On August 29, 2000, the FDIC Board of Directors issued for public comment a proposed rule that would amend 12 CFR part 308 by adding a new subpart T implementing PFCRA, 65 FR 52352. The FDIC did not receive any comment letters regarding the proposed rule. As a result, the final regulation mirrors the proposed rule and no substantive changes have been made in the regulation.

In October 1986, Congress enacted PFCRA 1 to establish a new administrative procedure as a remedy against those who knowingly make small dollar false claims for up to and including $150,000 or false statements to certain entities of the federal government. The statute requires the affected entities to adopt regulations that establish procedures to recover penalties and assessments against persons who file false claims or statements subject to PFCRA. The FDIC is subject to the requirements of the PFCRA pursuant to the Resolution Trust Corporation Completion Act (Pub. L. 103-204, 107 Stat. 2369), enacted December 20, 1993.

The FDIC is required by the PFCRA to promulgate the necessary rules and regulations to implement its provisions. To facilitate the implementation process and to promote uniformity in the government, an interagency task force was established by the President's Council on Integrity and Efficiency to develop model regulations for implementation of the PFCRA. The FDIC is adopting the model regulations set forth by the Council's taskforce with certain substantive changes necessary due to the FDIC's status as an independent regulatory agency. Further, certain revisions have been made in order for the FDIC to comply with the requirement of section 722 of the Gramm-Leach-Bliley Act, Pub. L. 106-102, title VII, 113 Stat. 1472 (Nov. 12, 1999), codified at 12 U.S.C. 4809, for all regulations issued by the FDIC after January 1, 2000 to be written in “plain language.”

The final rule applies to anyone who, with knowledge or reason to know, submits a false, fictitious, or fraudulent statement or claim in the amount of $150,000 or less for property, services, or money to the FDIC in connection with FDIC employment matters, contracting activities and the FDIC Asset Purchaser Certification Program.

The FDIC's implementation of the PFCRA is based on Congress's underlying purpose in enacting the PFCRA, which was to provide federal agencies with an administrative remedy for “small dollar fraud” cases for which there is no other remedy because the cases are too small for the United States Department of Justice (DOJ) to prosecute. Absent DOJ's prosecution, individuals who commit small dollar frauds against the government would profit from their wrongdoing because most agencies lack independent litigating authority. PFCRA was designed to remedy that problem.

The FDIC is different from most agencies because, pursuant to 12 U.S.C. 1819(a) Fourth, the FDIC has independent litigating authority and may pursue legal remedies through its own attorneys. The FDIC is particularly independent from representation by the DOJ when it is enforcing statutes governing financial institutions and in its receivership/liquidation activities.

Moreover, the FDIC has special administrative remedies available to it for the imposition of civil money penalties in cases relating to the FDIC's supervision and regulation of financial institutions. With respect to deposit insurance, since insurance coverage for financial institutions and deposit insurance payments to depositors are not federal benefit programs or federal payments for other purposes, PFCRA should not be applied. Furthermore, if fraud were ever to occur concerning the FDIC paying off a depositor of a failed financial institution, the FDIC would rely upon its independent litigating authority to bring an action in federal court to recover the precise amount of the insurance payment. A civil penalty procedure would not be particularly useful. For these reasons, FDIC's implementation of the PFCRA only to FDIC employment matters, FDIC contracting activities and the FDIC Asset Purchaser Certification Program recognizes Congress's intent that PFCRA provide administrative remedies for cases where the FDIC may have no other viable monetary remedy. The scope of the final rule is also limited to clearly exclude claims and statements pertaining to deposit insurance.

The PFCRA provides for designated investigative and reviewing officials, an administrative hearing process, and an agency appeal procedure with limited judicial review. In accordance with these requirements, the FDIC's final rule provides that the Inspector General (IG) or a designee will act as the Investigating Official; the General Counsel or a designee will serve as the Reviewing Official; an administrative law judge provided by the Office of Financial Institution Adjudication will be the Presiding Officer; and the Board of Directors of the FDIC will act as Authority Head on appeals.

Under the final rule, allegations of false claims and statements made to the FDIC in connection with FDIC employment matters and contracting activities, including asset sale contracting activities, will be investigated by the FDIC IG or designee. In cases where the IG concludes that a PFCRA action may be warranted, the IG will submit a report containing the IG's findings and conclusions to the Reviewing Official (the General Counsel or designee) for an evaluation of whether there is adequate evidence to believe that the person named in the report is liable under PFCRA. Upon an affirmative finding of adequate evidence, the Reviewing Official will send written notice to DOJ of the FDIC's desire to seek administrative remedies. Upon DOJ's approval for the FDIC to proceed with an administrative action, a complaint may be issued by the reviewing official and the case referred to an Administrative Law Judge (ALJ) for a formal hearing on the record in accordance with the procedures established in this final rule. The ALJ will issue an initial decision. An alleged wrongdoer may appeal an adverse decision issued by the ALJ to the Board, and then to federal district court.

In addition to providing procedures for dealing with the filing of false claims or statements, § 308.502(c) of the final rule provides procedures for assessing civil penalties against those doing business with the FDIC who intentionally fail to file declarations and/or certifications required by law. The provision carries out the statutory mandate of the so-called “Byrd Amendment” 2 (31 U.S.C. 1352) that the failure to file a declaration and/or certification concerning lobbying activities which is required by that statute is punishable using procedures adopted pursuant to the PFCRA. The same is true for any affirmative false statements concerning lobbying activities.

The procedures are established by adding a new subpart to 12 CFR part 308, subpart T. The procedures set forth in subpart T apply only to proceedings under PFCRA or 31 U.S.C. 1352. Further, a technical amendment is adopted to make it clear that the Uniform Rules and subpart B of the Local Rules under part 308 do not apply to proceedings initiated under subpart T.

The Debt Collection Improvement Act of 1996 provides for the FDIC adjusting civil money penalties every four years in accordance with a formula based on the rate of inflation, which is set forth in section 5 of 28 U.S.C. 2461, note. The final rule includes paragraph (d) to 12 CFR 308.530, determining the amount of penalties and assessments. The paragraph states that civil money penalties that may be assessed for PFCRA violations under the subpart are subject to adjustment on a four-year basis to account for inflation and cross-references 12 CFR 308.132(c)(3)(xv), which sets forth the current amount of the civil money penalty that may be assessed. The amount of civil money penalties that the FDIC may access for PFCRA violations has been adjusted for inflation in 12 CFR 308.132(c)(3)(xv) from the statutory amount of $5,000 per claim or statement to an amount that is currently $5,500. A conforming technical amendment to 12 CFR 308.132(c)(3)(xv) is adopted, which changes the phrase “$5,500 per day” to correctly state “$5,500 per claim or statement.”

Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., the FDIC hereby certifies that the final rule will not have a significant economic impact on a substantial number of small entities.

The FDIC has reached this conclusion because the rule imposes no compliance or regulatory requirements but applies only when the FDIC determines that a false claim has been knowingly filed and pursues a PFCRA action to recover penalties and assessments.

No collections of information pursuant to the Paperwork Reduction Act (44 U.S.C. 3501 et seq.) are contained in this final rule. Consequently, no information has been submitted to the Office of Management and Budget for review.

The FDIC has determined that this final rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681 (1998). No assessment or certification to the OMB and Congress is required.

The Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) (Pub. L. 104-121) provides generally for agencies to report rules to Congress for review. The reporting requirement is triggered when the FDIC issues a final rule as defined by the Administrative Procedure Act (APA) at 5 U.S.C. 551. Because the FDIC is issuing a final rule as defined by the APA, the FDIC will file the reports required by SBREFA. The Office of Management and Budget has determined that this final rule does not constitute a “major rule” as defined by SBREFA.

For the reasons set forth in the preamble, the FDIC amends part 308 of title 12 of chapter III of the Code of Federal Regulations as follows:

To the extent that 5 U.S.C section 553 applies to this action, it is exempt from notice and comment because it constitutes a rule of procedure under 5 U.S.C. section 553(b)(A). Alternatively, the FHWA's implementation of this rule without opportunity for public comment, effective immediately upon publication today in the Federal Register, is based on the good cause exceptions in 5 U.S.C. section 553(b)(B) and 553 (d)(3). Seeking public comment is impracticable, unnecessary, and contrary to the public interest. The temporary 60-day delay in effective date is necessary to give Department officials the opportunity for further review and consideration of the new regulations, consistent with the Assistant to the President's memorandum of January 20, 2001. Given the imminence of the effective date, seeking prior public comment on this temporary delay would have been impractical, as well as contrary to the public interest in the orderly promulgation and implementation of regulations. The imminence of the effective date is also good cause for making this action effective immediately upon publication.

The Macombs Dam Bridge, at mile 3.2, across the Harlem River, has a vertical clearance of 27 feet at mean high water, and 32 feet at mean low water in the closed position. The existing drawbridge operating regulations are listed at 33 CFR 117.789(c).

The bridge owner, New York City Department of Transportation (NYCDOT), requested a temporary deviation from the drawbridge operating regulations to facilitate the necessary structural maintenance at the bridge. This deviation from the operating regulations allows the bridge owner to keep the bridge in the closed position from February 1, 2001 through April 1, 2001.

Thirty days notice to the Coast Guard for approval of this maintenance repair was not given by the bridge owner and was not required because this work involves vital, unscheduled maintenance that must be performed without undue delay.

Vessels that can pass under the bridge without an opening may do so at all times during the closed period.

In accordance with 33 CFR 117.35(c), this work will be performed with all due speed in order to return the bridge to normal operation as soon as possible. This deviation from the operating regulations is authorized under 33 CFR 117.35.

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing an NPRM. Publishing an NPRM was impracticable because there was not sufficient time remaining after we were notified of the event to publish an NPRM. Further, publishing an NPRM is not necessary because of the minimal impact this temporary rule will have on bridge operations in an area of limited marine traffic.

For the same reason, 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.

The Platt and Brorein Street Drawbridges, miles 0.0 and 0.16 respectively, across the Hillsborough River, have vertical clearances of 15.6 feet at mean high water and a horizontal clearance of 80 feet between fenders. The existing operating regulations in 33 CFR 117.291(a) require the bridge to open on signal after two hours notice.

The City of Tampa Department of Public Works requested that the Platt and Brorein Street Drawbridge operations be temporarily changed to allow the running of the Bank of America Gasparilla Distance Classic foot race. This temporary change to the drawbridge operating regulations will allow the drawbridge to remain closed from 8 a.m. to 1 p.m., Saturday, February 24, 2001.

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). The Coast Guard expects the economic impact of this rule to be so minimal that a full Regulatory Evaluation under paragraph 10(e) of the regulatory policies and procedures of DOT is unnecessary.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we considered whether this rule will have a significant economic effect upon a substantial number of small entities. “Small entities” include small business, 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 may affect the following entities, some of which may be small entities: The owners or operators of vessels intending to transit the Hillsborough River under the Brorein or Platt Street Drawbridges on February 24, 2001.

This temporary rule will not have a significant economic impact on a substantial number of small entities because the regulations will only be in effect for five hours in an area of limited marine traffic, and the event will be highly publicized.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-221), we offer 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 entities may contact the person listed under FOR FURTHER INFORMATION CONTACT for assistance in understanding and participating in this rulemaking. We also have a point of contact for commenting on actions by employees of the Coast Guard. 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 requirements 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 unfunded mandate 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 safety that may disproportionately affect children.

The Coast Guard has considered the environmental impact of this action and has determined under figure 2-1, paragraph 32(e) of Commandant Instruction M16475.1C, that this rule is categorically excluded from further environmental documentation.

On October 6, 2000, we published a notice of proposed rulemaking (NPRM) entitled Drawbridge Operation Regulations; Kennebec River, Maine, in the Federal Register (65 FR 59780). We received no comments in response to the notice of proposed rulemaking. No public hearing was requested and none was held.

The Carlton (U.S. 1) highway-railroad bridge, at mile 14.0, across the Kennebec River has a vertical clearance in the closed position of 10 feet at mean high water and 16 feet at mean low water. The existing drawbridge operating regulations are listed at 33 CFR 117.525. Vehicular traffic no longer travels over the Carlton Bridge because a new fixed highway bridge has been constructed upstream. The bridge will continue to operate as a railroad bridge only.

The bridge owner, Maine Department of Transportation (MDOT), asked the Coast Guard to remove the unnecessary restrictions from the regulations and to add several time periods during which the bridge will open on an on call basis. The bridge presently is allowed to remain closed to navigation from 6 a.m. to 7:30 a.m. and from 3:15 p.m. to 5:30 p.m., Monday through Friday, excluding holidays. These closed periods were added to the regulations to prevent vehicular traffic congestion in Bath during the shift changes at the Bath Iron Works. These closed periods are no longer necessary and will be removed by this rule.

The bridge owner has also requested relief from crewing the bridge from 5 p.m. to 8 a.m., daily, and all day on Saturdays and Sundays from October 1 through May 14. The bridge opening log data submitted by MDOT indicates a relatively low number of requests to open the bridge during the time periods and the bridge owner has requested that the bridge operate on an on call basis. The greater amount of bridge openings in 1999, are attributed to construction vessel traffic during the building of the new highway bridge upstream from the Carlton Bridge.

The Coast Guard believes that operating the Carlton Bridge on an advance notice basis from 5 p.m. to 8 a.m., daily, and all day on Saturdays and Sundays, from October 1 through May 14, is reasonable and will still meet the needs of navigation. This conclusion is based upon the low number of opening requests received over the past several years and the fact that the bridge will still open on signal after the advance notice is given.

The Coast Guard received no comments and no changes will be made to this rule.

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 unfunded mandate 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.

The Coast Guard considered the environmental impact of this rule and concluded that under figure 2-1, paragraph (32)(e) of Commandant Instruction M16475.1C, this rule is categorically excluded from further environmental documentation because promulgation of changes to drawbridge regulations have been found to not have a significant effect on the environment. A written “Categorical Exclusion Determination” is not required for this final rule.

The temporary 60-day delay in effective date is necessary to give Agency officials the opportunity for further review and consideration of new regulations, consistent with the Assistant to the President's memorandum of January 20, 2001. This action involves matters relating to grants and under 5 U.S.C. 553(a)(2) is thus exempt from the notice and comment requirements of the Administrative Procedure Act.

Throughout this document “we,” “us,” and “our” means EPA. This section is organized as follows:

The EPA is approving Texas' CFF Substitute Plan submitted on August 27 1998, as supplemented with additional technical information in a letter to the EPA dated November 17, 2000, into the Texas SIP as meeting the requirements of Section 182(c)(4) of the CAA. A detailed rationale for this direct final approval is set forth in the accompanying Technical Support Document (TSD) available from the U.S. EPA Region 6 office.

On November 15, 1990, Congress enacted amendments to the 1997 Clean Air Act; Public Law 101-549, 104 Stat. 2399, codified at 42 U.S.C. 7401-7671q. The Federal Clean Fuel Fleet (CFF) program is contained under part C, entitled, “Clean Fuel Vehicles,” of Title II of the Clean Air Act, as amended November 15, 1990. Part C was added to the CAA to establish two programs: a clean-fuel vehicle pilot program in the State of California (the California Pilot Test Program) and the Federal CFF program in certain ozone and carbon monoxide (CO) nonattainment areas. Section 182(c)(4) of the CAA, 42 U.S.C. 7511a, allows States to opt-out of the Federal CFF program by submitting, for EPA approval, a SIP revision consisting of a substitute program resulting in as much or greater long term emissions reductions in ozone producing and toxic air emissions as the Federal CFF program. The EPA may approve such a revision “only if it consists exclusively of provisions other than those required under this Chapter for the area.”

The State of Texas chose to opt-out of the Federal CFF program in a committal SIP revision submitted to EPA on November 15, 1992. In July 1994, Texas submitted the State's opt-out program in a SIP revision to EPA and adopted rules to implement the Texas CFF program. The Texas Clean Fuel Fleet SIP was revised based upon State legislation changes and resubmitted to EPA on August 6, 1996. On June 20, 1997, the supporting legislation for the August 6, 1996, submittal was modified and, as a result, the legislative authority in the submittal was no longer in effect. On October 17, 1997, we proposed disapproval of the Texas Clean Fuel Fleet SIP due to changes in the State law that altered the current SIP submittal, and because the State had not made a convincing and compelling equivalency determination with the Federal CFF program.

The State submitted a further SIP revision to Chapter 114 and the State's plan for implementing a substitute program to opt out of the Federal CFF program on August 27, 1998. The revision was adopted after reasonable public notice and public hearing as required by sections 110(a)(2) and 110(l) of the CAA and 40 CFR 51.102(f). In the August 27, 1998, submittal, Texas also withdrew the August 6, 1996, CFF SIP revision. On October 1, 1998, we determined the SIP revision met completeness criteria. The State supplemented the SIP with additional technical information in a letter to the EPA dated November 17, 2000. This additional technical information clarified how the State would make up the shortfall for nitrogen oxide ( NOX) and volatile organic compound (VOC) emissions between the State's present (August 27, 1998) CFF program and the Federal CFF program.

A more detailed discussion of the Texas Clean Fleet program elements and control strategy can be found in the TSD.

Texas has decided to opt out of the Federal CFF program. Texas' CFF substitute plan relies on a State fleet program—the Texas Clean Fleet (TCF) program—supplemented with additional VOC and NOX emission controls.

The TCF program is a clean fleet program that will be implemented in all serious, severe and extreme nonattainment areas in Texas. It is similar to the Federal CFF program, but with a number of significant differences that, but for the supplemental controls, result in an emissions reduction shortfall as compared to the Federal CFF program. Key differences include later dates for scheduled low emission vehicles (LEV) purchases, number and type of vehicles allowed in a clean fleet, exclusions from fleet requirements, and the emissions credit program. Modeling of the Federal CFF program and the TCF program was performed using a spreadsheet model developed by the TNRCC's Mobile Source Section. The EPA has reviewed and is accepting the model (refer to the TSD for model details). The spreadsheet model estimates the number of low emission vehicles and conventional vehicles in each program and extrapolates the amount of emission reductions generated by each program through the number of LEV's purchased. The estimated shortfalls for the TCF program for the 1998-2007 ten-year period for ozone-producing chemicals are 947.9 total tons (0.38 tons per day (tpd)) for VOC and 848.2 total tons (0.34 tpd) for NOX.

Additional emission controls are used to make up this shortfall between the TCF and the Federal CFF programs. These controls, which are beyond those required by the CAA, are discussed in the following paragraphs.

The State identified additional VOC emission reductions from VOC controls on fugitive emissions and VOC transfer operations totaling 493.9; 19; and 22.4 tpd for Houston-Galveston (HG), El Paso, and Dallas-Fort Worth (DFW) non-attainment areas, respectively. For the ten year 1998-2007 period this amounts to 123,475; 5,600; and 4,750 total tons for the HG, El Paso, and DFW areas, respectively. These emission reductions are achieved through the State requirements codified in 30 TAC Sections 115.352-115.359, regarding Fugitive Emission Control in Petroleum Refining, Natural Gas/Gasoline Processing, and Petrochemical Processes in Ozone Nonattainment Areas, and the State requirements codified in 30 TAC Section 115.211(a)(1), regarding Volatile Organic Compound Transfer Operations at Gasoline Terminals. 62 FR 27964 (May 22, 1997). These reductions more than offset the shortfalls for VOCs.

The State also identified excess NOX emission reductions resulting from State mandated reduction requirements placed on electric generating facilities (EGFs) by the 76th Texas Legislature in Senate Bill 7 for the HG and DFW areas. 65 FR 64914 (October 31, 2000). These reductions, combined with other State mandated reductions as detailed in the DFW, Beaumont/Port Arthur (BPA), and HG areas SIPs, all in excess of those required by the CAA, provide for a 184 tpd reduction in the HG area, and a 129 tpd reduction in the DFW area. As El Paso has a NOX waiver in place, the combined VOC and NOX shortfall can be made up with VOC offsets alone.

The emission reductions for Texas' implementation of a substitute plan greatly exceed the reductions that would have been achieved with the Federal CFF program. Therefore, the State's substitute plan will meet the Federal CFF requirement for VOC and NOX emissions reductions. Details on the calculations for the TCF emission reductions, shortfalls and control measures used to make up the shortfalls, can be found in the TSD for this rulemaking.

EPA is approving Texas' Clean Fuel Fleets Substitute Plan SIP revision because the State has successfully demonstrated that it will achieve long term reductions in emissions of ozone producing and toxic air pollutants equivalent to those that would have been achieved by the Federal CFF program. We agree with the State's emission reduction calculations and the modeling it used. Further information on Texas' Clean Fuel Fleets Substitute Plan SIP revision and EPA's evaluation of the SIP revision can be found in the TSD for this rulemaking Copies of this document are available, upon request, from the EPA Regional Office listed in the ADDRESSES section of this document.

EPA's approval of Texas' CFF Substitute Plan will have a positive benefit on air quality in Texas. The Texas CFF substitute plan achieves equivalent or better long term reductions in emissions of ozone producing and toxic air pollutants than the Federal CFF program in the DFW, El Paso, and HG ozone nonattainment areas.

EPA is publishing this rule without prior proposal because we view this as a noncontroversial amendment and anticipate no adverse comments. However, in the proposed rules section of this Federal Register publication, EPA is also publishing a separate document that will serve as the proposal to approve this SIP revision should we receive relevant adverse. This action will be effective April 9, 2001 without further notice unless we receive relevant adverse comments by March 9, 2001.

If EPA does receive adverse comments, we will withdraw the direct final rule and publish a document stating that the rule will not take effect. We will then respond to all public comments received in a subsequent final rule based on the proposed rule. The EPA will not institute a second comment period on the proposed rule. If you are interested in commenting on this action, you should do so at this time. If no such comments are received, you should know that this rule will be effective on April 9, 2001 and no further action will be taken on the proposed rule.

