This rule has been reviewed under Executive Order 12866. The rule has been determined to be “not significant” for the purposes of Executive Order 12866, and therefore has not been reviewed by the Office of Management and Budget (OMB).

This rule has also been reviewed under Executive Order 12988, Civil Justice Reform. This action is not intended to have retroactive effect. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. There are no administrative procedures which must be exhausted prior to any judicial challenge to the provision of this rule.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ), the Administrator of AMS has considered the economic impact of this action on small entities. There are more than 800 users of the PVPO's variety protection service, of whom about 100 may file applications in a given year. Some of these users are small entities under the criteria established by the Small Business Administration (13 CFR 121.201). The Administrator of AMS determined that this action would not have a significant economic impact on a substantial number of these small entities.

The Plant Variety Protection Office (PVPO) administers the Plant Variety Protection Act by issuing Certificates of Protection which provide legal intellectual property rights to developers of new varieties of plants. A Certificate of Protection is awarded to an owner of a variety after an examination shows that it is new, distinct from other varieties, and genetically uniform and stable through successive generations.

The AMS regularly reviews its user fee financed programs to determine if the fees are adequate. The most recent review determined that the existing fee schedule will not generate sufficient revenues to cover programs costs while maintaining an adequate reserve balance. Without a fee increase, fiscal year (FY) 2000 revenues are projected at $1,100,000; costs are projected at $1,300,000, and trust fund balances would be $1,500,000. With a fee increase, FY 2000 revenues are projected at $1,200,000 and costs are projected at $1,300,000. With the increase in revenue, the trust fund balance will be maintained at $1,600,000, its level at the end of FY 1999.

This action raises the fee charged to users of plant variety protection. The AMS estimates that this rule would yield an additional $100,000 during FY 2000. The fee for plant variety protection would increase by approximately 10 percent. The costs to entities will be proportional to their use of the service, so that costs are shared equitably by all users. The increase in costs to individual users will be approximately $275.00 per Plant Variety Protection Certificate issued. Plant Variety Protection is sought on a voluntary basis. Any decision on their part to discontinue the use of plant variety protection would not prevent these entities from marketing their varieties. Finally, the addition of the information symbol to the USDA/AMS inventory of symbols and its inclusion in the regulations will not add further costs to users of the variety protection services.

This rule does not contain any information collection or recordkeeping requirements that are subject to OMB approval under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

The Plant Variety Protection Program is a voluntary, user fee-funded service, conducted under the Authority of the Plant Variety Protection Act (PVPA), 7 U.S.C. 2321 et seq. The Act authorizes the Secretary of Agriculture to provide intellectual property rights that facilitate marketing of new varieties of seed-propagated crops and tubers. The act also requires that reasonable fees be collected from the users of the services to cover the costs of maintaining the program.

On April 4, 1995, AMS published a rule in the Federal Register (60 FR 17188) that increased Plant Variety Protection Office fees pursuant to amendments to the Plant Variety Protection Act became effective April 4, 1995. In its analysis of projected costs for FY 2000, AMS has identified increases in the costs of providing plant variety protection. Anticipated revenue will not cover increased program costs. Without a fee increase, FY 2000 revenues are projected at $1,100,000; costs are projected at $1,300,000, and trust fund balances would be $1,500,000. With a fee increase, FY 2000 revenues are projected at $1,200,000 and costs are projected at $1,300,000. Due to the increase in revenue, the trust fund balance would be maintained at $1,600,000, its value at the end of FY 1999. The AMS estimates that this rule would yield an additional $100,000 during FY 2000.

Program operating costs include salaries and benefits of examining staff, supervision, training, and all administrative costs of operating the program. Cost increases are attributed mainly (80 percent of total operating budget) to national and locality pay raises and increased benefit costs for Federal employees. A general and locality salary increase for Federal employees, totaling approximately 4.8 percent for the Washington, D.C. metropolitan area, will materially affect the costs of plant variety protection. Increases are expected to continue in following years. Administrative costs, including salary increases, increases in rent, increases in costs of supplies and replacement equipment, and training have increased, in amounts ranging from 3.1 to 22 percent per item. Due to these operating cost increases, the last fee increase in 1995 is no longer adequate to cover obligations and maintain an adequate reserve balance.

The fees set forth in Section 97.175 will be increased. The application fee will be increased from $300 to $320, the search fee from $2,150 to $2,385, and the issuance fee from $300 to $320. The fees for reviving an abandoned application, correcting or reissuance of a certificate are increased from $300 to $320. The charge for granting an extension for responding to a request is increased from $50 to $55. The hourly charge for any other service not specified is increased from $60 to $66. The fee for appeal to the Secretary (refundable if appeal overturns the Commissioner's decision) is increased from $2,750 to $3,050. These fee increases are necessary to cover costs of this fee-funded program.

The Plant Variety Protection Advisory Board has been informed of cost increases, including anticipated salary increases, and consulted on a fee increase on March 24, 1999. The Board recommended that fees be increased. This rule makes the minimum changes in the regulations to implement the recommended increased fees to maintain the program as a fee-funded program.

The form of the official identification symbol, an umbrella over plant reproductive organs (a pistil with four stamens) illustrates the concept of intellectual property rights protection for sexually-reproduced crops.

A notice of proposed rule making was published in the Federal Register (65 FR 13917) on March 15, 2000. A 30-day comment period was provided to allow interested persons the opportunity to respond to the proposal, including any regulatory and informational impact of this action on small businesses.

The commentor observed that a charge for “any other service not specified” is in the current fee schedule, but was omitted from the proposed revised regulatory text. The hourly charge for “any other service not specified” was omitted from the list of fees and charges in § 97.175 due to an electronic error; however, it was included in the discussion of proposed increases in the text of the “Background” section of the proposed rule as published on March 15. The proposed increase was from $60 to $66. Accordingly, the text of § 97.175 is changed to reflect this fee. The comment also noted that first priority should be given to the examination and issue of certificates. This is done to the extent practicable.

This final rule is issued under Marketing Agreement No. 115 and Order No. 982, both as amended (7 CFR part 982), regulating the handling of hazelnuts grown in Oregon and Washington, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

The Department of Agriculture (Department) is issuing this rule in conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing order now in effect, hazelnut handlers are subject to assessments. Funds to administer the order are derived from such assessments. It is intended that the assessment rate as issued herein will be applicable to all assessable hazelnuts beginning on July 1, 2000, and continue until amended, suspended, or terminated. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with the Secretary a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. Such handler is afforded the opportunity for a hearing on the petition. After the hearing the Secretary would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review the Secretary's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

This rule increases the assessment rate established for the Board for the 2000-2001 and subsequent marketing years from $0.004 to $0.005 per pound of hazelnuts handled.

The order provides authority for the Board, with the approval of the Department, to formulate an annual budget of expenses and collect assessments from handlers to administer the program. The members of the Board are producers and handlers of hazelnuts. They are familiar with the Board's needs and with the costs for goods and services in their local area and are thus in a position to formulate an appropriate budget and assessment rate. The assessment rate and budget were recommended by a mail vote. The recommendation will be discussed and reconfirmed at the Board's next scheduled public meeting. Thus, all directly affected persons have an opportunity to participate and provide input.

For the 1997-98 and subsequent marketing years, the Board recommended, and the Department approved, an assessment rate that would continue in effect from marketing year to marketing year unless modified, suspended, or terminated by the Secretary upon recommendation and information submitted by the Board or other information available to the Secretary.

The Board, in a mail vote completed at the end of April 2000, unanimously recommended 2000-2001 expenditures of $596,293 and an assessment rate of $0.005 per pound of hazelnuts. In comparison, last year's budgeted expenditures were $568,457. The assessment rate of $0.005 is $0.001 higher than the rate previously in effect. At a rate of $0.004 per pound and an estimated 2000-2001 hazelnut production of 50,000,000 pounds, the Board believes that the projected reserve on June 30, 2001, would not have been adequate to administer the program. The increased assessment rate is expected to result in an operating reserve of $150,147 at the end of the 2000-2001 marketing year.

The major expenditures recommended by the Board for the 2000-2001 marketing year include $39,613 for personal services (salaries and benefits), $7,416 for rent, $5,000 for compliance, $23,000 for the crop estimate, $275,000 for promotion, and $182,364 for an emergency fund. Budgeted expenses for these items in 1999-2000 were $51,385, $7,308, $5,000, $21,000, $275,000, and $182,364, respectively. The Board will consider using emergency funds for authorized activities when it is reasonably certain that its estimate of assessable hazelnuts is reached. It will not be able to make this determination until December 2000, the month in which the hazelnut harvest and deliveries to handlers usually are completed.

The Board based its recommended assessment rate increase on the 2000-2001 crop estimate, the 2000-2001 marketing year expenditures estimate, and the current and projected balance of the operating reserve. Hazelnut shipments for the 2000-2001 marketing year are estimated at 50,000,000 pounds, which should provide $250,000 in assessment income. Income derived from handler assessments, along with interest income ($13,000) and funds from the Board's authorized reserve ($333,293), will be adequate to cover budgeted expenses. Funds in the reserve will be kept within the maximum permitted by the order (approximately one marketing year's operational expenses). Excess funds may be maintained and used by the Board until December 1 following the end of a marketing year (§ 982.62(b)). The Board shall refund to each handler upon request, or credit to the handler's account with the Board, the handler's share of such excess prior to January 1.

The assessment rate established in this rule will continue in effect indefinitely unless modified, suspended, or terminated by the Secretary upon recommendation and information submitted by the Board or other available information.

Although this assessment rate will be in effect for an indefinite period, the Board will continue to conduct a mail vote prior to or during each marketing year to recommend a budget of expenses and consider recommendations for modification of the assessment rate. Any mail votes will be discussed and reconfirmed at a public meeting. The dates and times of Board meetings are available from the Board or the Department. Board meetings are open to the public and interested persons may express their views at these meetings. The Department will evaluate Board recommendations and other available information to determine whether modification of the assessment rate is needed. Further rulemaking will be undertaken as necessary. The Board's 2000-2001 budget has been reviewed and approved. Budgets for subsequent marketing years will also be reviewed and, as appropriate, approved by the Department.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this rule on small entities. Accordingly, the AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf. Thus, both statutes have small entity orientation and compatibility.

There are approximately 800 producers of hazelnuts in the production area and approximately 22 handlers subject to regulation under the marketing order. Small agricultural producers are defined by the Small Business Administration (SBA) (13 CFR 121.201) as those having annual receipts of less than $500,000, and small agricultural service firms are defined as those whose annual receipts are less than $5,000,000. Currently, about 86 percent of hazelnut handlers could be considered small businesses under SBA's definition, excluding receipts from other sources. Further, it is estimated that virtually all hazelnut producers have annual receipts of less than $500,000, excluding receipts from other sources. Thus, the majority of handlers and producers of hazelnuts may be classified as small entities.

This rule increases the assessment rate established for the Board and collected from handlers for the 2000-2001 and subsequent marketing years from $0.004 to $0.005 per pound of hazelnuts. The Board, in a mail vote completed at the end of April 2000, unanimously recommended 2000-2001 expenditures of $596,293 and an assessment rate of $0.005 per pound. The assessment rate of $0.005 per pound is $0.001 higher than the $0.004 per pound rate previously in effect. The quantity of assessable hazelnuts for the 2000-2001 marketing year is estimated at 50,000,000 pounds. Income derived from handler assessments, along with interest income and funds from the Board's authorized reserve, will be adequate to cover budgeted expenses.

The major expenditures recommended by the Board for the 2000-2001 marketing year include $39,613 for personal services (salaries and benefits), $7,416 for rent, $5,000 for compliance, $23,000 for the crop estimate, $275,000 for promotion, and $182,364 for an emergency fund. Budgeted expenses for these items in 1999-2000 were $51,385, $7,308, $5,000, $21,000, $275,000, and $182,364, respectively. As mentioned earlier, the Board will not make any decision on using emergency funds until December 2000, at the earliest.

The Board based its recommended assessment rate increase on the 2000-2001 crop estimate, the 2000-2001 marketing year expenditures estimate, and the current and projected balance of the operating reserve. Hazelnut shipments for the 2000-2001 marketing year are estimated at 50,000,000 pounds, which should provide $250,000 in assessment income. Income derived from handler assessments, along with interest income ($13,000) and funds from the Board's authorized reserve ($333,293), will be adequate to cover budgeted expenses. Funds in the reserve will be kept within the maximum permitted by the order (approximately one marketing year's operational expenses). Excess funds may be maintained and used by the Board until December 1 following the end of a marketing year (§ 982.62(b)). The Board is required to refund or credit, upon request, each handler's share of the excess prior to January 1.

The Board reviewed and unanimously recommended 2000-2001 expenditures of $596,293. With the 2000-2001 marketing year assessable hazelnut crop estimated at 50,000,000 pounds, or 26,000,000 pounds less than for 1999-2000, the Board recommended the assessment rate increase to prevent its operating reserve from going lower than $150,000. The Board believes that a reserve less than this is too low. Prior to arriving at this budget, the Board considered information from various sources, including the Proration Committee, the Budget Committee, and the Marketing and Promotion Committee. Alternative expenditure levels were discussed by these groups, based upon the relative value of various research, marketing, and promotion projects to the hazelnut industry.

A review of historical information and preliminary information pertaining to the upcoming marketing year indicates that the producer price for the 2000-2001 marketing year could range between $0.32 and $0.49 per pound of hazelnuts. Therefore, the estimated assessment revenue for the 2000-2001 marketing year as a percentage of total producer revenue could range between 1.02 and 1.56 percent.

This action increases the assessment obligation imposed on handlers. While assessments impose some additional costs on handlers, the costs are minimal and uniform on all handlers. Some of the additional costs may be passed on to producers. However, these costs are offset by the benefits derived by the operation of the marketing order. In addition, interested persons were invited to submit information on the regulatory and informational impacts of this action on small businesses.

This rule imposes no additional reporting or recordkeeping requirements on either small or large hazelnut handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

The Department has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

A proposed rule concerning this action was published in the Federal Register on June 14, 2000 (65 FR 37300). Copies of the proposed rule were also mailed or sent via facsimile to Board members. Finally, the proposal was made available through the Internet by the Office of the Federal Register. A 30-day comment period ending July 14, 2000, was provided for interested persons to respond to the proposal. No comments were received.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

After consideration of all relevant material presented, including the information and recommendation submitted by the Board and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

Pursuant to 5 U.S.C. 553, it is also found and determined that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register because: (1) The 2000-2001 marketing year began on July 1, 2000, and the marketing order requires that the rate of assessment for each marketing year apply to all assessable hazelnuts handled during such marketing year; (2) the Board needs to have sufficient funds to pay its expenses which are incurred on a continuous basis; and (3) handlers are aware of this action which was unanimously recommended by the Board in a mail vote and is similar to other assessment rate actions issued in past years.

On June 7, 2000 (65 FR 36243), the FAA published amended type certification procedures for changed products. These amendments affect changes accomplished through either an amended type certificate or a supplemental type certificate. The amendments are needed to address the trend toward fewer products that are of completely new design and more products with multiple changes to previously approved designs. This final rule action will enhance safety by applying the latest airworthiness standards, to the greatest extent practicable, for the certification of significant design changes of aircraft, aircraft engines, and propellers.

These amended regulations become effective June 7, 2000. Mandatory compliance dates are December 10, 2001, for transport category airplanes and restricted category airplanes that have been certified using transport category standards, and December 9, 2002, for all other category aircraft and engines and propellers.

For the purposes of implementing these amended regulations, the FAA has chartered a Changed Product Rule Team to develop the necessary guidance materials allowing for proper orientation, application and standardization for the Aircraft Certification Service. These guidance materials include Notice, Advisory Circular (AC) and training. The Changed Product Rule Team started its work in April 1999.

At present, the AC draft applicable to part 25 airplanes has been developed. The philosophy and methodology adopted for this AC are derived from the approaches presented by the ICPTF (International Certification Procedures Task Force) Working Group III. Harmonizing this AC with JAA's version has been a constant effort throughout the development process. Notice of availability for public comment of this AC draft (for part 25 only) is scheduled for publication August 2000.

The next phase of the effort is to update the current AC (for part 25 only) by adding elements that are applicable to other parts (that is, parts 23, 27, 29, 31, 33 and 35). The FAA has determined that it is in the public interest to hold a public meeting for the purposes of sharing thoughts and gathering comments that need to be considered for the development of an AC related to general aviation aircraft and other products. Accordingly, the FAA will conduct this public meeting in Kansas City, Missouri.

The following procedures have been established for the U.S. industry meeting:

1. Admission and participation in the public meeting is free. Registration will occur on the date of the meeting between 8:00 a.m. and 9:00 a.m. Seating will be limited to the first 300 participants.

2. Representatives from the FAA will conduct the meeting. A technical panel of FAA personnel will discuss information.

3. The issue will be limited to the Changed Product Rule and the development of an AC.

4. Sign and oral interpretations will be made available at the meeting, including assistive listening devices, if requested from the person listed under FOR FURTHER INFORMATION CONTACT at least 10 calendar days before the meeting. Anyone requiring other accommodations under the Americans with Disability Act should notify the individual listed under FOR FURTHER INFORMATION CONTACT at least 10 calendar days before the meeting.

5. Statements made by FAA personnel are intended to clarify issues.

6. The meeting will be conducted in an informal and nonadversarial manner.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to CFM International (CFMI) CFM56-2, -2A, -2B, -3, -3B, -3C, -5, -5A, -5B, -5C series turbofan engines was published in the Federal Register on January 24, 2000 (65 FR 3621). That action proposed to require initial and repetitive visual inspections of the fuel pump filter cover helicoil inserts and bolts for damage, and, if necessary, repair or replacement with serviceable parts. That action also proposed to require the installation of new fuel pumps that incorporate an improved filter cover retention design (D-bolts) as terminating action to the inspections.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comments received.

One comment requests that the requirement for on-wing gearbox replacements be removed from the terminating action since the fuel pump is routinely reinstalled and does not receive a shop visit. The comment also suggests that the fuel pump modification should be required at fuel pump shop visit only.

The FAA agrees in part. The FAA agrees that it is not necessary to replace the fuel pump at on-wing gearbox replacement. However, the FAA does not agree that modification of the fuel pump should only be accomplished at fuel pump shop visit. The FAA believes fuel pump modifications should be accomplished at engine shop visit. The terminating action at on-wing gearbox replacement will be removed and the final rule revised accordingly. For clarity, the following definitions will also be added: A fuel pump shop visit is defined as introduction of an engine into a shop for the purpose of removal of the fuel pump from the gearbox. An engine shop visit is defined as introduction of an engine into a shop for the purpose of maintenance or inspection.

Eight comments request that credit be given to operators who have performed initial inspections per the applicable service bulletins (SBs) or aircraft maintenance manuals. One comment requests a wording change so that operators will not have to repeat the initial inspection.

The FAA agrees. This final rule has been revised accordingly.

One comment expresses concern that the fuel pump manufacturer and repair vendor will not be able to support the five-year compliance schedule. Another comment requests an extension of the terminating action date. Two comments request elimination of a five-year terminating-action requirement because there will be insufficent time to remove the fuel pumps on an attrition basis, and this requirement will disrupt planned component removal schedules.

The FAA does not agree. The engine manufacturer has informed the FAA that the fuel pump vendor should be able to support this five-year compliance schedule. The FAA has revised the final rule in response to another comment to allow an on-wing repair as a terminating action, which should help to minimize disruption in current maintenance schedules.

One comment requests that terminating action be mandated at the next shop visit or 6,000 hours because five years is too long.

The FAA agrees in part. Terminating action will be required at the next shop visit, however the FAA has determined that the terminating action date in this AD provides an adequate level of safety and allows operators time to properly schedule the required activity.

Four comments request that an on-wing repair referenced in the inspection SBs be allowed as terminating action.

The FAA agrees. The FAA will revise the final rule to allow the on-wing repair as terminating action.

One comment requests that military CFM56-2B operators not be required to perform periodic inspections since they already inspect fuel filters every 60 hours.

The FAA does not agree. The FAA has a responsibility to manage the CFM56-2B type certificate. Military operators have the option to determine if incorporation of this part 39 amendment is appropriate for them.

One comment requests that the requirement to reinspect the fuel filter cover assembly after every fuel filter change be removed since the inspection is already performed in accordance with the B737-300/-500 Aircraft Maintenance Manual, which is part of their FAA approved maintenance program. The comment also suggests that the documentation will create an undue burden.

The FAA does not agree. The FAA has determined that although performing the inspections in accordance with the B737-300/-500 Aircraft Maintenance Manual, may be prudent, it is not a requirement. This AD will mandate the inspection for all operators. The FAA does not consider the required documentation to be an undue burden.

Two comments request that the initial inspection be changed from 200 to 300 cycles or 600 hours. Another comment states that preflight walk-around inspections will spot fuel leaks.

The FAA does not agree. The FAA has determined that the initial inspection needs to be performed in a timely manner to detect damaged helicoil inserts and prevent additional fuel leaks. The FAA has also determined that this type of fuel leak may not be consistently detected by a preflight walk-around.

One comment suggests that a provision be included in the AD to not inspect all fuel pumps of an airplane during the same maintenance session.

The FAA agrees. This final rule prohibits servicing, replacement, and inspection on all engines of an airplane at one time by the same individual.

One comment suggests that the AD is unnecessary because the inspections are already being carried out voluntarily.

The FAA does not agree. The FAA has determined that an unsafe condition has been discovered that could cause substantial fuel loss and pose a fire hazard and that it is necessary to mandate action to correct the problem.

One comment questions if the CFM56-7B model should be included.

The FAA does not agree. The FAA has determined that it is unnecessary to include the CFM56-7B because its configuration is not similar to the design associated with the unsafe condition.

One comment requests that wording be added to the AD to indicate that there will be two groups of fuel pumps with D-bolts, reworked and newly made. Another comment requests that the definition of serviceable part be changed to include new fuel pumps.

The FAA agrees. This final rule indicates that both reworked and newly made fuel pumps are serviceable parts.

One comment supports the adoption of the rule as proposed.

After careful review of the available data, including the comments noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the changes described previously. The FAA has determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

No comments were received on the economic analysis contained in the proposed rules.

This rule does not have federalism implications, as defined in Executive Order 13132, because it would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Accordingly, the FAA has not consulted with state authorities prior to publication of this rule.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES .

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) by superseding AD 99-15-08, amendment 39-11227 (64 FR 39003, July 21, 1999), which is applicable to certain Boeing Model 747-200 and -300 series airplanes, was published in the Federal Register on December 28, 1999 (64 FR 72575). The action proposed to continue to require various inspections and functional tests to detect discrepancies of the thrust reverser control and indication system and correction of any discrepancy found, and installation of a terminating modification, repetitive functional tests of that installation, and repair, if necessary.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comment received.

One commenter, the airplane manufacturer, requests that the running torque check of the thrust reverser system be removed from the functional test procedures contained in Appendix 1 of the proposed rule. The commenter states no justification for its request.

The FAA concurs with the commenter's request. The FAA finds that the running torque check of the thrust reverser system is not directly related to the integrity of the cone brake or the actuation system lock. The running torque check is used to determine whether the thrust reverser is able to translate smoothly when commanded to deploy or stow. This check is described in Boeing 747 Airplane Maintenance Manual 78-31-00 “Thrust Reverser System—Adjustment/Test” and is performed when the angle gearbox and ballscrew actuator, the rotary flexible drive shaft, or the center drive unit is replaced. The FAA recognizes that it is appropriate to perform the running torque check when these components are replaced and finds that it is not necessary to perform this check as part of the functional test specified in Appendix 1. Therefore, the running torque check of the thrust reverser system has not been included in Appendix 1 of this final rule.

After careful review of the available data, including the comment noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the change previously described. This change will neither increase the economic burden on any operator nor increase the scope of the AD.

There are approximately 9 Model 747-200 and -300 series airplanes of the affected design in the worldwide fleet. The FAA estimates that 2 airplanes of U.S. registry will be affected by this AD.

The actions originally required by AD 95-06-01, and retained in this AD, take approximately 33 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the currently required actions on U.S. operators is estimated to be $3,960, or $1,980 per airplane, per inspection/test cycle.

The other actions (repeating the functional test of the cone brake required by AD 95-06-01 at reduced intervals) that are currently required by AD 99-15-08, and retained in this AD, do not add any additional economic burden on affected operators.

The bracket installation required by this new AD takes approximately 64 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Required parts will be provided by the manufacturer at no cost to the operators. Based on these figures, the cost impact of the bracket installation required by this AD on U.S. operators is estimated to be $7,680, or $3,840 per airplane.

The actuation system lock installation required by this new AD takes approximately 16 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Required parts will be provided by the manufacturer at no cost to the operators. Based on these figures, the cost impact of the lock installation required by this AD on U.S. operators is estimated to be $1,920, or $960 per airplane.

The functional test required by this new AD takes approximately 2 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the functional test required by this AD on U.S. operators is estimated to be $240, or $120 per airplane, per test cycle.

The wiring modifications required by this new AD take approximately 833 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Required parts will be provided by the manufacturer at no cost to the operators. Based on these figures, the cost impact of these modifications required by this AD on U.S. operators is estimated to be $99,960, or $49,980 per airplane.

The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the requirements of this AD action, and that no operator would accomplish those actions in the future if this AD were not adopted.

The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration amends part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) by superseding AD 98-20-20, amendment 39-10786 (63 FR 50495, September 22, 1998), which is applicable to certain Boeing 747 series airplanes, was published in the Federal Register on February 2, 2000 (65 FR 4906). The action proposed to continue to require certain actions required by the existing AD. The action proposed to add a requirement that a detailed visual inspection to detect fatigue cracking of the upper segment of the bulkhead web required by the existing AD be accomplished repetitively, along with corrective actions, if necessary. The action also proposed to require additional repetitive surface probe high frequency eddy current (HFEC) inspections to detect cracking of the upper and lower segments of the bulkhead web, and repair, if necessary.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comment received.

One commenter requests that the FAA revise paragraph (h) of the proposed AD to include the following statement: “For the inspection of the lower segment of the bulkhead web, the area between the 149 degree radial zee stiffeners may be omitted. These stiffeners are immediately outboard of pressure pans which reinforce the electrical wires [sic] penetrations, part number 65B02633-xx.” The commenter states that this area does not need surface probe HFEC inspections because splice straps and reinforcing doublers installed on the web during production improve the durability of the lap joint and significantly reduce the stress level of the web-to-Y-ring lap joint in this area.

The FAA concurs with the commenter's request and its rationale. The FAA also infers that the commenter's request applies to paragraph (i) as well as paragraph (h), and has revised those paragraphs in this final rule accordingly.

After careful review of the available data, including the comment noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the change previously described. The FAA has determined that this change will neither increase the economic burden on any operator nor increase the scope of the AD.

There are approximately 671 Model 747 series airplanes of the affected design in the worldwide fleet. The FAA estimates that 149 airplanes of U.S. registry will be affected by this AD.

The actions that are currently required by AD 98-20-20 and retained in this AD take approximately 360 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the currently required actions on U.S. operators is estimated to be $3,218,400, or $21,600 per airplane, per inspection cycle.

The new repetitive detailed visual inspections that are required in this AD take approximately 4 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of this requirement on U.S. operators is estimated to be $35,760, or $240 per airplane, per inspection cycle.

The new repetitive HFEC inspections that are required in this AD take approximately 48 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of this requirement on U.S. operators is estimated to be $429,120, or $2,880 per airplane, per inspection cycle.

The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the requirements of this AD, and that no operator would accomplish those actions in the future if this AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.

The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES .

On May 22, 2000, the FAA proposed to amend Part 71 of Title 14 of the Federal Regulations (14 CFR part 71) by amending Class E surface area at Kearney, NE (65 FR 32046). The action will amend the Class E surface area from part time to full time status.

Interested parties were invited to participate in this rulemaking proceeding by submitting written comments on the proposal to the FAA. No comments objecting to the proposal were received. Class E airspace areas designated as a surface area for an airport are published in paragraph 6002 of FAA Order 7400.9G, dated September 1, 1999, and effective September 16, 1999, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be published subsequently in the Order.

