MUNDT MACGREGOR_ L.L.r. \ T O R N E Y S A l L A W Jay H. Zulauf John H. Chun Henry Howard Happel. III 999 Third Avenue · Suite 4200 Christopher S. McNulty Wm. Paul MacGregor Joe B. Stansell Seattle, Washington· 98104-4082 Michael J. Hyde Christopher R. M. Stanton J. David Stahl Libby A. Williams Telephone Matthew L. Fick (206) 624-5950 Joseph M, Sullivan Facsimile (206) 624-5469 Lisa Riveland Pagán December 20, 1998 Janet H. Cheetham OF COUNSEL Mr. Joel I. Klein VIA FEDERAL EXPRESS Assistant Attorney General Antitrust Division Department of Justice Tenth and Constitution Avenue, N.W. Room3109 Washington D .C. 20530 Re: Pollock Conservation Cooperative - Request For Business Review Letter Dear Mr. Klein: We are writing to you on behalf of the Members (as defined below) and on behalf of Pollock Conservation Cooperative, a Washington nonprofit corporation (the "Cooperative") to request that the Department of Justice provide us with a statement of its enforcement intentions with respect to the proposed activity described below, pursuant to 28 C.F.R. § 50.6. Alaska Ocean Seafood, L.P., a Washington limited partnership(" Alaska Ocean"), Alaska Trawl Fisheries, Inc., a Washington corporation(" Alaska Trawl"), American Seafoods Company, a Washington corporation(" American"), Arctic Fjord, Inc., a Washington corporation(" Arctic Fjord"), Arctic Storm, Inc., a Washington corporation(" Arctic Storm"), Glacier Fish Company LLC, a Washington limited liability company ("Glacier"), Highland Light Seafoods, LLC, a Washington limited liability company ("Highland Light"), Starbound Ltd. Partnership, a Washington limited partnership ("Starbound") and Tyson Foods, Inc., a Delaware corporation ("Tyson"), (together, the "Members") have formed the Cooperative, and propose to conduct a cooperative fish harvesting arrangement under its auspices. As more fully explained below, the Cooperative is intended to function as a harvesting association through which the Members would allocate among themselves certain percentages of the total allowable catch ("TAC") for the catcher/processor sector Mr. Joel I. Klein MUNDT MACGREGOR L.L.r. \ \ 1 \ \\ December 20, 1998 Page2 of the Bering Sea/ Aleutian Islands ("BS/ AI") pollock fishery (the "Pollock Fishery") and certain other groundfish fisheries. The purpose of the proposed mutual harvest allocation agreement is to enable the Members to improve their utilization of pollock and other groundfish (the "target species" of the fisheries), to reduce their incidental catch (or "bycatch") of important non-target species such as salmon, herring, crab and halibut (together, the "prohibited species"), and to disperse their fishing effort in time and area, consistent with the principles of the "Reasonable and Prudent Alternatives" ("RP As") imposed by the National Marine Fisheries Service ("NMFS") in connection with its Endangered Species Act ("ESA") "Section 7 consultation" concerning the Steller sea lion. The following documents are enclosed for your reference: 1) A copy of the American Fisheries Act (Division C, Title II of Public Law 105-277) (the" AFA"), with the related Statement by Senator Stevens and the related Section by Section analysis. The AFA took effect October 21, 1998. It imposes a new U.S. ownership requirement as of 2001 on fishing vessels operating in U.S. waters, allocates BS/ AI pollock resources among several industry sectors as of January 1, 1999, and restricts the eligibility of certain vessels to harvest and process BS/ AI area resources as of January 1, 1999 and the eligibility of others as of January 1, 2000. 2) A copy of the RP As adopted by NMFS in connection with the ESA Section 7 Consultation conducted with respect to authorization of the BS/ AI and Gulf of Alaska pollock fisheries of 1999 through 2002, to analyze their potential impact on the Steller sea lion population of those areas. Also enclosed is a copy of the RP A Section of the related NMFS "Biological Opinion". 3) Alaska pollock product distribution data and charts, prepared in connection with the fall 1998 proceedings of the Groundfish Forum (an international seafood producer trade association). 4) Product-by-sector tables produced for the North Pacific Fishery Management Council (the "Council") in connection with Council's recent consideration of the second re-authorization of the "inshore/ offshore" BS/ AI pollock allocation ("I/O 3"). Mr. Joel I. Klein MUNDT MACGREGOR L.L.P. \ r r N l \ \ \\ December 20, 1998 Page3 5) Documents concerning the markets for BS/ AI pollock products, i.e., (a) a "Product Mix and Market" analysis prepared for the Council in connection with I/O 3; (b) "Processing Sector Ownership Interests and Patterns" analysis prepared for the Council in connection with I/O 3; (c) 1996 U.S. pollock catch data, and production tables for the BS/ AI shoreside plants operated by UniSea, Westward Seafoods, Trident Seafoods and Alyeska Seafoods, reflecting raw pollock deliveries to those plants (as reported to EPA); and (d) corporate profiles for Nippon Suisan (100% owner of UniSea) and Maruha (100% owner of Westward Seafoods and 50% owner of Alyeska Seafoods). 