Nothing in this action should be construed as permitting or establishing a precedent for any future request for revision to any State Implementation Plan. Each request for revision to the State implementation plan shall be considered separately in light of specific technical, economic, and environmental factors and in relation to relevant statutory and regulatory requirements.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this proposed action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. This proposed action merely approves State law as meeting federal requirements and imposes no additional requirements beyond those imposed by State law. Accordingly, the Administrator certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et. seq.). Because this rule proposes to approve pre-existing requirements under State law and does not impose any additional enforceable duty beyond that required by State law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). For the same reason, this proposed rule also does not significantly or uniquely affect the communities of tribal governments, as specified by Executive Order 13084 (63 FR 27655, May 10, 1998). This proposed 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 (64 FR 43255, August 10, 1999), 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. This proposed rule also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it is not economically significant.

In reviewing SIP submissions, EPA's role is to approve State choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. The proposed rule does not involve special consideration of environmental justice related issues as required by Executive Order 12898 (59 FR 7629, February 16, 1994). As required by section 3 of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing this proposed 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. The EPA has complied with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining the takings implications of the 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. This proposed rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

Throughout this document wherever “we”, “us”, or “our” is used we mean USEPA.

Under the Clean Air Act (Act), as amended in 1977, ozone nonattainment areas were required to adopt emission controls reflective of reasonably available control technology (RACT) for sources of volatile organic compound (VOC) emissions. USEPA issued three sets of control technique guidelines (CTGs) documents, establishing a “presumptive norm” for RACT for various categories of VOC sources. The three sets of CTGs were: (1) Group I—issued before January 1978 (15 CTGs); (2) Group II—issued in 1978 (9 CTGs); and (3) Group III—issued in the early 1980's (5 CTGs). Those sources not covered by a CTG are called non-CTG sources. USEPA determined that an area's State Implementation Plan (SIP) approved attainment date established which RACT rules the area needed to adopt and implement. In those areas where the State sought an extension of the attainment date under section 172(a)(2) to as late as December 31, 1987, RACT was required for all CTG sources and for all major (100 tons per year or more of VOC emissions under the pre-amended Act) non-CTG sources. Illinois sought and received such an extension for the Chicago area.

Section 182(b)(2) of the Act as amended in 1990 requires States to adopt RACT rules for all areas designated nonattainment for ozone and classified as moderate or above. There are three parts to the section 182(b)(2) RACT requirement: (1) RACT for sources covered by an existing CTG—i.e., a CTG issued prior to the enactment of the amended Act of 1990; (2) RACT for sources covered by a post-enactment CTG; and (3) all major sources not covered by a CTG. These section 182(b)(2) RACT requirements are referred to as the RACT “catch-up” requirements.

Section 183 of the amended Act requires USEPA to issue CTGs for 13 source categories by November 15, 1993. CTGs were published by this date for the following source categories—Synthetic Organic Chemical Manufacturing Industry (SOCMI) Reactors and Distillation, aerospace manufacturing coating operations, shipbuilding and ship repair coating operations, and wood furniture coating operations; however, the CTGs for the remaining source categories have not been completed. The amended Act requires States to submit rules for sources covered by a post-enactment CTG in accordance with a schedule specified in the CTG document.

The USEPA created a control guideline document as Appendix E to the General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990 (57 FR 18070-18077, April 28, 1992). In Appendix E, USEPA interpreted the Act to allow a State to submit a non-CTG rule by November 15, 1992, or to defer submittal of a RACT rule for sources that the State anticipated would be covered by a post-enactment CTG, based on the list of CTGs USEPA expected to issue to meet the requirement in section 183. Appendix E states that if USEPA fails to issue a CTG by November 15, 1993 (which it did for 9 source categories), the responsibility shifts to the State to submit a non-CTG RACT rule for those sources by November 15, 1994. In accordance with section 182(b)(2), implementation of that RACT rule should occur by May 31, 1995.

The USEPA does not require States to develop plans or regulations to control emissions from sources which are not present in the nonattainment area. If it is thought that this might be the case, the State carefully examines its emissions inventory before initiating the planning and regulation development process. If a careful examination of the emissions inventory finds no sources for a particular source category, then the State prepares and submits to USEPA a negative declaration stating that there are no sources in the nonattainment area for that source category in lieu of submitting a control strategy.

On December 23, 1999, Illinois submitted a negative declaration for major sources of industrial cleaning solvents VOC emissions in the Chicago ozone nonattainment area. In making this determination, the Illinois EPA conducted a search of its 1996 Chicago ozone precursor emission inventory for any source that would have the potential to emit at least 25 tons per year (TPY) of VOC emissions from industrial cleaning solvents. Illinois' search consisted of sources with source code classifications (SCCs) that may be used for cleaning solvents or key words related to industrial cleaning solvents appearing in their descriptions. From these, Illinois EPA calculated potential emissions and found that five sources had the potential to emit over 25 TPY. These were investigated more thoroughly using permit information. From this investigation, Illinois EPA found that none of the five sources would need to be subject to an industrial cleaning solvents rule either because emissions were limited by a federally enforceable permit or because the source was not a type of operation that would fall into the scope of the Industrial Cleaning Solvent Alternative Control Technique, for example, a vapor degreaser that is already covered by existing Illinois regulations. Further, Illinois' rules for the Chicago ozone nonattainment area already contain provisions for the regulation of cleaning solvents used in cold cleaning/degreasing, conveyorized degreasing, vapor degreasing, cleaning solutions on lithographic printing lines and cleaning solvents for wood furniture coating operations. It should be noted that any industrial cleaning solvent operation in the Chicago ozone nonattainment area that has maximum theoretical emissions of 100 TPY or greater, and is not otherwise regulated by Title 35 of the Illinois Administrative Code, Part 218 Organic Material Emission Standards and Limitations for the Chicago Area (35 Ill. Adm. Code, Part 218) would be regulated under Illinois' generic rules category which is codified under 35 Ill. Adm. Code Part 218, Subpart TT. Based on Illinois EPA's review of the 1996 Chicago ozone precursor emission inventory and the ongoing review of staff engineers of facilities in the Chicago ozone nonattainment area, there are no facilities would be subject to the industrial cleaning solvents RACT category. Therefore, RACT regulations for industrial cleaning solvents are not needed for the Chicago ozone nonattainment area.

USEPA has examined the State's negative declaration regarding the lack of need for regulations controlling emissions from industrial cleaning solvents sources located in the Chicago ozone nonattainment area. USEPA agrees there are no industrial cleaning solvents sources in the Chicago ozone nonattainment area which would require the adoption of rules to control this source category.

USEPA is publishing this action without prior proposal because USEPA views this as a noncontroversial revision and anticipates no adverse comments. However, in a separate document in this Federal Register publication, USEPA is proposing to approve the State Plan should adverse written comments be filed.

This action will be effective without further notice unless USEPA receives relevant adverse written comment by March 9, 2001. Should USEPA receive such comments, it will publish a final rule informing the public that this action will not take effect. Any parties interested in commenting on this action should do so at this time. If no such comments are received, the public is advised that this action will be effective on April 9, 2001.

The Office of Management and Budget (OMB) has exempted this regulatory action 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. 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.

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 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 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 action promulgated does 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. 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. section 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. 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 cannot 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. section 804(2). This rule will be effective April 9, 2001 unless EPA receives adverse written comments by March 9, 2001.

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 this action. Today's action does 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 this action must be filed in the United States Court of Appeals for the appropriate circuit by April 9, 2001. 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. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).

On April 30, 1999, the Delaware Department of Natural Resources and Environmental Control submitted a formal revision to its State Implementation Plan (SIP). The SIP revision consists of amended New Source Review (NSR) regulations found in Delaware Regulation 25, Requirements for Preconstruction Review. Regulation 25, sections 1 and 2, affect major new or modified stationary sources in nonattainment areas. The SIP Revision was submitted to meet the requirements imposed by EPA in its conditional approval of Delaware's NSR program published on April 3, 1998 (64 FR 16433-16535). The conditional approval required that certain deficiencies be corrected and clarifications made to Delaware's NSR program. Delaware's April 30, 1999 submittal satisfies the requirements of the April 3, 1998 conditional approval. This rulemaking will convert the conditional approval of Delaware's NSR program to a full approval and incorporate Delaware's revised NSR regulations into the Delaware SIP.

The SIP submission includes revisions to the Delaware Regulations Governing the Control of Air Pollution, Regulation 25—REQUIREMENTS FOR PRECONSTRUCTION REVIEW. Brief descriptions of the deficiencies noted in EPA's April 3, 1998 conditional approval and how they have been corrected or resolved are provided below:

1. Deficiency: EPA stated that Delaware's regulations did not provide special modification procedures found in the Clean Air Act (CAA) Section 182(c)(7). Under federal regulations, a source that makes a single modification at a unit which is greater than 100 tons per year can choose to make an 130% emission decrease at the same source (rather than off site). The source can then choose to follow different procedures for determining control technology requirements.

Clarification: Upon further review and discussion with Delaware, EPA determined that the Delaware regulations are not deficient in this regard. Delaware has retained the “dual definition” of major stationary source. As this definition of stationary source is both the source and the individual unit, the special rule for modifications would be less stringent than the existing Delaware regulations.

2. Deficiency: EPA stated that public participation procedures must be consistent with Federal regulations (as found in 40 CFR 51.161). The Delaware regulations did not specify that the public participation procedures found in another section of the Delaware regulations must be used in issuing nonattainment NSR permits.

Correction: New provisions have been added to the Delaware regulations at Delaware Regulation 25.2.4.D.2. The revised regulation requires the appropriate 30 day public comment period for nonattainment area NSR permits.

3. Deficiency: EPA stated that Delaware regulations did not contain a provision consistent with federal regulations (40 CFR 51.165 (a)(3)(ii)(A)). This federal requirement states that where a regulatory emission limitation (referred to as the allowable rate) is higher than is physically possible at a particular source (referred to as the potential of the source), credit for any emission reductions (emission offsets) will be given only for reductions below the potential of the source.

Correction: Provision 25-2.5 B has been added to Delaware law. The Delaware regulation is now consistent with the federal regulation and ensures that emission credit is not given for emissions which a source would not have the potential to emit.

4. Deficiency: EPA stated that Delaware's regulations did not have necessary safeguards for granting emission offset credit for fuel switching, as found in federal regulations at 40 CFR 51.165 (a)(3)(ii)(B). If a source has the ability to revert to a more polluting fuel, a federally enforceable requirement to maintain lower emission levels is necessary.

Correction: The needed restrictive language has been added to Delaware Regulations at 25-2.4C.2 and 2.5 A. The Delaware regulations ensure that all emission reductions happen before emission credit can be used elsewhere. They further require that emission reductions be federally enforceable such that a source which chooses to switch fuels and generate emission credits must have an enforceable permit or agreement to restrict emissions.

5. Deficiency: EPA stated that Delaware's regulations did not include appropriate safeguards for granting emission reduction credits. Specifically, requirements that all emission offset reductions are federally enforceable, restrictions on granting emission offset credits for sources which previously shut down or curtailed production, and prohibition from granting emission offset credits for emission reductions required by other requirements of the Clean Air Act.

Correction: New provisions have been added to Delaware Regulation 25-2.5 (paragraphs A, C, D and E) and 2.4. These new provisions ensure that all offset credits meet federal requirements.

6. Deficiency: EPA stated that Delaware regulations did not restrict where offsetting emission reductions occurred. Federal regulations require that emission offsets are used only in areas which have been classified as the same or higher nonattainment classification.

Correction: The Delaware Regulations were revised to add 25-2.5E. This provision requires that emission offsets must be generated in an area with the same or higher air quality classification.

EPA is publishing this rule to convert its conditional approval of Delaware's NSR program to a full approval without prior proposal because the Agency views this as a noncontroversial amendment and anticipates no adverse comment. However, in the “Proposed Rules” section of today's Federal Register, EPA is publishing a separate document that will serve as the proposal to approve the SIP revision if adverse comments are filed. This rule will be effective on April 9, 2001 without further notice unless EPA receives adverse comment by March 9, 2001. If EPA receives adverse comment, EPA will publish a timely withdrawal in the Federal Register informing the public that the rule will not take effect. EPA will address all public comments in a subsequent final rule based on the proposed rule. EPA will not institute a second comment period on this action converting its conditional approval of Delaware's NSR program to to a full approval. Any parties interested in commenting must do so at this time.

EPA is taking direct final action to convert its conditional approval of Delaware's revised New Source Review (NSR) regulations to a full approval and to incorporate those regulations into the Delaware State Implementation Plan (SIP). These regulations define the requirements for the nonattainment New Source Review program in Delaware. This action will also remove the conditional approval provision found at 40 CFR 52.424(c).

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. This action merely approves state law as meeting federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). For the same reason, this rule also does not significantly or uniquely affect the communities of tribal governments, as specified by Executive Order 13084 (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 (64 FR 43255, August 10, 1999), 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. This rule also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it is not economically significant. In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. As required by section 3 of Executive Order 12988 (61 FR 4729, February 7, 1996), 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. EPA has complied with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining the takings implications of the 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. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

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. 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 rule is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action converting EPA's conditional approval of revisions to the Delaware SIP for NSR to a full approval must be filed in the United States Court of Appeals for the appropriate circuit by April 9, 2001. 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. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

To the extent that 5 U.S.C. 553 applies to this action, it is exempt from notice and comment because it constitutes a rule of procedure under 5 U.S.C. 553(b)(A). Alternatively, the Agency's implementation of this action without opportunity for public comment, effective immediately upon publication today in the Federal Register, is based on the good cause exceptions in 5 U.S.C. 553(b)(B) and 553(d)(3). Seeking public comment is impracticable, unnecessary and contrary to the public interest. The temporary 60-day delay in effective date is necessary to give Agency officials the opportunity for further review and consideration of new regulations, consistent with the Assistant to the President's memorandum of January 20, 2001. Given the imminence of the effective date, seeking prior public comment on this temporary delay would have been impractical, as well as contrary to the public interest in the orderly promulgation and implementation of regulations. The imminence of the effective date is also good cause for making this rule immediately effective upon publication.

This is a summary of a Second Order on Reconsideration of the Report and Order and Memorandum Opinion and Order (Order) in WT Docket No. 98-169, adopted on November 22, 2000, and released on December 13, 2000. The complete text of the Order is available for inspection and copying during normal business hours in the FCC Reference Center (Room CY-A257), 445 12th Street, SW, Washington, DC. It may also be purchased from the Commission's copy contractor, International Transcription Services, Inc. (ITS, Inc.), 445 12th Street, SW, Room CY-B400, Washington, DC 20554, (202) 314-3070. The Order is also available on the Internet at the Commission's web site: http://www.fcc.gov/wtb/documents.html.

1. On September 10, 1999, the Federal Communications Commission (“Commission”) issued the 218-219 MHz Order, which modified the regulations governing the licensing of the 218-219 MHz Service (formerly known as the Interactive Video and Data Service (“IVDS”)) to maximize the efficient and effective use of the band. See 64 FR 59656 (November 3, 1999). The 218-219 MHz Order, among other things, modified service and technical rules for the band and extended the license term from five to ten years, eliminated the three- and five-year construction benchmarks, and adopted a “substantial service” analysis to be assessed at the expiration of the 218-219 MHz license term as a condition of renewal. The Commission also adopted a restructuring plan for existing licensees that had participated in the installment payment program and that: (i) Were current in installment payments as of March 16, 1998; (ii) were less than ninety days delinquent on the last payment due before March 16, 1998; or (iii) had properly filed grace period requests under the former installment payment rules (“Eligible Licensees”). Those licensees that had paid in full are not eligible to participate in the restructuring plan as they no longer owe a debt to the Commission and no public policy goal would be served by allowing them to participate. Pursuant to the restructuring plan, Eligible Licensees must make elections on a per license basis, choosing among three options: (i) Reamortization and Resumption of Payments; (ii) Amnesty; or (iii) Prepayment (Prepayment-Retain or Prepayment-Return). If an Eligible Licensee elects Reamortization and Resumption of Payments the licensee retains one or more of its licenses and remains in the installment payment plan. The loan will be “reamortized” over the remaining term of the license. If an Eligible Licensee elects Amnesty its license is returned to the Commission in exchange for debt forgiveness of the outstanding principal balance and all interest payments due thereon. The Commission retains the down payment. If an Eligible Licensee elects Prepayment it may return or retain as many licenses as it wishes. The Prepayment option applies to all of the licenses held by a licensee and cannot be combined with Amnesty or Reamortization/Resumption.

2. “Ineligible Entities” are those entities that made first and second down payments and: (i) Made some installment payments, but were not current in their installment payments as of March 16, 1998, and did not have a grace period request on file in conformance with the former installment payment rules; or (ii) never made any installment payments and did not have a timely filed grace period request on file, in conformance with the former rules. See 47 CFR 95.816 (d)(3) (1994). Ineligible Entities are not eligible to make elections, but will be granted debt forgiveness for any outstanding balances owed and have previously paid installment payments refunded.

3. On November 24, 1999, on our own motion, we adopted the 218-219 MHz Reconsideration Order, 64 FR 72956 (December 29, 1999), which modified our 218-219 MHz Order. We eliminated the provision allowing an Eligible Licensee electing the Amnesty option to obtain a credit for seventy percent of its down payment and forego, for a period of two years from the start date of the next auction of the 218-219 MHz Service, eligibility to reacquire the surrendered licenses through either auction or any secondary market transaction.

4. In response to the rulings in the 218-219 MHz Order, we received seven petitions for reconsideration, one opposition to the petitions, and no replies. We note that we did not receive any petitions for reconsideration in response to our sua sponte 218-219 MHz Reconsideration Order. After considering the arguments raised in the filings, we affirm the 218-219 MHz Order, as modified by the 218-219 MHz Reconsideration Order, in its entirety. Additionally, we respond to certain requests for clarification contained in the filings and we make technical modifications to the rules.

5. The following is a synopsis of the major actions we adopt. In this Second Order on Reconsideration of the Report and Order and Memorandum Opinion and Order, we:

(i) Affirm that the restructuring plan is limited to existing licensees that: (i) Were current in installment payments as of March 16, 1998; (ii) were less than ninety days delinquent on the last payment due before March 16, 1998; or (iii) had properly filed grace period requests under the former installment payment rules;

(ii) Decline to expand the options offered in the restructuring plan to include disaggregation;

(iii) Decline to expand the options offered in the restructuring plan to include the return of the down payment;

(iv) Affirm that the twenty-five percent bidding credit granted to all winning small business bidders in the 1994 auction of this service will not be extended to all winning bidders in the 1994 auction of this service; and

(v) Affirm that the new part 1 rules regarding installment payments will apply to licensees in this service.

6. The 218-219 MHz Service is a short distance communications service that allows one-and two-way communications for both common carrier and private operations on a fixed or mobile basis. See 47 CFR 95.803(a), 95.807(a). The 1992 Allocation Report and Order, 57 FR 8272 (March 9, 1992), established the 218-219 MHz Service with a 500 kilohertz frequency segment for two licenses in each of the 734 cellular-defined service areas.

7. We issued 218-219 MHz Service licenses by both random selection (lottery) and competitive bidding (auction). In the Omnibus Budget Reconciliation Act of 1993 (1993 Budget Act), Congress authorized the Commission to award licenses for spectrum-based services by auction. We subsequently determined that 218-219 MHz Service licenses should be awarded by competitive bidding and adopted rules and procedures for this licensing structure. Using these procedures, we held the first auction in the 218-219 MHz Service on July 28 and 29, 1994 (Auction No. 2). On January 18, 1995, February 28, 1995, and May 17, 1995, the Commission conditionally granted licenses to the winning bidders, subject to the bidder satisfying the terms of the auction rules, including down payment requirements.

8. Under the Commission's competitive bidding rules in effect at the time of Auction No. 2, winning bidders that qualified as small businesses were allowed to pay twenty percent of their net bid(s) as a down payment and the remaining eighty percent in installments over the five-year term of the license(s), with interest-only payments for the first two years, and interest and principal payments amortized over the remaining three years. See 47 CFR 95.816(d)(3). The first interest-only payment, due March 31, 1995, was deferred to June 30, 1995, pursuant to administrative action by the Office of Managing Director. Subsequently, the Wireless Telecommunications Bureau (Bureau) further stayed the date for making the initial interest-only payments pending Commission resolution of licensees' substantive requests related to the payment requirements. The Commission lifted the stay effective January 5, 1996, on which date licensees were required to make the interest-only payments back-due from March 31, 1995 and June 30, 1995. Although the interest-only payments due September 30, 1995 and December 31, 1995 remained uncollected, we denied requests to set back the installment payment date and the first principal and interest payments were due on March 31, 1997.

9. The Commission, in the 1995 IVDS Omnibus Order, and the Bureau in the IVDS Grace Period PN, 60 FR 39656 (August 3, 1995), cautioned licensees that, in accordance with § 1.2110(e)(4)(ii) of our rules, if they individually required financial assistance, they should request a three-or six-month grace period during the first ninety days following any missed installment payments. The Bureau further cautioned licensees that if a licensee failed to make timely payments, absent the filing of a grace period request, the license would be in default. The Commission's rules in effect at that time provided that any licensee whose installment payment was more than ninety days past due was in default, unless the licensee properly filed a grace period request. Under the Commission's rules, licensees with properly filed grace period requests would not be held in default during the pendency of their requests and the interest accruing would be amortized by adding it to the other interest payments over the remaining term of the license. Upon expiration of any grace period without successful resumption of payment, or upon default with no such request submitted, the license would cancel automatically. The Commission amended the installment payment rules in 1998 to provide for two automatic grace periods of ninety days, subject to late fees. The 1998 amendment of the installment payment rules did not affect pending grace period requests filed by 218-219 MHz Service licensees.

