[Federal Register Volume 65, Number 213 (Thursday, November 2, 2000)]
[Notices]
[Pages 65841-65845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-28153]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
[I.D. 051500C]
Guidelines for Economic Analysis of Fishery Management Actions
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Notice of availability.
-----------------------------------------------------------------------
SUMMARY: The Guidelines for Economic Analysis of Fishery Management
Actions (Guidelines) provide guidance on meeting the procedural and
analytical requirements of Executive Order (E.O.) 12866 and the
Regulatory Flexibility Act(RFA)for regulatory actions of federally
managed fisheries. Specifically, the guidelines include a general
framework for conducting economic analyses of regulatory actions;
recommend that a preliminary regulatory economic evaluation be
conducted early in the regulatory process to provide information on the
impacts of proposed measures to the public and decision makers; outline
the process for doing the regulatory impact
[[Page 65842]]
review for meeting analytical requirements, including information
requirements, analytical procedures, and methodologies; outline the
steps for fulfilling the requirements of the RFA; discuss the
relationship of the RFA to other applicable law; and identify ways of
involving small entities in the rulemaking process.
FOR FURTHER INFORMATION CONTACT: Theo R. Brainerd, 301-713-2337.
SUPPLEMENTARY INFORMATION:
Background
The objective of E.O. 12866 (58 FR 51735, October 4, 1993) is to
improve the Federal regulatory system. NMFS complies with E.O. 12866 by
preparing a Regulatory Impact Review (RIR) which includes an analysis
of the economic effects of the proposed action and alternative actions.
The RIR is intended to assist Councils and the NMFS in selecting the
regulatory approach that maximizes net benefits (including potential
economic, environmental, public health and safety, and other
advantages; distributive impacts, and equity issues), unless a statute
requires another regulatory approach.
The purpose of the RFA (5 U.S.C. 601 et seq.) is to establish as a
principle of regulatory issuance that agencies shall endeavor,
consistent with the objectives of the regulatory action and applicable
statutes, to fit regulatory and informational requirements to the scale
of businesses, organizations, and governmental jurisdictions subject to
the regulation. NMFS conducts a Regulatory Flexibility Act Analysis
(RFAA) to assess the impacts of the proposed/final rule on small
entities and describes steps the agency has taken to minimize any
significant economic impact on small entities while achieving
regulatory goals.
In comparison to the previous RIR/RFAA guidelines, these
guidelines:
Incorporate the revisions to the RFA made by the Small Business
Regulatory Enforcement Act;
Revise the basis the agency will use to certify that a proposed
regulation will not have a significant economic impact on a substantial
number of small entities;
Place greater emphasis on the need for the Regional Fishery
Management Councils and NMFS to have draft analyses early in the
Fishery Management Plan (FMP) development process and final analyses
available prior to a decision on the preferred course of action. These
analyses would also be a source of information for public comment on
the expected effects of the alternatives under consideration;
Provide recommendations concerning key topic areas and organization
for the regulatory analyst to consider when developing and revising the
regulatory analysis;
Based on the growing regulatory emphasis on protected resources and
habitat, recommend that analysts highlight, where appropriate, the
effects on the non-consumptive uses of fishery, other living marine
resources, and the ecological benefits derived from these resources and
their habitats; and
Incorporate changes based on comments from the public.
Comments on Draft Guidelines for Economic Analysis of Fishery
Management Actions
By the final date (June 21, 2000) for receiving comments on the
draft guidelines, 36 comments were received.
Comment 1: The NMFS guidelines failed to follow the letter and
spirit of the RFA and E.O. 12866.
Response: The guidelines addressed all applicable requirements of
the RFA and E.O. 12866. The requirements are outlined in detail, and a
stepwise approach to meeting those requirements is provided in the
guidelines. Most of the comments received indicated that the guidelines
provide clear and concise guidance to analysts and set the stage for
improving the quality of economic analyses of regulatory actions. The
Office of Advocacy at the U. S. Small Business Administration (SBA)
reviewed the draft guidelines and provided comments. Those comments
were incorporated into the final version of the revised guidelines.