This amendment to part 71 of Title 14 of the Federal Regulations (14 CFR part 71) amends the Class E airspace area at Kearney, NE, from part time to full time status. The area will be depicted on appropriate aeronautical charts.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this regulation (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routing matter that will only affect air traffic procedures and air navigation, it is certified that this rule will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

On June 20, 2000, the FAA proposed to amend 14 CFR part 71 by modifying the Class E airspace area at Elko, NV (65 FR 38227). Additional controlled airspace extending upward from 700 feet above the surface is needed to contain aircraft executing the RNAV RWY 23 SIAP at Elko Municipal-J.C. Harris Field, Elko, NV. This action will provide adequate controlled airspace for aircraft executing the RNAV RWY 23 SIAP at Elko Municipal-J.C. Harris Field, Elko, NV.

Interested parties were invited to participate in this rulemaking proceeding by submitting written comments on the proposal to the FAA. No comments to the proposal were received. Class E airspace designations for airspace extending from 700 feet or more above the surface of the earth are published in paragraph 6005 of FAA Order 7400.9G dated September 1, 1999, and effective September 16, 1999, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be published subsequently in the Order.

This amendment to 14 CFR part 71 modifies the Class E airspace area at Elko, NV. A revision to the RNAV RWY 23 SIAP has made this action necessary. The effect of this action will provide adequate airspace for aircraft executing the RNAV 23 SIAP at Elko Municipal-J.C. Harris Field, Elko, NV.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this regulation—(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

On May 5, 2000, the FAA proposed to amend part 71 of the Federal Aviation Regulations (14 CFR part 71) by amending Class E airspace at Savannah, GA (65 FR 26156). This action will provide Class E airspace designated as surface area to accommodate IFR operations at Hunter AAF when Hunter AAF control tower is closed. Class E airspace designations are published in Paragraph 6002 of FAA Order 7400.9G, dated September 1, 1999, and effective September 16, 1999, which is incorporated by reference in 14 CFR 71.1, dated September 1, 1999. The Class E airspace designations listed in this document will be published subsequently in the Order.

Interested parties were invited to participate in this rulemaking proceeding by submitting written comments on the proposal to the FAA. No comments objecting to the proposal were received.

This amendment to Part 71 of the Federal Aviation Regulations (14 CFR part 71) amends Class E airspace at Savannah, GA for Hunter AAF. This action also makes a technical amendment to the name of the location, changing it from Savannah International Airport, GA, to Savannah, GA.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore, (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

On May 23, 2000, the FAA published in the Federal Register a direct final rule; request for comments which revises the Class E airspace at Hampton, IA (FR document 00-12821, 65 FR 33250, Airspace Docket No. 00-ACE-7). An error was subsequently discovered in the coordinates for the Hampton Municipal Airport ARP and the Hampton NDB. This action corrects those errors. After careful review of all available information related to the subject presented above, the FAA has determined that air safety and the public interest require adoption of the rule. The FAA has determined that these corrections will not change the meaning of the action nor add any additional burden on the public beyond that already published. This action corrects the errors in the coordinates of the Hampton Municipal Airport ARP and the Hampton NDB and confirms the effective date to the direct final rule.

The FAA uses the direct final rulemaking procedure for a non-controversial rule where the FAA believes that there will be no adverse public comment. This direct final rule advised the public that no adverse comments were anticipated, and that unless a written adverse comment, or a written notice of intent to submit such an adverse comment, were received within the comment period, the regulation would become effective on October 5, 2000. No adverse comments were received, and thus this notice confirms that this direct final rule will become effective on that date.

This document is published pursuant to section 18 of the Federal Trade Commission (“FTC”) Act, 15 U.S.C. 57a et seq. , the provisions of part 1, subpart B of the Commission's rules of practice, 16 CFR 1.14, and 5 U.S.C. 551 et seq. This authority permits the Commission to promulgate, modify, and repeal trade regulation rules that define with specificity acts or practices that are unfair or deceptive in or affecting commerce within the meaning of Section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).

The Care Labeling Rule was promulgated by the Commission on December 16, 1971. 36 FR 23883. In 1983, the Commission amended the Rule to clarify its requirements by identifying in greater detail the washing or drycleaning information to be included on care labels. 48 FR 22733. The Care Labeling Rule, as amended, requires manufacturers and importers of textile wearing apparel and certain piece goods to attach care labels to these items stating what regular care is needed for the ordinary use of the product. 16 CFR 423.6(a) and (b). The Rule also requires that the manufacturer or importer possess, prior to sale, a reasonable basis for the care instructions. 16 CFR 423.6(c).

As part of its continuing review of its trade regulation rules to determine their current effectiveness and impact, the Commission published a Federal Register notice on June 15, 1994, seeking comment on the costs and benefits of the Rule and related questions, such as what changes in the Rule would increase the Rule's benefits to purchasers and how those changes would affect the costs the Rule imposes on firms subject to its requirements. 59 FR 30733 (“the Regulatory Review Notice”). 1 The comments in response to the Regulatory Review Notice generally expressed continuing support for the Rule, stating that correct care instructions benefit consumers by extending the useful life of the garment, by helping the consumer maximize the appearance of the garment, and by allowing the consumer to take the ease and cost of care into consideration when making a purchase.

Based on this review, the Commission determined to retain the Rule, but to seek additional comment on possible amendments to the Rule. To begin the process, the Commission published an Advance Notice of Proposed Rulemaking on December 28, 1995. 60 FR 67102 (“the ANPR”). In the ANPR, the Commission discussed and solicited comment on standards for water temperature, the desirability of a home washing instruction and a professional wetcleaning instruction for items for which such processes are appropriate, and the Rule's reasonable basis standard. The Commission received 64 comments in response to this notice.

Based on the comments responding to the ANPR, and on other evidence, the Commission published a Notice of Proposed Rulemaking on May 8, 1998, 63 FR 25417 (“the NPR”), in which the Commission proposed the following specific amendments to the Rule and sought comments thereon:

In the NPR, at 63 FR 25425-26, the Commission also made the following announcement:

There were no requests for hearings in the 38 comments received in response to the NPR. 2 Therefore, the Commission did not hold public hearings in this matter. The public workshop-conference (hereinafter “workshop”)  3 took place on January 29, 1999 at the Commission's Headquarters Building at 600 Pennsylvania Avenue, NW, Washington, DC. There were 28 participants in the workshop, representing 20 different interests. 4 There also were approximately 30 observers, some of whom, upon request, contributed to the discussion. At the workshop, an announcement was made that post-workshop comments would be accepted until March 1, 1999, and 40 such comments were submitted. 5

The Rule requires that manufacturers and importers of textile wearing apparel possess, prior to sale, a reasonable basis for the care instructions they provide. A reasonable basis must consist of reliable evidence supporting the instructions on the label. Specifically, a reasonable basis can consist of: (1) Reliable evidence that the product was not harmed when cleaned reasonably often according to the instructions; (2) reliable evidence that the product or a fair sample of the product was harmed when cleaned by methods warned against on the label; (3) reliable evidence, like that described in (1) or (2), for each component part; (4) reliable evidence that the product or a fair sample of the product was successfully tested; (5) reliable evidence of current technical literature, past experience, or the industry expertise supporting the care information on the label; or (6) other reliable evidence. 16 CFR 423.6(c).

The Regulatory Review Notice solicited comment on whether the Commission should amend the Rule to conform with the interpretation of “reasonable basis” described in the FTC Policy Statement Regarding Advertising Substantiation (“Advertising Policy Statement”), 104 F.T.C. 839 (1984), or to change the definition of “reasonable basis” in some other manner. The comments in response to the Regulatory Review Notice suggested that a significant number of care labels lack a reasonable basis. Based on these comments, the ANPR proposed amending the reasonable basis requirement.

The ANPR sought comment on the incidence of inaccurate or incomplete care instructions, the extent to which it might be reduced by clarifying the reasonable basis standard, and the costs and benefits of such a clarification. The Commission further solicited comment on whether to amend the Rule to clarify that the reasonable basis requirement applies to a garment in its entirety rather than to each of its individual components. 6 Ten commenters responding to the ANPR discussed the reasonable basis provision. Seven of these supported modification of the Rule, contending that clarification would reduce mislabeling. 7 ATMI stated that the Rule should not be modified to require testing of completed garments; however, ATMI also asserted that “apparel manufacturers should be responsible for selecting and combining component materials that can be refurbished together” and should provide warnings about potential problems if components cannot be refurbished by the same method. 8 AAMA contended that changing the Rule was unnecessary. 9 Ginetex, the organization responsible for the voluntary care labeling system used in European countries, noted that it provides technical advice on appropriate test procedures to ensure correct care labeling. 10

Two commenters provided data on the incidence of mislabeling, which in both cases indicated that there is a significant incidence of inaccurate and/or incomplete labeling. 11 ATMI, while stating that most home washing labels are accurate, and that the vast majority of dryclean instruction labels are accurate, noted that there are limited problems associated with care instructions for special items such as beaded apparel, sequins, and leather appliques. 12 IFI noted that its database shows that “a large portion of the garments damaged are the result of the trim or component part of the garment failing in a specified care procedure.”  13

Section 423.6(c)(3) of the Rule currently states that a manufacturer or importer establishes a reasonable basis for care information by “possessing prior to sale: Reliable evidence . . . for each component part of the product.” In the NPR, the Commission proposed to amend the reasonable basis standard to make clear that the reasonable basis requirement applies to the garment in its entirety rather than to each of its individual components, noting that the record establishes that in some cases care instructions may not be accurate for the entire garment. 14 Thus, in the NPR, the Commission proposed amending § 423.6(c)(3) of the Rule to provide that “Reliable evidence . . . for each component part of the product, in conjunction with reliable evidence for the garment as a whole” can constitute a reasonable basis for care instructions.

Most commenters favored the proposal to clarify the reasonable basis requirements of the Rule. 15 Some commenters, who believe that only testing can constitute a reasonable basis, stated that the proposal did not go far enough because it does not require testing. 16 Only one commenter, AAMA, opposed the proposed clarification of the reasonable basis standard. AAMA stated that its member manufacturers specify fabric performance from suppliers and test new styles to makeder sure that components are compatible. It also stated that there is only a very small portion of garments made in the United States with incompatible materials (for fashion reasons) and that “(t)o require that all garments be made entirely of compatible components unduly restricts the creation of fashion.”  17

The Commission has decided to amend § 423.6(c)(3) of the Rule to provide that “Reliable evidence . . . for each component part of the product, in conjunction with reliable evidence for the garment as a whole” can constitute a reasonable basis for care instructions. This amendment does not require testing of the entire garment if there is an adequate reasonable basis for the garment as a whole without such testing; the amendment clarifies, however, that testing of separate components is not necessarily sufficient if problems are likely to occur when the components are combined. 18

The Commission does not believe that this revision of the Rule will unduly restrict the creativity of fashion, as AAMA feared. If the combination of components used to make a garment are so incompatible that the garment cannot be cleaned without damage, the Rule provides that the garment can be labeled “Do not wash—do not dryclean.” 16 CFR 423.6(b). This is information that the consumer has a right to know, and indeed, under the Rule, it would be deceptive to sell a garment with a care label indicating that it could be successfully cleaned when in fact it cannot. With truthful labeling that indicates the garment cannot be cleaned, consumers are given adequate information and can choose to purchase the garment if they wish to do so even though it cannot be cleaned without damage.

The Rule currently requires that a care label recommending washing also must state a water temperature that may be used unless “the regular use of hot water will not harm the product.” 16 CFR 423.6(b)(1)(i). The Rule also provides that if the term “machine wash” is used with no temperature indication, “hot water up to 150 degrees F (66 degrees C) can regularly be used.” 16 CFR 423.1(d). This definition is repeated in Appendix 1.a. “Warm” is defined in Appendix 1.b. as ranging from 90 to 110 degrees F (32 to 43 degrees C), and “cold,” in Appendix 1.c., as cold tap water up to 85 degrees F (29 degrees C).

Based on the comments filed in response to the Regulatory Review Notice and the ANPR, including recommendations that the Commission adopt definitions developed by the AATCC, the Commission, in the NPR, stated that the definition of “cold,” “warm,” and “hot” water should be changed because of changes in settings on water heaters and in consumer washing practices in the years since the definitions were established. 19 The Commission noted that AATCC has changed its definitions, which are used in textile testing by much of the apparel industry, to take account of these factors. The NPR proposed changing the upper range of temperature definitions in the Rule to the upper range of what is allowed in tests published by AATCC. 20 Specifically, the Commission proposed the following definitions for water temperature in Appendix.1.b-1.d: “Hot”—initial water temperature ranging from 112 to 125 degrees F (45 to 52 degrees C); “Warm”—initial water temperature ranging from 87 to 111 degrees F (31 to 44 degrees C); “Cold”—initial water temperature up to 86 degrees F (30 degrees C).

The Commission also proposed adding the term “very hot” to the Rule, defined consistently with the AATCC definition, i.e., with an upper range of 63 degrees C (145 degrees F). The record indicated that some garments do need to be cleaned at temperatures higher than 125 degrees F, and that some consumers have access to water hotter than 125 degrees F, either at home or through laundering by professional cleaners. The Commission asked whether the addition of the term “very hot,” together with appropriate consumer education, would give notice to those consumers whose hottest water is 120 degrees F that they may have to use professional laundering for garments that should be cleaned in very hot water. The Commission indicated that it was aware, however, that the term “very hot” may be confusing to some consumers because most washing machine dials offer only the choices of “cold,” “warm,” and “hot.” The NPR requested comment on the issue, and, in particular, on suggestions for methods of consumer education.

The Commission noted in the NPR that some comments indicated that consumers need more precise information in order to select the appropriate temperature setting on their washing machines. For example, the comments suggested that some consumers in colder climates may unknowingly be using water that is too cold to activate detergents at the “cold” setting on their machines, and that these consumers would be alerted by a numerical temperature on the care label to use the “warm” setting to compensate. The comments contended that, similarly, an upper range for “warm” might also be helpful to consumers because on many machines the dial setting for warm simply produces a mixture of hot and cold, and if the incoming tap water is very cold, the water in the machine may be too cold to produce optimal cleaning of the clothes being washed. The comments argued that the addition of a precise temperature (52 degrees C, 125 degrees F) after the word “hot” on the care label of a garment may give some consumers an indication that their hot water may be too hot for that garment.  21

On August 26, 1999, the Commission published proposed amendments to Part 30 of its rules. 2 Part 30 sets forth rules governing the offer and sale of foreign futures  3 and foreign option  4 contracts. For example, with respect to foreign futures or foreign options customers, 5 Rule 30.4 requires any person engaged in the activities of a futures commission merchant (“FCM”) or introducing broker (“IB”), as those activities are defined within the rule, to register with the Commission unless such person claims relief from registration under Part 30. The activities that are subject to regulation and that require registration under Part 30 include the solicitation or acceptance of orders for trading any foreign futures or foreign option contract and acceptance of money, securities or property to margin, guarantee or secure any foreign futures or foreign option trades or contracts. 6 Rule 30.10 allows the Commission to exempt a firm from compliance with any or all of the requirements of Part 30. 7

In response to requests from industry representatives, the Commission proposed to adopt Rule 30.12 to permit certain foreign firms acting in the capacity of FCMs and IBs (referred to herein as foreign futures and options brokers (“FFOBs”))  8 to accept and to execute foreign futures and options orders directly from certain, sophisticated U.S. customers without having to register with the Commission. 9 Prior to the amendment to Part 30 adopted herein, only those FFOBs that were foreign affiliates of U.S. FCMs were permitted, subject to certain terms and conditions set forth in advisories issued by the Division of Trading and Markets (“T&M”), to accept and to execute orders from certain sophisticated U.S. customers, known as “authorized customers,” through the FCM's foreign futures and options customer omnibus account. 10 As set forth in the final rule, any unregistered FFOB may accept orders directly from authorized customers for execution for or on behalf of such customers to be carried in the FCM's foreign futures and options customer omnibus account at the FFOB, or to be given up to another unregistered FFOB carrying the FCM's customer omnibus account. The Commission believes that permitting greater flexibility with respect to the direct foreign order transmittal process will provide authorized customers with more efficient access to international futures markets without requiring these customers to forfeit the operational and economic efficiencies that are the natural consequence of having all futures and options transactions carried by a well-capitalized U.S. FCM. The Commission also notes that such an arrangement affords the FCM a more complete picture of aggregate risk that the customer, and hence the FCM, is incurring.

The Commission received seven comment letters on the proposed rulemaking: One from a U.S. commodity exchange; one from the National Futures Association; two from futures industry professional associations; two from U.S. FCMs; and one from a global investment banking firm. The commenters generally supported the relief provided by proposed Rule 30.12, but suggested that the relief did not go far enough with respect to the participants in the direct foreign order transmittal process and the means by which orders may be transmitted. A discussion of the comments follows.

Proposed Rule 30.12 restricted the direct foreign order transmittal process to certain sophisticated U.S. customers, known as “authorized customers.” The Commission derived its definition of “authorized customers” from the list of “eligible swap participants” (“ESPs”) in Part 35 of the Commission's rules and the list of customers eligible to participate in the limited foreign order transmittal process set forth in prior advisories issued by T&M. As requested by industry representatives, the Commission also included in its definition certain commodity trading advisors (“CTAs”) and those foreign persons performing a similar function.

Commenters on the proposed rulemaking recommended that the Commission's definition of “authorized customer” be modified in two ways. First, the commenters sought uniformity in defining the class of sophisticated U.S. customers to which less regulatory protections apply. Currently, there exist within Commission rules six definitions of sophisticated U.S. customers: qualified eligible participants, qualified eligible clients, ESPs, eligible participants for exchange transactions under § 4(c) of the Commodity Exchange Act (“Act”), eligible customers for post-execution allocation, and customers for which FCMs and IBs are not required to provide the Rule 1.55 risk disclosure statement. One commenter stated, “[t]his new definition [of “authorized customer”], along with the others, subjects firms to unnecessary compliance burdens without adding any real regulatory benefit.” Second, the commenters specifically questioned why the category of persons who are eligible to engage in direct foreign order transmittal should be any more restrictive than the category of persons who are eligible to engage in complex, over-the-counter swap transactions addressed in Part 35. 11

Upon review of these comments and its own reconsideration of the issue, the Commission has determined to revise the definition of “authorized customer” in the final rule to incorporate those changes recommended by the commenters. The Commission notes, however, that certain characteristics unique to the direct foreign order transmittal process prevent the Commission from merely cross-referencing the definition of an ESP (or any other current class of sophisticated customer) in the definition for “authorized customer.” For example, Part 30 generally does not govern the offer and sale of foreign futures and foreign options contracts to persons located outside the U.S. 12 As such, rules regulating the conduct of an FCM (or any firm exempt from such registration) are generally limited to the firm's interaction with U.S. customers or to customers engaged in transactions on U.S. markets. In light of the obligations, discussed below, that will be required of an FCM (or a firm exempt from such registration) flowing from a customer's classification as an “authorized customer,” the definition of “authorized customer” does not include persons located outside the U.S. Additionally, at the request of futures industry representatives, Rule 30.12, unlike Part 35, will focus on the financial sophistication of the person managing the assets and not the individual contributors to a commodity pool or the clients of a CTA. As such, Rule 30.12 will permit certain domestic and foreign trading advisors to place orders directly for foreign futures and foreign options contracts for customers that do not otherwise qualify as ESPs. The inclusion of advisors in this context thus provides for greater participation in direct foreign order transmittal than is permitted in swaps. 13

As previously stated, Rule 30.12 defines an authorized customer, in part, as a foreign futures or foreign options customer that the carrying FCM has authorized to place orders for the account of the FCM's foreign futures and foreign options customer omnibus account. Since non-U.S. persons cannot, by definition, be foreign futures or foreign options customers, Rule 30.12 does not regulate the manner in which they execute foreign futures and option transactions through an FCM's foreign futures and options customer omnibus account. Non-U.S. persons, however, may act on behalf of authorized customers, provided that the non-U.S. persons independently qualify as an eligible direct foreign order transmittal participant. To clarify that non-U.S. persons may act on behalf of authorized customers, the Commission has determined to define “authorized customer” as “[a]ny foreign futures or foreign options customer, as defined in paragraph (c) of § 30.1, or its designated representative ,” that the FCM has authorized to place orders for the account of the FCM's foreign futures and options customer omnibus account.

As noted, the Commission also is incorporating the request from industry representatives to focus on the financial sophistication of the person managing the assets and not on the sophistication of the individual contributors to the clients of a CTA. The Commission is adopting Rule 30.12 to include in the definition of “authorized customer” any person whose investment decisions with respect to foreign futures and foreign option transactions are made by a CTA, including any investment adviser registered as such with the Securities and Exchange Commission that is exempt from regulation as a CTA under the Act or Commission regulations, or a foreign person performing a similar role or function subject as such to foreign regulation, provided that the CTA has total assets under management exceeding $50,000,000 and that the CTA places the foreign futures or foreign options order. The Commission recognizes that, under this scenario, the contact with the unregistered FFOB is limited to contact with the individual with the demonstrated financial sophistication, i.e. , the CTA. For the sake of consistency, the $50,000,000 asset under management test will apply to those CTAs providing the investment decisions for employee benefit plans subject to the Employee Retirement Income Security Act of 1974 that do not independently have total assets exceeding $5,000,000.

In the proposed rulemaking, the Commission proposed to limit direct foreign order transmittal to authorized customers of FCMs whose adjusted net capital exceeds certain minimum requirements. As discussed in the rule proposal, a participating FCM may not be able to prevent an authorized customer from placing orders in excess of its trading limits with an unaffiliated FFOB. 14 Under these circumstances, an FCM may be responsible for the trades even though the positions exceed a customer's trading limits. Therefore, FCMs should possess sufficient capital to meet an unusually large margin call and thereby mitigate the increased systemic risk. 15 Accordingly, as set forth in paragraph (b)(1) of the proposed rule, the Commission proposed to require FCMs whose authorized customers use direct foreign order transmittal to maintain either $50,000,000 in adjusted net capital as defined by Rule 1.17(c)(5), or three times the amount of adjusted net capital required by Rule 1.17(a)(1)(i)(B). 16 In the alternative, the proposed rule stated that any FCM not satisfying either standard could seek relief from the capital requirement in accordance with the petition process described in Rule 140.99.

Three of the seven commenters addressed the capital requirements for carrying FCMs. One commenter agreed with the Commission that capital requirements are a necessary element of direct foreign order transmittal, but suggested that the standard for adjusted net capital be $50,000,000, or the greater of three times the FCM's capital requirement under Rule 1.17(a)(1)(i)(A) or three times the FCM's capital requirement under Rule 1.17(a)(i)(B) (and not just paragraph (a)(1)(i)(B)). The commenter noted that, under certain circumstances, an FCM possessing adjusted net capital of three times the amount set forth in paragraph (a)(1)(i)(B), i.e., three times four percent of the required segregated and secured amounts, but not (a)(1)(i)(A), i.e., three times $250,000, or $750,000, may not possess sufficient capital to provide the necessary cushion in the event of a systemic failure. The second commenter requested that the Commission more specifically describe the type of showing an FCM would be required to make in order to obtain relief from the capital requirement and recommended that the petition for relief from the capital requirement be made in accordance with Rule 30.10, instead of Rule 140.99. The third commenter questioned whether “less onerous [capital] requirements” for FCMs that cannot satisfy either capital standard are justified.

The Commission has determined to adopt Rule 30.12 by incorporating certain comments regarding the capital requirement for carrying FCMs. As adopted, Rule 30.12 will require that FCMs maintain adjusted net capital of $20,000,000, or the greater of three times the FCM's capital requirement under Rule 1.17(a)(1)(i)(A) or three times the FCM's capital requirement under Rule 1.17(a)(i)(B). After careful consideration, the Commission has determined that $20,000,000 in adjusted net capital provides sufficient cushion to protect against the risk of defaulting authorized customers. Accordingly, the Commission is adopting, for those FCMs who do not meet the requirement to maintain at least triple their minimum capital requirement under Rule 1.17, a $20,000,000 minimum adjusted net capital figure rather than the proposed $50,000,000. The decrease in the minimum capital requirement is consistent with the Commission's recent proposal to permit FCMs with at least $20,000,000 in adjusted net capital to act as intermediaries for non-institutional customers on derivatives transaction facilities. 17

The Commission believes that the decrease in the required minimum capital for FCMs under Rule 30.12 as amended as compared to proposed Rule 30.12 should reduce the need for relief from this requirement. The Commission further believes that any request for relief from this capital requirement must be addressed on a case-by-case basis and believes that a petition for relief from this requirement should be made in accordance with Rule 140.99. The Commission expects that any FCM seeking relief from the Rule 30.12 capital requirement shall be required to likewise demonstrate its ability to mitigate the risk associated with the activities of its authorized customers, including, but not limited to, the use of internal controls to evaluate on an ongoing basis the risk of default for any given authorized customer.

The proposed rulemaking also required carrying FCMs to institute internal controls designed to regulate the direct foreign order transactions entered into by authorized customers (or their designated representatives), including procedures to determine which customers qualify as authorized customers and to monitor the FCM's risk relative to its authorized customers' risk aggregated across all markets. The Commission did not receive any comments dealing with these aspects of the proposed rule.

The Commission received one comment regarding the requirement that carrying FCMs furnish a written disclosure to each authorized customer advising the customer of the additional risks the customer may be assuming in placing orders directly with an FFOB. The commenter inquired whether the FCM may provide the disclosure as a separate document or as additional text in the customer account agreement. Either method will be acceptable. The Commission also has determined to eliminate from the final rule the requirement that the written disclosure be “in a form acceptable to the Commission.” In light of the existing requirement for written disclosures to track the language set forth in the rule, the requirement as to form is superfluous. Accordingly, paragraphs (b)(3)(i) and (ii) have been combined into one paragraph for the final rule.

Proposed Rule 30.12 would have required participating foreign brokers to be FFOBs, as defined in Amended Rule 30.1(e), and either a clearing member of the foreign exchange on which the trade is executed, a majority-owned affiliate of such a clearing member, or an affiliate of the FCM carrying the authorized customer's account. Amended Rule 30.1(e) defines FFOB to mean a non-U.S. person that is a member of a foreign board of trade, as defined in Rule 1.3(ss), licensed, authorized or otherwise subject to regulation in the jurisdiction where the foreign board of trade is located, or a foreign affiliate of a U.S. FCM, licensed, authorized or otherwise subject to regulation in the jurisdiction where the affiliate is located.

Two commenters addressed the eligibility requirements for foreign brokers. While one commenter recommended that Rule 30.12 require a participating foreign broker to be an FFOB and either a clearing member on any foreign exchange (or its majority-owned affiliate) or an affiliate of any FCM, another commenter stated that any FFOB should be eligible to participate in the direct foreign order transmittal process.

In light of these comments and the foreign order transmittal-specific risk disclosure to be distributed by each authorized customer's FCM, combined with the sophisticated nature of the participating customers and the required internal controls for FCMs, the Commission has determined that the additional layer of protection set forth in the eligibility requirements for foreign brokers is not necessary. Accordingly, the adopted rule only will require participating foreign brokers to be FFOBs, as defined in Amended Rule 30.1(e).

Commenters also requested that the Commission clarify the application of Rule 30.12 with respect to FFOBs that carry the customer account for any foreign futures and options customer directly rather than on an omnibus basis. The Commission confirms that an FFOB that directly carries the customer account for any foreign futures and options customer may permit that customer to place orders directly with another FFOB in accordance with the procedures set forth herein, provided that: (i) The carrying FFOB has registered as an FCM, or has applied for and received confirmation of Rule 30.10 relief in accordance with existing procedures; (ii) the carrying FFOB complies with the terms and conditions set forth in the rule; and (iii) the foreign futures and options customer qualifies as an authorized customer. Additionally, the Commission confirms that authorized customers of FCMs that maintain a customer omnibus account with a single foreign affiliate who, in turn, maintains customer omnibus accounts with clearing brokers at foreign exchanges also may participate in the direct foreign order transmittal process described in Rule 30.12.

