In March, 2000, the Board in connection with publishing an interim rule implementing provisions of the Gramm-Leach-Bliley Act (GLB Act) that allow financial holding companies to engage in merchant banking activities, invited public comment on a proposal to establish capital requirements governing investments by bank holding companies in nonfinancial companies. (See 65 FR 16480). The capital proposal would assess, at the holding company level, a 50 percent capital charge on the carrying value of each investment.

The capital proposal applied to investments, including equity and debt instruments under some circumstances, made by a bank holding company under any of its equity investment authorities, including its merchant banking authority, investment authority under Regulation K, authority to make investments through small business investment companies, authority to hold indirectly investments under section 24 of the Federal Deposit Insurance Act, and authority to make investments in less than 5 percent of the shares of any company under sections 4(c)(6) and 4(c)(7) of the Bank Holding Company Act (BHC Act). This capital proposal did not apply, however, to shares that a bank holding company acquires in a company engaged only in financial activities, acquires in connection with its securities underwriting, dealing or market making activities and held in trading accounts, or acquires through an insurance underwriting company.

The Board and the Secretary of the Treasury together received more than 130 comments on the capital proposal. Commenters included members of Congress, other federal agencies, state banking departments, banking organizations, securities firms, trade associations for the banking and securities industries, law firms and individuals. Many commenters acknowledged that equity investment activities involve greater risks than traditional banking activities. For example, a trade association for the banking industry fully supported the proposed capital charge as appropriate to protect banking organizations and the financial system from the risks associated with merchant banking investment activities.

Most commenters, however, opposed the capital proposal or one or more aspects of the proposal. Some commenters contended that the proposal, by applying a uniform 50-percent charge to all equity investments, failed adequately to take into account risk variances between different types of equity investments (e.g., private equity investments vs. investments in publicly traded stocks) or between different investment portfolios. A number of commenters argued that the proposal would frustrate Congress' desire to permit a “two-way street” between securities firms and banking organizations or would place bank holding companies, and particularly those with large equity investment portfolios, at a disadvantage in competing with nonbanking organizations and foreign banking organizations in the market for making equity investments. Some commenters also contended that the Board lacked the authority to establish special capital requirements for merchant banking and similar equity investments.

Many commenters acknowledged that the internal capital models developed by banking organizations and securities firms frequently require equity investment activities to be supported by significant amounts of capital. Some commenters argued that banking organizations should be permitted to use their internal capital models to determine the appropriate amount of regulatory capital needed to support their investment activities. Others argued that, because banking organizations use internal models for a variety of purposes, it is not appropriate for the agencies to rely on selected data from those models as a principal basis for establishing a minimum regulatory capital requirement for equity investments. Commenters also argued that the banking agencies should not use data derived from internal models to support establishing a high regulatory capital requirement for equity investments without also using the data from these models to reduce the amount of regulatory capital needed to support more traditional banking assets, such as consumer and commercial loans.

Many commenters suggested specific amendments or alternatives to the proposed capital charge. For example, some commenters suggested that the Board rely solely on the examination and supervisory process, as well as market discipline, to ensure that a bank holding company maintains adequate capital to support its equity investment activities. Other commenters argued that the proposal should be replaced with a rule that prohibits bank holding companies from including any unrealized gains on equity investments in their regulatory capital. Some commenters argued that the proposal should be amended to impose a lower capital charge on equity investments such as, for instance, by assigning equity investments a 200 percent risk-weight or by applying a capital charge higher than the current minimums only to equity investments that exceed some threshold amount of the banking organization's Tier 1 capital (e.g., 30 percent).