Comment 2: Two commenters expressed concern that the effects of
fishery regulations on the recreational sector will not be given
adequate attention.
Response: The guidelines state the importance of considering the
impacts of management measures on all sectors of the industry,
including recreational and non-consumptive users to the extent that
available data permit. All sectors affected are considered to be
equally important in terms of conducting the economic impact analysis.
NMFS is constantly working to improve its data and analytical methods
for each sector so that future analyses of management actions can be
enhanced.
Comment 3: Small entities affected must include all participants,
not only those of the commercial fishing sector but also those of the
recreational fishing sector. The guidelines take the position that only
economic effects on the commercial sector must be included in economic
analysis (RFAA) to comply with the RFA.
Response: The guidelines refer to small entities as defined by the
SBA. These include all small entities whether commercial, recreational,
or otherwise. RFA analyses of management actions will encompass all the
small entities to which the rule will apply.
Comment 4: The statement: ``The RFAA need only analyze the economic
impacts on small entities to which the proposed rule will apply'' is
not true.
Response: Section 603(b)(3) of the RFA (5 U.S.C. 601 et seq.)
refers to the small entities to which the rule will apply. However,
other analyses will examine a rule's effects on other entities outside
the ambit of the RFA. The analysis of the economic impacts on small
entities whether they are directly affected, or indirectly affected by
the proposed rule are to be analyzed.
Comment 5: Two commenters agreed with the approach to provide
preliminary economic analyses of the impacts of proposed actions early
in the process, but stress that such analyses should be available to
the public in sufficient time to provide comments. This could enable
resolution of weaknesses in the analyses due to missing or incomplete
data among other things.
Response: NMFS encourages early presentation of economic analyses
so that weaknesses and missing or incomplete data can be identified. In
so doing, NMFS hopes that efforts can be made early in the process to
address those issues. The guidelines recommend that the preliminary
economic analyses should be included in the public hearing document.
The public hearing process provides the public with its first
opportunity to review the alternatives and to submit comments on the
analyses of those alternatives. In addition, the public has opportunity
to comment during public comment period at Council meetings before
final actions are taken, and during comment period when the proposed
rules are published in the Federal Register. In certain instances, the
Councils may request public comment during the development of the
public hearing document.
Comment 6: Although annual gross sales (revenues) could appear
large, net revenues could be much less compared to similar size
businesses in other industries. Analyses should focus on net revenues.
Response: NMFS agrees with this suggestion. Analyses usually
attempt to calculate and consider net revenues when cost and revenue
data are available. However, cost data are not available for most
fisheries. NMFS is taking steps to collect cost data for
[[Page 65843]]
federally managed fisheries. As more cost data become available, more
of the analyses will focus on computing net revenues.
Comment 7: Differential impacts on subsets within the fishing
industry should be considered even when a subset does not comprise a
significant number.
Response: NMFS agrees with this suggestion. The guidelines
recommend creation of separate classes of entities for doing the
analysis when a regulatory action is expected to have differential
impacts based on the sizes of entities and other characteristics. The
guidelines recommend that tiering by size or by other appropriate
characteristics be done when differential impacts are expected on
subgroups of affected small entities.
Comment 8: The certification process (certifying that proposed
action would not result in significant economic impact on a substantial
number of small entities) tends to mask the cumulative effects of
regulatory actions on a large segment of the fishing industry.
Cumulative effects should be analyzed where possible. There are some
routine management actions that could be considered as good candidates
for certification.
Response: The guidelines recommend that conceptual and empirical
analyses should explicitly account for the management history in a
fishery by reviewing past regulatory activities and trends. It is
expected that this approach would incorporate cumulative effects of
management measures. Also, the guidelines recommend that certification
only be done when the economic analysis of the proposed action provides
adequate information on the expected impacts.