Proposed Rule 30.12 permitted qualifying FFOBs to accept orders directly from authorized customers only via telephone, facsimile and email. The relief from registration under proposed Rule 30.12 did not extend to orders placed directly with FFOBs via automated order routing systems (“AORSs”). With one exception, the commenters generally requested that the Commission modify proposed Rule 30.12 to permit FFOBs to accept orders placed via AORSs.

The Commission has determined to revise Rule 30.12 to permit qualifying FFOBs to accept orders directly from authorized customers via an AORS. 18 The Commission notes that the requirement for each carrying FCM to establish control procedures governing the direct contacts between authorized customers and FFOBs and to have in place appropriate risk management procedures to monitor its own risk relative to its authorized customers' risk aggregated across all markets applies regardless of whether the authorized customer places the order via telephone, facsimile, e-mail or an AORS.

In the proposed rulemaking, the Commission noted that Rule 30.12, if adopted, would replace prior T&M advisories as the sole source of authorization for unregistered FFOBs to accept orders directly from foreign futures and options customers. The Commission invited comment from any party adversely affected by that determination. Having received no comment on this issue, the Commission hereby rescinds CFTC Advisories Nos. 93-115 and 95-08. Adopted Rule 30.12 will apply to all regulated activities with all current and new foreign futures and foreign options customers as of the effective date of the new rule. As a point of clarification, adopted Rule 30.12 will not apply to brokerage activities originating with non-U.S customers. Additionally, this rule does not amend, abrogate or otherwise alter the transactional relationship between any U.S. foreign futures and foreign options customer and any non-U.S. firm that has received confirmation of Rule 30.10 relief. With respect to U.S. customers, a firm with Rule 30.10 relief must continue to abide by the local laws, rules and regulations deemed acceptable for substituted compliance by the Commission, as well as the Commission laws and regulations outlined in orders issued by the Commission.

In the Federal Register notice issued concurrently with proposed Rule 30.12, the Commission proposed, among other things, to amend Rule 30.1 to include definitions for “foreign futures and options customer omnibus account” and FFOBs. 19 Currently, for purposes of Parts 15 through 21 of the Act, Rule 15.00(a)(1) defines the term “foreign broker” to mean “any person located outside the United States or its territories who carries an account in commodity futures or commodity options on any contract market for any other person.” For the sake of clarity, the Commission believes that a formal definition of FFOB is necessary to distinguish it from the definition of “foreign broker.” Having gradually expanded the relief associated with direct foreign order transmittal by reference to customer omnibus accounts, it is also appropriate to define the term “foreign futures and options customer omnibus account.” The Commission did not receive any comments regarding either of the proposed definitions. Accordingly, the Commission is adopting the proposed definitions of “foreign futures and options customer omnibus account” and “foreign futures and options brokers” as Rules 30.1(d) and (e), respectively.

The Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601-611, requires that agencies, in adopting rules, consider the impact of those rules on small businesses. The Commission has previously established certain definitions of “small entities” to be used by the Commission in evaluating the impact of its rules on such entities in accordance with the RFA. 20 The Commission previously has determined that registered FCMs and CPOs are not small entities for the purpose of the RFA. 21 With respect to CTAs, the Commission has stated that it would evaluate within the context of a particular rule proposal whether all or some affected CTAs would be considered to be small entities and, if so, the economic impact on them of any rule. 22 Due to the minimum requirements for the amount of money under management for eligible CTAs under Rule 30.12, the Commission believes that it is unlikely that firms defined as small businesses could qualify as an authorized customer for the purpose of engaging in direct order transmittal. Further, the final rule would not add any legal, accounting, consulting or expert costs because the determination of whether a business qualifies as an authorized person requires minimal analysis of data that will be readily accessible. Therefore, the Chairman, on behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that these regulations will not have a significant economic impact on a substantial number of small entities.

When publishing final rules, the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq. (Supp. I 1995)) imposes certain requirements on federal agencies (including the Commission) in connection with their conducting or sponsoring any collection of information as defined by the PRA. These rules contain information collection requirements. As required by the PRA, the Commission has submitted a copy of this rule to the Office of Management and Budget (OMB) for its review. (44 U.S.C. 3504(h)). In response to the Commission's invitation in the proposed rulemakings to comment on any potential paperwork burden associated with these rules, no comments were received.

In consideration of the foregoing, and pursuant to the authority contained in the Commodity Exchange Act and, in particular, sections 2(a)(1), 4(b), 4c and 8a thereof, 7 U.S.C. 2, 6(b), 6c and 12a (1982), and pursuant to the authority contained in 5 U.S.C. 552 and 552b (1982), the Commission hereby amends Chapter I of Title 17 of the Code of Federal Regulations as follows:

The Securities and Exchange Commission (“Commission”) is adopting rule 160 [17 CFR 230.160] under the Securities Act of 1933 [15 U.S.C. 77a et seq. ] (“Securities Act”) as an interim final rule pursuant to Section 104(d)(2) of the Electronic Signatures Act.

We are adopting, as an interim final rule, rule 160 under the Securities Act to exempt from the consumer consent requirements of the Electronic Signatures Act prospectuses of registered investment companies (“funds”) that are used for the sole purpose of permitting supplemental sales literature to be provided to prospective investors. The rule implements Section 104(d)(2) of the Electronic Signatures Act, which directs the Commission to provide this exemption within 30 days after the date of enactment. 2 Rule 160, consistent with Commission interpretations of existing law, permits a fund to provide its prospectus and supplemental sales literature on its web site or by other electronic means without first obtaining an investor's consent to the electronic format of the prospectus. 3

On June 30, 2000, President Clinton signed the Electronic Signatures Act into law. The Electronic Signatures Act is designed to facilitate the use of electronic records and signatures in interstate or foreign commerce. 4 Among other things, the Act provides that if a statute or regulation requires that information relating to a transaction in interstate commerce be provided to a consumer in writing, the use of an electronic record to provide the information satisfies the “writing” requirement if the consumer consent requirements of the Electronic Signatures Act are met. 5

Section 104(d)(2) of the Electronic Signatures Act directs the Commission to issue a regulation or order, within 30 days after the date of enactment, exempting from the Act's consumer consent requirements “any records that are required to be provided in order to allow advertising, sales literature, or other information concerning a security issued by [a registered] investment company * * * to be excluded from the definition of a prospectus under section 2(a)(10)(A) of the Securities Act * * *.” The purpose of this exemption is “to clarify that documents, such as sales literature, that appear on the same [w]eb site as, or which are hyperlinked to, the final prospectus required to be delivered under the federal securities laws, can continue to be accessed on a [w]eb site as they are today under [Commission] guidance for electronic delivery.”  6

Section 5(b)(1) of the Securities Act prohibits the use of interstate commerce to transmit any “prospectus” relating to a security with respect to which a registration statement has been filed unless the prospectus meets the requirements of Section 10 of the Securities Act. 7 “Prospectus” is broadly defined in Section 2(a)(10) of the Securities Act to include any advertisement or communication, “written or by radio or television, which offers any security for sale.”  8 Because the term “offer” is defined and interpreted broadly under the Securities Act, written or broadcast communications that relate to a security or that aid in the selling effort with respect to a security generally must be in the form of a Section 10 prospectus to comply with Section 5(b)(1). 9

There is a limited exception to the general requirement that written or broadcast offers after the filing of a registration statement must be in the form of a Section 10 prospectus. So-called “supplemental sales literature” may be used after the effective date of a registration statement if it is preceded or accompanied by a prospectus that meets the requirements of Section 10(a) of the Securities Act (“statutory prospectus”). 10 Many investment companies, particularly mutual funds, continuously offer and sell their shares, and are continuously subject to the restrictions on communications imposed by Section 5(b)(1). 11 As a result, investment companies frequently rely on the “supplemental sales literature” exception.

Commission interpretations of existing law permit a fund to provide its supplemental sales literature on its web site or by other electronic means without first obtaining an investor's consent to receive in electronic form the statutory prospectus that is required to precede or accompany the supplemental sales literature. 12 Rule 160 would clarify that a fund may continue this practice after the effective date of the Electronic Signatures Act. Specifically, the rule would provide that a prospectus for an investment company registered under the Investment Company Act of 1940 that is sent or given for the sole purpose of permitting a communication not to be deemed a prospectus under Section 2(a)(10)(a) of the Securities Act is exempt from the consumer consent requirements of the Electronic Signatures Act. We remind funds, however, that we do not consider supplemental sales literature that is electronically delivered to have been preceded or accompanied by an electronic statutory prospectus unless investors are provided with reasonably comparable access to both the prospectus and the supplemental sales literature. 13

The exemption provided by rule 160 is not available when a fund prospectus is provided to an investor for a purpose other than, or in addition to, permitting the fund's supplemental sales literature not to be deemed a prospectus under Section 2(a)(10)(a) of the Securities Act. For example, if an investor who views a fund's prospectus and supplemental sales literature on its web site subsequently purchases shares of the fund, rule 160 will not apply to the delivery of the prospectus that is required in connection with the purchase. 14

Today we express no view regarding how the Electronic Signatures Act affects the federal securities laws. We are continuing to consider the implications of the Electronic Signatures Act on securities transactions.

Under the Administrative Procedure Act (“APA”), the Commission may issue a final rule without prior notice and comment upon a finding of good cause. 15 We find that good cause exists for dispensing with the normal notice and comment requirements of the APA in connection with interim final rule 160.

Congress directed the Commission to issue, within 30 days after the date of enactment of the Electronic Signatures Act, a rule exempting from the consumer consent requirements of the Act fund prospectuses that are used for the purpose of permitting sales literature to be provided to prospective investors. It is impracticable for the Commission to comply with the normal notice and comment requirements within the mandated 30-day period. In making the determination that good cause exists for waiving notice and comment, we also note that rule 160 will make no changes to Commission interpretations of existing law or industry practice. Thus, the Commission finds that the Congressional directive and the absence of any negative effect of the rule on any interested parties render observation of the normal notice and comment requirements under the APA impracticable and unnecessary.

Rule 160 will be effective October 1, 2000, the effective date for the consumer consent requirements of the Electronic Signatures Act. Although the Commission has dispensed with prior notice of proposed rulemaking, the Commission is interested in receiving written comments on the rule within 30 days after its publication in the Federal Register . The Commission will consider those comments and make changes to the rule if necessary.

This interim final rule does not contain a collection of information.

The Commission is sensitive to the costs imposed by its rules. We anticipate that rule 160 will not impose any new regulatory costs on funds, since the rule would provide an exemption from the consumer consent requirements of the Electronic Signatures Act. Moreover, because the rule makes no changes to Commission interpretations of existing law or industry practice, it should not produce any new costs. However, we request that commenters address the costs and benefits of the rule, and provide supporting empirical data for any positions advanced.

Rule 160 is being issued as an interim final rule. In accordance with its responsibilities under Section 2(b) of the Securities Act, the Commission, in determining whether rule 160 is consistent with the public interest, has considered, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. 16 Because the rule makes no changes to prior Commission interpretations of existing law or industry practice, it should not affect efficiency, competition, or capital formation. The Commission is, however, interested in receiving any comments regarding rule 160's impact on efficiency, competition, and capital formation. We will consider those comments in making any changes to the rule if necessary. Likewise, for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996, 17 the Commission is interested in receiving information regarding the potential effect of the proposals on the U.S. economy on an annual basis. Commenters are requested to provide empirical data to support their views.

Pursuant to Section 605(b) of the Regulatory Flexibility Act [5 U.S.C. 605(b)], the Chairman of the Commission has certified that rule 160 will not have a significant economic impact on a substantial number of small entities. Rule 160 provides an exemption from the consumer consent requirements of the Electronic Signatures Act, effective on the date the Act goes into effect. The rule will make no changes to Commission interpretations of existing law or industry practice. Moreover, all registered investment companies that are small entities will qualify for the exemptive relief provided by rule 160. Accordingly, the rule will not have a significant economic impact on a substantial number of small entities. We include the Certification in this release as Attachment A. Although rule 160 is being issued as an interim final rule, the Commission is interested in receiving written comments relating to the Certification. Commenters should describe the nature of any impact on small entities and provide empirical data to support the extent of the impact.

In the Commission's April release on the use of electronic media (the “2000 Release”), we expressed our view that when an issuer embeds a hyperlink to a web site within a document that is required to be filed or delivered under the federal securities laws, the issuer should always be deemed to be adopting the hyperlinked information for purposes of the antifraud provisions of the federal securities laws. 18 We wish to clarify, effective immediately, that this view does not extend to a mutual fund's responsibility for hyperlinks to third-party web sites from fund advertisements or sales literature. 19

Mutual funds, unlike operating companies, are required to file their advertisements and sales literature with the Commission. 20 We do not believe, however, that it follows from this filing requirement that a mutual fund, unlike an operating company, should always be responsible for third-party information to which it establishes a hyperlink from an advertisement or sales literature, without regard to the specific facts and circumstances.

The issue of whether a fund should be deemed to have adopted information on a third-party web site to which a fund advertisement or sales literature is hyperlinked should be resolved by reference to the factors set forth in the 2000 Release, as applied to the specific facts and circumstances. 21 In addition, when a fund is in registration, if the fund establishes a hyperlink from its web site to information that meets the definition of an “offer to sell,” “offer for sale,” or “offer” under Section 2(a)(3) of the Securities Act, a strong inference arises that the fund has adopted that information for purposes of Section 10(b) of the Securities Exchange Act of 1934 and rule 10b-5. 22

In Order No. 637-A, 1 issued on May 19, 2000, the Commission denied in part and granted in part rehearing of Order No. 637, 2 and clarified its policies as they relate to the regulatory changes made in Order No. 637. Order Nos. 637 and 637-A revised the Commission's open access regulations to improve the efficiency of the market and to provide captive customers with the opportunity to reduce their cost of holding long-term pipeline capacity, while continuing to protect against the exercise of market power. Specifically, Order Nos. 637 and 637-A granted a waiver for a limited period of the price ceilings for short-term released capacity; revised the Commission's regulatory approach to pipeline pricing in order to enhance the efficient allocation of capacity; revised regulations relating to scheduling procedures, capacity segmentation, and pipeline penalties to improve the efficiency and competitiveness of the pipeline grid; revised pipeline reporting requirements to provide greater transparency; and revised the right of first refusal (ROFR) to remove economic biases.

In Order No. 637-A, the Commission upheld the regulations adopted in Order No. 637, making only minor adjustments relating to penalties, reporting requirements, and the ROFR. The Commission also responded to requests for clarification and explained its policies relating to implementation of the regulations adopted in Order No. 637.

Twenty-one requests for rehearing or clarification of Order No. 637-A were filed. 3 The principal requests relate to the issues of posting and bidding requirements for pre-arranged capacity release transactions at the maximum tariff rate and the requirement that pipelines permit shippers to segment capacity as well as Commission policies as they relate to segmentation. There also are a few requests for rehearing or clarification relating to the penalty provisions, reporting requirements, and the ROFR.

As discussed below, this order denies the requests for rehearing. The order does not address rehearing or clarification requests that were fully discussed in Order No. 637-A or that are not generic, but relate to particular pipelines or potential issues that may arise in filings. These issues include requests by the Pa. Office of Consumer Advocate about pipeline filings to implement capacity auctions, by AGA, El Paso, and DTI relating to the mechanics of the ROFR pricing policy, and by National Fuel regarding the receipt and delivery points available to a shipper exercising its ROFR for a volumetric portion of its capacity. These concerns can be addressed in specific cases, if they arise.

In Order No. 637, the Commission granted a waiver of the maximum rate ceiling applicable to short-term capacity release transactions until September 30, 2002. The Commission, however, retained the pre-existing posting and bidding requirements for capacity release transactions. 4 Under the Commission regulations issued in Order No. 636 and continued in Order No. 637, the Commission requires all capacity release transactions, including prearranged deals, to be posted for bidding with two exceptions. First, pre-arranged deals for 31 days or less are not subject to posting and bidding, but any rollover or continuation of such transactions is subject to bidding. Second, transactions at the “maximum rate applicable to the release” are exempt from posting and bidding. 5

On rehearing of Order No. 637, a number of shippers sought rehearing or clarification regarding the continued applicability to short-term capacity release transactions of the prior exemption from posting and bidding for prearranged capacity release transactions at the maximum tariff rate. They contended local distribution companies should be permitted to enter into pre-arranged transactions at the maximum tariff rate without having those transactions subject to the posting and bidding requirements. They argued that maintaining pre-arranged transactions at the maximum rate would facilitate state retail unbundling programs.

In Order No. 637-A, the Commission denied the rehearing and clarification requests. The Commission explained that the current regulation exempted transactions at the “maximum rate applicable to the release,” so that once the maximum rate ceiling was removed, all transactions (except for transactions qualifying for the 31 days or less exemption) would be subject to the posting and bidding requirements. In order to ensure that the regulations are clear, the Commission amended 284.8 (i) to specify that the exemption from the posting and bidding requirements for transactions at the maximum rate would not apply to short-term capacity release transactions as long as the waiver of the maximum rate ceiling is in effect.

In denying rehearing, the Commission found that requiring posting and bidding is necessary to ensure that capacity is equally available to all shippers and to protect against undue discrimination and the exercise of market power. 6 The Commission also explained that in individual cases where an LDC considers an exemption from the posting and bidding requirement essential to further a state retail unbundling program, it, together with the appropriate state regulatory agency, may request the Commission to waive the regulation. If the LDC seeks such a waiver, the Commission stated the LDC should be prepared to have all of its capacity release transactions and any re-releases of that capacity limited to the applicable maximum rate for pipeline capacity.

AGA, UGI, Florida Cities, Dominion LDCs, New England Local Distribution Cos., Pa. Office of Consumer Advocate, and National Fuel seek rehearing of the Commission's determination to require posting and bidding for transactions at the previous maximum tariff rate for release transactions. They also request that local distribution companies not be required to relinquish their ability to sell above the maximum rate as condition of a waiver exempting maximum rate transactions from the posting and bidding requirements. They contend that failing to provide an exemption from posting and bidding for prearranged capacity release transactions at the previous maximum rate impedes state retail unbundling efforts where LDCs are required to release capacity to marketers serving in-state customers at maximum rates.

The Commission denies the requests for rehearing of its requirement for posting and bidding for capacity release transactions at the previous maximum tariff rate. As the Commission explained in Order No. 637-A, Order No. 636 generally required posting and bidding for capacity release transactions to ensure that capacity is equally available to all shippers and to protect against undue discrimination and the exercise of market power. The only reason that prearranged deals at the maximum rate were exempt from the posting and bidding requirements was that, as long as a rate ceiling was in effect, no other shipper could beat the pre-arranged deal and bidding and posting requirements would be superfluous. 7 With the removal of the rate ceiling during the waiver period, pre-arranged transactions always can be beaten by a higher bid, and posting and bidding for transactions at the previous (and now non-existent) maximum rate is necessary to ensure that capacity is available to all shippers and to protect against undue discrimination and the exercise of market power.

Order No. 637 proceeded from the premise that lifting the price ceiling for short-term capacity release transactions would create a more efficient and competitive national market for gas and transportation in which shippers seeking short-term capacity would pay the market price. Providing certain customers with a preferential rate for short-term capacity runs counter to that premise. It would make the overall gas market less efficient because capacity could be allocated to those shippers who do not place the greatest value on obtaining it. Indeed, providing preferential rates to certain customers is inconsistent with the basic premise of Order No. 637, because such preferences can lead to other customers having to pay higher than market rates for capacity. Reserving capacity at preferential rates for certain customers will remove that capacity from the market, with the likely effect of increasing prices for the capacity remaining to be sold to other customers. 8

The rehearing requests also address potential conditions the Commission may impose in considering requests for waiver of the posting and bidding requirements. The Commission has yet to receive a waiver request or determine whether to grant such a waiver. Each waiver request, together with any associated conditions, will be considered on an individual basis based on the facts presented in the waiver request.

In Order No. 636, the Commission adopted a policy of requiring pipelines to permit shippers to divide their capacity into segments and use each segment for different purposes. In Order No. 637, the Commission responded to the inconsistent application of segmentation rights by adopting a regulation requiring pipelines to enable each shipper “to make use of the firm capacity for which it has contracted by segmenting that capacity into separate parts for its own use or for the purpose of releasing that capacity to replacement shippers to the extent such segmentation is operationally feasible.”  9 The Commission required pipelines to submit pro forma tariff filings to comply with this regulation. In Order No. 637-A, the Commission made no changes in the regulation, but explained some of its policies regarding the implementation of the segmentation requirement in the pipeline compliance filings.

Columbia Gas seeks rehearing of the requirement that pipelines make pro forma compliance filings. Other requests relate to policies involved in implementing the requirement, particularly those relating to segmentation on reticulated pipelines and policies relating to the use of primary receipt points, discounting, backhauls, and priority for transactions at secondary points.

Columbia Gas contends that under section 5 of the Natural Gas Act, the Commission must show that an existing pipeline tariff is unjust and unreasonable and that its proposed change is just and reasonable. Columbia Gas maintains the Commission has not explained whether it is acting under section 5 in the rulemaking or in the individual compliance filings and, accordingly, has not demonstrated that it has the authority to direct pipelines to make filings to change their tariffs to permit segmentation or to demonstrate that they should not have to comply with the new requirement.

The Commission exercised its section 5 authority in this case by making the generic determination that pipeline tariffs that do not permit segmentation, where segmentation is feasible, are unjust and unreasonable, because the pipeline is denying shippers the ability to use their firm capacity as flexibly as the pipelines did when they were merchants. 10 Because pipelines may have to implement segmentation in different ways depending on the operational characteristics of their systems, the Commission established pro forma compliance filings, just as it did in Order No. 636, as the means for determining how pipelines can best comply with the regulation. Any final determination on whether a particular pipeline tariff is unjust and unreasonable will be made in the individual compliance filing.

The Commission has the authority under section 5 of the NGA to establish a hearing to determine whether a pipeline's tariff is unjust and unreasonable and to determine the proper just and reasonable tariff provision. 11 The NGA gives the Commission the authority to require pipelines to provide information necessary to make those determinations, 12 which is the information required by the pro forma compliance filings. Indeed, Columbia Gas concedes the Commission “may have sufficient authority to direct a pipeline to show cause why a specific alleged conduct should not be found to be in violation of its tariff or the Commission's regulations.”  13 In this case, the Commission has directed the filing of pro forma tariffs to determine whether pipelines are in compliance with its regulation requiring them to permit segmentation.

Columbia Gas and DTI seek clarification or rehearing relating to the requirement for segmentation on reticulated pipelines. Columbia Gas seeks clarification that a pipeline is permitted to demonstrate that capacity segmentation is not operationally feasible on its system. DTI argues that in requiring segmentation for reticulated pipelines the Commission ignored the detrimental effect that requiring segmentation for one zone pipelines with postage stamp rate designs can have on the development of market centers.

DTI asserts that the Commission erred by not providing greater guidance on how segmentation on reticulated pipelines should be accomplished.

The determination as to whether and how to implement segmentation on particular pipelines will be determined in the pro forma compliance filing proceedings. As the Commission stated in Order No. 637-A, the Commission expects all pipelines, including reticulated pipelines, to implement segmentation to the maximum extent feasible and that factors such as current rate design should not be an obstacle to permitting segmentation. The Commission expects pipelines and their customers to work together to propose methods of segmentation that will work given the operational characteristics of the pipeline. On reticulated pipelines, this may include allowing segmentation on straight-line portions of the pipeline where capacity paths can be constructed, using different methods for allocating storage capacity so that customers will have capacity paths from storage to delivery points, or permitting shippers authority to segment subject to operational limitations when needed to protect system integrity or other shippers rights. The details of segmentation need to be worked out in the first instance between the pipelines and their customers who have the greatest knowledge of the physical operations of the system.

In Order No. 637-A, the Commission discussed its policies on how segmentation should be implemented, including policies relating to overlapping capacity segments, allocation of primary point rights, point discounts, and mainline priority at secondary points within a contract path. Rehearing or clarification requests were received on several of these policies.

In Order No. 637-A, the Commission clarified that shippers can divide their capacity through segmentation at any transaction point on the pipeline system, including virtual transaction points, such as paper pooling points, as well as at physical interconnect points, such as market centers. 14 Columbia Gas and El Paso contend that the Commission has not explained how segmentation at paper points will work. Columbia contends that permitting segmentation at paper points will permit shippers to multiply their capacity beyond their contract demand.

The Commission was merely clarifying that shippers would have the right to segment capacity at locations on a pipeline that may not be physical interconnect points, but are recognized gas transaction points, such as paper pooling points. For example, a shipper may want to release capacity upstream of a pooling point and obtain gas at the pooling point for transportation on a downstream segment of its capacity. Columbia Gas has not explained how such segmentation will permit shippers to multiply their capacity beyond their contract demand. To the extent such difficulties exist, they are more appropriately examined in the compliance filings where the operational characteristics of the pipeline can be evaluated.

In Order No. 637-A, the Commission explained its policy regarding overlap of capacity segments. As a general matter, the Commission's policy is that shippers are permitted to segment capacity and overlap those mainline segments up to the contract demand of the underlying contract. As part of this discussion, the Commission found that a shipper using a forwardhaul and a backhaul to bring gas to a delivery point in an amount that exceeds its contract demand is not overlapping mainline capacity.

INGAA, Williams, and El Paso Pipelines seek rehearing of this determination. They claim that the Commission is changing an existing policy without adequate justification and that overlaps of capacity at a point result in shippers receiving service in excess of the original shipper's contract.

In the first place, the Commission is not changing a well established policy. The only case cited by those seeking rehearing in which the Commission did not permit a forwardhaul and backhaul overlap to a single point was a Commission letter order, addressed only to the parties in the case and which did not discuss the policy issues involved. 15 More recently, in a formal order, the Commission found that a forwardhaul and a backhaul to 23 meter stations treated as a single delivery point for nomination and scheduling purposes would not be considered an overlap. 16 In making this determination, the Commission found it unnecessary to analyze whether gas may have physically overlapped at some mainline point in excess of the shipper's contract demand. Distinguishing between overlaps at a single point and those to a collection of points treated as a single point is not a useful basis for determining shippers' rights to use their capacity.

The Commission, therefore, has eliminated such artificial distinctions and moved to a policy in which forwardhauls and backhauls to the same point are not considered an overlap. Those seeking rehearing have not shown that pipelines face any operational problems in permitting such flexibility nor have they demonstrated that such flexibility adversely affects other shippers or the pipeline's ability to sell mainline capacity to other shippers. The shipper has contracted for a certain amount of mainline capacity from the pipeline and the use of that capacity to effect a forwardhaul and a backhaul does not exceed the shipper's contract demand in any mainline segment.

The Commission's policy since Order No. 636 has been that shippers should be permitted to make the full use of their firm capacity whether through a forwardhaul, backhaul, or through a combination of forwardhaul and backhaul. 17 After unbundling, shippers should have the same flexibility that pipelines had as merchants, which included the ability to forwardhaul and backhaul to the same point.

In Order No. 637, the Commission explained that in the past it had adopted different policies on the issue of whether pipelines could restrict replacement shippers' ability to choose new primary points depending on whether pipelines had historic tariff provisions that limited primary point rights to the same level as the shipper's mainline contract demand. Although the Commission accepted tariff filings during Order No. 636 that continued historic limitations on the number of primary receipt and delivery points, the Commission questioned in the Order No. 636 restructuring orders as well as in Order No. 637 whether allowing pipelines to limit receipt and delivery point quantities to the shipper's contract demand continued to be appropriate.