Some commenters argued that a higher capital charge should be limited only to merchant banking investments made by financial holding companies under the new merchant banking authority in the GLB Act, and should not be applied to past or future investments made by banking organizations under other statutory authorities. Other commenters requested that specific investment authorities be excluded from the proposal. For example, a number of commenters argued that the proposal should not apply to investments made by small business investment company (SBIC) subsidiaries of a banking organization because SBICs are an important source of capital for small businesses, are subject to oversight by the Small Business Administration, and have not historically caused significant losses at banking organizations. Many state banking institutions also argued that the proposal should not apply to the equity investments made by state banks under the special grandfather provisions of section 24(f)(2) of the Federal Deposit Insurance Act (FDI Act). Others asserted that the capital charge should not be applied to investments approved on a case-by-case basis by the FDIC under section 24 of the FDI Act, to investments made under section 4(c)(6) or 4(c)(7) of the BHC Act, or to debt instruments.

A number of commenters asserted that a capital charge higher than the current minimums should not be applied to equity investments actually made prior to issuance of the capital proposal. Commenters argued that the business decisions concerning these investments were made based on the capital rules then in effect, and that applying a new, higher capital charge to these pre-existing investments would be unfair.

The Board has carefully reviewed the comments regarding its initial capital proposal. In addition, the Board has consulted with the Treasury Department and has worked with the other Federal banking agencies to improve the proposal and to develop capital standards that would apply uniformly to equity investments held by bank holding companies and those held by depository institutions.

The new proposal attempts to balance the concerns of commenters with the belief of the Federal banking agencies that banking organizations must maintain sufficient capital to offset the risk of an activity that generally involves risks that are higher than the risks associated with many traditional banking activities. In striking this balance, the new proposal focuses on establishing a regulatory capital requirement that the Federal banking agencies believe represents the minimum capital levels consistent with the safe and sound conduct of equity investment activities. The agencies fully expect that individual banking organizations in most cases will allocate higher economic capital levels, as appropriate, commensurate with the risk in the individual investment portfolios of the company.

The banking agencies have been guided by several principles in considering the appropriate levels of capital that should be required as a regulatory minimum to support equity investment activities. First, equity investment activities in nonfinancial companies generally involve greater risks than traditional bank and financial activities. Analysis of the annual returns for a diversified portfolio of publicly-traded small cap stocks over the past seventy-five years indicates that capital levels well in excess of the current regulatory minimum capital levels for banking organizations may be needed to support equity investment activities with the level of financial soundness expected of organizations that control insured depository institutions. Over the past twenty-five years, a study of venture capital investment firms indicates that, while some of these firms did very well, nearly 20 percent of these firms failed and a substantial number of others achieved only modest returns. Two national rating agencies have indicated that the private equity business is largely funded with equity capital and that equity portfolios, including mature and well diversified equity portfolios, require substantially more capital than loans.

Firms and institutional investors that engage to a significant degree in equity investment activities typically support their equity investment activities with high levels of capital—often dollar for dollar—due to the greater risk and illiquidity of these types of investments and the higher leverage that often is employed by portfolio companies. In fact, the vast majority of commenters did not disagree that equity investment activities are riskier than traditional banking activities or that it is prudent to fund these types of investment activities with higher levels of capital.

For these reasons, the agencies believe that capital in excess of the current regulatory minimum capital levels for more traditional banking activities should be required to allow a banking organization to conduct equity investment activities in a safe and sound manner.

A second and related principle that guided the agencies in considering this new proposal is that the financial risks to an organization engaged in equity investment activities increase as the level of their investments accounts for a larger portion of the organization's capital, earnings and activities. Banking organizations have for some time engaged in equity investment activities using various authorities, including primarily SBICs and authority to make limited passive investments under sections 4(c)(6) and (7) of the BHC Act. When the current capital treatment, which requires a minimum of 4% Tier 1 capital (6% in the case of depository institutions that must meet the regulatory well-capitalized definition) was developed, these equity investment activities by bank holding companies and banks were small in relation to the more traditional lending and other activities of these organizations.

The level of these investment activities has grown significantly in recent years, however. For example, investments made through SBICs owned by banking organizations have alone more than doubled in the past 5 years. In addition, the merchant banking authority granted to financial holding companies by the GLB Act provides significant new authority to make equity investments without many of the restrictions that apply to other authorities currently used by banking organizations to make these investments. The agencies believe that it is appropriate to revisit the regulatory capital requirements applicable to equity investment activities in light of the dramatic growth in banking organizations' equity investment activities through existing authorities and the grant of this new and expanded merchant banking authority.