6) The Articles of Incorporation of the Cooperative, and the Cooperative Membership Agreement (the" Agreement"). The Agreement specifies the terms under which the Members propose to conduct a cooperative fishery resource harvesting arrangement; 7) A spreadsheet based on information compiled from industry sources, which shows the optimal increase in pollock products available to the U.S. market that could result from a cooperative harvesting arrangement for the catcher/ processor sector of the Pollock Fishery. 8) A copy of a report from Pacific Whiting Conservation Cooperative to the National Research Council, which describes the increases in production and decreases in incidental catch of certain non-target species obtained by implementing a comparable cooperative harvesting arrangement in the Pacific coast whiting fishery. 1. Fishery Management. The BS/ AI pollock resource is commonly considered to be composed of two stocks: the "Eastern Bering Sea" stock, and the "Aleutian Basin" stock. These stocks are fished in both the U.S. and Russian 200 mile "fishery conservation zones". Consequently, you will see references to foreign catch of Alaska pollock (in the Groundfish Forum data for example), even though no foreign vessels fish in U.S. waters. The Eastern Bering Sea and Aleutian Basin are currently managed as separate areas. Pollock Fishery management policy is established by the North Pacific Fishery Management Council (the "Council"), one of the regional councils constituted under the Magnuson-Stevens Fisheries Conservation and Management Act (16 USC §1801 et. Seq.) (the "Magnuson-Stevens Act"). Mr. Joel I. Klein MUNDT MACGREGOR_ LLP. .\ l \ .\ \\ December 20, 1998 Page4 The Council sets the annual allocation levels for the resources under its jurisdiction, and sub-allocates harvesting rights to certain of those resources among various fishing gear and processing sectors. Upon adoption by the Council, BS/ AI and Gulf of Alaska fishery management policy is implemented through regulations drafted and promulgated by the NMFS. The NMFS Alaska Regional Office, located in Juneau, Alaska, has management jurisdiction over the Pollock Fishery. The federal management regulations for the Pollock Fishery (and all other fisheries under Council jurisdiction) are at 50 C.F.R. § 679. As a general matter, the fisheries under Council jurisdiction are managed on a quota-driven basis, i.e., the Council and NMFS set an annual total allowable catch ("TAC") based on stock size estimates and other biological and economic considerations, allocate prohibited species catch ("PSC") amounts for each fishery or fisheries complex, open the fisheries on selected seasonal opening dates, and each sector of the fishery remains open to all eligible harvesters until the earlier of the TAC for that season and sector having been harvested, the PSC cap for the fishery having been reached, or the seasonal closing date. At their current levels of capitalization, the Pollock Fishery and almost all other groundfish fisheries under Council jurisdiction are constrained by their TAC or their PSC allocation, i.e., the fisheries are fully utilized up to their regulatory limit. The BS/ AI Pollock Fishery is managed on the basis of three major management areas: the Eastern Bering Sea, the Aleutian Islands, and the "Bogoslof" area, with individual biomasses, allowable biological catches and TACs being calculated for each area. See map at Tab 2A. The BS/ AI Pollock Fishery TAC has generally averaged between 1and1.5 million metric tons per year since the mid 1970's. See "Figure 13" catch data at Tab 2. The Council has proposed that the Eastern Bering Sea TAC be set at 992,000 metric tons for 1999, and that the Aleutian Islands and Bogoslof areas be placed on "bycatch only" status; in other words, no directed pollock fishery would be allowed in either area. The Pollock Fishery has been allocated among three major groups since 1992: (i) Community Development Quota groups (the "CDQ Groups") which are composed of Western Alaskan Native villages that receive an allocation as part of a fishery-related economic development program; (ii) the "inshore" sector, composed of catcher vessels that deliver their catch to processing plants built onshore or anchored at a single location within State of Alaska waters; and (iii) the "offshore" sector, composed of "catcher/processors", i.e., vessels that catch and process fish, and the "mothership" Mr. Joel I. Klein MUNDT MACGREGOR L.L.r. \ r \ 1 L \ \\ December 20, 1998 Page5 fleet, which is composed of catcher vessels that deliver their product to mobile processing vessels that do not catch fish themselves, and such processing vessels. The Pollock Fishery TAC is further allocated by seasons and sub-areas, to disperse fishing effort in time and space. Under the NMFS management regime that " "B" has been in place for some time, the Pollock Fishery is divided into A" and seasons. The TAC is then split between the"A" and 11 B" seasons, on a sector-by-sector basis.