Comment 9: Pareto criteria and Hicksian Compensation criteria are
strictly efficiency-based and do not attempt to make equity or
distributional judgements, but merely indicate if the overall pie is
getting bigger or not, regardless of who wins or losses. The footnote
on Page 10, Section IV.1 of the draft guidelines is inappropriate
within the context that distribution is being raised in the text. One
needs to point out that distributive implications of alternatives can
and should be determined. These distributive implications can then be
weighed along with the net benefit results by the regulatory
authorities.
Response: The guidelines have been revised to better reflect that
economic analysis should provide a quantitative or qualitative estimate
of changes in net benefits expressed in monetary terms. The guidelines
indicate that it is desirable to show how the benefits and costs may be
distributed among the various impacted sectors / entities if the
appropriate data and analytical methods are available. Presentation of
other measures of distributional effects such as changes in shares of
harvest or revenues are encouraged.
Comment 10: There is need to provide more guidance on conducting
analyses involving non-use values. It would be useful to include an
addendum to the guidelines that addresses both methodological and
application considerations especially with regard to Essential Fish
Habitat and MPA related actions, as a temporary solution.
Response: Section IV of the guidelines provides recommendations for
computing non-use values and includes three techniques (travel cost,
stated preference, and hedonic pricing) for computing non-use values
even though it is indicated in section III that the guidelines do not
prescribe methods. Also, the list of references at the end of the
guidelines includes references on non-use valuation techniques.
Comment 11: Willingness to Accept (WTA) can be used instead of
Willingness To Pay. For example, WTA compensation for a loss of a
fishing permit.
Response: The concept of WTA has been included in the revised
guidelines to reflect that WTA may be preferable in certain situations
when valuing market or non-market goods.
Comment 12: The agency should consider existence value for
endangered/threatened species.
Response: Existence value is discussed under non-market value in
section IV. Where appropriate, existence value may be considered for
species, including those covered under the Endangered Species Act
(ESA).
Comment 13: The guidelines should mention IMPLAN as a useful
package for doing input-output analyses.
Response: There are a number of software packages available for
doing input-output analysis. Analysts can utilize any package they are
familiar with. It is not the agency's policy to promote a particular
brand of product.
Comment 14: In addition to inter-generational equity and fairness
issues, irreversibility needs to be addressed. The following sentence
should be included: ``In addition, discounting of actions intended to
prevent irreversible impacts, such as habitat damage, might also
include applying techniques that escalate the future value of an
environmental asset over time.''
Response: The revised guidelines provide a discussion on the issue
of irreversibility.
Comment 15: NMFS should use focus groups to obtain real world
perspective when data is lacking and when the analysis is mainly
qualitative.
Response: NMFS notes the comment. NMFS and the Councils may use
focus groups when appropriate.
Comment 16: Most of NMFS regulations are reactive to crisis
situations. They do not allow for well documented use of analytical
methods to indicate impacts. NMFS can become more pro-active.
Response: The purpose of the guidelines is not to discuss the
reasons for proposing regulations, but to provide guidance on how to
conduct economic analyses to meet the requirements of the RFA and E.O.
12866; i.e., to analyze the expected impacts of the proposed
regulations.
Comment 17: The guidelines should emphasize the distinction between
the RIR and RFAA and should address the issues under each decisional
rubric.
Response: The guidelines clearly indicate where the requirements of
the RFA and E.O. 12866 overlap and where they differ. For each of the
requirements under the RFA and E.O. 12866, specific guidance is
provided on how to conduct economic analyses to meet those
requirements.
Comment 18: The weight given to non-consumptive uses could
overshadow impacts on fishermen. The guidelines should emphasize that
the public derives important benefit from being able to purchase
seafood at stores and that there is a separate existence value for the
U.S. seafood industry.