A third principle guiding the agencies' efforts is that the risk of loss associated with a particular equity investment is likely to be the same regardless of the legal authority used to make the investment or whether the investment is held in the bank holding company or in the bank. In fact, the agencies' supervisory experience is that banking organizations are increasingly making investment decisions and managing equity investment risks across legal entities as a single business line within the organization. These organizations use different legal authorities available to different legal entities within the organization to conduct a unified equity investment business.

In light of these principles, the agencies propose to amend their respective capital regulations and guidelines to establish special minimum regulatory capital requirements for equity investments in nonfinancial companies as described herein. This capital treatment would apply symmetrically to equity investment activities of bank holding companies and banks. Importantly, this new proposal applies a series of marginal capital charges that increase with the level of a banking organization's overall exposure to equity investment activities relative to the institution's Tier 1 capital.

The Board, the OCC, and the FDIC each propose to amend their respective capital regulations and guidelines applicable to banks to incorporate the capital treatment described below. In addition, the Board proposes to amend its capital guidelines and regulations that apply on a consolidated basis to bank holding companies as described below.

The agencies invite comment on all aspects of the proposal.

The proposed capital treatment discussed below would apply only to equity investments in nonfinancial companies. Specifically, the proposed capital treatment would apply to equity investments made in nonfinancial companies:

• By financial holding companies under the merchant banking authority of section 4(k)(4)(H) of the BHC Act;

• By bank holding companies (including financial holding companies) in less than 5 percent of the shares of a nonfinancial company under the authority of section 4(c)(6) or 4(c)(7) of the BHC Act;

• By bank holding companies (including financial holding companies) or banks in nonfinancial companies through SBICs;

• By bank holding companies (including financial holding companies) or banks under Regulation K; and

• By banking organizations under section 24 of the Federal Deposit Insurance Act.

Many commenters, including a number of members of Congress, argued that investments in SBICs should not be subject to higher capital requirements. These commenters contended that SBICs serve the important public purpose of encouraging the development and funding of small businesses and that SBICs owned by banking organizations have generally been profitable to date.

Congress has, through the Small Business Investment Act, expressed its desire to facilitate the funding of small businesses through SBICs and has by statute imposed limits on the formation, operation, funding and investments of SBICs. Congress has also imposed special limitations on the amount of capital that a banking organization may invest in an SBIC. In light of this congressional intent and these statutory limits, the revised proposal would not apply any special capital charge to investments in nonfinancial companies held by SBICs owned by banks or bank holding companies so long as these investments remain within traditional limits.

The agencies note, however, that SBICs have grown significantly in the past few years, in part because of the appreciation of the value of SBIC investments on their books. Reflecting both the specific congressional preference for SBICs and the appreciation in the value of SBIC investments, the proposal would apply special capital charges to equity investments made through SBICs only when the carrying value of those investments exceeds certain high thresholds relative to Tier 1 capital. The agencies note that nearly all SBICs owned by banking organizations currently are below the thresholds proposed.

Commenters requested clarification regarding whether the capital charge would apply to certain other types of equity investments, including in particular investments in companies that engage solely in banking and financial activities that the investing company could conduct directly. Banking organizations have special expertise in managing the risks associated with financial activities. As a result, neither the original proposal made by the Board nor the new proposal by the banking agencies would apply to equity investments made in companies that engage in banking or financial activities that are permissible for the investing bank holding company or bank, as relevant, to conduct directly. The proposal also would not apply to an equity investment made under Regulation K in any company that is engaged solely in activities that have been determined to be financial in nature or incidental to financial services.

A number of commenters, requested that the agencies clarify whether the capital proposal would apply to equity securities held in a trading account. The new proposal does not apply to securities that are held in a trading account in accordance with applicable accounting principles and as part of an underwriting, market making or dealing activity. Several commenters also requested clarification regarding whether the proposal would apply to investments that the primary supervisor of the bank or bank holding company has determined to be designed primarily to promote the public welfare and are held in community development corporations. The proposal would not apply to these investments.

