Commission Agenda Item No. 10
Exhibit A

STATEWIDE OYSTER FISHERY PROCLAMATION
PROPOSAL PREAMBLE

1. Introduction.

        The Texas Parks and Wildlife Department proposes new §58.70, concerning the Oyster License Buyback Program. The proposed new rule would create a buyback program for commercial oyster licenses by prescribing the application requirements and bidding procedures for prospective license offerors, setting forth the criteria to be used by the department in ranking bids from offerors and the selection of licenses to be purchased (if any), providing for notification of applicants of acceptance or rejection of bids, and authorizing the delegation of license buyback authority to third parties.

        The 79th Legislature (2005) enacted Senate Bill 272, which directed the department to implement a license moratorium to promote efficiency and economic stability in the oyster industry. In the period between the passage of SB 272 and its effective date, commercial oyster license sales increased by 127% in comparison to the previous five-year average, which the department attributes to speculative behavior by persons anticipating a future opportunity to sell licenses back to the department at a profit. In 2017, the 85th Texas Legislature enacted House Bill 51, which, among other things, required the department to implement a commercial oyster license buyback program. Accordingly, the proposed new rule would create a mechanism for the purchase and retirement of commercial oyster licenses. Although some attrition in the number of licenses has occurred over the years and it appears that a significant number of licenses have never actually been used, the number of licenses remaining constitutes a risk to the recovery and sustainability of oyster resources in Texas, given the current state of the fishery and the resultant pressure on oyster resources.

        Proposed new §58.70(a) would provide for the delegation of authority to the executive director of the department to administer the oyster license buyback program. Although such authority is implicit in the provisions of H.B. 51 that direct the department to implement and administer a license buyback program, the department has determined that the rule should be patterned after existing rules governing the license buyback program for shrimp (31 TAC §58.130) in order to avoid confusion.

        Proposed new §58.70(b) would provide for the establishment of application periods based on the availability of funds, during which bids would be accepted by the department. The department anticipates that funds for license buyback will not be continuously available; therefore, the department believes it is efficient to conduct buyback activities during specific periods when funds are available.

         Proposed new §58.70(c) would require an applicant to be the owner of a license offered for buyback and to submit a department-supplied application form by the stated deadline. The proposed new subsection would also prescribe the contents of the application form. The application form would require the applicant’s full name, current residence address and social security number, documentation attesting that applicant is the sole owner of the vessel and holds the sole rights and privileges to the license (or that all members of a partnership or corporation have agreed to the application and the bid contained in the application), the federal vessel documentation number or state registration number for the vessel, a copy of the applicant’s current commercial oyster boat license, and the applicant’s bid offer, in U.S. dollars. The department believes that it is necessary and prudent to verify that a person seeking to sell a license is legally entitled to do so, which necessitates that the department verify the person’s identity, legal residence, and licensure status, as well as vessel documentation.

        Proposed new §58.70(d) would set forth the criteria that could be used by the department in evaluating applications and selecting licenses for buyback, such as vessel length, the funds available to the department; the number of commercial oyster boat licenses in the fishery issued in the license year of the specific bid offer application period, bid offers from previous application periods, established open market prices for licenses, and other relevant factors. The department has determined that since a variety of factors are in play at any given time, the department should have the latitude to consider all of them in the process of determining whether a license should be repurchased and at what price.

        Proposed new §58.70(e) would establish the procedure used by the department to prioritize bid offers. The proposed new subsection would provide that applications be ranked from highest to lowest using the criteria in proposed new subsection (d), that licenses be purchased in order from highest to lowest evaluations, and that in the case of bid offers that are ranked equally, priority will be given to the larger vessel and after that, in alphabetical order of the applicant’s last name. The department has determined that in cases where two bid offers have an equal ranking, the larger vessel should take precedence since the larger the vessel, the greater the harvest and storage capacity and, concomitantly, the greater the positive impact on oyster resources realized by the purchase of that license. Beyond that, there are no additional useful criteria and an alphabetical order is necessary simply to separate bid offers that are so similar as to be indistinguishable.

