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Guidelines for Economic Analysis of Fishery Management Actions

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National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.


Notice of availability.


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 Start Printed Page 65842review 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.

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Theo R. Brainerd, 301-713-2337.

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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 Start Printed Page 65843federally 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.

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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:​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.

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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:​sfa/​ under “Proposed & Final Rules, and Documents for Public Comment.”

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Dated: October 27, 2000.

Clarence Pautzke,

Director, Office of Sustainable Fisheries, National Marine Fisheries Service.

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[FR Doc. 00-28153 Filed 11-01-00; 8:45 am]