Many commenters argued that the proposed capital treatment should not be applied to investments in nonfinancial companies held by state banks in accordance with section 24 of the FDI Act. Commenters argued that state banks, especially state banks located in New England, have been authorized to make limited amounts of equity investments for more than 50 years and that these investments have provided diversification to their earnings when loans have been unprofitable.

Section 24 of the FDI Act allows state banks to retain equity investments in nonfinancial companies made pursuant to state law under certain circumstances. In particular, section 24(f) permits certain state banks to retain shares of publicly traded companies and registered investment companies if the investment was permitted under a state law enacted as of a certain date, the state bank engaged in the investment activity as of a certain date and the total amount of equity investments made by the bank does not exceed the capital of the bank. Commenters argued that Congress specifically considered the risks to state banks from these investments when deciding to grandfather these equity investment activities.

In addition to this grandfathered investment authority, a state bank may hold equity in other nonfinancial companies if the FDIC determines that the investment does not pose a significant risk to the deposit insurance fund. The FDIC is empowered to establish and has established higher capital requirements and other limitations on equity investments of state banks held under this authority, such as investments in companies engaged in real estate investment and development activities. The FDIC has to date in most cases required state banks that make these investments to limit the amount of the investment and to deduct these investments from the bank's capital, effectively imposing a 100 percent capital charge on these investments.

For these reasons, the agencies propose to exclude from the special capital charge any investment in a nonfinancial company held by a state bank in accordance with the grandfather provisions of section 24(f) of the FDI Act. The proposal would apply to other equity investments in nonfinancial companies held by state banks in accordance with other provision of section 24.1

A few commenters argued that the capital proposal should not be applied to any equity investment made by a bank or bank holding company prior to March 13, 2000. These investments were made at a time when the agencies had not proposed a higher regulatory capital charge, are modest in amount at most banking organizations, and will be liquidated over time. As explained below, the new capital proposal establishes a marginal capital structure that is different and, on average, lower than the original proposal. The new proposal also provides that no special capital charge would be imposed on investments made through an SBIC within certain thresholds. SBICs hold a very large portion of the investments made prior to March 13, 2000, by banking organizations. In light of these changes, the agencies request comment on whether it is necessary or appropriate to grandfather the individual investments made prior to March 13, 2000. The agencies also request comment on the alternative of allowing banking organizations to phase in over a period of time (such as 3 years) the proposed capital standards with regard to investments made prior to March 13, 2000.

Commenters also argued that capital charges should not apply to debt that is extended to companies in which an organization has made an equity investment. The original proposal would have applied the proposed capital charge to any debt instrument with equity features (such as conversion rights, warrants or call options). In addition, the proposal would have applied a higher capital charge to any other type of debt extended to a company if the debt instrument is held by a banking organization that also owns at least 15 percent of the equity of the company. The original proposal included exceptions for short-term, secured credit provided for working capital purposes, any extension of credit that meets the collateral requirements of section 23A of the Federal Reserve Act, any extension of credit that is guaranteed by the U.S. Government, and any extension of credit at least 50 percent of which is sold or participated out to unaffiliated parties.

Commenters noted that the legal doctrine of equitable subordination affects the ability of investors to make loans to portfolio companies that serve as the functional equivalent of equity. Under this doctrine, courts in bankruptcy proceedings have, under certain circumstances, subordinated the claims of creditors that are also investors in a company to the claims of other creditors, effectively treating the debt held by the investor as if the debt were equity.

After considering the comments on this matter, the agencies have revised the approach to debt instruments with equity features. The new proposal applies the proposed capital treatment to equity features of debt (such as warrants and options to purchase equities in nonfinancial companies) and to debt instruments convertible into equity investments in nonfinancial companies where the equity feature or instrument is held under one of the authorities listed above. The primary supervisor will monitor the use of debt held under any authority as a method for providing the equivalent of equity funding to portfolio companies, and may, on a case-by-case basis in the supervisory process, require banking organizations to maintain higher capital against debt where circumstances indicate that the debt serves as the functional equivalent of equity.