10. We have previously noted that deployment of the 218-219 MHz Service has not been successful despite previous steps we had taken to promote development of the 218-219 MHz Service. Moreover, those licensees actually deploying services are providing service different than that originally envisioned when the service was established. To promote full utilization of the service, we issued the 1998 218-219 MHz Flex NPRM that proposed changes to the 218-219 MHz Service licensing and technical rules. See 63 FR 54073 (October 8, 1998). The 218-219 MHz Flex NPRM also suspended, for the pendency of this rulemaking, the late payment fee and automatic cancellation provisions of § 1.2110(f)(4) of our rules for licensees that were current in installment payments as of March 16, 1998; stayed decisions on grace period requests properly filed under the part 1 rules previously in effect; and proposed payment restructuring options. In the 218-219 MHz Order, we substantially adopted our proposals.

11. Additionally, in the 218-219 MHz Order, we eliminated the minority- and women-owned business credits previously provided in Auction No. 2. At that same time, to harmonize our treatment of licensees in this service with the treatment of licensees in other services, we granted a bidding credit (Remedial Bidding Credit) to all winning bidders that met the small business qualifications for Auction No. 2.

12. In the 218-219 MHz Order, we determined that it would serve the public interest to provide a variety of relief mechanisms to assist current 218-219 MHz Service licensees that were experiencing difficulties in meeting their financial obligations under the installment payment plan. We stated our belief that the mechanisms adopted afforded relief to current licensees while at the same time preserving the integrity of the auction process. We also recognized that for licensees whose licenses had cancelled, enforcement of the payment obligations would be unduly harsh in light of the totality of the circumstances. Thus, we recommended that those entities whose licenses had cancelled should receive debt forgiveness for their outstanding principal balance and accrued interest owed. We continue to believe that the approach adopted in the 218-219 MHz Order best serves the public interest. Thus, we affirm the 218-219 MHz Order, as modified by the 218-219 MHz Reconsideration Order. We discuss the particular issues raised by the petitioners, clarify certain points in the 218-219 MHz Order, and make technical modifications to the rules.

13. The petitioners have made a number of requests that fall into four general categories. The first category includes requests to change the options available under the restructuring plan. The second category includes requests to expand the definition of entities eligible to participate in the restructuring program. The third category consists of miscellaneous requests relating to the restructuring plan. The fourth category consists of requests to expand the remedial bidding credit to all current and former licensees.

14. Background. As noted, the restructuring plan offers Eligible Licensees three options: (i) Reamortization and Resumption of Payments; (ii) Amnesty; or (iii) Prepayment (Prepayment-Retain or Prepayment-Return). Disaggregation was not proposed or adopted as a restructuring option.

15. Originally, disaggregation was not allowed in this service. However, in the 218-219 MHz Flex Order, 63 FR 54073 (October 8, 1998), we proposed allowing spectrum aggregation, disaggregation, and partitioning as part of our overall effort to maximize the efficient and effective use of the 218-219 MHz frequency band. In doing so, we recognized that we have already adopted, and proposed adopting, disaggregation, and partitioning for a number of services. The proposal in the 218-219 MHz Flex Order to allow spectrum aggregation—in which a licensee could hold both 500 kHz block licenses in a 218-219 MHz Service market—received widespread support. Few commenters addressed disaggregation specifically. Those commenters that supported disaggregation did so based upon the general principle that regulatory parity with other wireless services would benefit licensees. However, one commenter believed that disaggregation would be impractical for such a small amount of spectrum, and another suggested that smaller amounts of spectrum would lower entry barriers for small businesses, but did not discuss what applications, if any, could be supported in the disaggregated spectrum.

16. In adopting partitioning and disaggregation in the 218-219 MHz Service, we concluded that the benefits identified in the Partitioning Report and Order, 62 FR 696 (January 6, 1997), which we had extended to other wireless services, would likewise benefit the 218-219 MHz Service. In doing so, we noted that partitioning the geographic area of a license might provide sufficient flexibility to allow entry into the market by entities that lack sufficient resources to participate in the original auction.

17. Discussion. Under Celtronix's proposal, an Eligible Licensee would elect to retain a portion of the spectrum for a given market and return the remainder to the Commission. This procedure, Celtronix suggests, would encourage parties to use spectrum more efficiently and speed service to unserved and underserved areas. Celtronix says it could provide service on 250 kHz—one half the bandwidth it is currently licensed to use, and notes that 220 MHz SMR frequencies are licensed in blocks smaller than 500 kHz.

18. Although Celtronix's filings at an earlier stage of the proceeding supported a change in the rules to allow disaggregation, it first proposed disaggregation as a restructuring option in its petition for reconsideration. No other commenters or petitioners requested disaggregation as a restructuring option and, as noted above, several actually claimed that the existing 500 kHz blocks are insufficiently small for licensees to develop innovative services that will allow them to compete in the marketplace or to provide optimal interference protection.

19. We believe that we have provided ample flexibility in the restructuring options offered. We recognize these options may not suit every licensee's particular business plan. We decline to modify the restructuring options without a substantial record demonstrating a broad-based need or desire for such a change. Based on the minimal record—as well as the outright skepticism of some commenters that channel blocks smaller than 500 kHz are practical for innovative uses—we are doubtful that service will be developed in the portion of a channel block that would remain after a licensee elects disaggregation as a restructuring option. However, if, in the private marketplace, a licensee (such as Celtronix) and a third party can identify 218-219 MHz Service applications for which disaggregated spectrum is practical, our rules allow and we would encourage such a transaction because it would promote the rapid development of an entire 500 kHz channel block.

20. Finally, we distinguish the 218-219 MHz spectrum from the 220 MHz SMR frequencies identified by Celtronix. Although Celtronix is correct in pointing out that 220 MHz SMR frequencies are licensed in blocks smaller than 500 kHz, 218-219 MHz Service licensees, unlike 220 MHz Service licensees, have TV Channel 13 protection requirements. Because disaggregated spectrum would provide a licensee with more limited interference protection options, we are even less confident that the marketplace would support the auction of disaggregated spectrum blocks in the 218-219 MHz Service. Accordingly, we decline to adopt Celtronix's proposal.

21. Background. The 218-219 MHz Order allows for refunds of payments in three instances. First, Eligible Licensees that elect Amnesty will receive a refund of installment payments. Second, Ineligible Entities will receive a refund of installment payments. Third, Eligible Licensees that elect Prepayment, depending upon the number of licenses they return, might be entitled to a refund of excess installment payments. In the 218-219 MHz Order, we specifically declined to provide for the refunds of down payments. Two petitioners, Celtronix and Houston, request that we refund down payments. Specifically, Celtronix requests that we refund the down payments of those Eligible Licensees electing Amnesty. Houston alternatively suggests that we provide a credit equal to the down payments that may be used in future auctions.

In essence, both petitioners are requesting that the Commission completely unwind the transaction and provide a full refund.

22. Discussion. We decline to adopt the proposal to refund down payments as part of the restructuring plan as it would place the Eligible Licensees electing Amnesty in virtually the same position they would have occupied had the auction never taken place. In support of its proposal, Celtronix argues that it is inconsistent to allow Eligible Licensees that elect Prepayment-Return to get an 85 percent credit on the down payments for the returned license, when Eligible Licensees that elect Amnesty are not provided with a full refund on the down payments. Houston supports its proposal by alleging that investors in the service “were victimized by slick promoters.”

23. Providing a refund of down payments to those electing the Amnesty option, without an adequate counterbalancing public interest benefit, would undermine the integrity of the auction process by relieving participants of even the most basic obligation of their participation. Such an approach would not only be unfair to the other participants in the original auction, but it would encourage speculation in future auctions. In the 218-219 MHz Order, we considered and rejected a request to return a portion of the down payment. Our decision to allow licensees that elect Prepayment-Return to get an 85 percent credit on the down payment is justified by the public interest benefit of speeding service to the public. Presumably, only a licensees that reasonably believes it has access to adequate sources of capital and a viable business plan will elect Prepayment-Return. Presumably, these licensees will provide service to the public earlier then licensees from a subsequent auction. Thus, this option speeds service to the public. However, no such public interest benefit would accrue from providing a full refund to Eligible Licensees electing Amnesty. While we are sympathetic to Houston's allegations regarding “slick promoters,” we note that the Commission's present restructuring plan offers significant relief and that the Commission is not responsible for the actions of third parties. Accordingly, as the public interest is not served by giving licensees a complete refund, we reject petitioners' request.

24. Background. As noted, the 218-219 MHz Order adopted, among other things, a restructuring plan for existing licensees that participated in the installment payment plan and that: (i) were current in installment payments as of March 16, 1998; (ii) were less than ninety days delinquent on the last payment due before March 16, 1998; or (iii) had properly filed grace period requests under the former installment payment rules (“Eligible Licensees”). Other relief has been extended to Ineligible Entities.

25. Discussion. One petitioner, Vista, requests that we modify the definition of Eligible Licensees. In support of its request, Vista argues that it is inequitable to allow licensees that had made no installment payments, but had filed a timely grace period request to retain their license, while refusing to permit licensees that made “substantial payments” to retain their licenses. Vista also argues that the payment instructions provided by the Commission were conflicting, thus justifying a licensee's failure to make payments on its license or justifying a licensees failure to timely file a grace period request. Thus, Vista requests that the standard be modified so that the definition of Eligible Licensees also includes those licensees that have made “substantial payments” as of September 7, 1999, the date that the 218-219 MHz Order was adopted. In the alternative, Vista requests that former licensees be able to make a retroactive payment sufficient to be deemed “current as of March 16, 1998.” As explained, we reject these arguments and conclude that the approach we have adopted in the 218-219 MHz Order is equitable and is consistent with the treatment afforded licensees in other services. Accordingly, we decline to change the definition of Eligible Licensees.

26. In the 218-219 MHz Order, the Commission attempted to balance the need to maintain the integrity of the auction system with the desire to assist licensees that might be experiencing financial difficulties. In doing so, we recognized the unique factual history of the 218-219 MHz Service. At the same time, we looked to the treatment afforded licensees in other services. Our decision to allow licensees that were current in installment payments (i.e. less than 90 days delinquent) as of March 16, 1998 to retain their licenses recognized that these licensees complied with our rules and attempted to fulfill their obligations to the Commission. Similarly, our decision to allow licensees that had timely filed grace period requests to retain their licenses stems from the licensees' ability to recognize their obligation to the Commission and take appropriate steps under our rules to request relief from their obligations in a timely manner. Allowing licensees that had timely filed grace period requests to retain their licenses is also consistent with the treatment afforded licensees in other services under the Part 1 Third Report and Order. See 63 FR 770 (January 7, 1998).

27. The test proposed by Vista is inherently subjective and would be unfair to licensees in other services. Administering such a subjective test would be difficult and would invite challenge on the basis of being arbitrary. Further, allowing licensees that failed to abide by the Commission's rules, but had made “substantial payments” to retain their licenses is inconsistent with the Commission's requirement that a licensee make full and timely payments. From such a rule current licensees, in this or other services, might conclude that no consequences would flow from failure to make full and timely payment. Accordingly, we decline to adopt the “substantial payments” test advocated by Vista.

28. Additionally, we also reject Vista's argument that myriad factors created substantial confusion and uncertainty about licensees' payment obligations. Although the date for the initial payment was postponed for a period of time, even the most favorable reading of the Commission's orders and letters to licensees would not lead a licensee to believe that it was excused from its obligation to make payments, or that it did not need to file a grace period request if it determined that it could not make timely payments. To the extent there was any confusion as to the precise date a particular payment was due, the Commission took that into account by defining Eligible Licensees as existing licensees that had participated in the installment payment program and “were current in installment payments as of March 16, 1998.” Thus, Vista has failed to provide a reasonable explanation of a licensees' failure to either make payments or file a timely grace period request.

29. Finally, we decline to adopt Vista's request that licensees be able to make retroactive payments sufficient to be deemed “current as of March 16, 1998.” Vista's suggestion would undermine the Commission's rules that timely and full payment are a condition of retaining the license. In light of the ample notice provided licensees regarding the payment rules, 47 CFR 1.2110(e)(4)(ii)(1994), and the generous provisions for Ineligible Entities provided in the 218-219 MHz Order, Vista's suggestion at this late date that it be allowed to make retroactive payments is unsupportable. Thus, we reject Vista's proposal to allow former licensees to make retroactive payments.

30. Background. The restructuring options in the 218-219 MHz Order are limited to those entities that met the small business qualifications of the auction, availed themselves of the installment payment plan, and have not paid in full. Two petitioners, Hughes and Hot Topics, have requested that all licensees be allowed to turn in a license and receive a refund.

31. Discussion. We decline to adopt the petitioners' request as no public policy interest would be served by allowing all licensees to return their licenses and receive a refund. In support of its proposal, Hughes argues that the Commission has insufficient evidence before it to conclude that installment payment licensees were experiencing financial difficulties, and that alternatively, some licensees may have simply chosen to walk away from their financial responsibilities. Thus, Hughes concludes that the Commission's action is arbitrary. In the 218-219 MHz Order, we have previously rejected Hughes arguments. Hot Topics contends that as the technology for the service never developed, a refund to all licensees is appropriate.

32. For licensees utilizing installment payments, we offered a combination of debt restructuring for those entities that wish to retain their licenses and debt forgiveness to a limited number of current and former licensees. The relief is similar to that offered in the C Block Restructuring Orders, 63 FR 17111 (April 8, 1998), where the Commission chose to offer limited relief to licensees participating in the installment payment program, but not to those that paid in full. The restructuring plan fulfills the public policy goal of ensuring that the entity best qualified to provide service holds the license, and allows the market to determine the highest use for the license. However, where a licensee has paid in full for the license, nothing would prohibit the licensee from selling the license on the open market. Neither Hughes nor Hot Topics has established that a public policy goal would be fulfilled by unwinding the auction. By contrast, we risk considerable harm in adopting the proposal as it might create the false expectation in bidders in future auctions in this, or other services, that the Commission would compensate a licensee for any perceived loss in the value of its license. The Commission does not ensure the success of a service or the value of a license in the secondary market. Although, in a secondary market transaction, the licensee might receive less than the amount paid for the license, no public policy concerns would be raised by such a loss. As mandated by section 309(j) of the Communications Act, the Commission established a competitive bidding process that ensures that licenses are awarded to those that value them most highly as indicated by submitting the highest bid. To grant petitioners' request would encourage bidders to engage in insincere bidding with the expectation that the Commission would ensure against market difficulties encountered after license award.

33. Finally, contrary to Hughes's suggestion, the Commission has considered evidence of the unique financial difficulties experienced by the 218-219 MHz Service licensees participating in the installment payment plan. For example, to our knowledge at least two licensees have filed for bankruptcy. Additionally, in the comments filed by the licensees in response to the 218-219 MHz Flex Order, and in the various grace period requests received by the Commission, licensees alleged that they have encountered financial difficulties particularly in raising capital. Accordingly, for the reasons discussed above, we decline to allow licenses that have paid in full to participate in the restructuring plan.

34. In the Part 1 Third Report and Order, we modified the installment payment grace period and late payment fee provisions of our Rules as applied to all licensees participating in an installment payment plan at that time. One petitioner, Celtronix, proposes to exempt 218-219 MHz Service licensees from the modified installment payment grace period and late payment fee provisions of the new part 1 rules. Celtronix's petition in this proceeding offers the same argument that it previously offered in its petition for reconsideration of the Part 1 Third Report and Order. Specifically, Celtronix argues that applying these rules to 218-219 MHz Service licensees constitutes impermissible retroactive rulemaking. We rejected this argument in the Order on Reconsideration of the Part 1 Third Report and Order, See 65 FR 52323 (August 29, 2000), and concluded that our new part 1 rules do not violate the prohibitions on retroactivity under the Administrative Procedure Act (“APA”). We see no reason to revist this issue in this proceeding

35. Background. In the 218-219 MHz NPRM, See 63 FR 52215 (September 30, 1998), we indicated that “[e]very licensee electing to continue making installment payments would be required to execute appropriate loan documents, that may include a note and security agreement, as a condition of reamortization of its installment payment plan under the revised ten-year term, pursuant to § 1.2110(f)(3) of the Commission's rules.” In the 218-219 MHz Order, we indicated that Eligible Licensees electing resumption “may be required to execute loan documents.” The Implementation Procedures PN, 65 FR 35633 (June 5, 2000), in turn, indicated that those Eligible Licensees electing Reamortization/Resumption would be “required to execute loan documents in the form of an Installment Payment Acknowledgement.” In general, the acknowledgement contains a restatement of the amount of the debt owed, the payment terms under the 218-219 MHz Order, and references other Commission rules and regulations related to the payment of installment debt. The Implementation Procedures PN also notes that “licensees may also be required to execute a Uniform Commercial Code financing statement (UCC-1).” The Implementation Procedures PN further informs Eligible Licensees that failure to fully and timely execute and deliver the requisite loan document(s) as of ten business days from receipt will result in the automatic cancellation of the license.

36. Discussion. One petitioner, In-Sync, argues that requiring loan documents, specifically notes and security agreements, is unnecessary and would constitute a retroactive rulemaking. We reject this argument. As discussed in the Implementation Procedures PN, the Bureau has determined not to require notes and security agreements, but will require the execution of other loan documents that evidence that the licensee understands and agrees to the restructured financing terms. Those licensees that do not wish to execute the required documents may elect Amnesty or elect Prepayment.

37. The APA's definition of “rule” provides that a rule “means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedures, or practice requirements of an agency * * *” By definition, a rule has legal consequences only for the future. Thus, absent explicit statutory authority to the contrary, the APA precludes an agency from issuing rules that alter the past legal consequences of past actions. The requirement that Eligible Licensees execute loan documents does not violate this proscription. We have not gone back to past transactions and imposed penalties for conduct that was previously allowed. Rather, we are establishing prospective procedures to allow licensees to continue to meet their previously established payment obligation to the Commission. The mere fact that these rules deal with past transactions does not constitute unlawful retroactive rulemaking under the APA. Further, the Bureau's decision to require the execution of loan documents by Eligible Licensees that elect Reamortization and Resumption of Payments is based upon the reasonable concern that the Government's interests are adequately protected in the event of default. Accordingly, we agree with the approach adopted by the Bureau and reject petitioner's request.

38. Background. In the 218-219 MHz Flex Order, the Commission suspended the automatic cancellation rules. The effect of this was not to suspend the obligation of licensees to make payments; rather it merely suspended the consequences of failing to make payment. As the underlying debt remained, a licensee was still permitted to make payments. In fact, some licensees have continued to make payments during the suspension period. However, licensees that failed to make payments did not face automatic cancellation.

39. Discussion. Two petitioners, In-Sync and Celtronix, argue that interest should not have continued to accrue during the suspension period. In-Sync argues that as the 218-219 MHz Flex Order suspended the obligation to make the payments as of March 1998, interest should have not have continued to accrue during the period since March 1998. Additionally, both In-Sync and Celtronix argue that the 218-219 MHz Order is unclear and, accordingly, interest should not be calculated for the suspension period. Specifically, Celtronix points to the fact that in the 218-219 MHz Order the Commission stated that it will capitalize all “accrued and unpaid” interest into the principal amount as of the election date. However, in § 95.816(c) of our rules, we stated that “all unpaid interest” from the grant date through the election date will be capitalized into the principal. From this, Celtronix concludes that we did not intend interest to accrue. Both petitioners are mistaken. As the underlying debt remained, the interest continued to accrue. The fact that the Commission relieved the licensees of one consequence of failing to make timely payments does not mean that the Commission intended to also relieve the licensees of all the consequences of failing to make payments. Further, given the sums involved, for at least some licensees, it would require approval by the Department of Justice to forgive the interest incurred during the suspension period. We note that the licensees had the use of the licenses during this period of time. As the petitioners have failed to provide any basis to forgive the interest, the Commission is not inclined to request debt forgiveness on this issue. Accordingly, petitioners' request is rejected.

40. Background. Pursuant to statutory mandate, our auction rules have included provisions to encourage participation by minority- and women-owned entities, small businesses, and rural telephone companies. See 47 CFR 1.2110, 95.816(d)(3). Thus, when the auction for what is now the 218-219 MHz Service was conducted on July 28 and 29, 1994, (Auction No. 2), part 95 of the Commission's rules included provisions that allowed small businesses to pay eighty percent of their winning bids in installments. See 47 CFR 95.816(d)(3). Businesses owned by minority- and/or women-owned entities were also entitled to a twenty-five percent bidding credit that could be applied to one of the two licenses available in each market. See 47 CFR 95.816(d)(1). Bidders that were both small businesses and minority- and/or women-owned entities received bidding credits and were allowed to participate in the installment plan.

41. At the time our rules were adopted for Auction No. 2, the standard of review applied to federal programs designed to enhance opportunities for racial minorities and women was an “intermediate scrutiny standard.” In June 1995, almost a year after the conclusion of Auction No. 2, the U.S. Supreme Court decided Adarand Constructors v. Pena, holding that racial classifications are subject to “strict scrutiny” and will be found unconstitutional unless “narrowly tailored” and in furtherance of “compelling governmental interests.” The following term, the Court decided in United States v. Virginia, that to successfully defend a gender based program, the government must demonstrate an “exceedingly persuasive justification” for the program. As explained in the 218-219 MHz Order, after Auction No. 2, Graceba and others raised constitutional questions concerning the bidding credits used in the 218-219 MHz service. In addition, the Commission, in the Competitive Bidding Sixth Report and Order, 60 FR 37786 (July 21, 1995) and the Competitive Bidding Sixth Memorandum Opinion and Order, 61 FR 49066 (September 18, 1996), questioned whether the record was sufficiently developed to support the race and gender-based provisions of the C block competitive bidding rules and the competitive bidding rules of other services under a strict scrutiny standard. In order to avoid delay of two scheduled auctions, the Commission decided to eliminate the race and gender based provisions for those auctions and instead employ a similar provision for small businesses. However, in light of the Commission's statutory mandate, the Commission commenced a series of studies to examine the minority and female ownership of telecommunications and electronic media facilities in the Unites States. Despite these efforts, in establishing rules for auctions in other services, we have continued to note that the record remains insufficient to support any racial or gender based provision under the standard established by the Supreme Court in Adarand and VMI.