        Proposed new §58.70(f) would require the department to notify applicants within 45 days of receipt of an application of the department’s decisions to either accept or reject the applicant’s bid offer, and would give accepted applicants 15 days from the date of notification to accept or reject the department’s offer. The department considers that because the process set forth by the proposed rule takes place within a specified period, the timeframe of the decision to accept or refuse the department’s decision cannot be open-ended, but must be definitive as of a date certain.

        Proposed new §58.70(g) would provide for the delegation of purchasing authority to qualified agents. The department has determined that circumstances in some cases might make it more convenient and efficient for a qualified agent to analyze and accept or reject bids according to the provisions of the rule.

2. Fiscal Note.

        Lance Robinson, Deputy Director of the Coastal Fisheries Division, has determined that for each of the first five years that the rule as proposed is in effect, there will be no fiscal implications to state or local governments as a result of enforcing or administering the rule, as the administration of the oyster license buyback program will be performed by existing staff as part of current job duties.

3. Public Benefit/Cost Note.

        Mr. Robinson also has determined that for each of the first five years the rule as proposed is in effect:

                 (A) The public benefit anticipated as a result of enforcing or administering the rule as proposed will be the long-term sustainable management of the oyster resource and increased social and economic benefits for the oyster fishery in Texas. The program should stabilize effort in the fishery through time, allowing for the long-term recovery and protection of the oyster fishery.

                 (B) There will be no adverse economic effect on persons required to comply with the rule as proposed, as participation in the license buyback program is not mandatory, but at the discretion of the license holder.

                 (C) Under the provisions of Government Code, Chapter 2006, a state agency must prepare an economic impact statement and a regulatory flexibility analysis for a rule that may have an adverse economic effect on small businesses, micro-businesses, or rural communities. As required by Government Code, §2006.002(g), in April 2008, the Office of the Attorney General issued guidelines to assist state agencies in determining a proposed rule’s potential adverse economic impact on small businesses. These guidelines state that “generally, there is no need to examine the indirect effects of a proposed rule on entities outside of an agency’s regulatory jurisdiction.” The guidelines state that an agency need only consider a proposed rule’s “direct adverse economic impacts” to small businesses and micro-businesses to determine if any further analysis is required. The guidelines also list examples of the types of costs that may result in a “direct economic impact.” Such costs may include costs associated with additional recordkeeping or reporting requirements; new taxes or fees; lost sales or profits; changes in market competition; or the need to purchase or modify equipment or services.

        The department has determined that the rule as proposed will not adversely affect small businesses, micro-businesses, or rural communities, as it compels no person, small business or microbusiness to comply with any rule other than those set forth for participation in a voluntary program under which the department may repurchase oyster licenses and for those same reasons exerts no direct effect on any rural community. Accordingly the department has not prepared the economic impact statement or regulatory flexibility analysis described in Government Code, Chapter 2006.

                 (D) The department has not drafted a local employment impact statement under the Administrative Procedures Act, §2001.022, as the agency has determined that the rule as proposed will not impact local economies.

                 (E) The department has determined that Government Code, §2001.0225 (Regulatory Analysis of Major Environmental Rules), does not apply to the proposed rule.

                 (F) the department has determined that there will not be a taking of private real property, as defined by Government Code, Chapter 2007, as a result of the proposed rule.

                 (G) The department has determined that because the rule as proposed does not impose a cost on regulated persons and is necessary to implement legislation, it is not necessary to repeal or amend any existing rule.

                 (H) In compliance with the requirements of Government Code, §2001.0221, the department has prepared the following Government Growth Impact Statement (GGIS).  The rule as proposed, if adopted, will:

                                  (1) not eliminate a government program, but will create an oyster license buyback program;

                                  (2) not result in an increase or decrease in the number of full-time equivalent employee needs;

                                  (3) not result in a need for additional General Revenue funding;

                                  (4) not affect the amount of any fee;

                         (5) create a new regulation (to administer the oyster license buyback program);

                                  (6) decrease the number of individuals subject to regulation through time;

                                  (7) not expand, limit, or repeal an existing regulation; and

                                  (8) not significantly affect the state’s economy positively or adversely.

4. Request for Public Comment.