Response: The guidelines support the use of existence value when it
is appropriate to address the issue. Also, the guidelines recommend
computing producer and consumer surpluses to capture all costs and
benefits for traded goods. Consumer surplus captures the value
consumers put on the availability of seafood products. As noted in
Comment 2, all sectors affected should be considered in a complete,
objective, and balanced way when conducting economic impact analyses.
Comment 19: Information requirements should include consideration
of the cumulative economic and social effects of regulations.
Response: The guidelines stress the need for considering cumulative
impacts and include suggestions on how to assess cumulative impacts.
Comment 20: The analyst could ``back fill'' a framework adjustment
measure with economic and social justifications, rather than conduct a
full and fair analysis during the actual decision-making process.
[[Page 65844]]
Response: The guidelines outline the steps for doing the economic
analyses before NMFS or the Councils take final actions. The guidelines
specifically address framework measures and the need to ensure that
regulatory actions under a framework are adequately analyzed.
Comment 21: The statement that the RFA does not contain any
decisional criterion is untrue.
Response: This statement refers to the fact that the RFA does not
require that the least costly alternative or the alternative with the
highest benefits be selected. The RFA requires that the agency
considers a range of suitable alternatives, and if a rejected
alternative would have a lower impact on small entities than the chosen
alternative, justify why it chose that alternative over the rejected
alternative.
Comment 22: NMFS must find a way to obtain reliable cost
information if it expects to do rigorous profitability analyses.
Response: The purpose of the guidelines is not to design methods
for collecting data, but to give guidance on how to utilize data to do
the economic analyses. However, NMFS is currently collecting cost data
for some fisheries and is making effort to expand cost data collection
to include more federally managed fisheries.
Comment 23: NMFS must explore innovative alternatives to minimize
impact on small entities while meeting the goals and objectives of
management.
Response: The analyst does not decide on the alternatives to be
included in the regulatory document. As such, the guidelines make no
suggestion on what should be suitable alternatives, except that the no
action alternative must be considered and should be the baseline from
which other alternatives are assessed. However, the Councils and NMFS
are required to explore a range of alternatives that are consistent
with the goals and objectives of the FMP, and select alternatives that
minimize impacts on small entities. The guidelines provide four
examples of the types of alternatives that could be used to minimize
impact on small entities while meeting the goals and objectives of
management.
Comment 24: The contents of the Final Regulatory Flexibility
Analysis (FRFA) need to be expanded to include an explanation of why
NMFS chose a particular alternative and should include additional
consideration of economic, social and regulatory impacts discovered in
public comment on the Initial Regulatory Flexibility Analysis.
Response: The FRFA section of the RFAA is structured to meet the
requirements of Section 604 of the RFA (5 U.S.C. 601 et seq.). The
guidelines for preparing the FRFA address all the suggestions made by
the commenter.
Comment 25: The current form of the guidelines is likely too
general to be useful for practitioners.
Response: The guidelines are primarily written for analysts to aid
them in performing economic analyses of regulatory actions while taking
into account the wide array of actions for different fisheries under
management. It is also written so that it is intelligible to managers,
policy makers and to the public in general.
Comment 26: ``Efficiency'' should be explained in the context of
fishery management.
Response: Section IV of the guidelines emphasizes estimating the
changes in benefits and costs associated with each alternative to the
status quo. This incremental or marginal approach is intended to
capture differences in efficiency among the alternatives. However,
because increased efficiency is not the sole objective of management
actions, the guidelines do not emphasize the conditions necessary for
an efficient allocation of resources. The guidelines include references
to the relevant literature on benefit-cost analysis and efficiency.
Comment 27: Appendix C of Office of Management and Budget (OMB)
Circular No. A-94 (revised January 2000) states that OMB officially
recommends the use of real discount rates in the range of 3.8 - 4.2
percent. The guidelines should state clearly that analysts should refer
to OMB Circular for the current rate schedule and future adjustments to
the schedule.