42. In the 218-219 MHz Order, consistent with the modifications made to the rules governing the auction of licenses in other services, we eliminated the minority- and women-owned business bidding credit previously afforded licensees in the first 218-219 MHz auction. Thus, all minority- and women-owned businesses lost the bidding credit they had previously received in the original auction in the 218-219 MHz Service conducted in 1994. At the same time, recognizing that we have provided bidding credits in other services to small businesses, we determined to grant a twenty-five percent bidding credit to the accounts of every winning bidder in the 1994 auction “that met the small business qualifications for that auction.”

43. Discussion. A few petitioners have requested that the 25 percent credit granted to small business be applied to the accounts of all winning bidders regardless of whether they met the small business qualifications for the auction. One petitioner, Ad Hoc Coalition, argues that the provision of the remedial bidding credit, although facially neutral, was impermissibly motivated by a desire to assist women and minority businesses and is thus constitutionally flawed under Hunt v. Cromartie. Another petitioner, Hughes, argues that the Commission's response to the constitutional issue is inequitable as “all bidders in the auction suffered from the inflated prices of the licenses caused by the bidding credits.” Hughes concludes that “all winning bidders, whether they paid in full or not should be afforded a remedy.” For the reasons discussed, we reject these arguments and decline to expand the remedial bidding credit to all winning bidders in Auction No. 2.

44. The arguments of Hughes and Ad Hoc Coalition are based upon the assumption that we accorded bidding credits to all small businesses as a direct remedy for race and gender discrimination. That is incorrect. In order to address the questions raised concerning the constitutionality of race-and gender-based bidding credits, we eliminated those credits. This was the extent of the “remedy” provided for Graceba's concerns. However, as this issue was not raised until after the auction closed, we determined that it would be disruptive and unfair not to provide some form of bidding credit in this service, as licensees had crafted business plans in reliance upon the credit. Therefore, consistent with our practice in subsequent auctions, we choose to afford all small businesses an after the fact bidding credit. Thus, in effect, we leveled the bidding credit benefit upward. In doing so, we minimized the potential for disruption to entities that had previously qualified for the credit, we equalized the regulatory treatment between the 218-219 MHz Service and the many other services in which we have extended bidding credits to all small businesses, and we fulfilled our statutory mandate of encouraging participation of entrepreneurs, rural telephone companies, and businesses owned by members of minority groups and women. The credit accorded small businesses thus solved a multi-faceted and complex set of regulatory issues. Those issues are not presented with respect to larger businesses such as Hughes and those represented by the Coalition, for Congress has not directed us to take special steps to ensure the participation of large companies. We, therefore, have no obligation to extend to such companies the same approach we have adopted toward smaller businesses.

45. The remedial bidding credit affords 218-219 MHz Service licensees treatment similar to that afforded licensees in other services. Because the credit is not based on racial or gender classifications, it is not subject to a strict scrutiny analysis. Instead, our policy operates in a neutral manner and does not subject anyone to unequal treatment on the basis of race or gender. It therefore should be evaluated on the more deferential rational basis review.

46. Under rational basis review, government action is permissible unless the varying treatment of different groups or persons is so unrelated to the achievement of any combination of legitimate purposes the government's actions are deemed irrational. In areas of social and economic policy, a classification that neither proceeds along suspect lines nor infringes fundamental constitutional rights must be upheld against equal protection challenge if there is any reasonably conceivable state of facts that could provide a rational basis for the classification.

47. As we have stated previously with respect to small business credits, the remedial bidding credit for small businesses furthers Congress's objective of disseminating licenses among a wide variety of applicants. That reasonable objective is the basis for our decision to grant small business credits whether prospectively or retroactively as in this instance. Thus, the Commission's decision to grant remedial bidding credits to small businesses is entirely permissible. The fact that the pool of licensees eligible for the credit includes all the licensees that had previously been afforded the minority- and women-owned bidding credit is immaterial to the lawfulness of our approach. Indeed, that correspondence is not surprising because women and minority businesses are frequently, although not exclusively, small businesses. Accordingly, we reject Ad Hoc Coalition's argument that the bidding credits were impermissibly motivated.

48. With respect to Hughes comments that the existence of bidding credits inflated the prices paid by licensees, such a contention is wholly speculative. Hughes has failed to provide any evidence indicative of inflation in the bidding due to the existence of bidding credits, nor has it provided an analysis that would distinguish such inflation in the bidding price due to bidding credits from other factors. Further, as explained, the elimination of the race-and gender-based bidding credits was the “remedy” provided for any alleged constitutional concerns. Even had Hughes provided an evidentiary basis, we would decline to offer the relief requested. Thus, as Hughes' comment is purely speculative, we dismiss it as such.

49. On our own motion, we make several technical modifications to conform our rules to the 218-219 MHz Order. Among these changes, we correct the cross-reference to § 95.815(a) contained in § 95.861 of our rules to specify the interference plan discussed in the text of the 218-219 MHz Order, clarify that CTSs provide fixed service, and specify that the general part 1 transfer and assignment procedures apply to all 218-219 MHz Service licensees, regardless of how they obtained their license. Although § 1.902 of the rules makes these transfer and assignment procedures broadly applicable to all the Wireless Radio Services, we conclude that the inclusion of a specific cross-reference to § 1.948 of the rules in part 95 will aid 218-219 MHz service licensees in meeting their obligations under our general part 1 rules. We also remove the individual licensing requirements for CTSs that may have an environmental effect or require obstruction marking and lighting, because we already collect this information elsewhere in our rules.

50. Accordingly, it is ordered that, pursuant to the authority granted in § 4(i), 303(r), and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 303(r), and 309(j), the petitions for reconsideration filed in response to the 218-219 MHz Order are denied.

51. It is further ordered, that pursuant to that authority granted in sections 4(i), 303(r), and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 303(r), and 309(j), the technical modifications to the Commission's rules, as described herein, are hereby adopted. These modifications shall become effective April 9, 2001.

The Zayante band-winged grasshopper (Trimerotropis infantilis), Order Orthoptera and Family Acrididae, was first described from near Mount Hermon in the Santa Cruz Mountains, Santa Cruz County, California, in 1984 (Rentz and Weissman 1984). The body and forewings of the Zayante band-winged grasshopper are pale gray to light brown with dark cross-bands on the forewings. The basal area of the hindwings is pale yellow with a faint thin band. The hind tibiae (lower legs) are blue, and the eyes have bands around them. Males range in length from 13.7 to 17.2 millimeters (mm) (0.54 to 0.68 inches (in.)); females are larger, ranging in length from 19.7 to 21.6 mm (0.78 to 0.85 in.) (Otte 1984; Rentz and Weissman 1984). The Zayante band-winged grasshopper is most similar in appearance to T. occulans and T. koebelei; neither of these species is known from the Santa Cruz Mountains (Otte 1984, Rentz and Weissman 1984). Trimerotropis thalassica and T. pallidipennis pallidipennis have been observed in the vicinity of Zayante band-winged grasshopper, but are morphologically distinct from it and appear to prefer different microhabitats (Rentz and Weissman 1984; Arnold 1999a, b).

The flight season for adult Zayante band-winged grasshopper extends from late May through October with peak activity during July and August (White, in litt. 1993; Morgan, in litt. 1994; Arnold 1999a, b). Specimens have been observed as late as November 4 (Arnold 1999a). When flushed, individuals generally fly 1 to 2 meters (m) (3 to 7 feet (ft)), producing a buzzing sound while in flight (Rentz and Weissman 1984). Band-winged grasshoppers often alight on bare ground, and are conspicuous in flight because of the color of the hind wings and the buzzing sound made by the wings (Borror et al. 1976). No additional information on the life cycle of this species is available.

The Zayante band-winged grasshopper is known only from Santa Cruz County, California. The species was described in 1984 from specimens collected in 1977 on sparsely vegetated sandy soil above the Olympia Sand Quarry. Between 1989 and 1994, Zayante band-winged grasshoppers were found at 10 of 39 sites sampled during two independent surveys near the communities of Ben Lomond, Felton, Mount Hermon, Zayante, and Scotts Valley, California (Hovore 1996, USFWS 1998).

Little is known of the historical distribution of the species. A review of museum specimens yielded Zayante band-winged grasshoppers from “Santa Cruz Mountains, no date”, “Alma, 1928”, “Felton, 1959”, and “Santa Cruz, 1941” (Rentz and Weissman 1984). No subsequent collections have been recorded that substantiate the existence of a population in the vicinity of Alma. Furthermore, the town of Alma is currently beneath a reservoir, and the cited specimens cannot be located in the listed depository for verification (D. Weissman, California Academy of Sciences, pers. comm. 1994, 2000). Therefore, because no specific descriptions of location or habitat accompanied these historic specimens, they were not considered in our assessment of the current range and status of the species.

The Zayante band-winged grasshopper occurs in association with the Zayante soil series (USDA Soil Conservation Service 1980). The Zayante soils in the vicinity of the communities of Ben Lomond, Felton, Mount Hermon, Zayante, and Scotts Valley are dominated by maritime coast range Pinus ponderosa (ponderosa pine) forest and northern maritime chaparral (Griffin 1964, Holland 1986). The distributions of these two plant communities overlap to form a complex and intergrading mosaic of communities variously referred to as ponderosa sand parkland, ponderosa pine sand hills, and Arctostaphylos silvicola (silver-leafed manzanita) mixed chaparral. These communities are collectively referred to as “Zayante sand hills habitat” and harbor a diversity of rare and endemic plant species (Thomas 1961, Griffin 1964, Morgan 1983). A unique habitat within the Zayante sand hills is sand parkland, characterized by sparsely vegetated, sandstone-dominated ridges, and saddles that support scattered ponderosa pines and a wide array of annual and perennial herbs and grasses.

The role of landscape-level processes, including hydrology, seed dispersal, succession, fire, and other disturbances, in forming Zayante sand hills habitats is poorly understood. Historically, the Zayante sand hills included a continually changing pattern of habitat patches, each with specific disturbance histories, sizes, and species compositions. At any one time, patches of all possible stages of succession would be present (Lee 1994). Populations of the Zayante band-winged grasshopper evolved within this dynamic landscape and most likely are adapted to disturbance and change.

The habitat of the Zayante band-winged grasshopper was originally described as “sandy substrate sparsely covered with Lotus and grasses at the base of pines” (Rentz and Weissman 1984). All of the locations where grasshoppers were found during surveys completed between 1989 and 1994 were on Zayante soils. The habitat at these sites was consistently described as a sparsely vegetated sandy substrate or sand parkland (White, in litt. 1993; Morgan, in litt. 1994). In 1997, at the time of the listing of this species, all of its known locations occurred within 7 discrete areas of sand parkland habitat as characterized by Lee (1994). These areas of sand parkland totaled 78 ha (193 ac). Recent studies indicated that the Zayante band-winged grasshopper occurs primarily in early successional sand parkland with widely scattered tree and shrub cover, extensive areas of bare or sparsely vegetated ground, loose sand, and relatively flat relief (Hovore 1996; Arnold 1999a, b). However, Zayante band-winged grasshoppers have also recently been observed in areas with a well-developed ground cover and in areas with sparse chaparral mixed with patches of grasses and forbs (Hovore 1996; Arnold 1999a, b), indicating that Zayante band-winged grasshoppers are not restricted solely to sand parkland. As a result of this new information, the amount of area that provides potential habitat for the species has not been quantified at this time.

The primary threat to the Zayante band-winged grasshopper is loss of habitat. Historically, approximately 2,533 ha (6,265 ac) of Zayante sand hills habitat occurred in Santa Cruz County. Over 40 percent of the Zayante sand hills habitat, and 60 percent of the sand parkland within that habitat, is estimated to have been lost or altered due to human activities. These activities include—sand mining, urban development, recreational activities, and agriculture (Marangio and Morgan 1987; Lee 1994; R. Morgan, pers. comm. 1992). Approximately 200 to 240 hectares (ha) (500 to 600 acres (ac)) of sand parkland existed historically (Marangio and Morgan 1987). By 1986, only 100 ha (250 ac) of sand parkland remained intact (Marangio and Morgan 1987). By 1992, sand parkland was reportedly reduced to only 40 ha (100 ac) (Morgan, pers. comm. 1992). A more recent assessment revised that estimate up to 78 ha (193 ac), largely because of identification and inclusion of additional, lower-quality sand parkland (Lee 1994).

The disruption of natural landscape-level processes may also be resulting in shifts in plant communities, which has reduced the extent and quality of habitat available for the Zayante band-winged grasshopper (USFWS 1998). For example, active suppression of fire has resulted in the encroachment of mixed evergreen forest into ponderosa pine forest (Marangio 1985). Increased shading from the mixed evergreen forest appears to restrict the use of areas by the Zayante band-winged grasshopper and results in lower population numbers (Sculley, USFWS, pers. observation 1999). Historically, fires would have burned in this area and resulted in areas with more exposure to sunlight. Seed dispersal mechanisms may be disrupted as a result of urbanization of the Zayante sandhills. Residential development may disrupt wind pollination events and isolate or extirpate metapopulations of insect pollinators. In addition, nonnative plant species, including Cystisus striatus (Portuguese broom) and Carpobrotus chilensis (sea fig), are out-competing native species and encroaching on sites occupied by the Zayante band-winged grasshopper (Rigney 1999). Pesticides and over-collection are also recognized as potential threats to the Zayante band-winged grasshopper (USFWS 1998).

On July 16, 1992, Dr. David Weissman, of the California Academy of Sciences, petitioned us to list the Zayante band-winged grasshopper as an endangered species. During our status review of the Zayante band-winged grasshopper, we examined the available literature and data on the species' life history, ecology, locality records, and range. Sources of information on the status of and threats to the Zayante band-winged grasshopper include reports supplied by proponents of the listing, plans supplied by reviewing agencies for development projects, and published and unpublished data from scientists with expertise on the species and its habitat needs.

On May 10, 1994, we published a proposed rule in the Federal Register (59 FR 24112) to list the Zayante band-winged grasshopper and two other insect species as endangered. The proposed rule constituted the final finding for the petitioned actions for the Zayante band-winged grasshopper in accordance with section 4(b)(3)(B)(ii) of the Endangered Species Act (Act) of 1973, as amended (16 U.S.C. 1531 et seq.). Publication of the proposed rule opened a 60-day public comment period through July 11, 1994, to allow submission of new and additional information on the species and written comments from the public. We held a public hearing on July 18, 1994, in Santa Cruz, California, that included presentations of oral testimony and written comments. We published a notice on September 1, 1994 (59 FR 45254), reopening the public comment period through October 31, 1994, to allow submission of additional comments and information concerning the proposed rule.

Using information received during the cited public comment periods, we published a final rule on January 24, 1997 (62 FR 3616), determining the Zayante band-winged grasshopper and Mount Hermon June beetle (Polyphylla barbata), both occurring within the Zayante sand hills habitat, to be endangered species. At the time of listing, we concluded that designation of critical habitat for the Zayante band-winged grasshopper was not prudent. On September 30, 1997, we made a draft recovery plan for the Zayante band-winged grasshopper, Mount Hermon June beetle, and three plants (Chorizanthe pungens var. hartwegiana (Ben Lomond spineflower), Erysimum teretifolium (Ben Lomond wallflower), and Chorizanthe robusta var. hartwegii (Scotts Valley spineflower)) available for public comment (62 FR 51126). We published the final recovery plan in September 1998.

At the time of listing, we concluded that designation of critical habitat for the Zayante band-winged grasshopper was not prudent because such designation would not benefit the species since all known populations of the species occur on non-Federal lands where Federal involvement in land-use activities would not generally occur. Since this time, we have determined that designating critical habitat can provide educational benefits by formally identifying those areas essential to the conservation of the species. These areas are also identified in the recovery plan as the focus of our recovery efforts for the Zayante band-winged grasshopper.

On March 4, 1999, the Southwest Center for Biological Diversity, the Center for Biological Diversity, and Christians Caring for Creation filed a lawsuit in the Northern District Court of California against the U.S. Fish and Wildlife Service and Bruce Babbitt, Secretary of the Department of the Interior, for failure to designate critical habitat for seven species—the Alameda whipsnake (Masticophis lateralis euryxanthus), the Zayante band-winged grasshopper, the Morro shoulderband snail (Helminthoglypta walkeriana), the arroyo southwestern toad (Bufo microscaphus californicus), the San Bernardino kangaroo rat (Dipodomys merriami parvus), the spectacled eider (Somateria fischeri), and the Steller's eider (Polysticta stelleri) (Southwest Center for Biological Diversity v. U.S. Fish and Wildlife, CIV 99-1003 MMC). On November 5, 1999, William Alsup, U.S. District Judge, dismissed the plaintiffs' lawsuit according to a settlement agreement entered into by the parties. Consistent with the settlement agreement, we proposed critical habitat for the Zayante band-winged grasshopper (65 FR 41917) on July 7, 2000.

The comment period for this proposal closed on September 5, 2000. On December 6, 2000, we published a notice (65 FR 76207) announcing the reopening of the comment period on the draft proposal to designate critical habitat for the Zayante band-winged grasshopper and a notice of availability of the draft economic analysis on the proposed determination. The comment period was opened for an additional 15 days, closing on December 21, 2000.

Critical habitat is defined in section 3 of the Act as—(i) the specific areas within the geographic area occupied by a species, at the time it is listed in accordance with the Act, on which are found those physical or biological features (I) essential to the conservation of the species and (II) that may require special management considerations or protection; and, (ii) specific areas outside the geographic area occupied by a species at the time it is listed, upon a determination that such areas are essential for the conservation of the species. “Conservation” means the use of all methods and procedures that are necessary to bring an endangered or a threatened species to the point at which listing under the Act is no longer necessary.

Critical habitat receives protection under section 7 of the Act through the prohibition against destruction or adverse modification of critical habitat with regard to actions carried out, funded, or authorized by a Federal agency. Section 7 also requires consultation on Federal actions that are likely to result in the destruction or adverse modification of critical habitat. In our regulations at 50 CFR 402.02, we define destruction or adverse modification as “* * * the direct or indirect alteration that appreciably diminishes the value of critical habitat for both the survival and recovery of a listed species. Such alterations include, but are not limited to, alterations adversely modifying any of those physical or biological features that were the basis for determining the habitat to be critical.” Aside from the added protection that may be provided under section 7, the Act does not provide other forms of protection to lands designated as critical habitat. Because consultation under section 7 of the Act does not apply to activities on private or other non-Federal lands that do not involve a Federal nexus, critical habitat designation would not afford any additional protections under the Act against such activities.

To be included in a critical habitat designation, the habitat must first be “essential to the conservation of the species.” Critical habitat designations identify, to the extent known using the best scientific and commercial data available, habitat areas that provide essential life cycle needs of the species (i.e., areas on which are found the primary constituent elements, as defined at 50 CFR 424.12(b)).

Section 4 requires that we designate critical habitat at the time of listing and based on what we know at the time of the designation. When we designate critical habitat at the time of listing or under short court-ordered deadlines, we will often not have sufficient information to identify all areas of critical habitat. We are required, nevertheless, to make a decision and thus must base our designations on what, at the time of designation, we know to be critical habitat.

Within the geographic area occupied by the species, we will designate only areas currently known to be essential. Essential areas should already have the features and habitat characteristics that are necessary to sustain the species. We will not speculate about what areas might be found to be essential if better information became available, or what areas may become essential over time. If the information available at the time of designation does not show that an area provides essential life cycle needs of the species, then the area should not be included in the critical habitat designation. Within the geographic area occupied by the species, we will not designate areas that do not now have the primary constituent elements, as defined at 50 CFR 424.12(b), that provide essential life cycle needs of the species.

Our regulations state that, “The Secretary shall designate as critical habitat areas outside the geographic area presently occupied by the species only when a designation limited to its present range would be inadequate to ensure the conservation of the species.” (50 CFR 424.12(e)). Accordingly, when the best available scientific and commercial data do not demonstrate that the conservation needs of the species require designation of critical habitat outside of occupied areas, we will not designate critical habitat in areas outside the geographic area occupied by the species.

Our Policy on Information Standards Under the Endangered Species Act, published in the Federal Register on July 1, 1994 (Vol. 59, p. 34271), provides criteria, establishes procedures, and provides guidance to ensure that decisions made by the Service represent the best scientific and commercial data available. It requires our biologists, to the extent consistent with the Act and with the use of the best scientific and commercial data available, to use primary and original sources of information as the basis for recommendations to designate critical habitat. When determining which areas are critical habitat, a primary source of information should be the listing package for the species. Additional information may be obtained from a recovery plan, articles in peer-reviewed journals, conservation plans developed by states and counties, scientific status surveys and studies, and biological assessments, unpublished materials (i.e., gray literature), and expert opinion or personal knowledge.

Habitat is often dynamic, and species may move from one area to another over time. Furthermore, we recognize that designation of critical habitat may not include all of the habitat areas that may eventually be determined to be necessary for the recovery of the species. For these reasons, all should understand that critical habitat designations do not signal that habitat outside the designation is unimportant or may not be required for recovery. Areas outside the critical habitat designation will continue to be subject to conservation actions that may be implemented under section 7(a)(1) and to the regulatory protections afforded by the section 7(a)(2) jeopardy standard and the section 9 take prohibition, as determined on the basis of the best available information at the time of the action. We specifically anticipate that federally funded or assisted projects affecting listed species outside their designated critical habitat areas may still result in jeopardy findings in some cases. Similarly, critical habitat designations made on the basis of the best available information at the time of designation will not control the direction and substance of future recovery plans, habitat conservation plans, or other species conservation planning efforts if new information available to these planning efforts calls for a different outcome.