The original capital proposal made by the Board did not apply to equity investments made under section 4(k)(4)(I) of the BHC Act by an insurance underwriting affiliate of a financial holding company, and the revised proposal continues that approach. These investments generally are already subject to higher capital charges under state insurance laws. The Board requests comment regarding whether special capital requirements or other supervisory restrictions should be applied to assure that financial holding companies do not use insurance underwriting companies to arbitrage any differences in the capital requirements on equity investment activities that apply to insurance companies and other financial holding company affiliates. To the extent appropriate, the Board will address these matters in a separate proposal regarding the appropriate method for accounting for insurance companies under the Board's consolidated capital adequacy guidelines applicable to financial holding companies.

The agencies believe that the authorities discussed above cover the principal authorities available to banking organizations to make equity investments in companies that engage in nonfinancial activities. The agencies request comment on whether there are other investment activities that should be covered by this capital proposal.

As noted above, the new proposal would apply the special capital charge to investments in nonfinancial companies made in accordance with the portfolio investment provisions of Regulation K. This includes investments made through so-called Edge Act and Agreement corporations. This special capital treatment would not apply, for example, to the ownership of equity securities held by an Edge Act or Agreement corporation to hedge equity derivative transactions for foreign customers. The agencies request comment on whether it is appropriate to apply the capital charge to investments made through Edge Act corporations and Agreement corporations in nonfinancial companies overseas.

As noted above, the agencies propose to amend their respective capital guidelines and rules to apply a different charge to equity investments in nonfinancial companies than is currently applied to traditional banking investments and activities. This proposal would apply symmetrically to banks and bank holding companies. This proposal would not have a significant effect on the capital levels of any major banking organization based on current investment levels.

The proposal involves a progression of capital charges that increases with the size of the aggregate equity investment portfolio of the banking organization relative to its Tier 1 capital. This approach takes account of the greater impact that losses in a larger portfolio of equity investments relative to capital may have on the financial condition of a banking organization.

As explained in the attached proposed amendment to the capital rules, the proposed capital charge would be applied by making a deduction from the organization's Tier 1 capital. This deduction would be based on the adjusted carrying value of equity investments in nonfinancial companies. The adjusted carrying value is the value at which the relevant investment is recorded on the balance sheet, reduced by net unrealized gains that are included in carrying value but that have not been included in Tier 1 capital and associated deferred tax liabilities.

For the reasons explained above, no additional capital charge would be applied to SBIC investments made by a bank or bank holding company, so long as the adjusted carrying value of the investments does not exceed 15 percent of the Tier 1 capital of the depository institution that holds the investment or, in the case of an SBIC held directly by the bank holding company, 15 percent of the pro rata Tier 1 capital of all depository institutions controlled by the bank holding company. These investments would be included, however, in determining the aggregate size of the organization's investment portfolio for purposes of applying the marginal capital charges discussed below.

For all investments other than SBIC investments, an 8 percent Tier 1 capital charge would be applied so long as the adjusted carrying value of all such investments (plus all SBIC investments and other covered investments) represent less than 15 percent of Tier 1 capital. This difference in treatment for investments made outside of an SBIC recognizes the special limits that have been imposed on the operations of SBICs and preferences that Congress has granted to SBICs.

In the case of a portfolio of covered investments that, in the aggregate (including SBIC investments and other covered investments), exceeds 15 percent of the organization's Tier 1 capital, a 12 percent Tier 1 capital charge would apply to the portion of the portfolio above the 15 percent threshold. The 12 percent marginal charge would apply to the adjusted carrying value of equity investments up to 25 percent of Tier 1 capital. In the case of a portfolio of covered investments that, in the aggregate, exceeds 25 percent of the organization's Tier 1 capital, a 25 percent marginal Tier 1 capital charge would apply to the portion of the portfolio above the 25 percent threshold. The following table, which is included in the proposed regulation, reflects these capital charges.