In Order No. 637, the Commission concluded that a pipeline's overly restrictive allocation of primary point rights to existing shippers could restrict the ability of shippers to use their capacity flexibly and required pipelines in their compliance filings to justify continued restrictions on primary receipt and delivery point allocation, in particular requiring pipelines to justify a proposal to deviate from the Commission policy that both releasing and replacement shippers could choose primary receipt and delivery points equal to their contract demand ( Texas Eastern/El Paso policy). 18 In Order No. 637-A, the Commission stated that it could not clarify the role of primary receipt points on a generic basis, but would need to examine the issues raised in the pipelines' compliance filings.

El Paso Energy contends that the Commission has not justified its change in policy with respect to primary point rights, a justification it argues is especially necessary when the policy change affects contractual rights. El Paso argues that “first-in-time shippers and marketers will immediately seek to segment their capacity into the smallest pieces possible in order to confiscate the largest amount of primary point capacity as possible.”  19

Rather than being a change in Commission policy, as El Paso intimates, the Commission is seeking here to apply on a uniform basis policies that it first developed in Order No. 636, in part at least, in El Paso's own restructuring proceeding. 20 In that order, the Commission found:

Because of the potential effects that limitations on primary point rights can have on competition, such restrictions need to be reexamined in the pipeline's compliance filings. In those filings, pipelines need to justify restrictions on shippers' abilities to use additional primary points in segmentation transactions and any deviations from the Texas Eastern/El Paso policy.

El Paso is concerned that permitting shippers to select primary points in excess of their mainline contract demand could lead to possible hoarding of capacity. But, as the Commission stated in Order No. 637-A, its policy recognizes that pipelines might need to impose some restrictions on primary point rights, as appropriate to the circumstances of their systems, to prevent hoarding of capacity by some shippers to the detriment of others. 22 While the crafting of appropriate tariff provisions to limit hoarding may be challenging, as El Paso suggests, it does not appear infeasible.

In Order No. 637-A, the Commission addressed requests with respect to the interaction of its segmentation policy and its current policy permitting pipelines to limit discounts to particular points. 23 The Commission stated that this issue needs to be reexamined in the compliance filings when segmented transactions occur within the path of the shipper's transportation contract. The Commission explained that once the pipeline has decided that a discount is needed to stimulate throughput in a section of the pipeline, it has foreclosed the possibility of selling that capacity to a shipper at an upstream point and that the discount, therefore, should apply to all transactions within the capacity path.

Pipelines contend that the new rule will prevent them from selectively discounting because it will prevent them from offering selective discounts to all shippers within the capacity path. 24 INGAA states that as it reads the Commission's new rule, if long line pipelines decide to “discount transportation to New York from the Gulf of Mexico or southern Texas they are precluded from refusing discounts from the just and reasonable maximum rate for points of delivery along over 1,000 miles of pipeline into many different markets, which markets present diverse competitive conditions.”  25

The Commission will clarify that it did not intend to change the rules regarding selective discounting. Pipelines, for example, will still be able to discount transportation to a particular customer who has competitive options to stimulate throughput without necessarily offering the same discount to other customers who are not similarly situated.

As part of the examination of restrictions on segmentation, the compliance filings need to examine whether current restrictions on a discount shipper's use of its capacity impede segmentation and competition. In Natural Gas Pipeline Company of America , 26 the Commission refused to permit the pipeline to impose a condition in discount contracts that would suspend the discount in the event the shipper released capacity, because such a provision would inhibit the competition between capacity release and pipeline capacity by requiring the discount shipper to pay the maximum rate in order to release capacity.

Regulations under the Outer Continental Shelf Lands Act Governing the Movement of Natural Gas on Facilities on the Outer Continental Shelf.

On April 10, 2000, the Federal Energy Regulatory Commission (Commission) issued a final rule, Order No. 639, 1 promulgating regulations under the Outer Continental Shelf Lands Act (OCSLA)  2 to ensure that natural gas is transported on an open and nondiscriminatory basis through pipeline facilities located on the Outer Continental Shelf (OCS). 3 The regulations require OCS gas transportation service providers to make available information regarding their affiliations and the conditions under which service is rendered. This information will assist the Commission and interested persons in determining whether OCS gas transportation services conform with the open access and nondiscrimination mandates of the OCSLA and will enable shippers who believe they are subject to anticompetitive practices to bring their concerns to the Commission. The transactional transparency that reporting will bring should provide a sound basis for ensuring open and nondiscriminatory access offshore and produce greater efficiencies in this marketplace. The Order No. 639 regulations do not eliminate or modify any existing regulations or Commission policies relating to the regulation of offshore facilities pursuant to the Commission's authority under the Natural Gas Act (NGA). 4

Requests for rehearing and/or clarification of Order No. 639 were filed by Duke Energy Field Services Assets, LLC (Duke); El Paso Energy Corporation (El Paso); the Interstate Natural Gas Association of America (INGAA); the Independent Petroleum Association of America (IPAA);  5 the Natural Gas Supply Association (NGSA); OCS Producers; the Producer Coalition; and the Williams Companies, Inc. (Williams). 6

Parties requesting rehearing endorse the expressed aim of the final rule—to ensure compliance with the OCSLA's open and nondiscriminatory access requirements. Producer interests generally support the Commission's means to this end—to require OCS service providers to report certain information on their affiliates and transactions—whereas pipeline interests generally oppose aspects of the new reporting requirements. In response to the concerns raised, for the reasons discussed below, we modify, clarify, and affirm the OCSLA reporting requirements set forth in Order No. 639.

Duke, El Paso, INGAA, OCS Producers, and Williams claim that the Commission has failed to present an adequate legal foundation for promulgating new OCSLA reporting requirements. The parties stress that since the OCSLA's 1953 enactment, with but a handful of exceptions, the Commission has not relied on the OCSLA to ensure that gas is transported on or across the OCS on an open and nondiscriminatory basis.

Williams argues that the Commission should have, but did not, consult with the Attorney General prior to implementing a new rule.

Duke insists that other federal agencies—but not the Commission—can act under the OCSLA to enforce nondiscrimination by instituting a civil action in district court; therefore, the Commission's rule and its proposed enforcement are without foundation and invalid.

OCS Producers believe the Commission could employ other, less burdensome means to secure the benefits of OCSLA compliance and assert the Commission has not demonstrated that reporting is needed for effective OCSLA enforcement.

We acknowledge that we have not established an extensive record of reliance upon the OCSLA. It was not until 1988 that we found cause to issue a rule interpreting the Commission's responsibilities under the OCSLA. 7 Until then, the NGA had appeared fully adequate to the task of regulating offshore natural gas facilities and services. As offshore exploration and development has evolved, it has grown beyond our ability to regulate by relying exclusively on the NGA.

Initial offshore construction consisted of gas companies building lines out from existing onshore facilities to production areas on the shallow shelf close to shore, stepping incrementally further out as technological advances led to the development of fields in increasing water depths. Typically, these early offshore lines were used to attach production from a single well or single platform in a field that produced gas for the system supply of a single company. It has proved to be the case that where an offshore pipeline serves to provide long-term, firm transportation for the pipeline's owner, issues of access do not arise. Generally, these offshore systems were owned and operated by, and used to carry the gas of, interstate pipeline companies. Thus, the Commission's NGA jurisdiction over interstate transportation extended to these offshore systems, and we consequently found no cause to turn to the OCSLA to guarantee open and nondiscriminatory access on these pipelines.

By the late 1980s, the nature of offshore operations had started to shift. In 1988, in Order No. 491, we observed that the offshore infrastructure consisted of major trunkline systems interconnected via a “proliferation” of laterals, resulting in a grid with the “flexibility to move offshore reserves from a variety of offshore locations via a number of pipeline facilities to onshore destinations.”  8 We recognized that to take advantage of such flexibility, shippers were equally dependent on the physical capabilities of the facilities and “the degree of access which shippers have to the transportation system.”  9 Consequently, in order to ensure open and nondiscriminatory access, we required all offshore NGA-jurisdictional pipelines to obtain blanket certificates under Part 284 of our regulations, authorizing transportation on behalf of others on an open and nondiscriminatory basis. 10

At that time, the offshore transportation grid was still largely subject to our NGA jurisdiction, so we found no need to implement a separate set of regulations under the OCSLA targeted at NGA-exempt OCS service providers. 11 During the past decade, however, the character of the offshore environment has again undergone significant change, particularly after the 1989 EP Operating Company v. FERC (EP Operating) decision, 12 which led the Commission to reclassify numerous offshore facilities from transmission to gathering.

Now a more significant portion (approximately half) of the offshore gas infrastructure is excluded from NGA oversight, thereby eroding the applicability and effectiveness of our earlier OCSLA rule. Further, we expect a continuation of the recent trend of pipelines' requesting reclassification of existing certificated offshore lines from transmission to gathering. We expect a greater portion of new construction to qualify as gathering as well. 13 In view of these factors, the OCSLA's competitive principles no longer can be met by mandating that offshore NGA pipelines adhere to our Part 284 open access requirements. Since we can no longer rely on this scheme of regulatory piggybacking, the new OCSLA reporting requirements are needed to adequately monitor the dynamic, expanding portion of the offshore infrastructure that is not subject to NGA oversight.

Williams contends the Commission neglected to consult with other federal agencies, as specified in OCSLA section 1334(f)(3), 14 prior to implementing the reporting regulations. This same issue was raised in response to the Notice of Proposed Rulemaking (NOPR), 15 referencing the separate but similar consultation requirement specified in OCSLA section 1334(e). 16 In the final rule, we explained our belief that the act of requiring reporting under the OCSLA did not trigger the consultation requirement, a position we maintain. 17

The OCSLA section 1334(f)(3) consultation requirement applies in the event that “specific conditions” are “included in any permit, license, easement, right-of-way, or grant of authority.” The final rule's reporting requirements are not such a condition, as demonstrated by the fact that the reporting requirements apply not only to NGA-jurisdictional pipelines to which we have granted certificates, but also to NGA-exempt pipelines, to which we have granted no certificate or any other “permit, license, easement, right-of-way, or grant of authority.” Thus, our rule is predicated entirely upon the OCSLA's open and nondiscriminatory access requirements, which pertain regardless of whether an OCS service provider is operating under authority of any permit or certificate. As such, we conclude consultation with the Attorney General is not a prerequisite for promulgating this reporting rule.

Williams notes that in the Order No. 509 rulemaking, the Commission requested the views of other federal agencies. There is a material distinction between that rulemaking and this one: there, we told OCS service providers how to operate; here, we merely have OCS service providers tell us how they operate.

In Order No. 509, we imposed specific conditions on service providers. Although the conditions were contained in our NGA regulations and were applied only to offshore pipelines already subject to the NGA, these NGA conditions were applied in fulfillment of the OCSLA's transportation requirements, compelling OCS service providers to adopt and follow certain business practices as a specific condition of complying with the competitive principles of OCSLA section 1334(f)(1). 18 In this rule, while we exhort NGA-exempt OCS service providers to adhere to the same competitive principles that NGA-jurisdictional pipelines are subject to under our Part 284 open access regulations, the only requirement of Order No. 639 issued under the OCSLA is that service providers present information on their business practices. We impose no new conditions on those practices.

Duke takes the position that the Commission's authority under OCSLA section 1334(f)(3) to impose conditions on OCS service providers “is not an independent grant of authority.” Rather, Duke argues that section 1334(f)(3) only describes “steps the Commission is required to take when exercising its authority under another statute such as the NGA.”  19 We disagree. Duke reads too much into our decision in Order No. 509 to limit the rule's applicability to offshore pipelines already subject to the NGA and our reliance on the operating obligations contained in our NGA regulations to compel compliance with the provisions of the OCSLA.

As we emphasized in the order on rehearing of Order No. 509, “the open-access mandate of the OCSLA applies to all pipeline operations on the OCS.”  20 We might have gone further and exercised our OCSLA authority to impose specific open access regulatory requirements on all OCS facilities; instead, on rehearing of Order No. 509, we elected to “consider appropriate measures for remedying discriminatory access to other [NGA-exempt] OCS facilities on a case by case basis.”  21 Thus, our approach in Order No. 509 does not indicate, as Duke advocates, that our OCSLA authority applies in some derivative manner only after we have already first established our jurisdiction by means of another statute. We conclude that, though administering and enforcing the OCSLA involves coordination and a division of labor among several federal entities, the Commission's OCSLA authority stands apart and independent from our statutory responsibilities under the NGA.

Duke is correct that several federal agencies can institute OCSLA enforcement actions. However, this sharing of responsibility does not preclude the Commission, as an independent agency, from acting without the assistance of other responsible federal agencies to oversee and enforce open and nondiscriminatory access. The Commission's capacity to compel open and nondiscriminatory access under the OCSLA is discussed in Shell Oil Company ( Shell ). 22 At issue in Shell was an offshore oil pipeline's refusal to serve a new customer. The Commission exercised its authority under section 1334(f) of the OCSLA to order the oil pipeline to accept and transport the new customer's volumes. 23 When the court issued its decision in Shell, the oil pipeline complied with the Commission's order to interconnect. Thus, issues relating to cooperative agency action were not reached. We note, however, that if the Commission finds it necessary to seek the imposition of monetary civil penalties for any OCS service provider's violation of the reporting requirements, as opposed to physical remedies to force open and nondiscriminatory access, the Commission expects to rely on the Secretary of the Interior's authority to “assess, collect, and compromise any such penalty,” in accordance with section 1350(b) of the OCSLA.

Duke, El Paso, INGAA, and Williams maintain it is inequitable to subject separate sets of offshore facilities to separate regulatory regimes. They stress that even if the new OCSLA reporting requirements diminish the difference between operating under the OCSLA as opposed to the NGA, OCS service providers subject exclusively to the OCSLA will still retain a competitive advantage over those also subject to the NGA.

INGAA proposes all offshore facilities be declared gathering, i.e. , exempt from the NGA under section 1(b), thereby leaving all offshore facilities and services subject exclusively to the OCSLA. Williams implicitly endorses this approach.

El Paso urges the Commission to rescind the new reporting requirements and regulate offshore activities as it has to date, by relying on the NGA in conjunction with complaints under the OCSLA.

OCS Producers caution that exploration, development, and production are properly the regulatory domain of the MMS, and the Commission risks clashing with MMS if it fails to plainly put these activities beyond its reach.

Concerns regarding the impacts of existing laws— e.g., whether the statutory regime in place offshore favors one type of entity or activity over another—are appropriately directed to Congress rather than to this Commission. In the onshore context, we have been confronted with analogous allegations of commercial advantage conferred as a consequence of operating subject to state versus federal regulation. Weighing the comparative benefits and burdens of operating under one statute versus another, however, is beyond our purview.

We are charged with, and our authority extends only to, enforcing each statute as it applies; hence, we are not at liberty to contemplate the equities and impacts of the existing regulatory regime on competitors' operations. We observe that here, if anything, the enhanced transactional transparency to be gained by OCSLA reporting will diminish the differences between OCS service providers now operating under joint NGA/OCSLA jurisdiction and those subject only to the OCSLA. We would not characterize the new reporting requirements as another layer of regulation, as does INGAA; rather, given the OCSLA's applicability to all OCS facilities and services, we view reporting as the foundation for implementation of a uniform, light-handed regulatory regime offshore.

We will not pursue INGAA's proposal that we find all offshore facilities gathering, and thereby remove them from our direct NGA oversight, since the application of our test for determining whether facilities are performing primary a gathering or transportation function  24 is not at issue in this rulemaking proceeding. However, as discussed in the NOPR and final rule, part of our motive for acting to enhance the availability of information about offshore operations is the development of the Sea Robin proceeding and the guidance offered by the court concerning the application of our primary function test to offshore facilities. That decision prompted us to review and revise our criteria for determining the primary function of offshore facilities, resulting in a determination that portions of Sea Robin's system, which had always been regulated under the NGA as transmission, should be reclassified as gathering. 25 While this result calls into question whether other offshore facilities that have traditionally been regulated as NGA transmission lines might be performing primarily a gathering function, we believe the proper approach is to examine such facilities individually, on a case-by-case basis, in separate proceedings.

If, in the wake of Sea Robin, additional offshore facilities are declared gathering, and are thereby pushed out from under the umbrella of the regulatory protections that the NGA provides, the NGA's scope will shrink, making it less effective as a means to check market power abuses. 26 Under these circumstances, we expect complaints brought under the OCSLA will play an increasingly significant role.

We have recently revised our complaint procedures to permit more efficient processing, 27 and where before a general allegation of wrongdoing might be deemed adequate to pursue a complaint, under the revised regulations, specific allegations must be presented that measure up to a more rigorous minimum criterion before the Commission will proceed. As discussed in the final rule, we expect it will be difficult for a shipper or service provider to fashion a sustainable complaint absent the availability of information about the business practices of service providers.

Setting forth the particulars of an alleged OCSLA violation by an NGA-regulated service provider can be straightforward, given the wealth of information regarding jurisdictional interstate pipelines' actions. However, while the NGA's disclosure requirements are arguably adequate to allow for a complaint-driven enforcement regime, the same cannot now be said regarding possible OCSLA violations by NGA-exempt entities, since without the data contained in the new OCSLA reports, we question whether a description of alleged violations could be set forth in sufficient detail to sustain a complaint. Because we believe the data that will be generated by OCSLA reports is necessary to effectively monitor NGA-exempt OCS service providers, we reject El Paso's proposal to rescind the OCSLA reporting requirement.

We envision no pending conflict with the MMS. First, offshore, traditionally, several federal agencies have simultaneously exercised overlapping duties without inducing intractable conflict. Second, as discussed below, production facilities are generally exempt from the OCSLA reporting requirements.

Duke, El Paso, OCS Producers, and Williams contend public disclosure will reveal commercially sensitive, confidential, and proprietary information, to the detriment of the reporting entities.

The Producer Coalition has the opposite apprehension, expecting service providers will request privileged and confidential treatment for most of the information they report. Therefore, to ensure transactional transparency, the Producer Coalition advocates eliminating such treatment and making all data public.

The final rule directs an OCS service provider to file a report on the first day of each quarter, describing its status as of the first day of the previous quarter. The Producer Coalition, OCS Producers, and NGSA are concerned that the filed report may omit the immediately preceding quarter's intra-quarter changes, i.e., a change on October 2 will be omitted from the January 1 report, and only picked up in the April 1 report. The parties suggest this is too long.

The Producer Coalition proposes requiring that additional details be reported regarding rates and conditions of service. For example, the Producer Coalition requests we revise § 330.2(b) to clarify that the primary receipt and delivery points include both the points listed as primary receipt or delivery points in each contract and any other receipt or delivery points that are actually used for service under the contract during the reporting period. The Producer Coalition explains this clarification will discourage the practice of listing primary points in contracts, and then in fact flowing gas through other points. Further, the Producer Coalition believes it would be easier to find receipt and delivery points if the service provider designated them not just by meter identification numbers but by geographic location as well.

OCS Producers request clarification concerning events triggering the reporting requirement and an itemization of the conditions of service to be reported. NGSA notes that the regulations request a detailed description of the derivation of non-cost-based rates and ask whether it is sufficient to simply state that such rates were derived by negotiation.

OCS Producers suggest the affiliate reporting requirement be modified as follows: eliminate the need to identify gas consumer affiliates, since such affiliates are numerous, change often, and have little impact on upstream offshore operations; list only those affiliates that are active on the OCS; and add gas gathering affiliates to those that must be reported. El Paso would restrict named affiliates to those engaged in gas operations within the US and adjacent water bodies.

NGSA requests that the Commission specify a format, establish procedures for electronic filing, and make the filed information Internet accessible.

Reporting is not intended to force the revelation of commercially sensitive, confidential, or proprietary information immaterial to ensuring compliance with the OCSLA. That said, reporting will nonetheless compel OCS service providers to make public aspects of their operations that they have heretofore been permitted to keep private. While we appreciate companies' preference to withhold certain information, we note that the wide applicability of the new OCSLA reporting requirements, like the wide applicability of the existing NGA reporting requirements, serves to place competitors on a more consistent regulatory footing.

We intend to continue the current practice under § 388.112 of our regulations of considering requests for privileged treatment of information on a case-by-case basis. Because the outcome of each request typically turns on the specific facts presented, we are unable to make broad declarations on what information qualifies for such treatment. Accordingly, we reject the Producer Coalition's proposal that we generically declare no information can qualify for privileged treatment. However, we do not intend to extend privileged treatment to information that is necessary to determine whether service providers are operating in accord with the OCSLA, e.g., a § 330.2 report that failed to state the actual rates charged would have no utility.

To date, in the context of exercising our non-OCSLA authority, we have been able to give adequate attention to individual requests for privileged treatment and expect to be able to do the same with respect to requests related to OCSLA reporting. Over time, the Commission has determined what types of data might be exempt from the mandatory disclosure requirements of the Freedom of Information Act, 28 and these past decisions can be expected to guide our assessment of requests for privileged treatment of information in OCSLA reports.

If circumstances arise that prompt the Commission, on its own initiative, to question a non-reporting OCS service provider's conformity with the OCSLA, we may deem it appropriate, initially, to permit the service provider to submit information to the Commission confidentially. If we subsequently determine the service provider does not qualify for an exemption, we would expect to then direct that reporting commence pursuant to § 330.2 of the regulations. Duke urges we expand upon this by revoking the reporting requirements and handling all OCSLA access disputes on a confidential basis. As noted, we expect there will be some cases where some portion of the information needed to resolve a dispute will be withheld from public view. However, because there is now no adequate repository of information regarding NGA-exempt OCSLA activities, there is now no straightforward means to gauge service providers' adherence to the OCSLA. Duke's proposal would preclude establishing a database sufficient to this task.

In the NOPR, we suggested that OCS service providers notify the Commission every time a change in affiliates or services took place, and to do so within 15 days of any such change. Comments in response painted the picture of a large, dynamic OCS service provider, compelled to make daily filings to keep the record up to date with ongoing changes to its system. To avoid burdening a service provider with perpetual filings, we modified our approach, foregoing ongoing updating in favor of quarterly reporting.

Because data's utility is a function of its accuracy, we share the concerns expressed that the reported data not be stale. Therefore, we will modify § 330.3(c) of the regulations. We will change the scheduled reporting date from the first day of a calender quarter to 15 days after the close of a calender quarter. However, a report must now reflect a service provider's status as of the last day of the preceding quarter and describe all changes to a service provider's affiliates, customers, rates, conditions of service, and facilities that have occurred during the course of that quarter. Thus, reports, when required, are due on April 15, July 15, October 15, and January 15.

In the final rule, we set October 1 as the due date for the initial § 330.2 reports. We revise that here. Reports will be due on October 15, 2000, and are to contain a description of activities during the third calender quarter of this year. However, because October 15, 2000 falls on a Sunday, pursuant to § 385.2007 of our rules of Practice and Procedure, reports are to be filed on Monday, October 16, 2000. This first OCSLA report will set a baseline specifying service providers' status; subsequent reports will look back to this baseline to determine what future changes merit reporting.

An exempt OCS service provider may become subject to reporting by virtue of taking on another shipper or as a result of a Commission decision that a shipper was denied service without good cause. Currently, § 330.3(b) gives such a service provider 90 days from the date it loses its exemption to file a report. We will modify this time frame so that if an exempt service loses its exemption during a calender quarter, it must file a § 330.2 report on the 15th day of the subsequent quarter. Where an exemption is lost due to serving another shipper, the date such service commences will be the date exempt status ends. 29 Where an exemption is lost due to a refusal to serve, the date the Commission determines the denial of service was unjustified is the date exempt status ends. In reaching such a determination, we note we may elect to alter this default date.

In the final rule, we stated that if an OCS service provider's operations are identical quarter to quarter, the service provider need not submit a report. Concerns were raised that this could entice a service provider to make intraquarter changes, while arranging to revert to an apparent static state in time to be able to claim no quarter-to-quarter change took place. We clarify that although reports need only be filed once per quarter, this report is to be a cumulative record of all changes that have taken place during the calender quarter covered. If there is no change during a given quarter, then there is no need to file a report on the 15th day of the subsequent quarter.

OCS Producers request clarification of §§ 330.3(a)(1) and (a)(2) of the regulations, which state that single-shipper and owner-shipper exemptions end when either the service provider agrees to serve another customer, or when a new customer requests service, is denied, and the Commission determines the denial is unjustified. Discussions with prospective shippers do not jeopardize an existing exemption. 30 We are persuaded that the date parties reach an accord for future service should not be, as is now, the event that triggers the reporting requirement. Precedent agreements for future service may schedule long lead times before going into effect; actions that take place between the time the agreement is signed and service starts may void the agreement. Therefore, rather than make reaching an agreement to serve the reporting trigger, we will require actual service, and so modify §§ 330.3(a)(1) and (a)(2) to designate the time the Gas Service Provider “commences service” as the event that eliminates a reporting exemption.

Currently, §§ 330.3(a)(1) and (a)(2) state that an exempt service provider's denial of service can trigger reporting if the Commission finds the denial unjustified and the denied shipper objects. OCS Producers persuades us that there is little to be gained by requiring that the denied shipper contest a refusal to serve. In investigating a denial of service, the Commission will have the opportunity to weigh the legitimacy and the merits of both the shipper's request and the service provider's refusal. Thus, we find no need for the denied shipper to present the Commission with the circumstances of its denial, again, following a finding that the denial was unwarranted. We will modify §§ 330.3(a)(1) and (a)(2) accordingly.

This is a first effort at obtaining information under the OCSLA. Nothing has changed since the final rule, where in response to a request for a more detailed OCSLA report we explained that “[g]iven the complexities of offshore operations, the array of entities offshore, and the fact that we have not heretofore collected the information described in §§ 330.2 and 330.3(b) and (c), we feel it premature to fix the manner of presentation or filing format of an OCSLA report at this time.”  31 If early rounds of OCSLA reports prove the information collected to be deficient, excessive, extraneous, redundant, inconsistent, or otherwise ineffective, we may then describe a more rigorous format and content for the reports. As is, we anticipate the information specified in our OCSLA regulations, as modified herein, will be adequate to enable interested parties to compare rates, conditions of service, and affiliate treatment among a pipeline's various customers and among various pipelines. Therefore, we deny rehearing requests to add details to the parameters of the OCSLA report.

For reporting to be effective, interested persons must be able to compare costs to ship gas between specific points. To address the Producer Coalition's apprehension that service providers might post rates between primary receipt and delivery points, then actually ship gas between other sets of points, we will revise our regulations. Sections 330.2(b)(5) and (b)(6), directing service providers to list their primary receipt and delivery points, remains unchanged. Section 330.2(b)(7) is expanded to require service providers to report “Rates between each pair of primary receipt and delivery points and each pair of any other points served.”

We concur with the Producer Coalition that it would be easier to find receipt and delivery points if the service provider designated them not just by meter identification numbers but by geographic location as well. We encourage service providers to do so.

Section 330.2(b) of the regulations presents two reporting alternatives and asks service providers to file either copies of contracts or a description of the conditions of service that includes an explanation of the rates charged. The Producer Coalition proposes that we emphasize the alternative nature of this filing requirement by changing the format, but not the substance, of the regulations. We will do so, to avoid any possible confusion regarding the information to be submitted, as follows.

Section 330.2(b) is revised to read: “A Gas Service Provider must file with the Commission its conditions of service, consisting of the information specified in this paragraph (b), or alternatively, the information specified in paragraph (c). Under paragraph (b), a Gas Service Provider must submit, for each shipper served * * *.” Section 330.2(b)(8) now concludes after “Gas Service Provider.” Section 330.2(b)(9) is redesignated as § 330.2(c) and reads: “As an alternative to the above paragraph (b) requirements, a Gas Service Provider may file a statement of its rules, regulations, and conditions of service that includes * * *.” Sections 330.2(b)(9)(i), (ii), (iii), and (iv) are redesignated as § 330.2(c)(1), (c)(2), (c)(3), and (c)(4), respectively.

In the final rule, we expressed the expectation “that, with limited exceptions, all filings by regulated entities will be made in electronic form.”  32 We retain this expectation, but for the reasons noted above, believe it would be premature to attempt to establish the format, content, and procedural protocol for electronic filing of OCSLA reports before the experience of a single round of reporting. The reports, filed as paper copies, will be available in the Commission's Public Reference Room and may be accessed remotely via the Internet through the FERC Home Page ( http://www.ferc.fed.us ) using the Records and Information Management System (RIMS) link or the Energy Information OnLine icon.