In determining areas that are essential to conserve the Zayante band-winged grasshopper, we included data from research and surveys published in peer-reviewed articles and unpublished reports, data submitted by biologists holding section 10(a)(1)(A) recovery permits, data from monitoring reports required for incidental take permits under section 10(a)(1)(B) of the Act, soil maps, and the recovery criteria outlined in the recovery plan (USFWS 1998). The area we are designating as critical habitat currently provides those habitat components essential for the primary biological needs of the Zayante band-winged grasshopper, as defined by the primary constituent elements, and maintains ecosystem functions on which the grasshopper depends.

In accordance with section 3(5)(A)(i) of the Act, and regulations at 50 CFR 424.12, in determining which areas to designate as critical habitat, we are required to base critical habitat determinations on the best scientific and commercial data available and to consider those physical and biological features (primary constituent elements) that are essential to the conservation of the species. These include, but are not limited to, space for individual and population growth and for normal behavior; food, water, air, light, minerals, and other nutritional or physiological requirements; cover or shelter; sites for breeding, reproduction, rearing (or development) of offspring; protection from disturbance; and habitats that are representative of the historic geographical and ecological distributions of a species.

The primary constituent elements for the Zayante band-winged grasshopper are those physical and biological features that provide conditions that are essential for the primary biological needs of thermoregulation, foraging, sheltering, reproduction, and dispersal. The primary constituent elements are—(a) the presence of Zayante soils, (b) the occurrence of Zayante sand hills habitat and the associated plant species, and (c) certain microhabitat conditions, including areas that receive large amounts of sunlight, widely scattered tree and shrub cover, bare or sparsely vegetated ground, and loose sand (Arnold 1999a,b). Zayante sand hills habitat is often characterized by plant species associated with ponderosa pine sand parkland and/or silverleaf manzanita mixed chaparral as described by Marangio (1985) and Lee (1994). Plant species that may occur within the boundaries include, but are not limited to—Pinus ponderosa (ponderosa pine), Arctostaphylos silvicola (silver-leafed manzanita), Ceonothus sp. (California lilac), Adenostoma sp., Eriodictyon sp. (yerba santa), Minuartia sp. (sandwort), Calyptridium umbellatum (pussypaws), Mimulus rattanii (monkeyflower), Lupinis bicolor (miniature lupine), Gilia tenuiflora (gilia), Lessingia filaginifolia (California aster), Eriogonum nudum ssp. decurrens (Ben Lomond buckwheat), Erysimum teretifolium (Ben Lomond wallflower), and Chorizanthe pungens var. hartwegiana (Ben Lomond spineflower) (Lee 1984, USFWS 1998, McGraw in litt. 1999). Of these plant species, Erysimum teretifolium (Ben Lomond wallflower) and Chorizanthe pungens var. hartwegiana (Ben Lomond spineflower) are also federally listed as endangered and are addressed within the same recovery plan as the Zayante band-winged grasshopper and the Mount Hermon June beetle.

Areas where surveys for Zayante band-winged grasshopper have not been conducted, but are adjacent or contiguous with known occupied habitat, are also essential to the species. Not only is it likely that these areas contain grasshoppers, the areas are necessary because they—(1) provide and maintain the ecosystem functions, including, but not limited to, hydrologic processes, succession, seed dispersal, and natural disturbance regimes, necessary to support populations of the Zayante band-winged grasshopper; (2) provide a means of connecting occupied areas so that the deleterious effects of isolation are minimized; and (3) increase the area available to the species in case of localized, random catastrophic events, thus decreasing the potential for extirpation of populations.

In an effort to identify areas essential for the conservation of the species, we evaluated information on Zayante soils, plant communities associated with these soils, and the distribution, life history, and habitat requirements of the Zayante band-winged grasshopper. Using a geographic information system (GIS), maps of the Zayante soil series were generated. We determined that published maps of the Zayante soil series were imprecise for our needs and did not always account for gradients between soil types. Therefore, a 60-m (200-ft) zone was mapped around the soils to account for possible inaccuracies in the current maps. We arrived at a 60-m zone based on recommendations by the Natural Resources Conservation Service (NRCS), the agency familiar with the techniques used to map soils and the distribution of Zayante soils (R. Casale, NRCS, USDA, pers comm. 2000).

Next, the known locations of the Zayante band-winged grasshopper were overlaid on the map of Zayante soil series. Areas included within the boundaries of critical habitat are those Zayante soils determined to be occupied by the grasshopper in past surveys and Zayante soils that are contiguous and adjacent to these occupied areas. These contiguous or adjacent areas were included because they are unsurveyed and are likely to contain grasshoppers, they create patches large enough in size to maintain ecosystem functions, and they connect habitat patches into a larger area so that populations do not become isolated and localized random or catastrophic events do not cause smaller populations to be extirpated. Over time, as succession occurs and vegetation encroaches on areas currently inhabited by the Zayante band-winged grasshopper, populations may disperse into these adjacent patches of habitat.

We considered sites identified in the recovery plan as important for the recovery of the Zayante band-winged grasshopper. While recovery units were not specifically described, the recovery plan recommends protecting the 7 discrete areas of sand parkland (Lee 1994), containing the 10 sites then known to be occupied by the species, as one criterion for down-listing to threatened status. These seven areas were included within the boundaries of the designated critical habitat. Additional areas were also included that have the constituent elements for the species, because new information about the range, distribution, and habitat requirements of the Zayante band-winged grasshopper indicates that the species occupies areas that are outside of these seven discrete areas and that are not considered sand parkland. Furthermore, sand hills habitat adjacent and contiguous with these seven areas is essential to maintain landscape level processes, including succession and fire regimes as described in the Background section of this rule.

We determined that approximately 3,620 ha (8,700 ac) of Zayante soils are scattered throughout Santa Cruz County. The soils occur from west of the community of Bonny Doon east to Corralitos, and from the northern portion of Wilder Ranch State Park north to the communities of Boulder Creek, Lompico, and Zayante. Several patches are also located near and within the City of Scotts Valley. The largest cluster of these soils occurs between Highways 9 and 17, surrounding the communities of Scotts Valley, Zayante, Lompico, Ben Lomond, Felton, and Mount Hermon. Surveyors of the Zayante band-winged grasshopper have focused their efforts in this region, and, at present, all of the known locations of this species are from this region. Zayante soils located in the eastern portion of Santa Cruz County in the vicinity of Corralitos do not support vegetation characteristic of the Zayante sand hills habitat.

We excluded from the designated critical habitat areas that have not been surveyed for the Zayante band-winged grasshopper and that are not part of a continuous corridor of Zayante soils that include known localities of the grasshopper. Although these areas have been excluded, we recognize that they may still include habitat presently or historically occupied by the Zayante band-winged grasshopper. In addition, these unsurveyed areas may include habitat appropriate for introduction of Zayante band-winged grasshoppers in the future. If we determine that areas outside of the boundaries of the designated critical habitat are important for the conservation of this species, we may propose these additional areas as critical habitat in the future.

We defined the boundaries for the designated critical habitat using township, range, and section numbers from the public land survey. Our minimum mapping unit was 1/4-section equating to 65 ha (160 ac). We overlayed the public land survey on the Zayante soils to be designated as critical habitat as defined above. If a 1/4-section of the public land survey included any of these Zayante soils, it was included within the boundaries of critical habitat. We designate approximately 4,230 ha (10,560 ac) of land as critical habitat for the Zayante band-winged grasshopper. Of this area, 1,600 ha (3,950 ac) are lands with Zayante soils. The remaining 2,630 ha (6,610 ac) of critical habitat are areas that were included due to insufficient mapping detail (as described below).

The Zayante soils occur in a mosaic of island-like and finger-like assemblages interspersed with non-Zayante soils. The nature of these assemblages combined with our minimum mapping unit of 65 ha resulted in having to include 2,630 ha of non-Zayante soils within the boundaries of critical habitat. We have displayed the Zayante soils and boundaries of the critical habitat on the map at the end of this rule. We did not map critical habitat in sufficient detail to exclude all developed areas such as towns, housing developments, and other similar lands. Furthermore, we recognize that areas with non-Zayante soils do not contain the primary constituent elements. Federal actions limited to areas within the unit boundaries, that do not contain one or more of the primary constituent elements and do not support the processes necessary to maintain the required ecosystem functions would not trigger a section 7 consultation, unless they affect the species and/or the primary constituent elements in adjacent critical habitat.

The approximate area included in the critical habitat designation within Santa Cruz County by land ownership is shown in Table 1. Land designated as critical habitat is under private, local government, and State ownership, and is described within one unit. A brief description of this unit is presented below in Table 1.

The Critical Habitat Unit (Unit) that is designated encompasses approximately 4,230 ha (10,560 ac) between Highways 9 and 17. Most of the lands designated as critical occur from the southeastern portion of Henry Cowell Redwoods State Park west to the City of Scotts Valley and north to the communities of Ben Lomond, Lompico, and Zayante. A small area designated as critical habitat is located east of Zayante in the vicinity of Weston Road.

Public lands that occur in this Unit include approximately 130 ha (310 ac) in Henry Cowell Redwoods State Park, owned and managed by the California Department of Parks and Recreation, and all of Quail Hollow Park (120 ha (300 ac)), jointly owned and managed by the County of Santa Cruz and the California Department of Fish and Game. Areas covered in the Revised Habitat Conservation Plan for Quail Hollow Quarry (Graniterock 1998) and the Habitat Conservation Plan for Hanson Aggregates' Felton Plant (Hanson Aggregates 1999) have been excluded from designation as critical habitat. See section “Relationship to Habitat Conservation Plans” for further discussion of these plans.

This unit is essential to the recovery of the species because it supports all of the populations that are currently known and all of the known suitable habitat for the Zayante band-winged grasshopper throughout its range. Given the habitat based threats to this species summarized above, we believe the area designated requires special management considerations or protection.

Section 7(a)(2) of the Act requires Federal agencies, including the Service, to ensure that actions they fund, authorize, or carry out do not destroy or adversely modify critical habitat to the extent that the action appreciably diminishes the value of the critical habitat for the survival and recovery of the species. Individuals, organizations, states, local governments, and other non-Federal entities are affected by the designation of critical habitat only if their actions occur on Federal lands, require a Federal permit, license, or other authorization, or involve Federal funding.

Section 7(a) of the Act requires Federal agencies, including the Service, to evaluate their actions with respect to any species that is proposed or listed as endangered or threatened and with respect to its critical habitat, if any is proposed or designated. Regulations implementing this interagency cooperation provision of the Act are codified at 50 CFR part 402. Section 7(a)(4) of the Act, requires Federal agencies to confer with us on any action that is likely to jeopardize the continued existence of a proposed species or result in destruction or adverse modification of proposed critical habitat. Conference reports provide conservation recommendations to assist the agency in eliminating conflicts that may be caused by the proposed action. The conservation recommendations in a conference report are advisory. If a species is listed or critical habitat is designated, section 7(a)(2) requires Federal agencies to ensure that activities they authorize, fund, or carry out are not likely to jeopardize the continued existence of such a species or to destroy or adversely modify its critical habitat. If a Federal action may affect a listed species or its critical habitat, the responsible Federal agency (action agency) must enter into consultation with us. Through this consultation, we would ensure that the permitted actions do not destroy or adversely modify critical habitat.

When we issue a biological opinion concluding that a project is likely to result in the destruction or adverse modification of critical habitat, we also provide reasonable and prudent alternatives to the project, if any are identifiable. “Reasonable and prudent alternatives” are defined at 50 CFR 402.02 as alternative actions identified during consultation that can be implemented in a manner consistent with the intended purpose of the action, that are consistent with the scope of the Federal agency's legal authority and jurisdiction, that are economically and technologically feasible, and that the Director believes would avoid destruction or adverse modification of critical habitat. Reasonable and prudent alternatives can vary from slight project modifications to extensive redesign or relocation of the project. Costs associated with implementing a reasonable and prudent alternative are similarly variable.

Regulations at 50 CFR 402.16 require Federal agencies to reinitiate consultation on previously reviewed actions in instances where critical habitat is subsequently designated and the Federal agency has retained discretionary involvement or control over the action or such discretionary involvement or control is authorized by law. Consequently, some Federal agencies may request reinitiation of consultation or conference with us on actions for which formal consultation has been completed, if those actions may affect designated critical habitat or adversely modify or destroy proposed critical habitat. Conference reports assist the agency in eliminating conflicts that may be caused by the proposed action, and may include recommendations on actions to eliminate conflicts with or adverse modifications to proposed critical habitat. The conservation recommendations in a conference report are advisory.

We may issue a formal conference report if requested by a Federal agency. Formal conference reports on proposed critical habitat contain an opinion that is prepared according to 50 CFR 402.14, as if critical habitat were designated. We may adopt the formal conference report as the biological opinion when the critical habitat is designated, if no substantial new information or changes in the action alter the content of the opinion (see 50 CFR 402.10(d)).

Activities on Federal lands that may affect the Zayante band-winged grasshopper or its critical habitat will require section 7 consultation. Activities on private or State lands requiring a permit from a Federal agency, such as a permit from the U.S. Army Corps of Engineers (Corps) under section 404 of the Clean Water Act, or some other Federal action, including funding (e.g., Federal Highway Administration, Federal Aviation Administration, or Federal Emergency Management Agency) will also continue to be subject to the section 7 consultation process. Federal actions not affecting listed species or critical habitat and actions on non-Federal lands that are not federally funded, authorized, or permitted do not require section 7 consultation.

Section 4(b)(8) of the Act requires us to briefly evaluate and describe in any proposed or final regulation that designates critical habitat those activities involving a Federal action that may adversely modify such habitat, or that may be affected by such designation. Activities that may destroy or adversely modify critical habitat include those that alter the primary constituent elements to an extent that the value of critical habitat for both the survival and recovery of the Zayante band-winged grasshopper is appreciably reduced. We note that such activities may also jeopardize the continued existence of the species. Activities that, when carried out, funded, or authorized by a Federal agency, may destroy or adversely modify critical habitat include, but are not limited to:

(1) Excavating, compacting, grading, or discing of soil, and vegetation removal;

(2) Grading, mining, or construction;

(3) Recreational activities that crush and remove vegetation or compact soils, including off-trail hiking, horse riding, and off-road motorized and non-motorized vehicular use;

(4) Activities that could lead to the introduction of exotic species into critical habitat; and

(5) Activities that cause erosion of soils.

Adverse modification or destruction of critical habitat could occur if these activities occur within the boundaries of critical habitat or outside the boundaries in a manner that indirectly affects critical habitat.

To properly portray the effects of critical habitat designation, we must first compare the section 7 requirements for actions that may affect critical habitat with the requirements for actions that may affect a listed species. Section 7 prohibits actions funded, authorized, or carried out by Federal agencies from jeopardizing the continued existence of a listed species or destroying or adversely modifying the listed species' critical habitat. Actions likely to “jeopardize the continued existence” of a species are those that would appreciably reduce the likelihood of the species' survival and recovery. Actions likely to “destroy or adversely modify” critical habitat are those that would appreciably reduce the value of critical habitat for the survival and recovery of the listed species.

Common to both definitions is an appreciable detrimental effect on both survival and recovery of a listed species. Given the similarity of these definitions, actions likely to destroy or adversely modify critical habitat would almost always result in jeopardy to the species concerned, particularly when the area of the proposed action is occupied by the species. In those cases, it is highly unlikely that additional modification to the action would be required as a result of designating critical habitat. However, critical habitat may provide benefits toward recovery when designated in areas currently unoccupied by the species. Designation of critical habitat for the Zayante band-winged grasshopper is not likely to result in a regulatory burden above that already in place due to the presence of the listed species. We believe that designation of critical habitat would have little effect on Federal agencies because no critical habitat occurs on Federal lands. Furthermore, the final economic analysis for the designation of critical habitat concludes that few if any federally funded or federally permitted actions are anticipated to take place in critical habitat.

This section serves in part as a general guide to clarify activities that may affect or destroy or adversely modify critical habitat. However, specific Federal actions will still need to be reviewed by the action agency. If the agency determines the activity may affect critical habitat, they will consult with us under section 7 of the Act. If it is determined that the activity is likely to adversely modify critical habitat, we will work with the agency to modify the activity to minimize negative impacts to critical habitat. We will work with the agencies and affected public early in the consultation process to avoid or minimize potential conflicts and, whenever possible, find a solution that protects listed species and their habitat while allowing the action to go forward in a manner consistent with its intended purpose.

If you have questions regarding whether specific activities will constitute adverse modification of critical habitat, contact the Field Supervisor, Ventura Fish and Wildlife Office (see ADDRESSES section). Requests for copies of the regulations on listed wildlife and inquiries about prohibitions and permits may be addressed to the U.S. Fish and Wildlife Service, Branch of Endangered Species, 911 N.E. 11th Ave, Portland, OR 97232 (telephone 503-231-2063, facsimile 503-231-6243).

Subsection 4(b)(2) of the Act allows us to exclude areas from critical habitat designation where the benefits of exclusion outweigh the benefits of designation, provided the exclusion will not result in the extinction of the species. For the following reasons, we believe that in most instances the benefits of excluding HCPs from critical habitat designations will outweigh the benefits of including them.

The benefits of including HCP lands in critical habitat are normally small. The principal benefit of any designated critical habitat is that activities in such habitat that may affect it require consultation under section 7 of the Act. Such consultation would ensure that adequate protection is provided to avoid adverse modification of critical habitat. Where HCPs are in place, our experience indicates that this benefit is small or non-existent. Currently approved and permitted HCPs are already designed to ensure the long-term survival of covered species within the plan area. Where we have an approved HCP, lands that we ordinarily would define as critical habitat for the covered species will normally be protected in reserves and other conservation lands by the terms of the HCPs and their implementation agreements. These HCPs and implementation agreements include management measures and protections for conservation lands that are crafted to protect, restore, and enhance their value as habitat for covered species.

In addition, an HCP application must itself be consulted upon. While this consultation will not look specifically at the issue of adverse modification of critical habitat, it will look at the very similar concept of jeopardy to the listed species in the plan area. Because HCPs, particularly large regional HCPs, address land use within the plan boundaries, habitat issues within the plan boundaries will have been thoroughly addressed in the HCP and the consultation on the HCP. Our experience is also that, under most circumstances, consultations under the jeopardy standard will reach the same result as consultations under the adverse modification standard. Implementing regulations (50 CFR Part 402) define “jeopardize the continued existence of” and “destruction or adverse modification of” in virtually identical terms. Jeopardize the continued existence of means to engage in an action “that reasonably would be expected to reduce appreciably the likelihood of both the survival and recovery of a listed species.” Destruction or adverse modification means an “alteration that appreciably diminishes the value of critical habitat for both the survival and recovery of a listed species.” Common to both definitions is an appreciable detrimental effect on both survival and recovery of a listed species, in the case of critical habitat by reducing the value of the habitat so designated. Thus, actions satisfying the standard for adverse modification are nearly always found to also jeopardize the species concerned, and the existence of a critical habitat designation does not materially affect the outcome of consultation. Additional measures to protect the habitat from adverse modification are not likely to be required.

Further, HCPs typically provide for greater conservation benefits to a covered species than section 7 consultations because HCPs assure the long term protection and management of a covered species and its habitat, and funding for such management through the standards found in the 5-Point Policy for HCPs (64 FR 35242) and the HCP No Surprises regulation (63 FR 8859). Such assurances are typically not provided by section 7 consultations which, in contrast to HCPs, often do not commit the project proponent to long term special management or protections. Thus, a consultation typically does not accord the lands it covers the extensive benefits an HCP provides.

The development and implementation of HCPs provide other important conservation benefits, including the development of biological information to guide conservation efforts and assist in species recovery and the creation of innovative solutions to conserve species while allowing for development. The educational benefits of critical habitat, including informing the public of areas that are important for the long-term survival and conservation of the species, are essentially the same as those that would occur from the public notice and comment procedures required to establish an HCP, as well as the public participation that occurs in the development of many regional HCPs. For these reasons, then, we believe that designation of critical habitat has little benefit in areas covered by HCPs.

The benefits of excluding HCPs from being designated as critical habitat may be more significant. During two public comment periods on our critical habitat policy, we received several comments about the additional regulatory and economic burden of designating critical habitat. These include the need for additional consultation with the Service and the need for additional surveys and information gathering to complete these consultations. HCP applicants have also stated that they are concerned that third parties may challenge HCPs on the basis that they result in adverse modification or destruction of critical habitat, should critical habitat be designated within the HCP boundaries.

The benefits of excluding HCPs include relieving landowners, communities and counties of any additional minor regulatory review that might be imposed by critical habitat. Many HCPs, particularly large regional HCPs, take many years to develop and, upon completion, may become regional conservation plans that are consistent with the recovery of covered species. Many of these plans benefit many species, both listed and unlisted. Imposing an additional regulatory review after HCP completion may jeopardize conservation efforts and partnerships in many areas and could be viewed as a disincentive to those developing HCPs. Excluding HCPs provides us with an opportunity to streamline regulatory compliance and confirms regulatory assurances for HCP participants.

A related benefit of excluding HCPs is that it would encourage the continued development of partnerships with HCP participants, including states, local governments, conservation organizations, and private landowners, that together can implement conservation actions we would be unable to accomplish alone. By excluding areas covered by HCPs from critical habitat designation, we preserve these partnerships, and, we believe, set the stage for more effective conservation actions in the future.

In general, then, we believe the benefits of critical habitat designation to be small in areas covered by approved HCPs. We also believe that the benefits of excluding HCPs from designation are significant. Weighing the small benefits of inclusion against the benefits of exclusion, including the benefits of relieving property owners of an additional layer of approvals and regulation, together with the encouragement of conservation partnerships, would generally result in HCPs being excluded from critical habitat designation under Section 4(b)(2) of the Act.

Not all HCPs are alike with regard to species coverage and design. Within this general analytical framework, we need to evaluate completed and legally operative HCPs in the range of the Zayante band-winged grasshopper on a case-by-case basis to determine whether the benefits of excluding these particular areas outweigh the benefits of including them.