Response: The guidelines indicate that the OMB has provided
``Guidelines and Discount Rates for Benefit-Cost Analysis of Federal
Programs'' in Circular No. A-94 distributed by Transmittal Memorandum
No. 64 (October 29, 1992). This Circular specifies certain discount
rates that will be updated annually when the interest rate and
inflation assumptions in the budget are changed. It also specifies
(section 8.b.1) a real discount rate of 7.0 percent for computing net
present value when doing constant-dollar benefit-cost analyses of
proposed investments and regulations. The rates presented in appendix C
of OMB Circular No. A-94 do not apply to regulatory analysis or
benefit-cost analysis of public investment. They are to be used for
lease-purchase and cost-effectiveness analysis, as specified in the
Circular. This information about appendix C is provided in:
``Memorandum for the Heads of Departments and Agencies''of February 9,
2000 (M-00-06, 2000 Discount Rates for OMB Circular No. A-94) and can
be obtained at: http://www.whitehouse.gov/OMB/memoranda/m00-06.html
Comment 28: Analyses should take cost effects into consideration.
Response: Under ``Changes in the distribution of benefits and
costs'' in section IV.1 of the Guidelines, details are provided on how
to account for changes in benefits and costs in the analyses. Also,
under ``Information Requirements'' in section IV.3, 14 factors are
listed for which information should be collected to do the required
analyses when relevant. Three of these factors are: expected changes in
harvesting costs, processing costs, and benefits or costs incurred by
specific user groups.
Comment 29: The section on ``Net benefits within a benefit cost
framework'' is confusing and should include a graph illustrating the
different surplus measures.
Response: This section has been revised and now provides clear
guidance on how to measure benefits and costs within a benefit-cost
framework.
Comment 30: There needs to be more guidance for conducting
sensitivity analysis.
Response: The guidelines describe three fundamental types of
analyses the analysts could employ, if appropriate, to deal with risk
and uncertainty. They are: (1) a qualitative description of the areas
of risk and uncertainty when reliable data or analytical models are
unavailable; (2) a formal sensitivity analysis in which the important
parameters are systematically varied and the impact on expected
economic effects evaluated; and (3) a formal risk analysis through
techniques such as Monte Carlo simulation.
Comment 31: The ``Summary of Expected Economic Effects'' section
should include a sample schedule that illustrates how this might look
in a particular policy assessment (e.g. quota level) to further aid the
analyst.
Response: This section only presents a summary (as a checklist) of
how the results of the analysis should be presented. The sample
schedule referred to would be appropriate in a practitioners manual
which could be developed at a later date.
Comment 32: The section on ``Period of Analysis'' is
unsatisfactory. It should include more examples on how various factors,
such as the reproductive rate of fish stock and capital mobility and
malleability, affect the relevant time frame of the analysis.
[[Page 65845]]
Response: Specific guidance on the period of analysis is not
appropriate because of the vast differences in the characteristics of
fisheries and the variety of management measures. A thorough knowledge
of the particular fishery under consideration, and the nature of the
proposed management measures and other relevant factors (as stated in
the guidelines), must be considered before determining the appropriate
period for the analysis.
Comment 33: The current section on ``Risk and Uncertainty'' does
not emphasize the importance of providing a range of benefit-cost
estimates as opposed to point estimates to the Councils.
Response: In addition to identifying three types of analyses to
deal with risk and uncertainty, the guidelines state that the use of
conservative or best estimates, or the use of a risk premium added to
the social discount rate is not recommended.
Electronic Access
A copy of the revised guidelines is available through the internet
at: http://www.nmfs.gov/sfa/ under ``Proposed & Final Rules, and
Documents for Public Comment.''
Dated: October 27, 2000.
Clarence Pautzke,
Director, Office of Sustainable Fisheries, National Marine Fisheries
Service.
[FR Doc. 00-28153 Filed 11-01-00; 8:45 am]
BILLING CODE 3510-22-S