We will expand the § 330.2(a)(6) definition of affiliate to include gathering affiliates and restrict it to affiliates engaged in gas operations within the US and adjacent water bodies. The omission of gathering affiliates was an oversight. We do not expect foreign affiliates will have any significant impact on OCS service providers' operations.

We will not adopt OCS Producers' proposal to further narrow the affiliate category to only those doing business on the OCS, as we can envision instances where onshore affiliates, e.g., an affiliate owner of a processing plant, might influence an OCS service provider to modify the volumes or path of gas transported. We will adopt OCS Producer's proposal to omit identification of affiliate gas consumers, and modify § 330.2(a)(6) accordingly. Given end user's location at the far end of the wellhead-to-burnertip gas path, we do not expect consumer affiliates to exert an undue influence on upstream offshore operations.

If shippers are charged negotiated rates, NGSA asks whether additional information beyond this fact needs to be submitted. Section 330.2(b) itemizes the reporting requirements. Reports should enable interested persons, particularly prospective and existing shippers, to compare the rates and terms of service they might receive or are receiving, with that of other shippers. Thus, simply stating that all rates are negotiated will not do. As noted in NorAm Gas Transmission Company, a negotiated rate formula must be stated with “sufficient specificity to permit easy calculation of the actual negotiated rate, charge, and rate component for each transaction,”  33 to enable a shipper to estimate the rate it would be charged to transport gas between specific points in order to compare its hypothetical rate with the actual rates of other shippers.

Williams would lift the single-shipper and owner-shipper reporting exemptions, claiming such exemptions make it difficult for a shipper to determine if it has been denied access or subject to discrimination. Duke is similarly concerned that reporting exemptions will produce an “information asymmetry,” whereby nonreporting OCS service providers may exploit the public record to gain a competitive advantage over their reporting rivals.

El Paso urges that all reporting exemptions, other than the exemption for offshore pipelines subject to the NGA, be eliminated as a means of leveling the regulatory playing field.

El Paso, OCS Producers, and Williams expect existing effective offshore arrangements will be upset as service providers structure their business organization and facilities to come within the reporting exemptions.

OCS Producers would expand the reporting exemptions by (1) treating affiliates of the same corporate family as if they were one entity; (2) considering parties engaged in a common financial transaction, such as a sale and leaseback, as a single or joint owner; (3) applying the owner-shipper exemption to a jointly-owned pipeline that receives gas from multiple fields, even though all pipeline owners do not hold interests in each of the attached fields; (4) treating each owner of a pipeline with undivided ownership interests as if each were an individual pipeline ( i.e., a pipe within a pipe); (5) extending the shared ownership exemption of a single pipeline crossing multiple fields to include multiple pipelines crossing multiple fields; and (6) declaring that gas volumes shipped in conjunction with the MMS' royalty-in-kind program will not void the single-shipper or shipper-owner exemptions.

OCS Producers argue that production platforms, and facilities upstream thereof, should be exempt from reporting (effectively broadening the “feeder-line” exemption). NGSA would establish a rebuttable presumption that all production facilities and services qualify for the feeder-line exemption.

Adopting proposals to eliminate some or all of the reporting exemptions would admittedly meet our aim of producing a broader and more complete picture of offshore operations. However, we seek only the minimal information necessary to be able to verify that OCS service providers are operating in compliance with the OCSLA's open and nondiscriminatory access mandates. We continue to believe that an entity that serves a single customer, or that transports only its own gas, has little opportunity or motive to contravene these OCSLA mandates. Thus, we do not find it necessary to employ reporting to monitor such entities.

Given that adding a new customer will void the single-shipper or owner-shipper reporting exemption, it seems futile for an exempt service provider to offer prospective shippers discriminatory terms, since the service provider's first filing following termination of its exemption will advertise the disparity between new and existing customers' conditions of service and invite action contesting the disparity. Similarly, a Commission determination that a denial of service is unjustified informs the rejected shipper, without the need for any further inquiry, that the rejected shipper has cause to complain. Therefore, while a reporting exemption may place a service provider at an advantage in negotiating with prospective shippers, acting on this advantage will be ultimately self-defeating, since any impropriety will come to light in a first filing. In view of the above, we do not expect the single-shipper or owner-shipper reporting exemptions will be used to exploit shippers, as Williams worries, since discrimination or an unwarranted refusal to serve inevitably will be revealed and rectified.

Duke is correct that the cure for “information asymmetry” is a wider application of the transactional transparency that OCSLA reporting provides. However, an exempt service provider that is able to make use of the public record to enable it to add a new customer or entice one away from a competitor, will lose its reporting exemption by adding that shipper. Because reporting will end the “information asymmetry,” the problem Duke identifies should prove largely self-correcting. To the extent we find evidence that this is not the case— i.e., as Duke warns, the partial transparency produced by allowing reporting exemptions reduces competition and economic efficiency in the OCS marketplace—we will reevaluate the operation and outcome of the OCSLA reporting regime.

Duke asserts that OCS producers, when compared to OCS service providers, “often have superior market knowledge,”  34 and thus enjoy an advantage when weighing offers for transportation services. This advantage, coupled with a producer's capability to construct its own gathering and transportation facilities, leads Duke to conclude that the ultimate leverage holder and decision maker is the offshore producer. We find this assertion unpersuasive. Individual producers are compelled to publically disclose to the MMS a significant amount of information about their OCS leaseholdings, including their estimates of gas and oil reserves, exploration and development plans, information on deepwater discoveries, and data on production, existing and planned wells, structures, platforms and rigs, geographic mapping, and royalty relief. Although some of the producer-specific or lease-specific data is not publically available, enough is to permit OCS service providers to evaluate OCS producers' ongoing activities. Given this we do not expect that requiring some service providers to make certain information public to tip the competitive balance between producers and the pipelines that carry their gas. Both service providers and producers should be positioned to adequately monitor one another and reach rational accord on the merits of contracting for capacity versus constructing proprietary pipeline facilities.

El Paso would eliminate the single-shipper, owner-shipper, and feeder-line reporting exemptions in the interests of leveling the competitive playing field. As discussed, we do not expect the first two exemptions to confer any sustainable competitive benefit; therefore, we believe these exemptions can be retained without distorting offshore operations. With respect to the feeder-line exemption, as discussed in the final rule, feeder line facilities are typically owned and operated by the same entity that holds the right to produce gas from a particular field and are found upstream of a point where gas leaves a platform or platforms on its way from a producing field to shore. We do not expect issues of access or discrimination to arise with respect to such facilities, since where the same entity owns or leases both the mineral rights and the facilities necessary to draw gas from its own reservoirs.

OCSLA section 1334(f)(2) states the “Commission may, by order or regulation, exempt from any or all of the [open and nondiscriminatory access] requirements * * * any pipeline or class of pipelines which feeds into a facility where oil and gas are first collected or a facility where oil and gas are first separated, dehydrated, or otherwise processed.” We exercised this option, stating in § 330.3(a)(3) of the regulations that the reporting requirements would not apply to “[s]ervices rendered over facilities that feed into a facility where natural gas is first collected, separated, dehydrated, or otherwise processed.”

OCS Producers and NGSA stress that the statute provides for an exemption for pipelines feeding into facilities where gas is first collected or into facilities where gas is first separated, dehydrated, or otherwise processed. They argue that because we eliminated the “or” between the point of first collection and the point of first separation, dehydration, or other processing, we restrict the exemption so that it holds only up to the first point where any of the specified activities occurs. OCS Producers maintain this excludes “the majority of production-related facilities” from qualifying for the feeder-line exemption, citing the example of a subsea manifold adjacent to wellbores as a potential point of first collection.

This was not our intention. In fact, we view our regulatory exemption as an expansive application of what OCSLA section 1334(f)(2) allows. However, to preclude any interpretative ambiguity, we will more explicitly follow the wording of the statute, and modify § 330.3(a)(3) to read “[a]ny pipeline or class of pipelines which feeds into a facility where gas is first collected or a facility where gas is first separated, dehydrated, or otherwise processed.”

We decline OCS Producers' and NGSA's invitations to categorically exempt all production-related facilities. Without reviewing the configuration of offshore facilities, we cannot be satisfied that a pipeline's location upstream of a processing platform guarantees it serves as a feeder line and not as a transportation line, or that a platform is being used to support production activities rather than, for example, serving to collect, redistribute, and boost the pressure of gas already in transit en route to shore. Therefore, we will retain the feeder-line exemption, but will not broaden it.

We recognize that by providing reporting exemptions, we invite OCS service providers to organize their operations so as to come within these exemptions. For example, Williams anticipates exempt service providers, in contemplating expansions, may be motivated to deliberately undersize new capacity to be able to claim to be physically incapable of serving additional customers.

In the final rule, in response to this same example, we observed it would be economically irrational to reject the receipt of the additional revenues that new customers confer in favor retaining a reporting exemption. We do not believe the administrative convenience of not reporting will outweigh service providers' motivation to maximize profit. As we also observed in the final rule, “[g]iven that exempt and non-exempt service providers must ultimately abide by the same OCSLA nondiscrimination provisions, we do not expect opting out of reporting will confer a noticeable commercial advantage.”  35 We do not expect legitimate efforts to obtain or retain exempt status will impede or distort offshore development, or have any significant adverse impact the offshore's competitive transportation markets, or upset offshore investments. Therefore, we will permit regulated entities to arrange their affairs with an eye to the regulatory impact thereof.

We do not intend, however, to let exempt form trump exempt substance, which leads us to reject OCS Producers' proposals to treat exemptions expansively. Specifically, our standard practice is to treat separate business entities as distinct, regardless of affiliation, and we will continue to do so. Thus, for the purposes of applying the single-shipper exemption, two affiliated shippers count as two shippers, and consequently could not both be served under the single-shipper criteria. Also, where a pipeline is jointly owned by more than one entity, each with an undivided interest in the line, the single-shipper exemption will only apply as long as one and only one party ships its gas through the pipeline.

In the same manner, we expect to rely on the formalities of financial arrangements, and treat entities engaged in a common financial transaction as separate parties. Thus, while OCS Producers propose treating entities engaged in a sale and leaseback as a single or joint owner, we view each participant as a separate actor. Accordingly, if individual entities wish to be treated as a collective joint owner, they should execute agreements to that effect, and not count on this Commission to examine the depth of their financial ties, affiliate status, or other indicia of intimacy in order to construe them to be a constructive joint owner.

We clarify that where the same parties own a pipeline and all the gas flowing through it, if such parties contract with a third party as their agent to operate the pipeline, or manage other transportation matters on their behalf, the owner-shipper exemption remains intact. This same principle applies to the single-shipper exemption.

We presume that service providers serving themselves will not deny access to or discriminate against themselves, hence the owner-shipper exemption. Section 330.3(a)(2) states this exemption applies where a service provider's owners hold interests in a pipeline and the gas from the “field or fields connected to a single pipeline.” OCS Producers suggest, and we agree, that the intent is clarified by changing “a single pipeline” to “that single pipeline.” OCS Producers also suggest changing the reference from “that single pipeline” to “that pipeline or pipelines” in order to cover a configuration where laterals that gather gas from a production area feed into a trunkline. We will also adopt this change, but note this owner-shipper exemption holds only as long as all the same parties share ownership interests in all the pipeline facilities and in all the gas supplies transported by those facilities.

We recognize that, as a practical matter, due to arrangements such as production balancing agreements, an owner-shipper pipeline may not always flow gas volumes in constant proportion to the ownership interests in the production field. We clarify that as long as all the same parties share ownership interests in the pipeline and in all production attached to that line, the owner-shipper exemption will apply.

OCS Producers would expand the owner-shipper exemption to permit parties that are not shippers to hold interests in a pipeline. A premise of the owner-shipper exemption is that where all parties share the same ultimate interest, the self-dealing of one will be the self-dealing of all. Introducing non-shipping pipeline owners, introduces third parties that do not necessarily share interests in common with shipper-owners. This undermines our assumption that parties engaged in a single enterprise will have little motive to exploit one another; therefore, we will not broaden the shipper-owner exemption in the proposed manner.

We clarify that the fact that upstream laterals and/or extensions of a pipeline system qualify for reporting exemptions is not determinative of whether the downstream segments of the same pipeline system are exempt. For example, consider an offshore pipeline system configured in the form of an inverted “Y,” owned and operated by gas producers A, B, and C. Gas flows in separate paths along the left and right legs, merging into a single stream that moves along the trunk of the “Y.” Assuming the legs are the only lines connecting to the trunk, if producer A owns and ships all the gas in the left leg, and producers B and C own and ship all of the gas in the right leg, then each leg qualifies for a reporting exemption. The left leg comes under the single-shipper exemption and the right leg under the shipper-owner exemption. In addition, because all gas flowing along the trunkline portion of the pipeline system is owned by the same parties that own that line, the trunkline would also qualify for the shipper-owner exemption. We note that if the trunkline were owned by only one or two of the three producers, the trunkline could not qualify for this exemption. The legs leading into the trunkline retain their exempt status regardless of the ownership of the trunkline.

We clarify that transporting gas on behalf of MMS under its royalty-in-kind program will be considered to be service for a separate shipper—but only if gas is actually moving under such an arrangement. 36 In theory, MMS royalty-in-kind gas could flow in every offshore pipeline. In practice, at present, only minimal amounts of such gas are actually flowing. In the final rule, we rejected MMS' suggestion that we treat its potential participation as a second shipper as voiding the single-shipper and owner-shipper exemptions. Here, we reject OCS Producers' contrary suggestion that we carve out an exception to retain those same exemptions where MMS participates as a shipper. Recognizing the provisional nature MMS' royalty-in-kind collection program, we reaffirm the wait-and-see approach of the final rule: “in the event MMS moves beyond its present royalty-in-kind pilot program and begins to collect a significant portion of royalty payments as gas volumes, we may be inclined to revisit the applicability of the reporting exemptions.”  37

Williams urges the Commission to state that it does not intend to use the OCSLA to impose cost-based rates.

Duke and Williams are concerned that potential allegations of rate discrimination will create the need to renegotiate existing contracts every time a new customer is signed up under different terms.

Duke and Williams are concerned that the reporting requirements will compel pipelines to forego individually-tailored offerings in favor of uniform rates and services.

We recognize that the OCSLA contains no provision for the imposition of cost-based rates and clarify that it is not our intention to apply a full NGA cost-of-service review to non-NGA OCS entities. Our focus under the OCSLA is open and nondiscriminatory access, not ratemaking methodology. Thus, as long as an OCS service provider charges its customers compatible rates, and assuming there is no rate inequity, then under the OCSLA we would have no cause for further inquiry regarding the rates' derivation. Of course, if an OCS service provider is subject to the NGA, its rates would be scrutinized and authorized as just and reasonable under the NGA.

The prospect that OCSLA reporting might place a straightjacket on OCS service providers was raised and responded to in the final rule. There we rejected such speculation, stating that “we see no bar to a service provider offering different shippers different terms—provided the variation in the terms of service either reflect differences in costs incurred to provide service or reflect differences among the shippers served,”  38 a position we reaffirm here. We clarify that our review of a service provider that charges a lower rate to one customer and a higher rate to another would not necessitate scrutiny of the service provider's full cost of service data. Rather, the service provider would only need to provide that data and other information material to justify the higher rate.

We reiterate that we will neither oblige an OCS service provider to offer identical rates and terms to all customers to meet the OCSLA's nondiscrimination mandate nor oblige comparable OCS service providers to offer identical rates and terms of service. Provided an OCS service provider can justify variable conditions of service among its customers, we may find such customers are not in fact similarly situated. Additionally, if comparable service providers can articulate an acceptable reason for differences in their rates and terms of service, we may accept the differences as reasonable reflections of distinctive business conditions and practices. 39

Duke and Williams are correct to suggest that offering service to a new customer under terms at odds with those of existing customers may give rise to suspicions of discrimination. However, such suspicions may be set aside if the service provider demonstrates a legitimate reason for such treatment, e.g., a disparity in new and existing customer reserve commitments. Thus, while a service provider may seek safe harbor by establishing a uniform tariff applicable to all customers, we do not interpret the OCSLA as requiring this. To clarify, we do not read the OCSLA's nondiscrimination requirement as a most-favored-nations clause; where an OCS service provider can present an acceptable rationale for offering its customers different rates and terms, we can find different conditions of service acceptable.

Duke asserts that reporting will lessen competition by reducing the business alternatives now available to offshore service providers, which will lead to diminished OCS investment. This conflicts with the premise of Order No. 639 that “the free flow of information regarding offshore gas activities is critical to the successful creation of a competitive and efficient marketplace.”  40 We are unclear which particular business practices depend on remaining closeted to remain viable. We stress that this new rule imposes no new obligations on how OCS service providers conduct business; it is the OCSLA that obligates OCS service providers to conduct business premised on open and nondiscriminatory access.

As discussed above, we do not intend for reporting to force all OCS service providers to adhere to one rigid tariff. We see no reason that the flexibility, variety, and experimentation reflected in existing offshore agreements and practices cannot be sustained under this new reporting regime, provided these business arrangements conform to the OCSLA's longstanding open and nondiscriminatory access requirements. Thus, reporting should neither diminish the number of legitimate business alternatives nor diminish offshore investments.

Duke points out that the OCSLA applies with equal force to oil and gas transportation and asks why the new reporting requirements are confined to gas. 41

Here we are concerned solely with offshore natural gas operations, and while this leads us to also consider other statutes' impact on such operations (principally the NGA), we find no cause to consider OCSLA provisions affecting oil operations. In the final rule, we explained to Duke that in this proceeding we have elected to confine our considerations to gas matters, given that we have found rates for transportation on oil pipelines to be just and reasonable, 42 but have made no such finding for rates for transportation on NGA-exempt OCS gas pipelines. Thus, to protect gas shippers using NGA-exempt OCS facilities from discriminatory, exorbitant charges, we look to the OCSLA. We do not rule out the future implementation of similar reporting requirements for offshore oil service providers, but that possibility is outside our present purpose.

OCS Producers expect the Commission to be inundated with requests for declarations that production-related facilities and services qualify for a reporting exemption.

We are unable to predict the number of petitions that might be presented with respect to OCSLA reporting status; however, we intend to give prudent consideration to the issues raised in each request and process all requests as expeditiously as our resources permit. Initial uncertainties about how to assess whether exemptions apply should recede with each declaratory order addressing the merits of the OCSLA exemptions. As discussed in the final rule, we entrust OCS service providers with undertaking a good faith analysis of whether they qualify for one of the reporting exemptions, i.e., service providers need not obtain prior Commission permission in order to lay claim to a reporting exemption.

We expect requests for a review of an entity's OCSLA reporting status will follow the pattern we are familiar with for requests of an entity's NGA jurisdictional status, namely, the Commission sees primarily those cases where the circumstances give rise to doubts about results reached. In the far more numerous cases where the facts lead to a reasonably unambiguous outcome, unless a company seeks reassurance that its own analysis is correct, the Commission's own assessment is rarely requested.

NGSA suggests that service providers be permitted to reserve capacity for their own future use and offer such capacity to third parties until needed. NGSA points out that NGA-regulated pipelines can reserve capacity for future use, and is apprehensive that unless NGA-exempt OCS pipelines can do the same, shippers seeking access to a service provider's facilities could disrupt a development plan between an OCS service provider and producer. NGSA also suggests OCS service providers be required to enlarge capacity when prospective shippers agree to bear the cost of the expansion.

We endorse the idea of sizing facilities to match anticipated transportation needs. Particularly offshore, where developing a producing field may entail extensive time and expense, we recognize the practicality of coordination, whereby a producer incrementally bringing additional volumes on line can be assured that when the field's extraction reaches its zenith, pipeline facilities will be in place with the capacity to take away and transport all gas volumes. Although such coordination, ultimately, is efficient, there can be a period of underutilization between the time a large diameter line is completed and the field it serves reaches full production.

Under such circumstances, we believe it is appropriate to compel the service provider to allow other shippers to interconnect, at their own expense, with the underutilized line. However, given that the primary purpose of the new line is to pick up gas at a particular production platform, as the volumes available at that production platform increase with the development of the field, these other shippers may be curtailed. This is appropriate, given that such shippers will have elected to enter into contracts for service on an interim basis, i.e., between the time the line is placed in operation and the time excess capacity on the line is needed by the producer-shipper. We will permit a service provider to reserve its own capacity, as NGSA requests, provided (1) potential shippers' transportation requirements are taken into consideration in designing the new line, (2) shippers willing to bear the economic costs of moving gas on an until-as-needed basis are allowed access to reserved but unused capacity, and (3) the service provider does not shift costs associated with the underutilization of its own reserved capacity onto other customers.

NGSA requests we mandate expansions. Our authority to do so is contained in OCSLA section 1334(f)(2)(B), which states that:

We have yet to exercise our authority under this section of the OCSLA, and until we are faced with a case of first impression covering our mandatory expansion authority, we believe it would be imprudent to speculate on how we might exercise that authority.

OCS Producers point to instances where the Commission's applies its rule to “OCS service providers” and “facilities” used to “move” gas. OCS Producers believes these words designate categories that are improperly broad given that the OCSLA, by its own terms, applies to “pipelines” that “transport” gas.

The OCSLA, by its own terms, applies to the exploration, development, or production of OCS minerals—defining “production” to include the “transfer of minerals to shore;”  43 “minerals” being defined as including gas. 44 This is a broader regulatory sweep than the NGA. For example, NGA section 1(b) excludes production and gathering facilities, whereas the OCSLA contains no such limitations.

For this reason, rather than refer to an OCS “pipeline,” which risks being associated with the narrower NGA usage, we deliberately refer to an OCS “service provider.” Similarly, “transportation,” as a term of art under the NGA, carries connotations and limitations that we seek to sidestep. Our reference to facilities that “move” gas is no more expansive than the OCSLA's section 1331(q) description of “transportation,” which covers everything between a wellhead and shore.

We clarify that we do not intend to cross reference common OCSLA and NGA terms. Thus, the OCSLA's use of the terms “pipeline” and “transportation” is to be interpreted by exclusive reference to the OCSLA. NGA definitions are relevant to the OCSLA only to the extent that NGA-regulated interstate transportation facilities are exempt from OCSLA reporting.

OCS Producers request we refine the § 330.1(b) definition of an OCS gas service provider to explicitly exclude production and explicitly include gathering. The OCSLA contains an expansive view of “production,” quoted above. Rather than attempt to define production more rigorously, we find the more prudent approach is to make use of our OCSLA authority to exclude feeder line facilities from compliance with the competitive principles of section 1334(f). This should have the effect of removing the bulk of production activities from the OCSLA reporting requirements. All other OCS facilities and services, unless they fall under the single-shipper, owner-shipper, or NGA-regulated exemption, remain subject to the reporting requirements.

The amendments to our regulations adopted in this order on rehearing will become effective October 2, 2000. As discussed above, since October 15, 2000 is a Sunday, OCS service providers' initial reports will be due on October 16, 2000.

In accordance with section 513(f)(1) of the act (21 U.S.C. 360c(f)(1)), devices that were not in commercial distribution before May 28, 1976, the date of enactment of the Medical Device Amendments of 1976 (the amendments), generally referred to as postamendments devices, are classified automatically by statute into class III without any FDA rulemaking process. These devices remain in class III and require premarket approval, unless and until the device is classified or reclassified into class I or II or FDA issues an order finding the device to be substantially equivalent, in accordance with section 513(i) of the act, to a predicate device that does not require premarket approval. The agency determines whether new devices are substantially equivalent to previously marketed devices by means of premarket notification procedures in section 510(k) of the act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807) of FDA's regulations.

Section 513(f)(2) of the act provides that any person who submits a premarket notification under section 510(k) of the act (21 U.S.C. 360(k)) for a device that has not previously been classified may, within 30 days after receiving an order classifying the device in class III under section 513(f)(1) of the act, request FDA to classify the device under the criteria set forth in section 513(a)(1) of the act. FDA shall, within 60 days of receiving such a request, classify the device by written order. This classification shall be the initial classification of the device. Within 30 days after the issuance of an order classifying the device, FDA must publish a notice in the Federal Register announcing such classification.

In accordance with section 513(f)(1) of the act, FDA issued an order on April 25, 2000, classifying the Urometrics EROS-Clitoral Therapy Device into class III because it was not substantially equivalent to a device that was introduced or delivered for introduction into interstate commerce for commercial distribution before May 28, 1976, or to a device that was subsequently reclassified into class I or class II. On April 27, 2000, FDA filed a petition submitted by Urometrics, requesting classification of the Urometrics EROS-Clitoral Therapy Device into class II under section 513(f)(2) of the act.

After review of the information submitted in the petition, FDA determined that the Urometrics EROS-Clitoral Therapy Device can be classified in class II with the establishment of special controls. This device is indicated for use in women with female sexual arousal disorder, which can present with symptoms of diminished vaginal lubrication, diminished clitoral and genital engorgement, lowered sexual satisfaction, and a reduced ability to achieve orgasm. FDA believes that class II special controls, in addition to the general controls, will provide reasonable assurance of the safety and effectiveness of the device.

FDA has identified the following risks to health associated specifically with this type of device: Unknown effects of extended use, and improper use of the device due to misplacement, or use of the device over compromised tissue. In addition to the general controls of the act, this type device is subject to the following special control: A special controls guidance document entitled “Guidance for Industry and FDA Reviewers: Class II Special Controls Guidance for Clitoral Engorgement Devices.”

Section 510(m) of the act provides that FDA may exempt a class II device from the premarket notification requirements under section 510(k) of the act, if FDA determines that premarket notification is not necessary to provide reasonable assurance of the safety and effectiveness of the device. FDA has determined that premarket notification is necessary to provide reasonable assurance of the safety and effectiveness of this type of device and, therefore, the device is not exempt from premarket notification requirements. FDA review of key design features, data sets from bench studies and clinical trials, other relevant performance data, and labeling will ensure that minimum levels of performance, for both safety and effectiveness, are addressed before marketing clearance. Thus, persons who intend to market this device must submit to FDA a premarket notification submission containing information on the clitoral engorgement device before marketing the device.

On April 28, 2000, FDA issued an order to the petitioner classifying Urometrics EROS-Clitoral Therapy Device and substantially equivalent devices of this generic type into class II under the generic name, clitoral engorgement device. FDA identifies this generic type of device as a device designed to apply a vacuum to the clitoris. It is intended for use in the treatment of female sexual arousal disorder. FDA is codifying this device by adding 21 CFR 884.5970. This order also identifies the following special control applicable to this device: A special controls guidance document entitled “Guidance for Industry and FDA Reviewers: Class II Special Controls Guidance for Clitoral Engorgement Devices.”

The agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

FDA has examined the impacts of the final rule under Executive Order 12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612) (as amended by subtitle D of the Small Business Regulatory Fairness Act of 1996 (Public Law 104-121)), and the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The agency believes that this final rule is consistent with the regulatory philosophy and principles identified in the Executive Order. In addition, the final rule is not a significant regulatory action as defined by the Executive Order and so it is not subject to review under the Executive Order.

The Regulatory Flexibility Act requires agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. FDA knows of only one manufacturer of this type of device. Classification of these devices from class III to class II will relieve this manufacturer of the device of the cost of complying with the premarket approval requirements of section 515 of the act (21 U.S.C. 360e) and may permit small potential competitors to enter the marketplace by lowering their costs. The agency, therefore, certifies that the final rule will not have a significant impact on a substantial number of small entities.

Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that agencies prepare a written statement of anticipated costs and benefits before proposing any rule that may result in an expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million in any one year (adjusted annually for inflation). The Unfunded Mandates Reform Act does not require FDA to prepare a statement of costs and benefits for the final rule, because the final rule is not expected to result in any 1-year expenditure that would exceed $100 million.