Section 4(b)(2) of the Act allows us broad discretion to exclude from critical habitat designation areas where the benefits of exclusion outweigh the benefits of designation, provided the exclusion will not result in the extinction of the species. We expect that critical habitat may be used as a tool to identify those areas essential for the conservation of the species, and we will encourage development of Habitat Conservation Plans (HCPs) for such areas on non-Federal lands.

Two HCPs have been completed within the range of the Zayante band-winged grasshopper. Both HCPs are for sand mining operations and both provide take authorization for the Zayante band-winged grasshopper. The Revised Habitat Conservation Plan for the Quail Hollow Quarry owned and operated by Granite Rock Company provides for the permanent protection and management of three conservation areas known to be occupied by the Zayante band-winged grasshopper and that total 26.3 ha (65.8 ac) in area (Graniterock 1998). The Habitat Conservation Plan for the Felton Plant owned and operated by Hanson Aggregates provides for the permanent protection and management of two habitat set-asides known to be occupied by the Zayante band-winged grasshopper and that total 8.5 ha (21.3 ac) in area (Hanson Aggregates 1999). In addition, both HCPs provide minimization measures to reduce the potential impacts of the sand-mining operations on the Zayante band-winged grasshopper.

All habitat for the Zayante band-winged grasshopper that is essential to the conservation of the species and is within the HCP planning areas is permanently protected in conservation areas and habitat set-asides. Habitat that is preserved in the HCP planning areas is already managed for the benefit of the grasshopper and other covered species under the terms of the plans and associated section 10(a)(1)(B) permits. The assurances afforded the Zayante band-winged grasshopper through the special management and protections in the implementation agreements of approved HCPs are believed to be sufficient to provide for the conservation of the grasshopper. Any additional benefit provided the grasshopper by designating these lands as critical habitat would be minimal at best. Therefore, we have determined that no additional private lands within the HCP planning areas warrant designation as critical habitat.

In contrast, the benefits of excluding lands covered by these HCPs would be significant in preserving positive relationships with our conservation partners, lessening potential additional regulatory review and potential economic burdens, reinforcing the regulatory assurances provided for in the implementation agreements for the approved HCPs, and providing for more established and cooperative partnerships for future conservation efforts.

In summary, the benefits of including HCPs in critical habitat for the Zayante band-winged grasshopper include minor, if any, additional protection for the Zayante band-winged grasshopper. The benefits of excluding HCPs from being designated as critical habitat for the Zayante band-winged grasshopper include the preservation of partnerships that may lead to future conservation, and the avoidance of the minor regulatory and economic burdens associated with the designation of critical habitat. We find that the benefits of excluding these areas from critical habitat designation outweigh the benefits of including these areas. Furthermore, we have determined that these exclusions will not result in the extinction of the species. We have already completed section 7 consultation on the impacts of these HCPs on the species. We have determined that they will not jeopardize the continued existence of the species, which means that they will not appreciably reduce likelihood of the survival and recovery of the species.

In the event that future HCPs covering the Zayante band-winged grasshopper are developed within the boundaries of designated critical habitat, we will work with applicants to ensure that the HCPs provide for protection and management of habitat areas essential for the conservation of the species by either directing development and habitat modification to nonessential areas or appropriately modifying activities within essential habitat areas so that such activities will not adversely modify the primary constituent elements. The HCP development process provides an opportunity for more intensive data collection and analysis regarding the use of particular habitat areas by the Zayante band-winged grasshopper. The process also enables us to conduct detailed evaluations of the importance of such lands to the long term survival of the species in the context of constructing a biologically configured system of interlinked habitat blocks.

We will provide technical assistance and work closely with applicants throughout the development of future HCPs to identify lands essential for the long-term conservation of the Zayante band-winged grasshopper and appropriate management for those lands. The minimization and mitigation measures provided under these HCPs are expected to protect the essential habitat lands designated as critical habitat in this rule. If, an HCP that addresses the Zayante band-winged grasshopper as a covered species is ultimately approved, the Service will reassess the critical habitat boundaries in light of the HCP. The Service will seek to undertake this review when the HCP is approved, but funding constraints may influence the timing of such a review.

In the proposed rule dated July 7, 2000 (65 FR 41917), we requested interested parties to submit factual reports or information that might contribute to development of a final rule. We contacted appropriate Federal and State agencies, county and city governments, scientific organizations, and other interested parties. We published a legal notice of the proposed rule in the Santa Cruz Sentinel on July 16, 2000, that invited general public comment. The 60-day comment period closed on September 5, 2000. On December 6, 2000, we published a notice (65 FR 76207) announcing the reopening of the comment period and the availability of the draft economic analysis on the proposed designation of critical habitat. Again, we contacted all interested parties and posted the draft economic analysis on our internet site. The comment period was opened for an additional 15 days, closing on December 21, 2000.

We requested that three entomologists (biologists who study insects) familiar with the species to peer review the proposed critical habitat designation. However, only two of the peer reviewers responded by the close of the comment periods. Both reviewers provided information about the biology of the species and commented on the areas proposed as critical habitat. Their comments are addressed in this section, and relevant information provided by the reviewers have been incorporated into the section titled “Background.”

We received a total of 14 written comments during the public comment periods. Of those written comments, 3 supported critical habitat designation, 8 opposed the designation, and 1 was neutral. Two commenters wrote to request additional information, but provided no opinion or information regarding the proposed designation. Eleven of the written comments were received from private individuals; one was from an individual representing a local government. All comments received were reviewed for substantive issues and new data regarding the proposed critical habitat, the biology of the species, and the range and threats to the Zayante band-winged grasshopper. We address all comments received during the comment periods under the headings of specific issues. The summarized comments and our responses are as follows:

Issue 1: One commenter questioned how we could determine the number of insects living in the areas proposed for critical habitat without trespassing on private property.

Our Response: In determining areas that are essential to conserve the Zayante band-winged grasshopper, we included data from research and surveys published in peer-reviewed articles and unpublished reports, data submitted by biologists holding section 10(a)(1)(A) recovery permits, data from monitoring reports required for incidental take permits under section 10(a)(1)(B) of the Act, soil maps, and the recovery criteria outlined in the recovery plan (USFWS 1998). To the best of our knowledge, the site-specific data used from these sources were collected with the permission of landowners.

Issue 2: One commenter identified topics with regards to the food plant requirements and dispersal capabilities of the Zayante band-winged grasshopper that need to be researched. The commenter recommended that the designation of critical habitat for the Zayante band-winged grasshopper proceed without this additional information, but noted that the adequacy and success of the designation could not be forecasted without this additional research being conducted.

Our Response: We recognize that important research questions need to be answered with regards to the life history of the Zayante band-winged grasshopper. We hope to secure funds to conduct such research in the future. However, section 3(5)(A)(i) of the Act and regulations at 50 CFR 424.12 require that we base critical habitat determinations on the best scientific and commercial data available. We used all existing information on the biology, life history, habitat requirements, dispersal capabilities, and distribution of the Zayante band-winged grasshopper and other closely related species that were available at this time to designate critical habitat for this species.

Issue 3: One commenter noted that GIS technology is useful to compile distributional data; to determine boundaries of critical habitat; to update the designation of critical habitat in the future; and to use as an analytical tool to identify suitable habitat, buffers zones, and areas of connectivity.

Our Response: We recognize that GIS is a useful tool for conserving species, including the Zayante band-winged grasshopper, for the reasons identified by the commenter. We used GIS to identify areas that we are designating as critical habitat. We expect to rely on GIS in the future to assist us with conservation planning for the Zayante band-winged grasshopper.

Issue 4: One commenter asserted that an environmental impact statement on the proposed designation of critical habitat is required under the National Environmental Policy Act.

Our Response: An environmental assessment and/or an environmental impact statement as defined by the National Environmental Policy Act of 1969 need not be prepared in connection with regulations adopted pursuant to section 4(a) of the Act. We published a notice in the Federal Register outlining our reasons for this determination on October 25, 1983 (48 FR 49244). This rule does not constitute a major Federal action significantly affecting the quality of the human environment.

Issue 5: Several commenters expressed concern that proposed designation of critical habitat will limit development and impose economic hardship on private landowners and businesses.

Our Response: We are sensitive to the concerns of individuals concerning their property rights. The designation of critical habitat has no effect on non-Federal actions occurring on private land, even if the private land is within the boundaries of the designated critical habitat. However, the listing of the Zayante band-winged grasshopper as endangered does provide the species the protection afforded by the Act on both public and private lands. Critical habitat may affect activities by private landowners only if the activity involves Federal funding, a Federal permit, or other Federal actions. If such a Federal nexus exists, we will work with the landowner and appropriate Federal agency to attempt to develop a project that can be completed without jeopardizing the continued existence of the Zayante band-winged grasshopper or adversely modifying its critical habitat.

Issue 6: One commenter expressed concern that the City of Scotts Valley is located within the critical habitat area for the grasshopper and may face significant additional costs associated with section 7 consultations necessitated by the habitat designation. More specifically, the commenter stated that local governments, including the City of Scotts Valley, would be placed at a disadvantage in competing for Federal grant monies to fund redevelopment projects and road improvements to be used inside the critical habitat area because of the additional administrative burden this designation would place on the Federal agency involved.

Our Response: As stated in the economic analysis, we do not believe that designation of critical habitat for the Zayante band-winged grasshopper will lead to additional economic hardship on residents and businesses within the proposed critical habitat. Previously developed areas within the designated critical habitat are exempted from section 7 consultation requirements. As stated previously in this rule, areas of existing features and structures within the unit boundaries, such as buildings, roads, aqueducts, railroads, airports, and paved areas do not contain one or more of the primary constituent elements and so do not support the functions necessary to maintain the required ecosystem functions. Federal actions limited to these areas, therefore, are exempted from a section 7 consultations, unless they affect the species and/or the primary constituent elements in adjacent critical habitat. Furthermore, most Federal agencies are very experienced with the requirements of the Act. If Federal agencies are funding activities in the designated critical habitat area, they would already be involved in communication with the Service regarding the significant number of other listed species in the area and the potential effects of their activities on these species. The existence of critical habitat for the Zayante band-winged grasshopper in the same area would probably not increase significantly either the cost or complexity of any needed interaction with the Service.

Issue 7: One commenter stated that the Service should refine the boundaries of critical habitat by identifying areas of known habitat for the Zayante band-winged grasshopper. Without refining these areas, the commenter was concerned that the proposed designation is too broad and may negatively impact property values and private property rights within urban areas.

Our Response: Due to time constraints resulting from short deadlines that were court-mandated, we were unable to map critical habitat in sufficient detail in the proposed and final rules to exclude all developed areas such as towns, housing developments, and other lands unlikely to contain habitat for the grasshopper. As previously stated, areas of existing features and structures within the unit boundaries, such as buildings, roads, aqueducts, railroads, airports, and paved areas do not contain one or more of the primary constituent elements and so do not support the functions necessary to maintain the required ecosystem functions. Federal actions limited to these areas, therefore, are exempted from a section 7 consultations, unless they affect the species and/or the primary constituent elements in adjacent critical habitat. We will provide technical assistance to Federal agencies to determine if the actions they permit, fund or carry out may affect the Zayante band-winged grasshopper or the primary constituent elements within areas designated as critical habitat.

This final rule to designate critical habitat for the Zayante band-winged grasshopper does not differ substantially from the previously published proposed rule.

Section 4(b)(2) of the Act requires us to designate critical habitat on the basis of the best scientific and commercial information available and to consider the economic and other relevant impacts of designating a particular area as critical habitat. We completed a draft economic analysis and made it available to the public for comment (65 FR 76207). We also completed a final economic analysis that incorporated public comment and information gathered since the draft analysis. The analysis found that few incremental costs due to the critical habitat designation are expected to occur above and beyond those associated with the listing of the Zayante band-winged grasshopper. We have determined that these economic impacts are minimal and do not warrant excluding any areas from the designation. The final economic analysis is available to the public at the Ventura Fish and Wildlife Office (see ADDRESSES section).

This document has been reviewed by the Office of Management and Budget (OMB), in accordance with Executive Order 12866. OMB makes the final determination under Executive Order 12866.

(a) This rule will not have an annual economic effect of $100 million or adversely affect an economic sector, productivity, jobs, the environment, or other units of government. A cost-benefit and economic analysis is not required. The Zayante band-winged grasshopper was listed as an endangered species in 1997.

Under the Act, critical habitat may not be adversely modified by a Federal agency action; critical habitat does not impose any restrictions on non-Federal persons unless they are conducting activities funded or otherwise sponsored, authorized, or permitted by a Federal agency (see Table 2 below).

Section 7 requires Federal agencies to ensure that they do not jeopardize the continued existence of the species. Based upon our experience with the species and its needs, we conclude that any Federal action or authorized action that could potentially cause adverse modification of designated critical habitat would currently be considered as “jeopardy” under the Act. Accordingly, the designation of areas within the geographic range occupied by the Zayante band-winged grasshopper does not have any incremental impacts on what actions may or may not be conducted by Federal agencies or non-Federal persons that receive Federal authorization or funding. The designation of areas outside the geographic range occupied by the species may have incremental impacts on what activities may or may not be conducted by Federal agencies or non-Federal persons that receive Federal authorization or funding. However, our analysis did not identify any significant incremental effects. Non-Federal persons that do not have a Federal “sponsorship” of their actions are not restricted by the designation of critical habitat, although they continue to be bound by the provisions of the Act concerning “take” of the species.

(b) This rule will not create inconsistencies with other agencies' actions. As discussed above, Federal agencies have been required to ensure that their actions do not jeopardize the continued existence of the Zayante band-winged grasshopper since the listing in 1997. The prohibition against adverse modification of critical habitat is not expected to have a significant economic impact. Because of the potential for impacts on other Federal agency activities, we will continue to review this action for any inconsistencies with other Federal agency actions.

(c) This rule will not materially affect entitlements, grants, user fees, loan programs, or the rights and obligations of their recipients. Federal agencies are currently required to ensure that their activities do not jeopardize the continued existence of the species, and as discussed above we do not anticipate that the adverse modification prohibition (resulting from critical habitat designation) will have any significant incremental effects.

(d) This rule will not raise novel legal or policy issues. This final determination follows the requirements for determining critical habitat contained in the Endangered Species Act.

In the economic analysis, we determined that designation of critical habitat will not have a significant effect on a substantial number of small entities. As discussed under Regulatory Planning and Review above and in this final determination, this designation of critical habitat for the Zayante band-winged grasshopper is not expected to have a significant economic impact. As indicated on Table 1 (see Critical Habitat Designation section), we have designated property owned by State and local governments, and private property.

Within these areas, the types of Federal actions, Federally funded or authorized activities that we have identified as potential concerns are:

(1) Excavating, compacting, grading, or discing of soil, and vegetation removal;

(2) grading, mining, or construction;

(3) recreational activities that crush and remove vegetation or compact soils, including off-trail hiking, horse riding, and off-road motorized and non-motorized vehicular use;

(4) activities that could lead to the introduction of exotic species into critical habitat; and

(5) activities that cause erosion of soils.

Some of these activities sponsored by Federal agencies within critical habitat areas are carried out by small entities (as defined by the Regulatory Flexibility Act) through contract, grant, permit, or other Federal authorization. As discussed above, these actions are largely required to comply with the protections of the Act, and the designation of critical habitat is not anticipated to have significant additional effects on these activities.

For actions on non-Federal property that do not have a Federal connection (such as funding or authorization), the current restrictions concerning take of the species remain in effect, and this final determination will have no additional restrictions.

In the economic analysis, we determined whether designation of critical habitat would cause (a) any effect on the economy of $100 million or more, (b) any increases in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions in the economic analysis, or (c) any significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S. based enterprises to compete with foreign-based enterprises. Refer to the final economic analysis for a discussion of the effects of this determination.

In accordance with the Unfunded Mandates Reform Act (2 U.S.C. 1501 et seq.):

(a) We believe this rule will not “significantly or uniquely” affect small governments. A Small Government Agency Plan is not required. Small governments will be affected only to the extent that any programs having Federal funds, permits, or other authorized activities must ensure that their actions will not adversely affect the critical habitat. However, as discussed above, these actions are currently subject to equivalent restrictions through the listing protections of the species, and no further restrictions are anticipated.

(b) This rule will not produce a Federal mandate of $100 million or greater in any year, that is, it is not a “significant regulatory action” under the Unfunded Mandates Reform Act. The designation of critical habitat imposes no obligations on State or local governments.

In accordance with Executive Order 12630, this rule does not have significant takings implications, and a takings implication assessment is not required. As discussed above, the designation of critical habitat affects only Federal agency actions. This designation will not “take” private property and will not alter the value of private property. Additionally, critical habitat designation does not preclude development of HCPs and issuance of incidental take permits. Owners of areas that are included in the designated critical habitat will continue to have opportunity to utilize their property in ways consistent with the survival of the Zayante band-winged grasshopper.

In accordance with Executive Order 13132, the rule does not have significant Federalism effects. A Federalism assessment is not required. This designation of critical habitat imposes no additional restrictions to those currently in place, and therefore has little incremental impact on State and local governments and their activities. The designation may have some benefit to these governments in that the areas essential to the conservation of the species are more clearly defined, and the primary constituent elements of the habitat necessary to the survival of the species are specifically identified. While this definition and identification does not alter where and what federally sponsored activities may occur, it may assist these local governments in long-range planning (rather than waiting for case-by-case section 7 consultations to occur).

In accordance with Executive Order 12988, the Department of the Interior's Office of the Solicitor has determined that this rule does not unduly burden the judicial system and meets the requirements of sections 3(a) and 3(b)(2) of the Order. We have made every effort to ensure that this final determination contains no drafting errors, provides clear standards, simplifies procedures, reduces burden, and is clearly written such that litigation risk is minimized.

This rule does not contain any information collection requirements for which Office of Management and Budget approval under the Paperwork Reduction Act is required.

We have determined that an Environmental Assessment and/or an Environmental Impact Statement as defined by the National Environmental Policy Act of 1969 need not be prepared in connection with regulations adopted pursuant to section 4(a) of the Endangered Species Act as amended. A notice outlining our reason for this determination was published in the Federal Register on October 25, 1983 (48 FR 49244). This final determination does not constitute a major Federal action significantly affecting the quality of the human environment.

In accordance with the President's memorandum of April 29, 1994, “Government-to-Government Relations with Native American Tribal Governments” (59 FR 22951) and 512 DM 2 and Executive Order 13175, we readily acknowledge our responsibility to communicate meaningfully with recognized Federal Tribes on a government-to-government basis. We have determined that there are no Tribal lands that are essential for the conservation of the Zayante band-winged grasshopper because they do not support populations or suitable habitat. Therefore, we are not designating critical habitat for the Zayante band-winged grasshopper on Tribal lands.

A complete list of all references cited in this final rule is available upon request from the Ventura Fish and Wildlife Office (see ADDRESSES section).

The primary author of this notice is Colleen Sculley, Ventura Fish and Wildlife Office (see ADDRESSES section).

The Morro shoulderband snail was first described as Helix walkeriana by Hemphill (1911) based on collections made “near Morro, California.” He also described a subspecies, based on sculptural features of the shell, Helix walkeriana, Helix var. morroensis, that was collected “near San Luis Obispo City” (1985). The Morro shoulderband snail is also commonly known as the banded dune snail and belongs to the class Gastropoda and family Helminthoglyptidae.

The shell of the Morro shoulderband snail has 5-6 whorls. Its dimensions are 18 to 29 millimeters (mm) (0.7 to 1.1 inches (in.)) in diameter and 14 to 25 mm (0.6 to 1.0 in.) in height. The Morro shoulderband snail can be distinguished from the Big Sur shoulderband snail (Helminthoglypta umbilicata), another native snail in the same area, by its more globose (globe-shaped) shell shape and presence of incised (deeply cut) spiral grooves (Roth 1985). The Morro shoulderband snail has spiral striae (longitudinal ridges) as well as transverse striae giving it a “checkerboard” appearance. Further, there are raised papillae (bumps) at the intersections of some of the striae. The shell of the Big Sur shoulderband snail tends to be flatter and shinier, and rarely has spiral striae. It also has malleations (dents) and tends to be darker in color. The Morro shoulderband's spire is low-domed, and half or more of the umbilicus (the cavity in the center of the base of a spiral shell that is surrounded by the whorls) is covered by the apertural (small opening) lip (Roth 1985). The brown garden snail (Helix aspersa) also occurs in Los Osos with the Morro shoulderband snail and has a marbled pattern on its shell, whereas the Morro shoulderband snail has one narrow dark brown spiral band on the shoulder.

The Morro shoulderband snail is found only in western San Luis Obispo County. At the time of its addition to the List of Endangered and Threatened Wildlife on December 15, 1994 (59 FR 64613), the Morro shoulderband snail was known to be distributed near Morro Bay. Its currently known range includes areas south of Morro Bay, west of Los Osos Creek and north of Hazard Canyon. Historically, the species has also been reported near the city of San Luis Obispo (type locality for “morroensis”) and south of Cayucos (Roth 1985).

The Morro shoulderband snail occurs in coastal dune and scrub communities and maritime chaparral. Through most of its range, the dominant shrub associated with the snail's habitat is mock heather (Ericameria ericoides). Other prominent shrub and succulent species are buckwheat (Eriogonum parvifolium), eriastrum (Eriastrum densifolium), chamisso lupine (Lupinus chamissonis), dudleya (Dudleya sp.), and in more inland locations, California sagebrush (Artemisia californica), coyote brush (Baccharis pilularis), and black sage (Salvia mellifera) (Roth 1985).

Away from the immediate coast, immature scrub in earlier successional stages may offer more favorable shelter sites than mature stands of coastal dune scrub. The immature shrubs provide canopy shelter for the snail, whereas the lower limbs of larger older shrubs may be too far off the ground to offer good shelter. In addition, mature stands produce twiggy litter that is low in food value (Roth 1985).