The agencies propose to apply heightened supervision to the equity investment activities of banking organizations as appropriate, including in the event that the adjusted carrying value of all nonfinancial equity investments represents more than 50 percent of the organization's Tier 1 capital. The agencies may in any case impose a higher minimum capital charge on an organization as appropriate in light of the risk management systems; risk, nature, size and composition of the organization's investments; market conditions; and other relevant information and circumstances.

In the event that the agencies determine not to apply this special capital charge to equity investments made by a banking organization prior to March 13, 2000, the agencies propose to include the adjusted carrying value of an organization's investment portfolio made in grandfathered investments for purposes of determining the appropriate marginal capital charge on investments that are not grandfathered.

Commenters questioned how the original capital proposal would apply to investments held through equity investment funds, in particular, through investment partnerships where the holding company may control the fund, usually through its role as general partner, but is not the sole participant in the fund. As noted in the original proposal, the capital charge in such instances would apply only to the holding company's proportionate share of the fund's investments. Such treatment would apply even if the partnership is consolidated in the holding company's financial reporting statements. Similarly, the new proposal provides that minority interest resulting from any such consolidation would not be included in the Tier 1 capital of the holding company. Such minority interest is not available to support the overall financial business of the holding company.

Similar treatment is proposed for minority interest with respect to investments in nonfinancial companies under the authorities covered by the proposal. Generally, it would not be expected that any nonfinancial company whose shares are acquired pursuant to these authorities would be consolidated, either because the investment is temporary as in the case of merchant banking investments, or limited to a minority interest. However, if consolidation does occur, any resulting minority interest must be excluded from Tier 1 capital because the minority interest is not available to support the general financial business of the banking organization.

The agencies invite comment on all aspects of the proposal, including in particular on the proposed marginal capital charges and the methods for calculating and applying the deduction to capital. The agencies recognize that the proposed capital deduction may have an effect on the calculation of the leverage ratio for the banking organization. Accordingly, the agencies also request comment on whether this effect is likely to be significant, whether an adjustment should be permitted to account for this effect, and, if so, what type of adjustment is appropriate.

Commenters offered a variety of alternatives to the original capital proposal. Among these suggestions were to rely on internal capital models, to rely on the supervisory process for determining appropriate capital charges on a case-by-case basis, to require banking organizations to adopt the regulatory equivalent of available-for-sale accounting, and to adopt a reduced capital charge.

Many commenters suggested that the agencies rely fully on internal capital models developed by each banking organization to measure the capital needs of the organization across all of its activities. A number of commenters argued that the original capital proposal was flawed because it adopted a higher capital charge on equity investments in a manner similar to the internal capital models used by many banking organizations without at the same time allowing banking organizations to adopt features of these models that allocate less capital than the regulatory minimum capital requirements against other, less risky, activities.

The agencies believe that internal capital models that take account of the different risks and capital needs of each of the activities of a particular banking organization ultimately represent an effective method for determining the capital adequacy of an organization. The agencies have encouraged the development of comprehensive internal capital models, and many banking organizations have begun to develop their own internal capital models. As yet, however, these models are largely untested and unable to capture the risks of many activities conducted by banking organizations. Moreover, the stage of development and sophistication of models varies greatly across organizations. In addition, as noted by many commenters, assessing the adequacy of capital by reference to risk models is most effective when applied across the entire organizational risk structure, rather than piece meal for selected assets or portfolios. As a result, the agencies do not believe that it is appropriate at this time to rely on internal modeling of equity portfolios as a replacement for regulatory minimum capital requirements. The agencies believe, however, that robust internal modeling can be an effective method for addressing capital adequacy. Accordingly, the agencies will review a banking organization's internal models in assessing the adequacy of the organization's capital levels in relation to its equity investment activities and expect to revisit the need for regulatory minimum capital requirements for equity investment activities as internal models become more sophisticated and reliable.