FDA has analyzed this final rule in accordance with the principles set forth in Executive Order 13132. FDA has determined that the rule does not contain policies that have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Accordingly, the agency has concluded that the rule does not contain policies that have federalism implications as defined in the order and, consequently, a federalism summary impact statement is not required.

This final rule contains no collections of information. Therefore, clearance by the Office of Management and Budget under the Paperwork Reduction Act of 1995 is not required.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 884 is amended as follows:

This rule finalizes an interim rule (65 FR 3124, Jan. 20, 2000, as corrected at 65 FR 5024, Feb. 2, 2000) which identified six products as being exempt from certain portions of the Controlled Substances Act (21 U.S.C. 801 et seq. ) (CSA). Section 1903 of the Anabolic Steroids Control Act of 1990 (title XIX of Pub. L. 101-647) (ASCA) provides that the Attorney General may exempt products which contain anabolic steroids from all or any part of the CSA if the products have no significant potential for abuse. The procedure for implementing this section of the ASCA is described in 21 CFR 1308.33. Exempt status removes each product from application of the registration, labeling, records, reports, prescription, physical security, and import and export restrictions associated with Schedule III substances.

Manufacturers of six anabolic steroid products submitted exempt status applications to the Deputy Assistant Administrator for the DEA Office of Diversion Control in accordance with 21 CFR 1308.33. Each application delineated a set of facts which the applicant believed justified the exempt status of its product. The applicants provided information which they believed showed that because of the specific product preparation, concentration, mixture, or delivery system these products had no significant potential for abuse. Upon acceptance of the applications, the Deputy Assistant Administrator requested from the Assistant Secretary for Health, Department of Health and Human Services (HHS) a recommendation as to whether these products should be considered for exemption from certain portions of the CSA. The Deputy Assistant Administrator received the determination and recommendation of the Assistant Secretary for Health and Surgeon General that there was sufficient evidence to establish that each product does not possess a significant potential for abuse.

In the interim rule, the Deputy Assistant Administrator identified the following six products as being exempt from application of sections 302 and through 309 and 1002 through 1004 of the CSA (21 U.S.C. 822-829 and 952-954) and 21 CFR 1301.13, 1301.22, and 1301.71 through 1301.76:

The interim rule became immediately effective on publication in the Federal Register, January 20, 2000, in order to provide a health benefit to the public by more expeditiously increasing the access to these anabolic steroid products and to reduce regulatory restrictions that DEA (in consultation with HHS) has determined to be an unnecessary burden on the businesses manufacturing these products.

Comments to the interim rule were requested, none were received.

With the publication of this final rule, the complete list of products referred to in 21 CFR 1308.34 is as follows:

Additional copies of this list may be obtained by submitting a written request to the Drug and Chemical Evaluation Section, Office of Diversion Control, Drug Enforcement Administration, Washington, D.C. 20537.

The Drug Enforcement Administration makes every effort to write clearly. If you have suggestions as to how to improve the clarity of this regulation, call or write Patricia M. Good, Chief, Liaison and Policy Section, Office of Diversion Control, Drug Enforcement Administration, Washington, D.C. 20537, Telephone (202) 307-7297.

The Deputy Assistant Administrator, for the DEA Office of Diversion Control, in accordance with the Regulatory Flexibility Act [5 U.S.C. 605(b)], has reviewed this rule and by approving it, certifies that it will not have significant economic impact on a substantial number of small business entities. The granting of exempt status relieves persons who handle the exempt products in the course of legitimate business from the registration, labeling, records, reports, prescription, physical security, and import and export restrictions imposed by the CSA.

The Deputy Assistant Administrator further certifies that this rulemaking has been drafted in accordance with the principles in Executive Order 12866, section 1(b). The Office of Management and Budget (OMB) reviewed the interim rule as a significant action; the DEA received no comments regarding the interim rule. This final rule falls into a category of regulatory actions which OMB has determined are exempt from regulatory review. Therefore, this action has not been reviewed by the OMB.

This action has been analyzed in accordance with the principles and criteria in Executive Order 13132 and it has been determined that this rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment.

This rule will not result in the expenditure by State, local and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more in any one year, and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under provisions of the Unfunded Mandates Reform Act of 1995.

This rule is not a major rule as defined by Section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996. This rule will not result in an annual effect on the economy of $100,000,000 or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete with foreign-based companies in domestic and export markets.

Section 204 of The Comprehensive Methamphetamine Control Act of 1996 (MCA), which became effective on October 3, 1996, amended the definition of “List II chemicals” in Section 102(35) of the Controlled Substances Act (CSA) (21 U.S.C. 802(35)) to include iodide as a List II chemical. The MCA, however, did not control salts of iodine ( e.g., potassium iodide or sodium iodide).

The listed chemical iodine is currently available as crystals, tinctures, and formulations ( e.g., povidone-iodine and polozamer-iodine complexes). Under this rule, only transactions involving at least 0.4 kg of iodine crystals will be subject to regulatory controls. Since iodine tinctures and formulations are considered chemical mixtures, transactions in these materials are not currently regulated and are not affected by this rule. However, DEA is conducting a separate rulemaking to develop regulations governing the distribution of any chemical mixtures that contain a listed chemical (63 FR 49506). As such, some chemical mixtures may soon be subject to recordkeeping and other chemical regulatory control provisions of the CSA.

This rule also relates to the chemical described in the MCA as “hydrochloric gas.” This term refers to the chemical hydrogen chloride that is free of water. The DEA has adopted the term “anhydrous hydrogen chloride,” which is the term used most commonly by the industrial and scientific communities to describe this chemical. Prior to passage of the MCA, hydrochloric acid was included as a listed chemical by regulation. The anhydrous form of hydrochloric acid, anhydrous hydrogen chloride, is a regulated form of hydrochloric acid (57 FR 43614). Prior to the MCA, domestic transactions in hydrochloric acid, including anhydrous hydrogen chloride, were excluded from the definition of “regulated transaction” (21 CFR 1310.08(a)). However, the MCA provides that domestic transactions in the anhydrous hydrogen chloride form of hydrochloric acid are regulated transactions, and subject to the recordkeeping and reporting requirements of 21 CFR 1310. This change does not affect other forms of hydrochloric acid.

Not all transactions involving a listed chemical are necessarily regulated. For purposes of defining a regulated transaction (21 U.S.C. 802(39)), the CSA provides that the Attorney General may establish a threshold amount for each listed chemical. A threshold amount is established to determine whether a receipt, sale, importation or exportation within a calendar month or cumulative transactions by an individual within a calendar month are considered regulated transactions. Unless the Attorney General sets a threshold, the threshold is considered to be zero; this has been the case of iodine and anhydrous hydrogen chloride since passage of the MCA on October 3, 1996.

When an amount of listed chemical distributed to any “person” in a calendar month is equal to or greater than the threshold, the transaction is a regulated transaction. Thereafter, all transactions within the calendar month to those persons involving the listed chemical are regulated transactions. If the transaction is considered a regulated transaction, recordkeeping and reporting requirements as specified in 21 CFR Part 1310 apply. A “person” is defined in 21 CFR 1300.02(21) as “any individual, corporation, government or governmental subdivision or agency, business trust, partnership, association, or other legal entity.” This includes any consumer who takes possession of a product, even as a free sample.

Prior to this Rule, thresholds had not been established for iodine or anhydrous hydrogen chloride. Therefore, all domestic distributions involving these chemicals became regulated effective October 3, 1996. In order to establish thresholds, the DEA published a notice of proposed rulemaking on September 30, 1997, (62 FR 51072) that proposed domestic thresholds for anhydrous hydrogen chloride and iodine of 0.0 kilograms and 0.4 kilograms, respectively. Interested persons were invited to comment.

The proposed domestic threshold of anhydrous hydrogen chloride is based on several factors: Nature of its legitimate use in industry; quantities used by legitimate industry; and quantities of anhydrous hydrogen chloride seized at clandestine laboratories. DEA learned that most transactions of anhydrous hydrogen chloride involve thousands of pounds, whereas clandestine laboratories use containers holding quantities as small as 0.5 pounds. Since the majority of anhydrous hydrogen chloride transactions involved large quantities, and to ensure the most effective controls on the diversion of this chemical, the DEA proposed a domestic threshold of 0.0 kilograms.

The comment period lasted for 60 days after publication of the proposed rule in the Federal Register. Interested persons who might be affected by the proposed thresholds responded. The DEA considered each of the seven comments received as well as the concerns of law enforcement and the provisions of the MCA.

A total of seven comments were received with two of the seven comments referring to iodine. One requested that the threshold be raised from 0.4 kilograms to 3 kilograms. The other comment encouraged DEA to take into account recognized industrial standards for iodine distribution and to reduce the reporting burden for all legitimate suppliers and consumers of iodine. The standard for iodine distribution refers to the iodine package size used in distributions.

All seven comments mentioned anhydrous hydrogen chloride. These comments mostly requested clarification while one requested that the threshold be set at 5 pounds. The comments also included a description of types of transactions in anhydrous hydrogen chloride that the commenters stated should not be subject to regulation.

Three comments described transactions involving very large amounts of anhydrous hydrogen chloride. These transactions involve a special form of anhydrous hydrogen chloride referred to as refrigerated liquid. The material is distributed via large tank trucks, tank cars or by pipeline. The DEA agrees that these transactions should not be subject to regulation. However, the Notice of Proposed Rulemaking did not propose that these methods of distribution be exempted from regulation. Therefore, the DEA will exempt these forms of transactions via this notice as an interim final rule. The rule will be in effect upon publication but the DEA will allow for a comment period.

This final rule will: (1) Establish the iodine threshold, (2) establish the anhydrous hydrogen chloride thresholds, and (3) serve as an interim rule that exempts certain transactions in anhydrous hydrogen chloride. Due to the complexity of this final rule, it will be broken into three parts.

The majority of clandestine laboratory seizures in the United States are those manufacturing methamphetamine, a Schedule II controlled substance. From 1993 through calendar year 1998, the DEA has participated in more than 4,740 methamphetamine laboratory seizures in the United States. This number does not include thousands of additional methamphetamine laboratory seizures by state and local authorities.

Clandestine laboratory operators most frequently use the ephedrine/pseudoephedrine reduction method to synthesize methamphetamine. This method utilizes hydriodic acid, which is a List I chemical with a domestic threshold of one liter. Because of increased controls on hydriodic acid, clandestine laboratory operators are resorting to producing their own hydriodic acid. They produce hydriodic acid from iodine, either in a separate step or by using iodine directly in the synthesis of methamphetamine.

Iodine is used largely in the form of a complex, salt, or as part of some chemical, that contains iodine. Iodine may be found dissolved in some disinfectants. Iodine does not dissolve well in water and so needs to be bound to a stabilizer or in some way converted to a water stable form to be used in disinfectants. Iodine crystals have very limited direct use and are mostly restricted to laboratory settings.

The major end uses of iodine are in catalysts, stabilizers and animal feeds. DEA has identified that farriers use iodine crystals. It can be purchased from either veterinary supply stores, feed and tack/farm supply stores or chemical distributors.

The reasons cited in the proposed rule for the 0.4 kilogram threshold included legitimate use in industry, including quantities normally required for such uses; quantities purchased by clandestine laboratory operators; quantities seized at clandestine laboratory sites; and iodine's use in the production of methamphetamine. The majority of clandestine laboratories that produce methamphetamine do so in less than one-half kilogram quantities. The DEA cannot determine the source of all of the iodine seized at the clandestine laboratories due to operators removing the original labels or transferring the iodine to other unmarked containers. At those sites where iodine was seized in its original containers, DEA identified that the iodine was being purchased from either veterinary supply stores, feed and tack/farm supply stores or chemical distributors. The DEA has determined that a 2-ounce bottle of iodine would last a rancher or a farrier several months and that, typically, an individual would purchase at the most three 2-ounce bottles (approximately 0.2 kilograms).

Based on the above information, the DEA proposed a domestic threshold of 0.4 kilograms for iodine. This would subject transactions of 1 pound package size or larger to recordkeeping requirements and would ensure the most effective controls on the diversion of iodine while minimizing the impact on industry, particularly for small businesses such as veterinary, feed, and farm supply stores.

One comment suggested that the threshold be raised to 3 kilograms for iodine. The perceived substantial burden that the threshold will place on certain retailers, namely those associated with supplying the research community, is cited as the reason for this suggested threshold. The DEA believes that implementing a 3 kilogram threshold for iodine would allow current diversion of this chemical to continue mostly unabated. The DEA has queried suppliers of iodine to walk-in customers regarding the amounts of iodine that these customers would reasonably require for legitimate purposes and found that a 2 ounce bottle (approximately 60 grams) would last a typical purchaser several months. Additionally, the DEA has evidence that indicates that iodine is diverted for use at illicit methamphetamine laboratories often in one pound sizes. The DEA is aware that many legitimate distributors devote a good deal of effort the prevent their products from being sold to traffickers. However, some distributors sell to the general public under the pretense that the chemicals are to be used solely for research purposes without regard to how these chemicals are actually used. Based on these findings, the DEA concluded that the 0.4 kilogram threshold for iodine would impact traffickers while minimizing the burden upon legitimate industry.

DEA estimates that approximately 75 grams (0.17 pounds) of methamphetamine can be produced from 0.4 kilograms of iodine that has been converted into hydriodic acid. Approximately 563 grams (over 1 pound) of methamphetamine can be produced from 3 kilograms of iodine converted by hydriodic acid. The amount of 0.4 kilograms is twice the amount identified as the normal quantity range sold in legitimate face-to-face transactions. These factors contribute to setting the threshold at 0.4 kilograms.

It should be noted that to help lessen the burden of recordkeeping, 21 CFR 1310.06(b) provides that normal business records shall be considered adequate, provided they contain information described in 21 CFR 1310.06(a) and are readily retrievable from other business records. These records can be those already required by other federal, state and local regulatory agencies.

DEA has determined that increasing the iodine threshold from 0.4 to 3 kilograms will not be sufficient to prevent diversion of iodine for illegitimate reasons. Therefore, the threshold for iodine will be set at 0.4 kilograms.

The statutory term “hydrochloric gas” is a form of hydrogen chloride more properly called anhydrous hydrogen chloride. Anhydrous hydrogen chloride is hydrogen chloride that is free from water. When in the form of a gas it is free of water. At ambient temperature and normal atmospheric pressure, anhydrous hydrogen chloride exists as a gas. Therefore, sometime anhydrous hydrogen chloride is referred to as hydrogen chloride gas or hydrochloric gas.

When the atmospheric pressure is increased and/or the temperature is decreased, anhydrous hydrogen chloride can change from a gas to a liquid. This is sometime referred to as refrigerated hydrogen chloride. Refrigerated hydrogen chloride is the same as anhydrous hydrogen chloride even though the physical state has been changed from a gas to a liquid.

Anhydrous hydrogen chloride is often dissolved in water. When dissolved it is usually referred to as hydrochloric acid. A commercial name for hydrochloric acid is muriatic acid. Because it is mixed with water, the term anhydrous cannot be used.

Yes. Prior to the MCA, by regulation, all forms of hydrochloric acid, which included anhydrous hydrogen chloride, were a list II chemical (21 CFR 1310.02(b)(8)). However, all domestic and import transactions of hydrochloric acid were excluded from the definition of “regulated transaction” (21 CFR 1310.08(a)). In addition, by regulation, all exports, transshipments and international transactions of anhydrous hydrogen chloride, except those to all South American countries and Panama above a threshold of 27 kilograms, had similarly been excluded from the definition of “regulated transaction” (21 CFR 1310.08(b)). This may have given the appearance that anhydrous hydrogen chloride was a non-regulated form of the chemical. Prior to enactment of the MCA, only exports to all South American countries and Panama above a threshold of 27 kilograms had been regulated transactions (21 CFR 1310.08(b)).

The CSA amendment by the MCA had the practical effect of directing DEA to place domestic controls on anhydrous hydrogen chloride. As a result, domestic transactions and the already controlled exports, transshipments and international transactions of anhydrous hydrogen chloride to designated countries are regulated transactions. These designated countries are listed in 21 CFR 1310.08(b).

Hydrochloric acid, that is, hydrogen chloride dissolved in water, is not affected by these regulations. Domestic and import transactions involving that form of the chemical are not regulated transactions. Only export transactions of threshold amounts to those countries designated in 21 CFR 1310.08(b) are regulated transactions.

i. Legal uses. According to information gathered by the DEA, the major legitimate uses of anhydrous hydrogen chloride are in the cotton industry, the electronic/silicon industry, the pharmaceutical industry and other industries for use in chemical syntheses. All of those industries use large quantities of anhydrous hydrogen chloride for their manufacturing processes. Generally, thousands of pounds are involved in a single transaction with the exception of smaller quantities (i.e., single or multiple cylinders) being used by research, analytical or synthetic laboratories.

ii. Illicit uses. Anhydrous hydrogen chloride can be used to convert an illicitly produced controlled substance from the “base” form to the “salt” form. These two forms have different physical characteristics. It is the salt form that is typically sold and used by individuals for abuse purposes.

Hydrochloric acid can also be used to isolate the base by forming the salt. However, using hydrochloric acid is not as easy as using anhydrous hydrogen chloride and requires the proper solvents and laboratory technique. Hydrochloric acid has advantages in the illicit processing of cocaine and heroin. Anhydrous hydrogen chloride is the preferred chemical for the manufacture of methamphetamine into a usable form.

Seven responses were received; two responses came from membership organizations. All seven comments requested clarifications or exemptions for specific types of transactions. One comment requested that the threshold be raised to 5 pounds. The DEA has carefully reviewed and considered the comments received in response to the Notice of Proposed Rulemaking. These will be discussed below.

Five comments requested that the DEA clarify what is meant by hydrochloric gas. In response, DEA notes that the chemical being addressed in this rulemaking is the form of hydrochloric acid that is free of water. This substance is anhydrous hydrochloric acid or anhydrous hydrogen chloride. The DEA has responded to these concerns by revising 21 CFR 1310.02 and 1310.04 to include the term “anhydrous hydrogen chloride,” thereby specifying the form of the chemical for which domestic transactions are regulated.

Two comments stated that the designations ( e.g. , UN 1050, UN 1789 and UN 2186) used by the United Nations (UN) should be adopted to identify the different forms of the acid. The DEA agrees that this is an efficient means to identify the acid for industrial commerce. However, the introduction of these numbers into the CFR would not be advantageous. DEA believes that introducing new designations to the CFR may cause confusion and imply that a new chemical has been placed in list II.

Anhydrous forms of hydrochloric acid being addressed in this rulemaking are anhydrous hydrogen chloride (designated as UN 1050; Anhydrous gas) and refrigerated anhydrous hydrogen chloride (designated as UN 2186; anhydrous refrigerated liquid). These forms of hydrochloric acid are free from water and thus included as anhydrous hydrogen chloride. The form that is dissolved in water is hydrochloric acid (designated as UN 1789) which has been addressed under a separate rulemaking published on September 22, 1992, (57 FR 43614). That final rule identifies anhydrous hydrogen chloride as a form of hydrochloric acid regulated under the chemical designation of hydrochloric acid (DEA chemical code number 6545).

The DEA does not treat the different forms of hydrogen chloride as separate listed chemicals with distinct DEA chemical code numbers (57 FR 43614). Certain transactions in hydrochloric acid, including domestic distributions, have been exempt from the recordkeeping and reporting requirements (21 CFR 1310.08(a)(b)). The MCA directed DEA to impose controls on domestic transactions of the anhydrous form of hydrochloric acid but not the form dissolved in water. However, no new chemical is being addressed. The use of UN numbers in the CFR may imply that new chemicals are being added to the list of regulated chemicals.

Introducing the UN numbers to the regulatory language would create additional problems. Reference to each form of the chemical will need to be made via UN numbers everywhere the chemical is mentioned. Because UN numbers may not be understood by all who use the CFR, it may cause confusion. The DEA would need to define the UN numbers in the CFR to make use of them.

Two comments raised the issue of including anhydrous hydrogen chloride in 21 CFR 1310.02(b)(8), which lists hydrochloric acid. The comments noted that if the different forms are named in the same subsection, then any time a reference in the regulation mentions hydrochloric acid, it also should include anhydrous hydrogen chloride. It was suggested that these different forms be listed separately in List II. The DEA concluded that this might imply that a new substance is being placed on the list. All forms of hydrogen chloride, as finalized in 57 FR 43614, are List II chemicals and currently regulated in 21 CFR 1310.02(b). To clarify, 21 CFR 1310.02(b)(8) will be modified to read: “Hydrochloric acid (including anhydrous hydrogen chloride).”

The comments raised the fact that DEA needs to clarify when a specific form of hydrogen chloride is referred to in the regulations. The appropriate sections of 21 CFR ( e.g., 1310.04 and 1310.08) will be modified accordingly to reflect this clarification. The new paragraph (I) in 21 CFR 1310.04(f)(2)(ii) will then be added to read “Anhydrous hydrogen chloride.” 21 CFR 1310.04(f)(2)(iv)(A)(1) will read “Anhydrous hydrogen chloride.” 21 CFR 1310.08(a) will be amended to read “Domestic and import transactions of hydrochloric and sulfuric acids but not including anhydrous hydrogen chloride.” 21 CFR 1310.08(b) will be amended by inserting after “hydrochloric” the phrase “(including anhydrous hydrogen chloride)”.

One comment suggested that the threshold for anhydrous hydrogen chloride be raised to 5 pounds. Many clandestine operations can be successfully carried out with 5 pounds or less of anhydrous hydrogen chloride. While most anhydrous hydrogen chloride containers seized at clandestine laboratories are 65 pounds and less, the DEA has identified small bottles containing 0.5 pounds of anhydrous hydrogen chloride at methamphetamine laboratories. The zero threshold for anhydrous hydrogen chloride has been chosen to prevent the diversion of smaller canisters, as small as 0.5 pounds, for use in illegal drug production.

As stated, the DEA is aware that legitimate chemical distributors understand the growing problem of diversion and act responsibly to prevent their products from being used for illicit purposes. However, some distributors sell products used for the production of illegal substances under the pretense that they are for research purposes only without regard for how the products will actually be used. Raising the threshold to 5 pounds would allow unscrupulous suppliers to sell almost without regard for the regulatory process. DEA determined that clandestine laboratories would be supplied with desired chemical if the threshold were raised to 5 pounds. Therefore, the threshold will be set at 0.0 kilograms.

One comment stated that undue burden would be placed upon industry if controls of anhydrous hydrogen chloride were to include all containers and physical states. The person stated that regardless of the physical state, all containers would have the gas phase in the container headspace. The headspace refers to the empty space above the solution within a container. When anhydrous hydrogen chloride is dissolved in water to form a solution of hydrochloric acid, a small amount of the hydrogen chloride gas will form in the headspace above the solution. Because of the zero threshold, the comment requests clarification for treatment of the small amount of gas that naturally forms in any container holding a solution of hydrochloric acid.

DEA would like to clarify that residual anhydrous hydrogen chloride contained in the head space of containers holding a solution of hydrochloric acid will not cause an otherwise non-regulated transaction to be regulated. The chemical being marketed as hydrochloric acid solution is distinctly different than that marketed as anhydrous hydrogen chloride. The natural formation of hydrogen chloride gas above the solution, along with water vapor, does not constitute the formation of anhydrous hydrogen chloride for purposes of this regulation.

The comment also stated that it is not clear from the proposed rule that the domestic regulatory controls would not apply to the inadvertent anhydrous hydrogen chloride present in container headspace of containers of anhydrous hydrogen chloride. The comment is referring to small amounts of anhydrous hydrogen chloride that remain inside a container of anhydrous hydrogen chloride because it is impossible to empty the container completely.

The DEA realizes that a container deemed empty may have residual anhydrous hydrogen chloride present. The purchaser frequently retains these containers until the hydrogen chloride is used and then the container is returned to the distributor. The DEA does not consider transactions involving depleted containers that held anhydrous hydrogen chloride to be regulated transactions just because a residual amount of anhydrous hydrogen chloride is present.

A comment suggested that small quantities of anhydrous hydrogen chloride be include in the DEA Special Surveillance List in lieu of adopting a zero threshold for this chemical. Section 205 of the MCA requires that DEA establish a Special Surveillance List of laboratory supplies. This was established on May 13, 1999 (62 FR 25910). The MCA provides for a civil penalty for distribution of a laboratory supply made with reckless disregard to a person who uses, or attempts to use the laboratory supply in the manufacturing of a controlled substance. The term “laboratory supply” is defined to include listed chemicals. Therefore, listed chemicals are already included on the surveillance list.

The Special Surveillance List is an added means to help prevent the diversion of both listed and other designated chemicals and equipment that can be used in clandestine synthesis of controlled substances. The surveillance list is not a substitute for regulatory controls on regulated transactions of anhydrous hydrogen chloride, a List II chemical. It does not impose recordkeeping, reporting or registration requirements as do regulations associated with listed chemicals.

A comment pointed out that the regulation of anhydrous hydrogen chloride might be a futile attempt at controlling the use of anhydrous hydrogen chloride in the illegal production of controlled substances. Clandestine operators may form their own anhydrous hydrogen chloride by using a method simple enough for such operations.

DEA acknowledges that hydrogen chloride can be manufactured clandestinely. However, commercially produced anhydrous hydrogen chloride is commonly found at seized clandestine laboratories. The control of such chemicals is a valuable tool in denying traffickers a ready supply of anhydrous hydrogen chloride. This is why Congress included such control provisions in the MCA.

A comment questioned whether this rulemaking was a significant rule. The person stated that the DEA acknowledged that the industry was large by including the statement “the majority of anhydrous hydrogen chloride transactions involve thousands of pounds” in the proposed rulemaking. This statement refers to the amount of anhydrous hydrogen chloride traded in a single transaction and not the number of persons carrying out such transactions. The major uses of anhydrous hydrogen chloride were determined to be in the cotton industry, the electronic/silicon industry, the pharmaceutical industry and other industries for use in chemical synthesis. All of these industries use large quantities of anhydrous hydrogen chloride for their manufacturing processes.

Distributions of anhydrous hydrogen chloride have been identified as originating from manufacturing sites that produce anhydrous hydrogen chloride as a by-product of a principle manufacturing operation. Manufacturers distribute large quantities of anhydrous hydrogen chloride, sometimes under terms of a contract, to end-users. The impact of this rulemaking on the trade has been evaluated by considering the added cost of doing business, not the gross annual cost for the entire anhydrous chloride trade. The DEA, as stated, only requires access to records that are part of daily recordkeeping for most companies that trade in this commodity. These records can be those already required by other federal agencies, or by state and local agencies. Normal business records needed by companies for internal recordkeeping are likely to be adequate for the purposes of this rulemaking.

21 CFR 1310.06 states that “* * * normal business records shall be considered adequate if they contain the information listed in paragraph (a) of this section and are readily retrievable from other business records of the regulated person.” This acceptance of records that are already maintained by persons in the anhydrous hydrogen chloride trade reduces the impact on the anhydrous hydrogen chloride industry.

The DEA has considered the comments submitted in response to the notice of proposed rulemaking (62 FR 51072) to establish the anhydrous hydrogen chloride threshold. Out of seven comments received, only one requested that the threshold be raised. Most comments raised issues of clarification or compliance. The DEA concluded that the threshold for anhydrous hydrogen chloride will be established at 0.0 kilograms for domestic distributions. This threshold is based on anhydrous hydrogen chloride cylinders containing as little as 0.5 pounds of the chemical being recovered at illicit methamphetamine laboratories and legitimate transactions of this chemical being large. Maintaining the zero threshold will help curtail diversion of amounts useful to the clandestine operator. Increasing the threshold will allow for the manufacturing of methamphetamine in quantities normally associated with clandestine operations with traffickers obtaining as little as 0.5 pounds of the chemical.