No studies or documented observations exist on the feeding behaviors of the Morro shoulderband snail. Hill (1974) suggested that the snail probably feeds on the fungal mycelia (webs or mats of non-reproductive fungal strands) growing on decaying plant litter. The Morro shoulderband snail is not a garden pest and is essentially harmless to gardens (Chambers 1997).

Sarcophagid flies (family of flies that rely on a host to complete its life-cycle) have been observed to parasitize the Morro shoulderband snail. Empty puparia (“cases” left behind by adult flies emerging from pupae) were observed in empty snail shells by Hill (1974), Roth (1985), and Kim Touneh (Service, pers. comm. 1997). Hill (1974) and Roth (1985) suggested that mortality from infestations of larvae of this parasitic fly often occurs before the snails reach reproductive maturity. The flies may have a significant impact on the population of the snail (Roth 1985). Seasonal drought and/or heat may contribute to the snail's egg mortality (Roth 1985). Based on shell examination, Roth (1985) also suggested that rodents may prey on the snail.

The Morro shoulderband snail is threatened by destruction of its habitat due to increasing development and by degradation of its habitat due to invasion of nonnative plant species (e.g., veldt grass (Ehrharta calycina), structural changes to its habitat due to maturing of dune vegetation, and recreational use (e.g., heavy off-highway activity). In addition to the known threats, possible threats to the snail include competition for resources with the nonnative brown garden snail (although no assessment has been made of possible dietary overlap between the species); the small and isolated nature of the remaining populations; the use of pesticides (including snail and slug baits); and the introduction of nonnative predatory snails, such as Oxycheilus sp.

We entered into a contract with the Sierra Club Foundation, San Francisco, California, to investigate the status of California land snails. A final report dated August 25, 1975, contained data indicating that several of the snails studied could be considered candidates for listing as threatened or endangered species. On April 28, 1976, we proposed endangered or threatened status for 32 land snails in the Federal Register (41 FR 17742). This proposal included the Morro shoulderband snail (under the common name “banded dune snail”) as endangered. However, we withdrew the proposed rulemaking on December 10, 1979 (44 FR 70796), because of the 1978 amendments to the Act, which required the withdrawal of proposals over 2 years old.

In 1984, we undertook a status review of the snail, which ended in a report by Roth (1985). Based on that report, we included the Morro shoulderband snail as a category one species in the Animal Notices of Review of May 22, 1984 (49 FR 21664); January 6, 1989 (54 FR 554); and November 21, 1991 (56 FR 58820). A category one species is one on which we have sufficient information to support a listing.

On December 23, 1991, we published a proposed rule in the Federal Register (56 FR 66400) to list five plants and the Morro shoulderband snail as endangered. We reopened the comment period on June 8, 1992 (57 FR 24221). On December 15, 1994, we published a final rule adding the Morro shoulderband snail and four plants to the List of Endangered and Threatened Wildlife as endangered species (59 FR 64613). We published a final recovery plan in September 1998.

At the time of listing, we concluded that designation of critical habitat for the Morro shoulderband snail was not prudent because such designation would not benefit the species. We were also concerned that critical habitat designation would likely result in an increased threat of vandalism or collection of the species. However, we have determined that instances of vandalism have not increased since the listing of the Morro shoulderband snail, and the threats to this species and its habitat from specific instances of collection and habitat destruction do not outweigh the broader educational, potential regulatory, and other possible benefits that designation of critical habitat would provide for this species. A designation of critical habitat can provide educational benefits by formally identifying those areas essential to the conservation of the species. These areas were already identified in the recovery plan as the focus of our recovery efforts for the Morro shoulderband snail. Therefore, we conclude that the benefits of designating critical habitat on lands essential for the conservation of the Morro shoulderband snail will not increase incidences of vandalism above current levels for this species.

On March 4, 1999, the Southwest Center for Biological Diversity, the Center for Biological Diversity, and Christians Caring for Creation filed a lawsuit in the Northern District of California against the Service for failure to designate critical habitat for seven species including the Morro shoulderband snail. On November 5, 1999, the district court dismissed the plaintiffs' lawsuit pursuant to a settlement agreement entered into by the parties. Under the settlement agreement, we agreed to submit a proposed determination of critical habitat for the Morro shoulderband snail by July 1, 2000, and to submit a final designation to the Federal Register by February 1, 2001.

The proposed rule to designate critical habitat for the Morro shoulderband snail was published in the Federal Register on July 12, 2000 (65 FR 42962). A total of approximately 1,039 hectares (ha) (2,566 acres (ac)) was proposed as critical habitat for the Morro shoulderband snail in San Luis Obispo County, California. The comment period was open until September 11, 2000. On November 21, 2000, we published a notice (65 FR 69896) announcing the reopening of the comment period and a notice of availability of the draft economic analysis on the proposed determination. The comment period was open an additional 16 days, until December 6, 2000. Publication of this final rule is consistent with the settlement agreement.

Critical habitat is defined in section 3 of the Act as: (i) The specific areas within the geographic area occupied by a species, at the time it is listed in accordance with the Act, on which are found those physical or biological features (I) essential to the conservation of the species and (II) that may require special management considerations or protection; and (ii) specific areas outside the geographic area occupied by a species at the time it is listed, upon a determination that such areas are essential for the conservation of the species. “Conservation” means the use of all methods and procedures that are necessary to bring an endangered species or a threatened species to the point at which listing under the Act is no longer necessary.

Critical habitat receives protection under section 7 of the Act through prohibition against destruction or adverse modification of critical habitat with regard to actions carried out, funded, or authorized by a Federal agency. Section 7 also requires conferences on Federal actions that are likely to result in the destruction or adverse modification of critical habitat. In our regulations at 50 CFR 402.02, we define destruction or adverse modification as “* * * the direct or indirect alteration that appreciably diminishes the value of critical habitat for both the survival and recovery of a listed species. Such alterations include, but are not limited to, alterations adversely modifying any of those physical or biological features that were the basis for determining the habitat to be critical.” Aside from the added protection that may be provided under section 7, the Act does not provide other forms of protection to lands designated as critical habitat.

Because consultation under section 7 of the Act does not apply to activities on private or other non-Federal lands that do not involve a Federal nexus, critical habitat designation would not afford any additional protections under the Act against such activities.

In order to be included in a critical habitat designation, habitat must first be “essential to the conservation of the species.” Critical habitat designations identify, to the extent known using the best scientific and commercial data available, habitat areas that provide essential life cycle needs of the species (i.e., areas on which are found the primary constituent elements defined at 50 CFR 424.12(b)).

Section 4 requires that we designate critical habitat at the time of listing and based on what we know at the time of the designation. When we designate critical habitat at the time of listing or under short court-ordered deadlines, we will often not have sufficient information to identify all areas of critical habitat. We are required, nevertheless, to make a decision and thus must base our designations on what, at the time of designation, we know to be critical habitat.

Within the geographic area occupied by the species, we will designate only areas currently known to be essential. Essential areas should already have the features and habitat characteristics that are necessary to sustain the species. We will not speculate about what areas might be found to be essential if better information became available, or what areas may become essential over time. If the information available at the time of designation does not show that an area provides essential life cycle needs of the species, then the area should not be included in the critical habitat designation. Within the geographic area occupied by the species, we will not designate areas that do not now have the primary constituent elements, as defined at 50 CFR 424.12(b), which provide essential life cycle needs of the species.

Our regulations state that, “The Secretary shall designate as critical habitat areas outside the geographic area presently occupied by the species only when a designation limited to its present range would be inadequate to ensure the conservation of the species (50 CFR 424.12(e)). Accordingly, when the best available scientific and commercial data do not demonstrate that the conservation needs of the species require designation of critical habitat outside of occupied areas, we will not designate critical habitat in areas outside the geographic area occupied by the species.

Our Policy on Information Standards Under the Endangered Species Act, published in the Federal Register on July 1, 1994 (59 FR 34271), provides criteria, establishes procedures, and provides guidance to ensure that our decisions represent the best scientific and commercial data available. It requires our biologists, to the extent consistent with the Act, and with the use of the best scientific and commercial data available, to use primary and original sources of information as the basis for recommendations to designate critical habitat. When determining which areas are critical habitat, a primary source of information should be the listing package for the species. Additional information may be obtained from a recovery plan, articles in peer-reviewed journals, conservation plans developed by States and counties, scientific status surveys and studies, and biological assessments or other unpublished materials (i.e., gray literature).

Habitat is often dynamic, and populations may move from one area to another over time. Furthermore, we recognize that designation of critical habitat may not include all of the habitat areas that may eventually be determined to be necessary for the recovery of the species. For these reasons, all should understand that critical habitat designations do not signal that habitat outside the designation is unimportant or may not be required for recovery. Areas outside the critical habitat designation will continue to be subject to conservation actions that may be implemented under section 7(a)(1) and to the regulatory protections afforded by the section 7(a)(2) jeopardy standard and the section 9 take prohibition, as determined on the basis of the best available information at the time of the action. We specifically anticipate that federally funded or assisted projects affecting listed species outside their designated critical habitat areas may still result in jeopardy findings in some cases. Similarly, critical habitat designations made on the basis of the best available information at the time of designation will not control the direction and substance of future recovery plans, habitat conservation plans, or other species conservation planning efforts if new information available to these planning efforts calls for a different outcome.

As required by the Act and regulations (section 4(b)(2) and 50 CFR 424.12), we used the best scientific information available to determine areas that contain the physical and biological features that are essential for the survival and recovery of the Morro shoulderband snail. This information included data from research and survey observations published in peer-reviewed articles, recovery criteria outlined in the recovery plan, regional Geographic Information System (GIS) vegetation coverages, and data collected from reports submitted by biologists holding section 10(a)(1)(A) recovery permits.

In accordance with section 3(5)(A)(i) of the Act, and regulations at 50 CFR 424.12, in determining which areas to propose as critical habitat, we are required to consider those physical and biological features (primary constituent elements) that are essential to the conservation of the species. These include, but are not limited to, space for individual and population growth and for normal behavior; food, water, or other nutritional or physiological requirements; cover or shelter; sites for breeding and reproduction; and habitats that are protected from disturbance or are representative of the historic and ecological distributions of a species.

The primary constituent elements of critical habitat for the Morro shoulderband snail are those habitat components that are essential for the primary biological needs of foraging, sheltering, reproduction, and dispersal. The areas we are proposing to designate as critical habitat provide these primary constituent elements, which are: sand or sandy soils needed for reproduction; a slope not greater than 10 percent to facilitate movement of individuals; and the presence of native coastal dune scrub vegetation. This vegetation is typically, but not exclusively, represented by mock heather, buckwheat, eriastrum, chamisso lupine, dudleya, and in more inland locations, California sagebrush, coyote brush, and black sage. Some of the habitat in the critical habitat units could be improved through habitat rehabilitation or improved management (e.g., removal of nonnative species).

In an effort to map areas that have the features essential to the conservation of the species, we used data on known Morro shoulderband snail locations and conservation planning areas that were identified in the final recovery plan (Service 1998) as essential for the recovery of the species. All of the critical habitat areas are occupied. Given the habitat-related threats to the species discussed above and in more detail in the final rule (59 FR 64613), we believe the areas we are designating as critical habitat may need special management considerations or protection.

In defining critical habitat boundaries, we made an effort to avoid developed areas such as towns and other similar lands, that are unlikely to contain primary constituent elements essential for Morro shoulderband snail conservation. Areas of existing features and structures within the unit boundaries, such as buildings, roads, aqueducts, railroads, airports, and paved areas, will not contain one or more of the primary constituent elements. Federal actions limited to these areas, therefore, would not trigger a section 7 consultation, unless they affect the species and/or the primary constituent elements in adjacent critical habitat.

We also considered the existing status of lands in designating areas as critical habitat. The Morro shoulderband snail is known to occur on State, county, and private lands. Section 10(a)(1)(B) of the Act authorizes us to issue permits for the take of listed species incidental to otherwise lawful activities. An incidental take permit application must be supported by a habitat conservation plan (HCP) that identifies conservation measures that the permittee agrees to implement for the species to minimize and mitigate the impacts of the requested incidental take. Non-Federal public lands and private lands that are covered by an existing operative HCP and executed implementation agreement (IA) for the Morro shoulderband snail under section 10(a)(1)(B) of the Act are not designated as critical habitat because the benefits of exclusion outweigh the benefits of inclusion as discussed in section 4(b)(2) of the Act.

The approximate area encompassing designated critical habitat by land ownership is shown in Table 1. Designated critical habitat includes Morro shoulderband snail habitat throughout the species' existing range in the United States (i.e., San Luis Obispo County, California). Lands designated are under private, State, and local ownership. The species is not known to occur or to have historically occurred on Federal lands. Lands designated as critical habitat have been divided into three Critical Habitat Units. All of the designated areas need special management, and the final recovery plan for the snail provides guidance on management of these areas for the snail. To recover, the snail needs habitat that is intact and relatively unfragmented by urban development, and that is secure from threats of non-native snail predation, pesticides, recreational use, and invasion of non-native plants. Special management needs include controlling non-native pest plants to maintain intact native habitat, restoring and maintaining connectivity among isolated populations to preserve genetic diversity, controlling pesticides in snail areas, controlling non-native predatory snails, and restoring native plant communities.

Brief descriptions of each unit, our reasons for designating it as critical habitat, are presented below.

Unit 1 encompasses areas managed by Montaña de Oro State Park (Dunes Natural Preserve) and the City of Morro Bay (north end of spit), including the length of the spit and the foredune areas extending south toward Hazard Canyon. The unit provides dune scrub habitat for the populations of Morro shoulderband snail that live there. The spit's windward side and its north end are non-vegetated; patches of vegetation occur along its leeward side on Morro Bay. The West Pecho portion of this unit lies to the east of the Morro Spit Conservation Planning Area and is bounded on the east by Pecho Road and the community of Los Osos. It extends north to the Bay and south to Hazard Canyon. Elevations range from sea level on the Bay to about 75 meters (m) (250 feet (ft)) along its southeastern edge. Vegetation associations include coastal dune scrub, with coastal sage scrub closer to Hazard Canyon.

The California Department of Fish and Game owns an ecological reserve in this unit, which is managed cooperatively with adjoining State Park property. Privately-owned lands occur to the northeast in the community of Los Osos, but private lands are not included in this unit and are not reflected in the approximate area of the critical habitat designated. Approximately 676 ha (1,670 ac) occur on State land, and 65 ha (160 ac) occur on local government land.

The protection and recovery of this unit is essential to maintain the genetic diversity of the Morro shoulderband snail. It contains several significant, viable populations, and provided suitable habitat conditions are maintained through proper management, this unit will provide for connectivity and dispersal between populations, thereby maintaining genetic diversity over the long-term.

Unit 2 is bounded on the north and east by residential development in the community of Los Osos and agricultural fields. The area on the lower slopes of the Irish Hills, where the vegetation is composed of maritime chaparral, is considered essential to the conservation of the Morro shoulderband snail. We designated approximately 129 ha (320 ac) of this area as critical habitat. This area is currently privately owned. The California Department of Fish and Game is expected to acquire the 204 acre Morro Palisades property within this unit early in 2001.

This area contains a core population that can be expanded, and threats to the species reduced, with appropriate management. Special management considerations are necessary in this unit for the protection and recovery of this population, and these are not currently in place. If suitable habitat conditions are maintained through proper management, this unit will provide the ecological conditions for which this snail is found.

The Northeast Los Osos Critical Habitat Unit includes undeveloped areas between Los Osos Creek and Baywood Park and is divided by South Bay Boulevard. Its elevation range is from sea level to about 30 m (100 ft). Vegetation is dominated by variants of coastal sage and dune scrub, with scattered stands of manzanita (Arctostaphylos spp.) and coast live oak (Quercus agrifolia). The Morro shoulderband snail is known to occupy this unit. This unit includes the State-and county-owned Elfin Forest Preserve, portions of Morro Bay State Park, and privately owned lands. The Los Osos Center, Hord Residential, and MCI/Worldcom HCPs fall within the unit boundaries, but areas where incidental take of the Morro shoulderband snail has been authorized are not being designated for critical habitat. Approximately 49 ha (121 ac) of designated critical habitat in this unit occur on State land, and 119 ha (295 ac) occur on private land. The Bureau of Land Management is expected to acquire 5 acres of privately owned land within this unit early in 2001.

This unit supports the most northern intact habitat for the snail. The protection and recovery of this unit is essential to maintain the genetic variability of the species and the full range of ecological setting within which the snail is found. Special management considerations are necessary in this unit for the protection and recovery of this population, and these are not currently in place. The unit has favorable habitat conditions for the expansion and persistence of the core population, and with the reduction of threats through appropriate management, this area should support a larger Morro shoulderband snail population, hence contribute to the recovery of the species.

Section 7(a) of the Act requires Federal agencies, including the Service, to ensure that actions they fund, authorize, or carry out are not likely to jeopardize the continued existence of a threatened or endangered species, or result in the destruction or adverse modification of critical habitat to the extent that the action appreciably diminishes the value of the critical habitat for the survival and recovery of the species. When multiple units of critical habitat are designated, each unit may serve as the basis of a jeopardy analysis if protection of different facets of the species' life cycle or its distribution are essential to the species as a whole for both its survival and recovery. Individuals, organizations, States, local governments, and other non-Federal entities are affected by the designation of critical habitat only if their actions occur on Federal lands, require a Federal permit, license, or other authorization, or involve Federal funding. In 50 CFR 402.01 “jeopardize the continued existence” (of a species) is defined as engaging in an appreciable reduction in the likelihood of survival and recovery of a listed species. “Destruction or adverse modification” (of critical habitat) is defined as a direct or indirect alteration that appreciably diminishes the value of critical habitat for the survival and recovery of the listed species for which critical habitat was designated. Thus, the definitions of “jeopardy” to the species and “adverse modification” of critical habitat are nearly identical.

Section 7(a) of the Act requires Federal agencies, including the Service, to evaluate their actions with respect to any species that is proposed or listed as endangered or threatened, and with respect to its critical habitat, if any is designated or proposed. Regulations implementing this interagency cooperation provision of the Act are codified at 50 CFR part 402. Section 7(a)(4) requires Federal agencies to confer with us on any action that is likely to jeopardize the continued existence of a proposed species or result in destruction or adverse modification of proposed critical habitat. Conference reports provide conservation recommendations to assist the agency in eliminating conflicts that may be caused by the proposed action. The conservation recommendations in a conference report are advisory. If a species is listed or critical habitat is designated, section 7(a)(2) requires Federal agencies to ensure that activities they authorize, fund, or carry out are not likely to jeopardize the continued existence of such a species or to destroy or adversely modify its critical habitat. If a Federal action may affect a listed species or its critical habitat, the responsible Federal agency (action agency) must enter into consultation with us. Through this consultation, we would ensure that the permitted actions do not adversely modify critical habitat.

When we issue a biological opinion concluding that a project is likely to result in the destruction or adverse modification of critical habitat, we also provide reasonable and prudent alternatives to the project, if any are identifiable. Reasonable and prudent alternatives are defined at 50 CFR 402.02 as alternative actions identified during consultation that can be implemented in a manner consistent with the intended purpose of the action, that are consistent with the scope of the Federal agency's legal authority and jurisdiction, that are economically and technologically feasible, and that the Director believes would avoid resulting in the destruction or adverse modification of critical habitat. Reasonable and prudent alternatives can vary from slight project modifications to extensive redesign or relocation of the project. Costs associated with implementing a reasonable and prudent alternative are similarly variable.

Regulations at 50 CFR 402.16 require Federal agencies to reinitiate consultation on previously reviewed actions in instances where critical habitat is subsequently designated, and the Federal agency has retained discretionary involvement or control over the action or such discretionary involvement or control is authorized by law. Consequently, some Federal agencies may request reinitiation of consultation or conferencing with us on actions for which formal consultation has been completed, if those actions may affect designated critical habitat, and they have retained discretionary involvement in the action. Further, some Federal agencies may have conferenced with us on proposed critical habitat. We may adopt the formal conference report as the biological opinion when critical habitat is designated, if no significant new information or changes in the action alter the content of the opinion (see 50 CFR 402.10(d)).

Activities on private or State lands requiring a permit from a Federal agency, such as a permit from the U.S. Army Corps of Engineers (Corps) under section 404 of the Clean Water Act or a section 10(a)(1)(B) permit from the Service, or some other Federal action, including funding (e.g., from the Federal Highway Administration (FHA), Environmental Protection Agency (EPA), or Federal Emergency Management Agency (FEMA)), will also continue to be subject to the section 7 consultation process. Federal actions not affecting listed species or critical habitat, and actions on non-Federal lands that are not federally funded, authorized, or permitted, do not require section 7 consultation.

Section 4(b)(8) of the Act requires us to briefly evaluate and describe in any proposed or final regulation that designates critical habitat those activities involving a Federal action that may destroy or adversely modify such habitat, or that may be affected by such designation.

Activities that, when carried out, funded, or authorized by a Federal agency, may affect critical habitat and require that a section 7 consultation be conducted include, but are not limited to:

(1) Activities that result in excavation, mechanized land clearing, or uncontrolled burning of coastal dune scrub vegetation; and

(2) Activities that could lead to the introduction of exotic species into occupied Morro shoulderband snail habitat.

Activities that may destroy or adversely modify critical habitat include those that alter the primary constituent elements to an extent that the value of critical habitat for both the survival and recovery of the Morro shoulderband snail is appreciably reduced. We note that such activities may also jeopardize the continued existence of the species.

To properly portray the effects of critical habitat designation, we must first compare the section 7 requirements for actions that may affect critical habitat with the requirements for actions that may affect a listed species. Section 7 prohibits actions funded, authorized, or carried out by Federal agencies from jeopardizing the continued existence of a listed species or destroying or adversely modifying the listed species' critical habitat. Actions likely to “jeopardize the continued existence” of a species are those that would appreciably reduce the likelihood of the species' survival and recovery. Actions likely to “destroy or adversely modify” critical habitat are those that would appreciably reduce the value of critical habitat for the survival and recovery of the listed species.

