, you are going to entice more teachers and better
teachers to come into the region, so you are going to have a
longer longevity and eventually you will have a better-educated
youth and a better community overall. There are communities
that the school district would have to try and renovate a
house. You know, in some communities I heard that there is no
floor, so they have to build a floor in there. So you would
save your school district some funds.
Another personal thing that I look at is why does Unakleet
have a airport--I mean a facility that when you land there, you
could actually come out of the weather? You could build
something at these airports. If you want to call them hangars,
Shaktoolik has--I am just using Shaktoolik, my home town--we
have five different airlines coming in every day. Surely these
airlines can get together and lease a facility to where someone
can make some money, and you would have less produce frozen,
you would have a place for people to warm up. You know, the new
airport that is under construction is a mile further than the
old one, and we are known for our winds. But I see that as a
business opportunity that NSEDC could get involved in and
build, not just in my community, but there are 14 other
communities--well, if you exclude Nome and Unakleet, there is
no other community in our region that has a facility where
people can come into that community to get out of the weather,
especially during the--
Mr. Young. Well, Gene, I happen to agree with all of you in
the sense that--the big dish--I never thought this program was
for just fisheries related, because it says community
development, and development has got a broad spectrum, and I
think that should be up to the board and the group to decide
what they are going to do to develop that community, and if
they have the money derived from a renewable resource, there
ought to be some latitude, and I hope we will get to that.
I have one last question. How does the performance for a
CDQ group invested in fisheries, that employs a large number of
people, but loses money? How does that--does anybody know how
your performance can be determined? Is that good or bad? You
are losing money, but you are employing people. Robin?
Mr. Samuelsen. Thank you, Mr. Chairman. I think that--I
will use BBEDC as an example. Our salmon runs are crashing. Our
markets are drying up.
Mr. Young. But this has nothing to do with CDQs.
Mr. Samuelsen. Yes. Last year BBEDC made a substantial
investment in the salmon industry, and we lost a substantial
amount of money on that investment last year because of
probably 25 percent management and 70 percent market
conditions, with the advent of farmed salmon flooding the
market.
Mr. Chairman, there is nothing in our regions to invest in
but salmon. So we fail last year. Is the State going to
penalize us? Are the councils going to penalize us? No, they
are not.
Mr. Young. Are you sure of that?
Mr. Samuelsen. I am positive of that.
Mr. Young. I want you to remember that if they cut your
quota by about 4 percent.
Mr. Samuelsen. That is right. They are not going to let us
continue losing that kind of money. They are going to make us
redesign a program and take another look at it, and that is
what my board is going through in September of this year. We
are going to take another look at it and try to figure it out,
how to develop a niche market. But we haven't been threatened
since the advent of the CDQ Program, about if you lose money,
we are going to cut your quota.
Mr. Cotter. Mr. Chairman?
Mr. Young. Yes, sir.
Mr. Cotter. Just the opposite side of that coin was we also
invested in a salmon processing facility last year, and opened
it in False Pass, and we lost a substantial amount of money.
And part of the justification that the State used in their
findings for reducing our allocation, was that we had poor
economic performance in that operation, whereas two other
groups had good--had successful operations in salmon, without,
of course, describing what successful means. Did they lose less
money or make money? But, yes, the State does apply that
criteria at least differently between groups.
Mr. Young. Well, see, this is what I am going to get at,
and Mr. Bush is going to get these questions. If he is in the
audience, I want him to understand, I want a set rule of
criteria applied equally to everyone. It is not correct to
penalize one person for doing one thing and reward the other
one for the other thing. And that is what causes dissension
amongst this group. A uniform set of rules that you can follow
and know where you are going to go is crucially important if
you have a future in planning your investment and how you are
going to handle it.
And like I say, I am amazed that you have been able to have
the success you have had with that type of oversight conduct,
and how you have been able to plan anything. You know, it
amazes me immensely.
I have another meeting. This has been going on from 11 to
1:30. And I want to thank all of you, and as I mentioned to you
yesterday, this is not a hostile position on my part, and I
hope not on your part. I am trying to make sure this program
continues to grow, and I hope it grows, and I will work to try
to get further allotments if possible, further amounts of fish
in every arena so you can grow.
Again, as you leave this meeting room and you go back to
your hotels or you fly to Alaska--and God bless you when you go
back; I will see you there in August--try to think about what
can we do together collectively, because you are small in
number, remember that. There is three of us down here, only one
Chairman left, and we have an opportunity this next year--this
year or next year, to renew the Magnuson Act, and this is going
to be one of linchpins of the Magnuson Act, is how the CDQ
Program works and where we are going to go in the future.
I want to thank each one of you for being in the room and
for the audience in participating. This meeting is adjourned.
[Whereupon, at 1:27 p.m., the Subcommittee meeting was
adjourned.]
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