The DEA received comments requesting exemption for two categories of transactions involving anhydrous hydrogen chloride. These are transactions involving: (1) Refrigerated liquid; and (2) anhydrous hydrogen chloride distributed by pipeline. The DEA agrees that anhydous hydrogen chloride distributed by these methods is unlikely to be susceptible to diversion. The exemption for these categories was not proposed in the Notice of Proposed Rulemaking. Authority to remove a category of transaction from the definition of “regulated transaction” is given in 21 U.S.C. 802(39)(A)(iii), which permits exclusion of “any category of transaction or any category of transaction for a specific listed chemical or chemicals specified by regulation of the Attorney General as excluded from this definition as unnecessary for enforcement of this subchapter or subchapter II of this chapter.”

The DEA collected additional information from the affected industry. DEA learned that rail and truck carriers ship refrigerated liquid only in large containers. The average payload of a rail car is approximately 135,000 pounds. The capacity for tank trucks is approximately 12,000 to 30,000 pounds. These shipments are in single containers holding the specified weights. Specialized equipment and engineering skills are needed to off-load this commodity. Distributors are aware of their customers and are involved in tracking shipments. The DEA believes that anhydrous hydrogen chloride in this form and in these quantities is not likely to be diverted.

DEA has not identified any shipment of refrigerated anhydous hydrogen chloride less than the tank truck size of approximately 12,000 pounds. Therefore, domestic distributions of anhydous hydrogen chloride in single container shipments of 12,000 pounds (net weight) or more will be excluded from the definition of regulated transaction. Transactions that involve multiple containers, each containing less than 12,000 pounds of the chemical are regulated transactions even if the aggregate weight is over 12,000 pounds.

The refrigerated liquid is not clearly defined or distinguished from the gaseous form except by the weight of the anhydrous hydrogen chloride contained in a single vessel. Distributors use both cooling and pressure to liquefy the gas in order to increase the amount of anhydrous hydrogen chloride that the container can hold. However, the containers that transport the liquefied hydrogen chloride are not refrigerated. The method of distributing the refrigerated form is only clearly distinguished by the size of the vessel used to transport the commodity. DEA is concerned that unscrupulous persons may attempt to deceive law enforcement personnel by distributing smaller quantities mislabeled as refrigerated liquid. Therefore, the DEA concluded that a category be defined by the net weight of anhydrous hydrogen chloride that a single container holds. Defining the category by using the net weight of anhydrous hydrogen chloride in a single container eliminates the possibility of misinterpreting whether or not a distribution is a regulated transaction.

The DEA also received comments that included reasons to eliminate pipeline transactions of anhydrous hydrogen chloride as regulated transactions. Pipeline transactions involve pumping the chemical through a closed system, directly to the customer from the distributor's site. Pipelines are located underground or in piperacks and are maintained at high pressure. Diversion from a pipeline is unlikely because of the location, construction and the obvious danger associated with the unauthorized tapping of this source. Pipeline distributions may involve thousands of pounds of anhydrous hydrogen chloride transferred on a given day.

The DEA concluded, in light of these comments, that these transactions have an insignificant risk of diversion. Therefore, domestic pipeline transactions will be the second category of transaction in anhydrous hydrogen chloride regarded as a non-regulated transaction.

This Final Rule will establish, on an interim basis, that domestic transactions of (1) anhydrous hydrogen chloride weighting 12,000 pounds (net weight) or more in a single container or (2) anhydrous hydrogen chloride by pipeline are excluded from the definition of regulated transactions. These exemptions will take effect on the day that this Final Rule is published in the Federal Register .

To exempt these categories, two new paragraphs (h) and (i) in Title 21 CFR Section 1310.08 will be added to read; (h) Domestic distribution of anhydrous hydrogen chloride weighing 12,000 pounds (net weight) or more in a single container; and (i) Domestic distribution of anhydrous hydrogen chloride by pipeline. The DEA is soliciting comments only on this portion of this Final Rule. The DEA will allow 30 days for persons to comment on these category exemptions.

After the close of this comment period pertaining to the exempted categories, DEA will publish a notice in the Federal Register to inform interested persons if changes are needed or if these categories will be adopted as stated.

The CSA authorizes DEA, pursuant to 21 U.S.C. 802(39)(A)(iii), to remove certain transactions in listed chemicals from the definition of regulated transaction. DEA has determined that transactions in anhydrous hydrogen chloride in the form of refrigerated liquid and transactions involving the direct transfer of anhydrous hydrogen chloride by pipeline are unlikely sources for diversion and should be removed from the definition of regulated transaction. DEA became aware of these types of transactions by the comments received in response to the Federal Register proposal to establish thresholds for iodine and anhydrous hydrogen chloride (62 FR 51072). Since that proposal did not propose that these categories of transactions in anhydrous hydrogen chloride would be exempt, the general public did not have the opportunity to comment on the exclusion of these transactions from the definition of regulated transaction.

The DEA has determined that good cause exists under the Administrative Procedure Act (5 U.S.C. 553 et seq. ) (APA) to forego a notice of proposed rulemaking for the exclusion of these transactions from the definition of regulated transaction. The AP states that an agency may forego a notice of proposed rule making if it is impracticable, unnecessary, or contrary to the public interest.

Although all transactions involving anhydrous hydrogen chloride are considered regulated until and unless DEA establishes a threshold, establishing a zero threshold for this substance may cause affected parties to implement a permanent system of recordkeeping and reporting for all transactions. This would involve some companies who otherwise may not engage in regulated transactions if the exemptions are finalized. If a proposal is published in the Federal Register to exclude these transactions from the definition of regulated transactions, each affected entity may find it necessary to establish these procedures on a permanent basis even though the requirement may only be temporary. To avoid unnecessary burdens on affected companies during the pendency of proceedings in this matter, the DEA will include as part of this rulemaking an interim rule, with request for comments, that removes these two types of transactions from the definition of regulated transactions.

The DEA is also including in this final rulemaking the reinsertion of the table in 21 CFR 1310.40(f)(2)(iv), listing thresholds for exports, transshipments, and international transactions to designated countries set forth in 21 CFR 1310.08(b). The DEA's final rule regarding implementation of the Domestic Chemical Diversion Control Act of 1993, published on June 22, 1995 (60 FR 32447), inadvertently omitted the table from the section. A DEA chemical code number for iodine, 6699, will also be included in this rule.

This regulation has been drafted and reviewed in accordance with Executive Order 12866, Section 1(b), Principles of Regulation. The DEA has determined that this rule is not a “significant regulatory action” under Executive Order 12866, Section 3(f), Regulatory Planning and Review, and accordingly this rule has not been reviewed by the Office of Management and Budget.

The Deputy Administrator in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed this regulation and by approving it certifies that this regulation will not have a significant economic impact upon a substantial number of small entities for the following reasons: The DEA sought information from legitimate handlers of iodine to determine the uses of iodine and the quantities typically sold in legitimate transactions. The DEA sought information from over 300 veterinary suppliers and feed and farm supply stores to determine how iodine is typically sold. The DEA learned that walk-in customers would purchase, at the most, three 2-ounce bottles (less than 0.2 kilograms). Suppliers and end-users claim that a 2-ounce bottle lasts several months. Iodine has very limited application for walk-in customers. Setting the iodine threshold at 0.4 kilograms will not have a significant effect on small businesses. The iodine portion of this Final Rule applies only to those companies manufacturing and distributing iodine in larger volumes. Recordkeeping requirements will not impact researchers or other end-users.

This regulation will not have a significant economic impact upon a substantial number of small entities that trade in anhydrous hydrogen chloride. Trade in anhydrous hydrogen chloride is mostly in very large quantities. Generally, thousands of pounds are involved in single industrial transactions. Smaller quantities i.e. , single or multiple cylinders) are being used by research, analytical or synthetic laboratories. The majority of anhydrous hydrogen chloride is traded in thousands of pound quantities. The DEA has included in this Final Rule the exclusion from the definition of “regulated transaction” transactions involving anhydrous hydrogen chloride in bulk quantities of 12,000 pounds (net weight) or more. The DEA is soliciting comments on that part of this Final Rule.

This regulation will not have substantial direct effects on the States, on the relationship between the national government and the States, or on distribution of power and responsibilities among the various levels of government. Therefore, in accordance with Executive Order 12612, it is determined that this rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment.

(iii) * * *

(iv) Exports, Transshipments and International Transactions to Designated Countries as Set Forth in § 1310.08(b).

Although this rule is being published as a temporary final rule without prior notice, an opportunity for public comment is nevertheless desirable to ensure the rule is both reasonable and workable. Accordingly, we encourage you to submit comments and related material. If you do so, please include your name and address, identify the docket number (CGD05-00-027), indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related materials in an unbound format, no larger than 8.5 by 11 inches, suitable for copying. If you would like to know they reached us, please enclose a stamped, self-addressed postcard or envelope.

A notice of proposed rulemaking (NPRM) was not published for this regulation. In keeping with 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a NPRM. The Coast Guard received confirmation of the request for special local regulations on June 16, 2000. We were notified of the event with insufficient time to publish a NPRM, allow for comments, and publish a final rule prior to the event.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . We had insufficient time to prepare and publish this rule in the Federal Register 30 days in advance of the event. To delay the effective date of the rule would be contrary to the public interest since a timely rule is necessary to protect mariners from the hazards associated with the event.

On August 5 and August 6, 2000, the Kent Narrows Racing Association will sponsor the “Thunder on the Narrows” hydroplane races, on the waters of Prospect Bay, Kent Island Narrows, Maryland. The event will consist of 75 hydroplanes racing in heats counter-clockwise around an oval race course. A large fleet of spectator vessels is anticipated. Due to the need for vessel control during the races, vessel traffic will be temporarily restricted to provide for the safety of spectators, participants and transiting vessels.

The Coast Guard is establishing temporary special local regulations on specified waters of Prospect Bay. The temporary special local regulations will be enforced from 10:30 a.m. to 6:30 p.m. on August 5 and August 6, 2000. The effect will be to restrict general navigation in the regulated areas during the event. Except for participants in the “Thunder on the Narrows” hydroplane races and vessels authorized by the Coast Guard Patrol Commander, no person or vessel may enter or remain in the regulated area. The Patrol Commander will allow non-participating vessels to transit the event area between races. These regulations are needed to control vessel traffic during the event to enhance the safety of participants, spectators and transiting vessels.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866 and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not significant under the regulatory policies and procedures of the Department of Transportation (DOT) (44 FR 11040; February 26, 1979).

We expect the economic impact of this temporary final rule to be so minimal that a full Regulatory Evaluation under paragraph 10e of the regulatory policies and procedures of DOT is unnecessary.

Although this regulation prevents traffic from transiting a portion of Prospect Bay during the event, the effect of this regulation will not be significant due to the limited duration of the regulation, the fact that the Patrol Commander will allow non-participating vessels to transit the event area between races, and the extensive advance notifications that will be made to the maritime community via the Local Notice to Mariners, marine information broadcasts, and area newspapers, so mariners can adjust their plans accordingly.

Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), we considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule will affect the following entities, some of which may be small entities: the owners or operators of vessels intending to transit or anchor in the effected portions of Prospect Bay during the event.

Although this regulation prevents traffic from transiting or anchoring in a portion of Prospect Bay during the event, the effect of this regulation will not be significant because of its limited duration, the fact that the Patrol Commander will allow non-participating vessels to transit the event area between races, and the extensive advance notifications that will be made to the maritime community via the Local Notice to Mariners, marine information broadcasts, and area newspapers, so mariners can adjust their plans accordingly.

This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

We have analyzed this rule under Executive Order 13132 and have determined that this rule does not have implications for federalism under that Order.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) governs the issuance of Federal regulations that require unfunded mandates. An unfunded mandate is a regulation that requires a State, local, or tribal government or the private sector to incur direct costs without the Federal Government's having first provided the funds to pay those costs. This rule will not impose an unfunded mandate.

This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not concern an environmental risk to health or risk to safety that may disproportionately affect children.

We prepared an “Environmental Assessment” in accordance with Commandant Instruction M16475.1C, and determined that this rule will not significantly affect the quality of the human environment. The “Environmental Assessment” and “Finding of No Significant Impact” is available in the docket where indicated under ADDRESSES.

On June 8, 2000, we published a notice of proposed rulemaking (NPRM) entitled Security Zone: Dignitary Arrival/Departure and United Nations Meetings, New York, NY. We received no letters commenting on the proposed rule. No public hearing was requested, and none was held.

New York City is often visited by the President and Vice President of the United States, as well as visiting heads of foreign states or foreign governments, on the average of 12 times per year. Often these visits are on short notice. The President, Vice President, and visiting heads of foreign states or foreign governments require Secret Service protection. Due to the sensitive nature of these visits, a security zone is needed. Standard security procedures are enacted to ensure the proper level of protection to prevent sabotage or other subversive acts, accidents, or other activities of a similar nature. In the past, temporary security zones were requested by the U.S. Secret Service with limited notice for preparation by the U.S. Coast Guard and no opportunity for public comment. Establishing permanent security zones by notice and comment rulemaking gave the public the opportunity to comment on the location and size of the zones. This regulation establishes two permanent security zones that can be activated upon request of the U.S. Secret Service pursuant to their authority under 18 U.S.C. 3056.

These security zones have been narrowly tailored, in consultation with the United States Secret Service and the maritime industry, to impose the least impact on maritime interests yet provide the level of security deemed necessary. Entry into or movement within these security zones is prohibited unless authorized by the Coast Guard Captain of the Port, New York. The activation of a particular security zone will be announced via facsimile and marine information broadcasts. The two security zones are as follows (all nautical positions are based on North American Datum of 1983):

The first security zone at United Nations Headquarters includes all waters of the East River bound by the following points: 40°44′37″N, 073°58′16.5″W (the base of East 35th Street, Manhattan), then east to 40°44′34.5″N, 073°58′10.5″W (about 175 yards offshore of Manhattan), then northeasterly to 40°45′29″N, 073°57′26.5″W (about 125 yards offshore of Manhattan at the Queensboro Bridge), then northwesterly to 40°45′31″N, 073°57′30.5″W (Manhattan shoreline at the Queensboro Bridge), then southerly to the starting point at 40°44′37″N, 073°58′16.5″W. The security zone prevents vessels from transiting a portion of the East River. Marine traffic will still be able to transit through the eastern 100 yards of the western channel of the East River. Additionally, vessels may transit through the eastern channel of the East River during this security zone. This zone is generally enacted from 8 a.m. until 7 p.m. during the United Nations General Assembly meetings. Generally, these meetings take place from Monday through Saturday for two consecutive weeks. Normally this occurs between the final two weeks of September and the first two weeks of October.

This security zone is necessary to protect the Port of New York/New Jersey and visiting dignitaries against terrorism, sabotage or other subversive acts and incidents of a similar nature during the dignitaries' meetings at the United Nations Headquarters. This security zone has been narrowly tailored, in consultation with the United States Secret Service and the maritime industry, to impose the least impact on maritime interests yet provide the level of security deemed necessary.

The second security zone at United Nations Headquarters includes all waters of the East river north of a line drawn from approximate position 40°44′37″N, 073°58′16.5″W (the base of East 35th Street, Manhattan), to approximate position 40°44′23″N, 073°57′44.5″W (Hunters Point, Long Island City), and south of the Queensboro Bridge. Marine traffic will not be able to transit through this portion of the East River because the zone extends bank to bank, and there are no alternate routes available in the river to go around the zone. This zone extends bank to bank while the President of the United States addresses, or is in attendance at, the United Nations General Assembly. Generally, this zone will only be activated once per year during one day of the annual U.N. General Assembly meeting during the Presidential address or while the President is in attendance. This address has been held during the final week of September for the past two years. However, due to the late notification of the daily security requirements from the Secret Service, there was insufficient time to follow notice and comment rulemaking to give the public the opportunity to comment on the location and size of the zones. The Coast Guard expects this zone to be activated for only 2.5 hours during the morning and 3 hours during the afternoon.

This security zone is necessary to protect the Port of New York/New Jersey, the President of the United States, and visiting dignitaries against terrorism, sabotage or other subversive acts and incidents of a similar nature during visits by the President of the United States and dignitaries' meetings at the United Nations Headquarters. This security zone has been narrowly tailored, in consultation with the United States Secret Service and the maritime industry, to impose the least impact on maritime interests yet provide the level of security deemed necessary.

The actual dates that these security zones will be activated are not known by the Coast Guard at this time. Coast Guard Activities New York will give notice of the activation of each security zone by all appropriate means to provide the widest publicity among the affected segments of the public. Marine information broadcasts will normally be made for these security zones beginning 24 to 48 hours before the zone is enacted. Facsimile broadcasts will also be made to notify the public. The Coast Guard expects that the notice of the activation of each permanent security zone in this rulemaking will normally be made less than seven days before the zone is actually activated.

The two new security zones are being enacted to ensure the Coast Guard can provide the U.S. Secret Service with the services they require to protect the Port of New York/New Jersey and visiting dignitaries in a timely manner. This zone also gave the marine community the opportunity to comment on the zones location and size.

This rule revises 33 CFR 165.164 by renaming the section heading to “Dignitary Arrival/Departure and United Nations Meetings, New York, NY” and adding two new East River locations to the listed zones.

The Coast Guard received no letters commenting on the proposed rulemaking. No changes were made to this rulemaking.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866 and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Transportation (DOT) (44 FR 11040, February 26, 1979).

We expect the economic impact of this rule to be so minimal that a full Regulatory Evaluation under paragraph 10e of the regulatory policies and procedures of DOT is unnecessary.

This finding is based on the fact that we anticipate these security zones will be activated on an average of 12 times per year, and the minimal time that vessels will be restricted from the zones. Marine traffic will still be able to transit through the eastern 100 yards of the western channel and recreational traffic will also be able to transit through the eastern channel of the East River while the first, smaller security zone at the United Nations Headquarters is enacted. We anticipate that the second security zone at the United Nations Headquarters, shutting down the East River in the vicinity of the United Nations Headquarters, will only be activated once per year during one day of the annual U.N. General Assembly meeting during the Presidential address. This zone that shuts down the East River will normally only be in effect for 2.5 hours during the morning and 3 hours during the afternoon. Extensive advance notifications will be made to the maritime community via facsimile and marine information broadcasts. These security zones have been narrowly tailored to impose the least impact on maritime interests yet provide the level of security deemed necessary.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule will affect the following entities, some of which might be small entities: the owners or operators of vessels intending to transit or anchor in a portion of the Port of New York/New Jersey during the times these zones are activated.

These security zones will not have a significant economic impact on a substantial number of small entities for the following reasons: Vessel traffic can transit through the eastern 100 yards of the western channel of the East River during the smaller security zone that is enacted when the President of the United States is not addressing the Assembly. Recreational traffic can also transit through the eastern channel of the East River during this same security zone. Before the effective period, we will issue maritime advisories widely available to users of the Port of New York/New Jersey by facsimile and marine information broadcasts.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule will have a significant economic impact on it, please submit a comment (see ADDRESSES ) explaining why you think it qualifies and how and to what degree this rule will economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we offered to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking process.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520.).

We have analyzed this rule under Executive Order 13132 and have determined that this rule does not have implications for federalism under that Order.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) governs the issuance of Federal regulations that require unfunded mandates. An unfunded mandate is a regulation that requires a State, local, or tribal government or the private sector to incur direct costs without the Federal Government's having first provided the funds to pay those costs. This rule will not impose an unfunded mandate.

This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not concern an environmental risk to health or risk to safety that may disproportionately affect children.

We considered the environmental impact of this rule and concluded that under figure 2-1, paragraph 34(g), of Commandant Instruction M16475.1C, this rule is categorically excluded from further environmental documentation. This rule fits paragraph 34(g) as it establishes two security zones. A “Categorical Exclusion Determination” is available in the docket for inspection or copying where indicated under ADDRESSES .

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(8), the Coast Guard finds that good cause exists for not publishing an NPRM. Good cause exists for not publishing an NPRM due to the date the Application for Approval of Marine Event was received, there was insufficient time to draft and publish an NPRM for the event. Further, it is a local, community supported event with minimal impact on the waterway, vessels may still transit through Peekskill Bay Channel during the display, and the zone is only in effect for 1 1/2 hours and vessels can be given permission to transit the zone except for about 20 minutes during this time. Any delay encountered in this regulation's effective date would be unnecessary and contrary to public interest since immediate action is needed to close the waterways and protect the maritime public from the hazards associated with this fireworks display.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . This is due to the following reasons: It is an annual event with local community support, it is a local event with minimal impact on the waterway, the zone is only in effect for 1 1/2 hours and vessels can be given permission to transit the zone except for about 20 minutes during this time, and marine traffic will be able to transit through Peekskill Bay Channel during the display. Finally, this rule creates a safety zone that will only be enforced if the annual event, scheduled for Saturday, August 5, 2000, is cancelled due to inclement weather.

The Coast Guard has received an application to hold a fireworks program on the waters of Peekskill Bay. This regulation establishes a safety zone in all waters of Peekskill Bay within a 360-yard radius of the fireworks barge in approximate position 41°17′16″ N 073°56′18″ W (NAD 1983), about 500 yards northeast of Peekskill Bay South Channel Buoy 3 (LLNR 37955). The safety zone is in effect from 8:30 p.m. (e.s.t.) until 10 p.m. (e.s.t.) on Sunday, August 6, 2000. This is an annual event regulated by 33 CFR 100.114 for the first Saturday in August. This rule is for the rain date of August 6, 2000, which is not addressed in the current regulation. This safety zone will not be enforced on Sunday, August 6, if the fireworks display is held on Saturday, August 5, 2000. The safety zone prevents vessels from transiting a portion of Peekskill Bay and is needed to protect boaters from the hazards associated with fireworks launched from a barge in the area. Marine traffic will still be able to transit through Peekskill Bay Channel during the event. This safety zone precludes the waterway users from entering only the safety zone itself. Public notifications will be made prior to the event via the Local Notice to Mariners. Furthermore, marine traffic will not be precluded from mooring at, or getting underway from, any piers in the vicinity of this event.

This final rule is not a significant regulatory action under section 3(f) of Executive Order 12866 and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. It has not been reviewed by the Office of Management and Budget under that Order. It is not significant under the regulatory policies and procedures of the Department of Transportation (DOT) (44 FR 11040; February 26, 1979). The Coast Guard expects the economic impact of this final rule to be so minimal that a full Regulatory Evaluation under paragraph 10e of the regulatory policies and procedures of DOT is unnecessary. This finding is based on the minimal time that vessels will be restricted from the zone, that vessels may still transit through Peekskill Bay Channel during the fireworks display, and advance notifications which will be made. Additionally, this is an annual event with local community support.

The size of this safety zone was determined using National Fire Protection Association and New York City Fire Department standards for 12” mortars fired from a barge combined with the Coast Guard's knowledge of tide and current conditions in the area.

Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), the Coast Guard considered whether this final rule will have a significant economic impact on a substantial number of small entities. “Small entities” include small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq .) that this rule will not have a significant economic impact on a substantial number of small entities.

This final rule does not provide for a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

The Coast Guard has analyzed this final rule under the principles and criteria contained in Executive Order 13132 and has determined that this final rule does not have implications for federalism under that Order.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) [Pub. L. 104-4, 109 Stat. 48] requires Federal agencies to assess the effects of certain regulatory actions on State, local, and tribal governments, and the private sector. UMRA requires a written statement of economic and regulatory alternatives for rules that contain Federal mandates. A Federal mandate is a new or additional enforceable duty imposed on any State, local, or tribal government, or the private sector. If any Federal mandate causes those entities to spend, in the aggregate, $100 million or more in any one year, the UMRA analysis is required. This final rule does not impose Federal mandates on any State, local, or tribal governments, or the private sector.

The Coast Guard considered the environmental impact of this final rule and concluded that under figure 2-1, paragraph 34(g), of Commandant Instruction M16475.1C, this final rule is categorically excluded from further environmental documentation. This rule fits paragraph 34(g) as it establishes a safety zone. A “Categorical Exclusion Determination” is available in the docket for inspection or copying where indicated under ADDRESSES .

In cooperation with Canada Post Corporation (CPC), the Postal Service offers Global Direct—Canada Admail. This international mail service is primarily intended for major printing firms, direct marketers, mail order companies, and other high-volume mailers seeking easier access to the Canadian domestic postal system. It is intended to provide mail delivery in an average of 5 to 10 business days in major urban areas throughout Canada. Ancillary services for local business reply and the return of undeliverable mail are also provided for use with Global Direct—Canada Admail.

CPC has announced a rate change for Admail. This makes it necessary for the Postal Service to adjust the rates it charges for Global Direct—Canada Admail.

The Postal Service is also eliminating discounts for Global Direct—Canada Admail. Discounts will no longer be available for Global Direct—Canada Mail; however, revenue from Global Direct—Canada Admail will count toward the revenue requirements for International Priority Airmail and International Surface Air Lift discounts. This enables the Postal Service to reduce the rate for Global Direct—Canada Admail.

Effective August 2, 2000, the following rates are adopted for Global Direct—Canada Admail:

Although the Postal Service is exempted by 39 U.S.C. 410(a) from the advance notice requirements of the Administrative Procedure Act regarding proposed rulemaking (5 U.S.C. 553), the Postal Service invites public comment at the above address.

The Postal Service is amending Subchapter 612, Global Direct—Canada Admail, International Mail Manual, which is incorporated by reference in the Code of Federal Regulations. See 39 CFR 20.1.

This action is directed to the public in general, and has particular applicability to anyone who might need or want to communicate in writing with EPA, or submit information to the Agency. Since this action may apply to anyone, the Agency has not attempted to describe all the specific entities that may be affected by this action. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT.

You may obtain electronic copies of this document, and other information about EPA programs from the EPA Internet Home Page at http://www.epa.gov/. To access this document, on the Home Page select “Laws and Regulations” and then look up the entry for this document under the “ Federal Register _Environmental Documents.” You can also go directly to the Federal Register listings at http://www.epa.gov/fedrgstr/.

EPA is announcing a change in its official mailing address and is amending the CFR to reflect this change. EPA is relocating its Headquarter offices in the Washington Metropolitan area to new offices in downtown Washington, DC. This effort will consolidate the majority of the EPA Headquarter offices in the Washington Metropolitan area providing for increased savings, efficiency, and enhancement of customer services. To date, approximately two-thirds of the EPA Headquarter offices have been successfully relocated to the new location, with the remaining offices expected to move within the next 2 years. Although not all of the offices have been relocated, the Agency will begin to phase in the new address for all of its documents over the next 12 months. This announcement and amendments to the CFR will begin the implementation of this change.

Although EPA's official mailing address has changed, EPA will continue to receive mail with the old address until the EPA relocation is complete. The EPA mailing center which processes all of EPA's mail has not be relocated yet, so EPA will continue to physically receive and process all of its mail at its current location until this operation is relocated.

If you wish to inspect a rulemaking record or deliver documents (e.g., your comments on a rulemaking) directly to the public record centers, which are also referred to as the public docket or locations for the public version of the official record, you should pay particular attention to information about the specific location of the particular public record center, because these record centers have not been relocated. EPA intends to consolidate these centers in the new location, and will announce the relocation when it occurs. For information about the location of these centers go to http://www.epa.gov/epahome/dockets.htm.

In certain cases, the EPA mailing address provided in the regulations, or in instructions for submitting a form or other information to EPA, may be an address other than the official mailing address for EPA Headquarter offices. In amending the CFR to reflect the address change, this FR document specifically identifies those CFR sections where the EPA address provided should not be changed. In addition, if you are responding to a request for comments, or otherwise wish to deliver your submission directly to a public docket or a particular office, please be sure to verify the relevant location to ensure that you identify the proper delivery address.

EPA intends to review existing regulatory documents, particularly forms and instructions for submitting information to the Agency, to ensure that the EPA mailing address is properly identified. If necessary, EPA intends to amend these documents over the next 2 years.

EPA is issuing this document under its general rulemaking authority, Reorganization Plan No. 3 of 1970 (5 U.S.C. app.).

In addition, section 553 of the Administrative Procedure Act (APA), 5 U.S.C. 553(b)(B), provides that, when an agency for good cause finds that notice and public procedure are impracticable, unnecessary or contrary to the public interest, the agency may issue a rule without providing notice and an opportunity for public comment. EPA has determined that there is good cause for making this rule final without prior proposal and opportunity for comment. EPA has determined that these amendments are technical and non-substantive. Thus, notice and public procedure are unnecessary. EPA finds that this constitutes good cause under 5 U.S.C. 553(b)(B).