Common to both definitions is an appreciable detrimental effect on both survival and recovery of a listed species. Given the similarity of these definitions, actions likely to destroy or modify critical habitat would almost always result in jeopardy to the species concerned, particularly when the area of the proposed action is occupied by the species concerned.

Designation of critical habitat in areas occupied by the Morro shoulderband snail is not likely to result in a regulatory burden above that already in place due to the presence of the listed species. When critical habitat is designated in unoccupied areas, the designation could result in an increase in regulatory requirements on Federal agencies; however, all of the critical habitat designated for the Morro shoulderband snail is occupied.

Federal agencies already consult with us on activities in areas currently occupied by the species to ensure that their actions do not jeopardize the continued existence of the species. The actions we consult on include, but are not limited to:

(1) Activities conducted by the Corps (e.g., ordinance removal);

(2) Road construction and maintenance funded by the FHA; and

(3) Exotic or invasive plant removal by pulling, shoveling, burning, or herbicide application by Federal agencies (e.g., EPA, FEMA, and the Service).

Subsection 4(b)(2) of the Act allows us to exclude areas from critical habitat designation where the benefits of exclusion outweigh the benefits of designation, provided the exclusion will not result in the extinction of the species. For the following reasons, we believe that in most instances the benefits of excluding lands with approved HCPs from critical habitat designations will outweigh the benefits of including them.

The benefits of including HCP lands in critical habitat are normally small. The principal benefit of any designated critical habitat is that activities in such habitat that may affect it require consultation under section 7 of the Act. Such consultation would ensure that adequate protection is provided to avoid adverse modification of critical habitat. Where HCPs are in place, our experience indicates that this benefit is small or non-existent. Currently approved and permitted HCPs are already designed to ensure the long-term survival of covered species within the plan area. Where we have an approved HCP, lands that we ordinarily would define as critical habitat for the covered species will normally be protected in reserves and other conservation lands by the terms of the HCPs and their implementation agreements. These HCPs and implementation agreements include management measures and protections for conservation lands that are crafted to protect, restore, and enhance their value as habitat for covered species.

In addition, an HCP application must itself be consulted upon. While this consultation will not look specifically at the issue of adverse modification if critical habitat has not been designated, it will look at the very similar concept of jeopardy to the listed species in the plan area. Because HCPs address land use within the plan boundaries, habitat issues within the plan boundaries will have been thoroughly addressed in the HCP and through the consultation on the HCP. Our experience is also that, under most circumstances, consultations under the jeopardy standard will reach the same result as consultations under the adverse modification standard. Implementing regulations (50 CFR Part 402) define “jeopardize the continued existence of” and “destruction or adverse modification of” in virtually identical terms. “Jeopardize the continued existence of'means to engage in an action “that reasonably would be expected to reduce appreciably the likelihood of both the survival and recovery of a listed species.” Destruction or adverse modification means an alteration that appreciably diminishes the value of critical habitat for both the survival and recovery of a listed species.” Common to both definitions is an appreciable detrimental effect on both survival and recovery of a listed species, in the case of critical habitat by reducing the value of the habitat so designated. Thus, actions satisfying the standard for adverse modification are nearly always found to also jeopardize the species concerned, and the existence of a critical habitat designation does not materially affect the outcome of consultation. Additional measures to protect the habitat from adverse modification are not likely to be required.

Further, HCPs typically provide for greater conservation benefits to a covered species than section 7 consultations because HCPs assure the long term protection and management of a covered species and its habitat, and funding for such management through the standards found in the 5-Point Policy for HCPs (64 FR 35242) and the HCP No Surprises regulation (63 FR 8859). Such assurances are typically not provided by section 7 consultations which, in contrast to HCPs, often do not commit the project proponent to long term special management or protections. Thus, a consultation typically does not accord the lands it covers the extensive benefits an HCP provides.

The development and implementation of HCPs provide other important conservation benefits, including the development of biological information to guide conservation efforts and assist in species recovery, and the creation of innovative solutions to conserve species while allowing for development. The educational benefits of critical habitat, including informing the public of areas that are important for the long-term survival and conservation of the species, are essentially the same as those that would occur from the public notice and comment procedures required to establish an HCP, as well as the public participation that occurs in the development of many HCPs. For these reasons, then, we believe that designation of critical habitat has little benefit in areas covered by HCPs.

The benefits of excluding HCPs from being designated as critical habitat may be more significant. During two public comment periods on our critical habitat policy, we received several comments about the additional regulatory and economic burden of designating critical habitat. These include the need for additional consultation with the Service and the need for additional surveys and information gathering to complete these consultations. HCP applicants have also stated that they are concerned that third parties may challenge HCPs on the basis that they result in adverse modification or destruction of critical habitat, should critical habitat be designated within the HCP boundaries.

The benefits of excluding HCPs include relieving landowners, communities and counties of any additional minor regulatory review that might be imposed by critical habitat. Many HCPs, particularly large regional HCPs, take many years to develop and, upon completion, become regional conservation plans that are consistent with the recovery of covered species. Many plans benefit many species, both listed and unlisted. Imposing an additional regulatory review after HCP completion may jeopardize conservation efforts and partnerships in many areas and could be viewed as a disincentive to those developing HCPs. Excluding HCPs provides us with an opportunity to streamline regulatory compliance and confirms regulatory assurances for HCP participants.

A related benefit of excluding HCPs is that it would encourage the continued development of partnerships with HCP participants, including states, local governments, conservation organizations, and private landowners, that together can implement conservation actions we would be unable to accomplish alone. By excluding areas covered by HCPs from critical habitat designation, we preserve these partnerships and, we believe, set the stage for more effective conservation actions in the future.

In general, then, we believe the benefits of critical habitat designation to be small in areas covered by approved HCPs. We also believe that the benefits of excluding HCPs from designation are significant. Weighing the small benefits of inclusion against the benefits of exclusion, including the benefits of relieving property owners of an additional layer of approvals and regulation, together with the encouragement of conservation partnerships, would generally result in HCPs being excluded from critical habitat designation under Section 4(b)(2) of the Act.

Not all HCPs are alike with regard to species coverage and design. Within this general analytical framework, we need to evaluate completed and legally operative HCPs in the range of the Morro shoulderband snail on a case-by-case basis to determine whether the benefits of excluding these particular areas outweigh the benefits of including them.

Section 4(b)(2) of the Act allows us to exclude areas from critical habitat designation where the benefits of exclusion outweigh the benefits of designation, provided the exclusion will not result in the extinction of the species. We expect that critical habitat may be used as a tool to identify those areas essential for the conservation of the species, and we will encourage development of HCPs for such areas on non-Federal lands. Habitat conservation plans currently under development are intended to provide for protection and management of habitat areas essential for the conservation of the Morro shoulderband snail, while directing development and habitat modification to nonessential areas of lower habitat value.

HCPs currently under development are intended to provide for protection and management of habitat areas essential for the conservation of the Morro shoulderband snail, while directing development and habitat modification to nonessential areas of lower habitat value. The HCP development process provides an opportunity for more intensive data collection and analysis regarding the use of particular habitat areas by the snail. The process also enables us to conduct detailed evaluations of the importance of such lands to the long-term survival of the species in the context of constructing a biologically configured system of interlinked habitat blocks. We fully expect that HCPs undertaken by local jurisdictions (e.g., counties, cities) and other parties will identify, protect, and provide appropriate management for those specific lands within the boundaries of the plans that are essential for the long-term conservation of the species. We believe and fully expect that our analyses of these proposed HCPs and proposed permits under section 7 will show that covered activities carried out in accordance with the provisions of the HCPs and permits will not result in destruction or adverse modification of critical habitat.

We will provide technical assistance and work closely with applicants throughout the development of future HCPs to identify lands essential for the long-term conservation of the Morro shoulderband snail, and appropriate management of those lands. The take minimization and mitigation measures provided under these HCPs are expected to protect the essential habitat lands designated as critical habitat in this rule. If an HCP that addresses the Morro shoulderband snail as a covered species is ultimately approved, we will reassess the critical habitat boundaries in light of the HCP. We will seek to undertake this review when the HCP is approved, but funding constraints may influence the timing of such a review. Several HCP efforts are now under way for listed species in areas within the range of the Morro shoulderband snail in areas we are designating as critical habitat. However, since these HCPs have not been completed, these areas are being designated as critical habitat.

Several HCPs have been completed within the range of the Morro shoulderband snail. The Los Osos Center HCP, Hord Residential HCP, and MCI/Worldcom HCP contributed funds toward the purchase and perpetual management of several acres to serve as conservation sites for the Morro shoulderband snail. The snail habitat preserved in these existing HCP planning areas will be managed for the benefit of the snail, regardless of a critical habitat designation. The benefits of excluding lands covered by these HCPs would be significant in preserving positive relationships with our conservation partners, lessening potential additional regulatory review and potential economic burdens, reinforcing the regulatory assurances provided for in the implementation agreements for the approved HCPs, and providing for more established and cooperative partnerships for future conservation efforts.

In summary, the benefits of including these HCPs in critical habitat for the Morro shoulderband snail include increased educational benefits and minor additional management protections and measures. The benefits of excluding HCPs from being designated as critical habitat for the Morro shoulderband snail include the additional conservation measures for the Morro shoulderband snail and other listed species, preservation of partnerships that may lead to future conservation, and the avoidance of the minor regulatory and economic burdens associated with the designation of critical habitat. The benefits of excluding these areas from critical habitat designation outweigh the benefits of including these areas. Furthermore, we have determined that these exclusions will not result in the extinction of the species. We have already completed section 7 consultation on the impacts of these HCPs on the species. We have determined that they will not jeopardize the continued existence of the species, which means that they will not appreciably reduce likelihood of the survival and recovery of the species. Consequently, these lands have not been designated as critical habitat for the Morro shoulderband snail.

In the July 12, 2000, proposed rule (65 FR 42962), we requested that all interested parties submit comments on the specifics of the proposal, including information, policy, treatment of HCPs, and proposed critical habitat boundaries. On November 21, 2000, we published a notice of availability and request for comments on the draft economic analysis (65 FR 69896). Comments received from July 12, 2000, through December 6, 2000, were entered into the administrative record.

We contacted all appropriate State and Federal agencies, county governments, scientific organizations, and other interested parties and invited them to comment. In addition, we published a newspaper notice in the San Luis Obispo Telegram Tribune on July 17, 2000, inviting public comment review and comment. We did not hold any public hearings on the proposed rule.

We requested three individuals familiar with the Morro shoulderband snail to peer review the proposed critical habitat designation. Two of the peer reviewers submitted comments on the proposed critical habitat designation, providing updated biological information, critical review, and editorial comments. We addressed their comments in the responses below, or incorporated them into other parts of this final rule.

We received a total of 12 written comments during the two comment periods. Of those written comments, five supported critical habitat designation, one opposed critical habitat designation, and six provided additional information but did not support or oppose critical habitat designation. One organization initially sent a letter requesting a public hearing, but later withdrew after we provided them the clarification they needed over the phone. In total, written comments were received from one State agency, one local government, and nine private organizations or individuals.

We reviewed all comments received for substantive issues and new data regarding critical habitat and the Morro shoulderband snail. We grouped comments of a similar nature relating specifically to the proposed critical habitat determination and draft economic analysis on the proposed determination. These are addressed in the following summary.

(1) Comment: One commenter expressed concerns about the present and future impact of the Morro Bay Power Plant (Power Plant) on the habitat of the Morro shoulderband snail. The commenter advised us to take into consideration any possible adverse effects from the Power Plant's air emissions to the Morro shoulderband snail and its habitat.

Our Response: We will explore any valid scientific information regarding the effect of air emissions from the Power Plant to the Morro shoulderband snail. This issue will also be addressed during our review of the draft and final Environmental Impact Report/Statements for the proposed expansion of the Power Plant.

(2) Comment: Two commenters, on behalf of some major landowners, requested more information and clarification regarding the designation of three proposed units including the purpose of unit numbers. They also wanted to know what information we used to determine which areas to designate as critical habitat for the Morro shoulderband snail.

Our Response: We determined what areas to include as critical habitat by using such factors as physiological, behavioral, ecological, and evolutionary requirements that are essential to the conservation of the Morro shoulderband snail. More specifically, we used the primary constituent elements which include the following physical and biological features: sand or sandy soil needed for reproduction; a slope not greater than 10 percent to facilitate movement of individuals; and native coastal dune scrub vegetation. The areas we proposed to designate as critical habitat provide some or all of the primary constituent elements and were selected because they contain the best of the remaining habitat for the snail in an otherwise fragmented landscape. Restoration and maintenance of snail habitat in these areas will contribute to recovery by reducing fragmentation and isolation of populations, and providing a mosaic of suitable habitat for recovering populations. The unit numbers represent the area for reference purposes and were based on areas identified as essential in the final Recovery Plan for the Morro Shoulderband Snail and Four Plants from Western San Luis Obispo County, September 26, 1998.

(3) Comment: One commenter requested we include all the critical habitat units as one unit of coastal dune ecosystem regardless of HCP boundaries or property ownerships so that when management of the critical habitat is planned, it can be managed as contiguous habitat as much as possible (except for “islands of habitat” within the urban part of Los Osos). Management plans should be united for the utmost protection resulting in the goal of recovery.

Our Response: We agree that a landscape approach to managing the larger coastal dune ecosystem would be ideal. However, this critical habitat designation can only encompass habitat essential for the conservation of the Morro shoulderband snail. It would not be appropriate to include in the designation other areas within the coastal zone ecosystem that do not provide the primary constituent element essential to the conservation of the snail. We used the primary constituent elements discussed in the preceding response to define the areas we are designating as critical habitat, so that all the areas would provide some or all of these primary constituent elements.

(4) Comment: One commenter was concerned how our proposed critical habitat designation would affect the proposed Los Osos wastewater treatment facility and project. The wastewater project is the result of an order from the Regional Water Quality Control Board under the Clean Water Act, and the lead agency for the wastewater project is in a very difficult position of trying to implement the wastewater system within an area with limited properties available for siting the wastewater facilities in the community of Los Osos.

Our Response: At present time, the lead agency is proposing to develop a 4.5 ha (11 ac) wastewater treatment facility located at Tri-W inside the community of Los Osos. This area is not within any of the designated critical habitat units. We have conducted formal section 7 consultations with the lead agency and EPA on the proposed facility as a result of the listing of the snail. Because the area where the facility is to be built is outside designated critical habitat, future section 7 consultations associated with the project will not be affected by the designation of critical habitat.

(5) Comment: Three commenters who supported the proposed critical habitat designation disagreed with the concept of excluding areas covered by HCPs.

Our Response: Three HCPs have been completed within the Los Osos area for the Morro shoulderband snail. All of these lands are located inside Unit 3, but were excluded from the critical habitat designation because we determined that, for lands covered by an existing operative HCP and executed implementation agreement (IA) for the Morro shoulderband snail under section 10(a)(1)(B) of the Act, the benefits of exclusion outweigh the benefits of inclusion as discussed in section 4(b)(2) of the Act. Therefore such lands are not designated as critical habitat. All three areas will be managed for the benefit of the species under the terms of the individual HCPs; in addition, a majority of those three areas are currently managed by California State Parks since they are a signatory party in the final IA. We believe California State Parks will implement the conservation efforts according to the guidelines set forth in the HCPs.

(6) Comment: Two commenters encouraged the Service to map the critical habitat boundaries in more detail.

Our Response: We believe we have mapped critical habitat in sufficient detail to include those areas that were determined to be essential to the conservation of the Morro shoulderband snail. We recognize that not every parcel of land within designated critical habitat will contain all of the habitat components essential to Morro shoulderband snail conservation. We are required to describe critical habitat (50 CFR 424.12(c)) with specific limits using reference points and lines as found on standard topographic maps of the area. The approach to developing this critical habitat designation was based on the best available scientific information, and on the development of a scientifically supportable model for predicting Morro shoulderband snail habitat.

Due to the time constraints imposed by the court, and the absence of fine-scale, detailed GIS coverages during the preparation of the proposed and final determination, we included some areas within the boundaries of the critical habitat designation that are not essential to the conservation of the Morro shoulderband snail, such as towns, housing developments, or other developed lands unlikely to provide habitat for the Morro shoulderband snail. However, because these developed areas do not contain the primary constituent elements for the species, we believe that activities occurring on them will not affect the snail or its designated critical habitat and thus, will not trigger a section 7 consultation.

(7) Comment: One commenter supplied new biological information based on his participation in biological survey work on the Morro shoulderband snail throughout the community of Los Osos. The commenter advised us that Morro shoulderband snails use coyote brush as they are commonly found under the coyote brush in an area north of unit 3. In addition, the commenter provided a U.S. Geological Survey 7.5 minute quadrangle map showing areas where Morro shoulderband snails have been found.

Our Response: We incorporated the commenter's new biological information in the final rule. One of the areas shaded was not within any of the proposed critical habitat units. The area is described as Cero Cabrillo and is located within Morro Bay State Park, northeast from proposed unit 3. Service staff visited the site on October 26, 2000, and Morro shoulderband snail shells were found in the area. However, we were not able to include the new location in the final rule because of time constraints in meeting the court ordered deadline for this final rule. We will consider amending the critical habitat designation to include the new location when funding is available.

Based on a review of public comments received on the proposed determination of critical habitat and economic analysis for the Morro shoulderband snail, we reevaluated our proposed designation of critical habitat for this species. We found there was no need to make any substantial changes to the proposed designation for the final rule.

Section 4(b)(2) of the Act requires us to designate critical habitat on the basis of the best scientific and commercial information available, and to consider the economic and other relevant impacts of designating a particular area as critical habitat. We may exclude areas from critical habitat upon a determination that the benefits of such exclusions outweigh the benefits of specifying such areas as critical habitat. We cannot exclude such areas from critical habitat when such exclusion will result in the extinction of the species.

Economic effects caused by listing the Morro shoulderband snail as an endangered species, and by other statutes, are the baseline upon which the effects of critical habitat designation are evaluated. The economic analysis must then examine the incremental economic effects of the critical habitat including both the cost and benefits. Economic effects are measured as changes in national income, regional jobs, and household income. An analysis of the economic effects of Morro shoulderband snail critical habitat designation was prepared (Industrial Economics, Incorporated 2000) and made available for public review (November 21, 2000-December 6, 2000; 65 FR 69896). The final analysis, which reviewed and incorporated public comments, concluded that no significant economic impacts are expected from critical habitat designation above and beyond those already imposed by listing the Morro shoulderband snail. The most likely economic effects of critical habitat designation are on activities funded, authorized, or carried out by a Federal agency. The analysis examined the effects of the proposed designation on: (1) Reinitiation of section 7 consultations, (2) length of time in which section 7 consultations are completed, and (3) new consultation resulting from the determination. Because areas proposed for critical habitat are within the geographic range occupied by the Morro shoulderband snail, activities that may affect critical habitat may also affect the species, and would thus be subject to consultation whether or not critical habitat is designated.

We believe that any project that would adversely modify or destroy critical habitat would also jeopardize the continued existence of the species, and that reasonable and prudent alternatives to avoid jeopardizing the species would also avoid adverse modification of critical habitat. Thus, no regulatory burden or significant additional costs would accrue because of critical habitat above and beyond that resulting from listing. Our economic analysis recognizes that there may be costs from delays associated with reinitiating completed consultations after the critical habitat designation is made final. There may also be economic effects due to the critical habitat designation, as real estate values may be lowered due to perceived increase in the regulatory burden. We believe this impact will be short-term, however.

A copy of the final economic analysis and description of the exclusion process with supporting documents are included in our administrative record, and may be obtained by contacting our office (see ADDRESSES section).

No public hearing was requested or held for the proposed rule.

This document has been reviewed by the Office of Management and Budget (OMB), in accordance with Executive Order 12866. OMB makes the final determination under Executive Order 12866.

(a) This rule will not have an annual economic effect of $100 million or more, or adversely affect an economic sector, productivity, jobs, the environment, or other units of government. A cost-benefit analysis is not required. The Morro shoulderband snail was listed as an endangered species in 1994. In fiscal years 1994 through 1999, we conducted nine formal section 7 consultations with other Federal agencies to ensure that their actions would not jeopardize the continued existence of the snail.

The areas designated as critical habitat are currently occupied by the Morro shoulderband snail. Under the Act, critical habitat may not be adversely modified by a Federal agency action; critical habitat does not impose any restrictions on non-Federal entities unless they are conducting activities funded or otherwise sponsored or permitted by a Federal agency (see Table 2 below). Section 7 requires Federal agencies to ensure that they do not jeopardize the continued existence of the species. Based upon our experience with the species and its needs, we conclude that any Federal action or authorized action that could potentially cause an adverse modification of the designated critical habitat would currently be considered as “jeopardy” under the Act in areas occupied by the species. Accordingly, the designation of currently occupied areas as critical habitat does not have any incremental impacts on what actions may or may not be conducted by Federal agencies or non-Federal persons that receive Federal authorization or funding. Non-Federal persons that do not have a Federal “sponsorship” of their actions are not restricted by the designation of critical habitat (however, they continue to be bound by the provisions of the Act concerning “take” of the species).

(b) This rule will not create inconsistencies with other agencies' actions. As discussed above, Federal agencies have been required to ensure that their actions do not jeopardize the continued existence of the Morro shoulderband snail since the listing in 1994. The prohibition against adverse modification of critical habitat is not expected to impose any additional restrictions to those that currently exist because all of the designated critical habitat occurs in occupied areas.

(c) This rule will not materially affect entitlements, grants, user fees, loan programs, or the rights and obligations of their recipients. Federal agencies are currently required to ensure that their activities do not jeopardize the continued existence of the species, and, as discussed above, we do not anticipate that the adverse modification prohibition (resulting from critical habitat designation) will have any incremental effects in areas of occupied habitat.

(d) This rule will not raise novel legal or policy issues. The final rule follows the requirements for determining critical habitat contained in the Act.