No. This final rule implements technical amendments to 40 CFR chapter I and 48 CFR chapter 15 to reflect a change in the EPA Headquarters' official mailing address, and it does not otherwise impose or amend any requirements. As such, the Office of Management and Budget (OMB) has determined that a technical correction is not a “significant regulatory action” subject to review by OMB under Executive Order 12866, entitled Regulatory Planning and Review (58 FR 51735, October 4, 1993). Nor does this rule contain any information collection requirements that require review and approval by OMB pursuant to the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq .).

Because this action is not economically significant as defined by section 3(f) of Executive Order 12866, this action is not subject to Executive Order 13045, entitled Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997).

This action will not result in environmental justice related issues and does not, therefore, require special consideration under Executive Order 12898, entitled Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations (59 FR 7629, February 16, 1994).

Since the Agency has made a “good cause” finding that this action is not subject to notice-and-comment requirements under the APA or any other statute (see Unit IV.), this action is not subject to provisions of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq .), or to sections 202 and 205 of the Unfunded Mandates Reform Act of 1995 (UMRA) (Public Law 104-4). In addition, this action does not significantly or uniquely affect small governments or impose a significant intergovernmental mandate, as described in sections 203 and 204 of UMRA. Nor does this action significantly or uniquely affect the communities of tribal governments as specified by Executive Order 13084, entitled Consultation and Coordination with Indian Tribal Governments (63 FR 27655, May 10, 1998). This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132, entitled Federalism (64 FR 43255, August 10, 1999).

This action does not involve any technical standards that require the Agency's consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note).

In issuing this rule, EPA has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation, and provide a clear legal standard for affected conduct, as required by section 3 of Executive Order 12988, entitled Civil Justice Reform (61 FR 4729, February 7, 1996).

EPA has complied with Executive Order 12630, entitled Governmental Actions and Interference with Constitutionally Protected Property Rights (53 FR 8859, March 15, 1988), by examining the takings implications of this rule in accordance with the “Attorney General's Supplemental Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings” issued under the Executive Order.

Yes. The Congressional Review Act (CRA) (5 U.S.C. 801 et seq .), as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. CRA section 808 allows the issuing agency to make a rule effective sooner than otherwise provided by the CRA, if the agency makes a good cause finding that notice and public procedure is impracticable, unnecessary, or contrary to the public interest. This determination must be supported by a brief statement (5 U.S.C. 808(2)). As stated previously, EPA has made such a good cause finding, including the reasons therefore, and established an effective date of August 2, 2000. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Environmental protection.

Acquisition, procurement, contracts.

Therefore, under the authority of Reorganization Plan No. 3 of 1970 (5 U.S.C. app.), 40 CFR chapter I and 48 CFR chapter 15 are amended as follows:

Each State is required by section 110(a)(1) of the Federal Clean Air Act (the Act), to have a SIP that contains the control measures and strategies which will be used to attain and maintain the national ambient air quality standards. The SIP is extensive, containing such elements as emission inventories, monitoring network, attainment demonstrations, and enforcement mechanisms. The control measures and strategies must be formally adopted by each State after the public has had an opportunity to comment on them. They are then submitted to EPA as SIP revisions on which EPA must formally act.

Once these control measures are approved by EPA pursuant to section 110(k) of the Act, after notice and comment, they are incorporated into the SIP and are identified in part 52 (Approval and Promulgation of Implementation Plans) of 40 CFR. The actual State regulations which are approved by EPA are not reproduced in their entirety in 40 CFR part 52, but are “incorporated by reference,” which means that the citation of a given State regulation with a specific effective date has been approved by EPA. This format allows both EPA and the public to know which measures are contained in a given SIP and ensures that the State is enforcing the regulations. It also allows EPA to take enforcement action or the public to bring citizen suits, should a State not enforce its SIP-approved regulations.

The SIP is an active or changing document which can be revised by the State as necessary to address the unique air pollution problems in the State as long as changes are not contrary to Federal law. Therefore, EPA, from time to time, must take action to incorporate into the SIP, revisions of the State program which may contain new and/or revised regulations. Regulations approved into the SIP are then incorporated by reference into part 52. Pursuant to section 110(h)(1) of the Act and as a result of consultations between EPA and the Office of Federal Register, EPA revised the procedures May 22, 1997 (62 FR 27968), for incorporating by reference federally-approved SIPs and began the process of developing: (1) a revised SIP document for each State that would be incorporated by reference under the provisions of 1 CFR part 51, (2) a revised mechanism for announcing EPA approval of revisions to an applicable SIP and updating both the IBR document and the CFR, and (3) a revised format of the “Identification of plan” sections for each applicable subpart to reflect these revised IBR procedures. The description of the revised SIP document, IBR procedures and “Identification of plan” format are discussed in further detail in the May 22, 1997, Federal Register document.

The new SIP compilations contain the federally-approved portion of State regulations and source specific permits submitted by each State agency. These regulations and source-specific permits have all been approved by EPA through previous rulemaking actions in the Federal Register . The SIP compilations are stored in 3-ring binders and will be updated primarily on an annual basis.

If no significant changes are made for any State to the SIP during the year, an update will not be made during that year. If significant changes occur during the year, an update could be done on a more frequent basis, as applicable. Typically, only the revised sections of the compilation will be updated. Complete resubmittals of a State SIP compilation will be done on an as-needed basis.

Each compilation contains two parts. Part 1 contains the regulations and Part 2 contains the source-specific permits that have been approved as part of the SIP. Each part has a table of contents identifying each regulation or each source specific permit. The table of contents in the compilation corresponds to the table of contents published in 40 CFR part 52 for these States. The EPA Regional offices have the primary responsibility for ensuring accuracy and updating the compilations. The Region 6 EPA Office developed and will maintain the compilations for Oklahoma. A copy of the full text of the State's current SIP-approved regulations will also be maintained at the Office of the Federal Register and EPA's Air Docket and Information Center in Washington, DC. The EPA is phasing in the SIP compilations for individual States. This revised format is consistent with the SIP compilation requirements of section 110(h)(1) of the Act.

In order to better serve the public, EPA is revising the organization of the “Identification of plan” section of 40 CFR section 52.1920. The EPA is including additional information which will more clearly identify the provisions that constitute the enforceable elements of the SIP.

The revised “Identification of plan” section will contain five subsections: (a) Purpose and scope; (b) Incorporation by reference; (c) EPA approved regulations; (d) EPA approved source-specific permits; and (e) EPA approved nonregulatory provisions, such as transportation control measures, statutory provisions, control strategies, monitoring networks, etc.

This change to the procedures for incorporation by reference announced today will not alter in any way the enforceability or legal effect of approved SIP materials, including both those approved in the past or to be approved in the future. As of the effective date of the final rule approving a SIP revision, all provisions identified in the Federal Register document announcing the SIP approval will be federally enforceable, both by EPA under section 113 of the Act and by citizens under section 304 of the Act, where applicable. All revisions to the applicable SIP are federally enforceable as of the effective date of EPA approval even if they have not yet been incorporated by reference. To facilitate enforcement of previously approved SIP provisions and provide a smooth transition to the new SIP processing system, EPA is retaining the original “Identification of Plan” section, previously appearing in the CFR as the first or second section of part 52 for each State subpart.

Today's action constitutes a “housekeeping” exercise to ensure that federally approved State plans are accurately reflected in 40 CFR part 52. State SIP revisions are controlled by EPA Regulations at 40 CFR part 51. When EPA receives a formal SIP revision request, the Agency must publish the proposed revision in the Federal Register and provide for public comment before approval.

The EPA has determined that today's rule falls under the “Good Cause” exemption in section 553(b)(3)(B) of the Administrative Procedures Act (APA) which, upon finding good cause, authorizes agencies to dispense with public participation and section 553(d)(3) which allows an agency to make a rule effective immediately (thereby avoiding the 30-day delayed effective date otherwise provided for in the APA). Today's rule simply codifies provisions which are already in effect as a matter of law in Federal and approved State programs.

Under section 553 of the APA, an agency may find good cause where procedures are “impractical, unnecessary, or contrary to the public interest.” Public comment is unnecessary since the codification only reflects existing law. Immediate revision to the CFR benefits the public by removing outdated citations.

The Office of Management and Budget (OMB) has exempted this regulatory action from Executive Order 12866, entitled “Regulatory Planning and Review.”

Executive 13132, entitled “Federalism” (64 FR 43255, August 10, 1999) revokes and replaces Executive Order 12612, “Federalism,” and Executive Order 12875, “Enhancing the Intergovernmental Partnership.” Executive Order 13132 requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” Under Executive Order 13132, EPA may not issue a regulation that has federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, or EPA consults with State and local officials early in the process of developing the proposed regulation. The EPA also may not issue a regulation that has federalism implications and that preempts State law unless the Agency consults with State and local officials early in the process of developing the proposed regulation.

This final rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132, because it merely approves a State rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Act. Thus, the requirements of section 6 of the Executive Order do not apply to this rule.

Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), applies to any rule that: (1) Is determined to be “economically significant” as defined under Executive Order 12866, and (2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency.

The EPA interprets Executive Order 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under section 5-501 of the Order has the potential to influence the regulation. This final rule is not subject to Executive Order 13045 because it approves a State program.

Under Executive Order 13084, EPA may not issue a regulation that is not required by statute, that significantly or uniquely affects the communities of Indian tribal governments, and that imposes substantial direct compliance costs on those communities, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by the tribal governments, or EPA consults with those governments. If EPA complies by consulting, Executive Order 13084 requires EPA to provide to the OMB, in a separately identified section of the preamble to the rule, a description of the extent of EPA's prior consultation with representatives of affected tribal governments, a summary of the nature of their concerns, and a statement supporting the need to issue the regulation. In addition, Executive Order 13084 requires EPA to develop an effective process permitting elected officials and other representatives of Indian tribal governments “to provide meaningful and timely input in the development of regulatory policies on matters that significantly or uniquely affect their communities.”

Today's rule does not significantly or uniquely affect the communities of Indian tribal governments. This action does not involve or impose any requirements that affect Indian tribes. Accordingly, the requirements of section 3(b) of Executive Order 13084 do not apply to this rule.

The Regulatory Flexibility Act, 5 U.S.C. 600 et seq. , generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small not-for-profit enterprises, and small governmental jurisdictions. This final rule will not have a significant impact on a substantial number of small entities because SIP approvals under section 110 and subchapter I, part D of the Act do not create any new requirements but simply approve requirements that the State is already imposing. Therefore, because the Federal SIP approval does not create any new requirements, I certify that this action will not have a significant economic impact on a substantial number of small entities. Moreover, due to the nature of the Federal-State relationship under the Act, preparation of a flexibility analysis would constitute Federal inquiry into the economic reasonableness of state action. The Act forbids EPA to base its actions concerning SIPs on such grounds. See Union Electric Co., v. U.S. EPA, 427 U.S. 246, 255-66 (1976); 42 U.S.C. 7410(a)(2).

Under section 202 of the Unfunded Mandates Reform Act of 1995, signed into law on March 22, 1995, EPA must prepare a budgetary impact statement to accompany any proposed or final rule that includes a Federal mandate that may result in estimated annual costs to State, local, or tribal governments in the aggregate; or to private sector, of $100 million or more. Under section 205, EPA must select the most cost-effective and least burdensome alternative that achieves the objectives of the rule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that may be significantly or uniquely impacted by the rule.

The EPA has determined that the approval action promulgated does not include a Federal mandate that may result in estimated annual costs of $100 million or more to either State, local, or tribal governments in the aggregate, or to the private sector. This Federal action approves pre-existing requirements under State or local law, and imposes no new requirements. Accordingly, no additional costs to State, local, or tribal governments, or to the private sector, result from this action.

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. The EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule can not take effect until 60 days after it is published in the Federal Register . This action is not a “major” rule as defined by 5 U.S.C. 804(2). This rule is effective August 2, 2000.

The EPA has determined that the provisions of section 307(b)(1) of the Clean Air Act pertaining to petitions for judicial review are not applicable to this action. Prior EPA rulemaking actions approving each individual component of Oklahoma SIP compilations had previously afforded interested parties the opportunity to file a petition for judicial review in the United States Court of Appeals for the appropriate circuit within 60 days of such rulemaking action. Thus, EPA sees no need in this action to reopen the 60-day period for filing such petitions for judicial review for this “Identification of plan” reorganization action for Oklahoma.

Throughout this document wherever “we,” “us,” or “our” are used we mean EPA.

We are approving revisions to TSP and SO 2 emissions regulations for National Starch, and TSP regulations for Allison, both of which are located in Marion County, Indiana. IDEM submitted the revised regulations on August 30, 1999, February 3, 1999, and May 17, 2000, as amendments to its SIP.

The revisions for National Starch include the elimination of TSP limits for 35 units and SO 2 limits for 4 boilers, all of which have shut down permanently. The National Starch revisions also include increases to the TSP limits of 6 units, and a decrease of the TSP limit for one unit. These SIP revisions results in an overall decrease in allowed TSP emissions of about 406 tpy of TSP.

For Allison, the revisions include combining the annual TSP emissions limits for 5 boilers into one, and the addition of recordkeeping requirements for these boilers. There are no changes to the short-term emissions limits for individual boilers. These revisions will not change the overall allowed emissions for Allison.

Indiana has eliminated 35 emission units at National Starch from TSP rule 326 IAC 6-1-12, and 4 boilers from SO 2 rule 326 IAC 7-4-2. The annual TSP emission limits for these eliminated sources totaled 519.7 tpy.

Indiana has revised some short-term and some long-term TSP emissions limits for sources at National Starch. Indiana has increased the annual limits for processes 61-9, 56-2, 56-1, 40-4, 40-3, and 40-2 from 2.3, 1.1, 0.2, 6.7, 7.9, and 8.6 tpy to 4.1, 11.3, 7.02, 44.1, 42.3, and 31.9 tpy, respectively. Indiana has increased the hourly concentration limits for processes 56-2, 56-1, 40-4, 40-3, and 40-2 from 0.001, 0.001, 0.005, 0.005, 0.005 grains per dry standard cubic foot (gr/dscf) to 0.010, 0.020, 0.020, 0.020. 0.020 gr/dscf, respectively. Indiana has decreased the hourly concentration limit for process 575-2 from 0.018 to 0.011 gr/dscf.

Indiana combined the annual emissions limits for boilers 1 through 5 at Allison into one overall limit. The previous version of the rule contained limits of 0.6, 3.9, 6.4, 19.9, and 8.5 tpy for boilers 1, 2, 3, 4, and 5, respectively. The revised rule contains one PM limit of 39.3 tpy for boilers 1 through 5 combined.

Indiana added recordkeeping requirements for Allison. Under these requirements, Allison is to maintain fuel type, fuel usage, and fuel heat content information for each boiler. Allison must also submit quarterly reports of this information to IDEM, and maintain the records for 5 years.

The general criteria used by the EPA to evaluate such emissions trades, or “bubbles”, under the Clean Air Act and applicable regulations are set out in the EPA's December 4, 1986, Emissions Trading Policy Statement (ETPS) (see 51 FR 43814). Emissions trades which result in an overall decrease in allowable emissions require a “Level II” modeling analysis under the ETPS to ensure that the NAAQS will be protected. A Level II analysis must include emissions from the sources involved in the trade, and must demonstrate that the air quality impact of the trade does not exceed set significance levels. For particulate matter, the significance levels are 10 micrograms per cubic meter (μg/m 3 ) for any 24-hour period, and 5 μg/m 3 for any annual period.

While the limits for Marion County, Indiana apply to TSP, the current National Ambient Air Quality Standards apply to particulate matter 10 microns or less in diameter (PM 10 ). In applying the ETPS, Indiana calculated allowed PM 10 emissions from the sources involved in the trade based on published emissions fractions. These PM 10 emissions estimates were used in determining the type of modeling analysis needed (i.e., Level II), and were also used in conducting the modeling analysis.

Indiana's PM 10 analysis showed that these SIP revisions will result in a decrease in allowable emissions of 316 tpy of PM 10 for National Starch, and no change in allowable PM 10 emissions for Allison.

The modeling analyses submitted by the IDEM in support of the requested SIP revisions are consistent with a Level II analysis. The analyses shows that the SIP revisions will not cause or contribute to any exceedances of the PM 10 NAAQS. The maximum modeled PM 10 air quality impacts for National Starch were 9.18 μg/m 3 in 24-hours, and 0.0 μg/m 3 on an annual basis. The maximum modeled PM 10 air quality impacts for Allison were 0.9 μg/m 3 in 24-hours, and 0.08 μg/m 3 on an annual basis. Therefore, IDEM has demonstrated that these SIP revisions will not have a significant adverse impact on air quality.

These SIP revisions will result in a decrease in allowable TSP emissions of 406 tons per year for National Starch, and no change in overall annual TSP emissions for Allison. This equates to a reduction of 316 tpy of PM 10 from National Starch, and no change in overall annual PM 10 emissions for Allison. In addition, air quality modeling analyses conducted by IDEM show that the maximum daily and annual impacts of these SIP revisions are below established significance levels. Therefore, these SIP revisions will not have an adverse effect on air quality.

We are approving, through direct final rulemaking, revisions to TSP and SO 2 emissions regulations for National Starch, and TSP regulations for Allison, both of which are located in Marion County, Indiana. We are publishing these actions without prior proposal because we view these as noncontroversial revisions and anticipate no adverse comments. However, in a separate document in this Federal Register publication, we are proposing to approve the SIP revisions should adverse written comments be filed. These actions will be effective without further notice unless we receive relevant adverse written comment by September 1, 2000. Should we receive such comments, we will publish a final rule informing the public that these actions will not take effect. Any parties interested in commenting on these actions should do so at this time. If no such comments are received, you are advised that these actions will be effective on October 2, 2000.

The Office of Management and Budget (OMB) has exempted these regulatory actions from Executive Order 12866, entitled “Regulatory Planning and Review.”

Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997), applies to any rule that: (1) is determined to be “economically significant” as defined under Executive Order 12866, and (2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency.

This rule is not subject to Executive Order 13045 because it does not involve decisions intended to mitigate environmental health or safety risks.

Under Executive Order 13084, EPA may not issue a regulation that is not required by statute, that significantly affects or uniquely affects the communities of Indian tribal governments, and that imposes substantial direct compliance costs on those communities, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by the tribal governments, or EPA consults with those governments. If EPA complies by consulting, Executive Order 13084 requires EPA to provide to the Office of Management and Budget, in a separately identified section of the preamble to the rule, a description of the extent of EPA's prior consultation with representatives of affected tribal governments, a summary of the nature of their concerns, and a statement supporting the need to issue the regulation. In addition, Executive Order 13084 requires EPA to develop an effective process permitting elected officials and other representatives of Indian tribal governments “to provide meaningful and timely input in the development of regulatory policies on matters that significantly or uniquely affect their communities.”

Today's rule does not significantly or uniquely affect the communities of Indian tribal governments. These actions do not involve or impose any requirements that affect Indian Tribes. Accordingly, the requirements of section 3(b) of Executive Order 13084 do not apply to this rule.

Federalism (64 FR 43255, August 10, 1999) revokes and replaces Executive Orders 12612 (Federalism) and 12875 (Enhancing the Intergovernmental Partnership). Executive Order 13132 requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” Under Executive Order 13132, EPA may not issue a regulation that has federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, or EPA consults with State and local officials early in the process of developing the proposed regulation. EPA also may not issue a regulation that has federalism implications and that preempts State law unless the Agency consults with State and local officials early in the process of developing the proposed regulation.

This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132, because it merely approves a state rule implementing a federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. Thus, the requirements of section 6 of the Executive Order do not apply to this rule.

The Regulatory Flexibility Act (RFA) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small not-for-profit enterprises, and small governmental jurisdictions.

This rule will not have a significant impact on a substantial number of small entities because SIP approvals under section 110 and subchapter I, part D of the Clean Air Act do not create any new requirements but simply approve requirements that the State is already imposing. Therefore, because the Federal SIP approval does not create any new requirements, I certify that these actions will not have a significant economic impact on a substantial number of small entities. Moreover, due to the nature of the Federal-State relationship under the Clean Air Act, preparation of flexibility analysis would constitute Federal inquiry into the economic reasonableness of state action. The Clean Air Act forbids EPA to base its actions concerning SIPs on such grounds. Union Electric Co., v. U.S. EPA, 427 U.S. 246, 255-66 (1976); 42 U.S.C. 7410(a)(2).

Under sections 202 of the Unfunded Mandates Reform Act of 1995 (“Unfunded Mandates Act”), signed into law on March 22, 1995, EPA must prepare a budgetary impact statement to accompany any proposed or final rule that includes a Federal mandate that may result in estimated costs to State, local, or tribal governments in the aggregate; or to the private sector, of $100 million or more. Under section 205, EPA must select the most cost-effective and least burdensome alternative that achieves the objectives of the rule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that may be significantly or uniquely impacted by the rule.

EPA has determined that the approval actions promulgated do not include a Federal mandate that may result in estimated costs of $100 million or more to either State, local, or tribal governments in the aggregate, or to the private sector. These Federal actions approve pre-existing requirements under State or local law, and imposes no new requirements. Accordingly, no additional costs to State, local, or tribal governments, or to the private sector, result from these actions.

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. Section 804, however, exempts from section 801 the following types of rules: rules of particular applicability; rules relating to agency management or personnel; and rules of agency organization, procedure, or practice that do not substantially affect the rights or obligations of non-agency parties. 5 U.S.C. 804(3). EPA is not required to submit a rule report regarding these actions under section 801 because this is a rule of particular applicability.

Section 12 of the National Technology Transfer and Advancement Act (NTTAA) of 1995 requires Federal agencies to evaluate existing technical standards when developing a new regulation. To comply with NTTAA, EPA must consider and use “voluntary consensus standards” (VCS) if available and applicable when developing programs and policies unless doing so would be inconsistent with applicable law or otherwise impractical.

The EPA believes that VCS are inapplicable to these actions. Today's actions do not require the public to perform activities conducive to the use of VCS.

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of these actions must be filed in the United States Court of Appeals for the appropriate circuit by October 2, 2000. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. These actions may not be challenged later in proceedings to enforce their requirements. (See section 307(b)(2).)

On February 17, 2000, the West Virginia Division of Environmental Protection submitted a formal revision to its State Implementation Plan (SIP). The SIP revision consists of Consent Orders prescribing sulfur dioxide (SO 2 ) emission limits and operating practices for three facilities in Marshall County, West Virginia.

The EPA is approving as a SIP revision, and incorporating by reference into the West Virginia SIP, three Consent Orders containing new SO 2 emission limits for three facilities located in Marshall County. The facilities are PPG Industries, Bayer Corporation, and Columbian Chemicals Company. Changes to the emission limits were enforceably established by the WVOAQ through Consent Orders. This action approves these Consent Orders into the SIP and makes them federally enforceable.

These three sources, and others, were modeled as “nearby background sources” in the preliminary modeling of the Kammer power plant in Marshall County. The preliminary modeling indicated that these sources, at their existing allowable emission rates, were substantial contributors to predicted violations of the national ambient air quality standards (NAAQS) for SO 2 . The WVOAQ initiated action to complete a refined modeling analysis and determine appropriate emission limits for these sources and other sources in and near to Marshall County.

With the emission limits and work practice requirements being approved for these three facilities and the existing SIP-approved emission rates for the other sources modeled, the refined modeling results predict worst-case concentrations for the 3-hour, 24-hour, and annual averaging periods of 1294 micrograms per cubic meter of air (μg/m3), (for the secondary 3-hour), 352 μg/m3, (for the primary 24-hour standard) and 62 μg/m3, (for the primary annual standard) respectively. Therefore, upon approval of this SIP revision, the West Virginia SIP for SO 2 in Marshall County ensures that all ambient concentrations are below the applicable NAAQS of 1300 μg/m3, 365 μg/m3, and 80 μg/m3, respectively.

Section 110 of the Clean Air Act requires states to develop air pollution regulations and control strategies to ensure that State air quality meets the NAAQS established by the EPA. These ambient air quality standards are established under the Clean Air Act and they address six criteria air pollutants: carbon monoxide, nitrogen dioxide, ozone, lead, particulate matter and sulfur dioxide.

Each State must submit regulations and control strategies to us for approval and incorporation into the federally enforceable SIP. Each State has a SIP designed to protect its air quality. These SIPs are extensive, containing regulations, enforceable emission limits, emission inventories, monitoring networks, and modeling demonstrations. The West Virginia SIP contains various “Consent Orders” (Orders) to meet the SIP requirements and other State statutory requirements. The Orders are developed to contain specific conditions for a particular source and can provide specific conditions such as, emission limits, hours of operation, record keeping requirements, production rates, compliance demonstration requirements, etc. Once properly issued State-enforceable Consent Orders are approved by EPA as SIP revisions, those Orders are incorporated by reference into the SIP, and become federally enforceable.

The Clean Air Act requires States to observe certain procedural requirements while developing SIP revisions for submission to and approval by the EPA. Section 110(l) of the Clean Air Act requires that a revision to a SIP must be adopted by such State after reasonable notice and public hearing. The EPA must also determine whether a submittal is complete and warrants further action (see Section 110(k)(1) and 57 FR 13565). The EPA's completeness criteria for SIP revision submittals are found at 40 Code of Federal Regulations (CFR) Part 51, appendix V.

West Virginia's February 17, 2000 SIP submittal for Marshall County was determined to be administratively complete by EPA through a letter to the Chief of the WVOAQ dated March 6, 2000.

The State of West Virginia held a public hearing on this SIP revision on July 22, 1999. The SIP revision request was then submitted by the Director of the West Virginia Division of Environmental Protection to the EPA by cover letter dated February 17, 2000. The SIP revision demonstrates attainment of the SO 2 NAAQS in Marshall County, West Virginia.

All State regulations and supporting information approved by the EPA under Section 110 of the Act are incorporated into the federally approved SIP. Records of such SIP actions are maintained in the 40 CFR Part 52. The actual State regulations and Orders which are approved as SIP revisions are not reproduced in their entirety in the CFR but are “incorporated by reference,” with a specific effective date.

Sulfur dioxide belongs to the family of sulfur oxide gases. These gases are formed when fuel containing sulfur, such as coal and oil, is burned and during metal smelting, and other industrial processes. Sulfur dioxide is a rapidly-diffusing reactive gas that is very soluble in water. Sulfur dioxide and oxides of nitrogen are the major precursors to acidic deposition (acid rain), and are associated with the acidification of lakes and streams, corrosion of buildings and monuments. They are also associated with reduced visibility. Sulfur dioxide in the Marshall County area is emitted principally from combustion, or processing, of sulfur-containing fossil fuels and ores. At elevated concentrations, sulfur dioxide can adversely affect human health. The major health concerns associated with exposure to high concentrations of SO 2 include effects on breathing, respiratory illness, alterations in the lungs' defenses, and aggravation of existing cardiovascular disease. Sulfur dioxide can also produce damage to the foliage of trees and agricultural crops.

The primary national ambient air quality standards for sulfur oxides, measured as SO 2 , are 0.14 parts per million (ppm), or 365 μg/m3, averaged over a period of 24 hours and not to be exceeded more than once per year, and an annual standard of 0.030 ppm, or 80 μg/m3, never to be exceeded. The secondary standard for SO 2 is 0.50 ppm, or 1300 μg/m3 averaged over a three-hour period. The secondary standard may not be exceeded more than once per year.

The purpose of this revision is to ensure the federal enforceability of Consent Orders entered between the West Virginia Division of Environmental Protection, Office of Air Quality, and three facilities in Marshall County, West Virginia. The essential compliance provisions of the three Consent Orders are presented below. Each Consent Order also contains generic provisions requiring compliance with 45CSR10, the West Virginia regulation to prevent and control air pollution from the emissions of sulfur oxides as well as good air pollution control practice.