Another alternative suggested by many commenters was that the agencies assess the appropriate regulatory capital levels for equity investment activities on a case-by-case basis through the supervisory process. These commenters argued that it was inappropriate for the agencies to adopt a single regulatory minimum capital requirement that would apply in the same way to all banking organizations engaged in equity investment activities, regardless of the differences in portfolio risks at different organizations. These commenters believed that the capital needs of individual organizations could be best assessed through the individual examination of each organization, with the agencies assessing higher capital requirements on a case-by-case basis to address particular risks at individual organizations.

The agencies agree that examination and supervision are important methods for assuring that individual organizations are conducting equity investment activities in a safe and sound manner and have adequate capital to support those activities. The agencies expect to pay particular attention to the investment activities of banking organizations and to heighten that supervision as the level of concentration in these activities increases at an organization. The supervisory process will consider, among other things, the institution's internal allocation of capital to equity investment activities as an important element in assessing capital adequacy.

However, the agencies believe that supervisory experience and analysis of equity investment activities over a long period of time indicate that it is prudent to establish minimum capital requirements for equity investment activities in addition to effective supervision and examination. Establishing minimum capital requirements by rule also reduces the potential that capital requirements at an organization will be arbitrarily set during the examination process. A uniform regulatory minimum capital rule also indicates to organizations that are entering this business line for the first time the agencies' expectations for additional capital to support these activities.

Some commenters suggested that the agencies require that banking organizations adopt the regulatory equivalent of available-for-sale (AFS) accounting. Commenters argued that this approach improves the capital strength of an organization by eliminating from Tier 1 capital, at least for regulatory reporting purposes, any reliance on unrealized gains on equity investments. This arguably reduces the volatility in capital that results from changes in the value of equity investments, which often occur unpredictably and quickly during the life of the investment, by preventing banking organizations from taking unrealized gains into income, and thus capital, for regulatory purposes.

AFS accounting has been adopted by many organizations and represents a prudent and appropriate approach to accounting for equity investments in many situations. Nonetheless, the agencies have determined not to require the regulatory equivalent of this accounting treatment for regulatory capital calculations for several reasons. First, this approach does not address the risk associated with the initial cost of the investment. Instead, it effectively applies a 100 percent capital charge on unrealized gains while maintaining the normal capital charge on the initial investment cost. For investments that are very profitable, this charge may be too high, while for investments that are not performing well, this capital charge is likely to be too low.

In addition, an AFS approach creates differences in capital treatment for companies that acquired the same equity investment, with the same risk, on different dates. Under the AFS approach, an investor that has acquired an investment in the initial offering of stock of the portfolio company would be effectively required to hold more capital against the investment than a second investor that acquires the same amount of shares of the same company for a higher price at a later date.

Moreover, a capital charge based on the AFS approach is easily manipulated through the sale and repurchase of equity of the same company. This manipulation would be difficult to monitor and prevent.

While the agencies have not proposed adopting the regulatory equivalent of the AFS accounting approach, the agencies recognize that a regulatory minimum capital charge must take account of situations in which an investor determines to adopt this approach for GAAP reporting purposes. Accordingly, the capital charge proposed by the agencies is based on the “adjusted carrying value” of the relevant investment and the proposal would require deduction of the adjusted carrying value from risk-weighted assets for purposes of calculating the risk-based capital ratio. This treatment retains the flexibility of an investor to adopt AFS accounting or other accounting treatments permitted under GAAP.

OCC: This proposal would amend the OCC's risk-based capital guidelines and leverage capital rules for national banks. The amendments made by the proposal would establish the regulatory capital requirements applicable to a national bank's equity investment in a nonfinancial company made through a SBIC pursuant to section 302(b) of the Small Business Investment Act of 1958 or under the portfolio investment provisions of the Board's Regulation K.

The OCC hereby certifies, pursuant to section 5(b) of the Regulatory Flexibility Act (5 U.S.C. 603(a)), that the proposed amendments will not, if promulgated in final rule form, have a significant economic impact on a substantial number of small entities.

For the purposes of the Regulatory Flexibility Act, small entities are defined to include any national bank that has $100 million in assets or less. See 5 U.S.C. 601(3) and (6), 15 U.S.C. 632(a), and 13 CFR 121.201. With respect to national banks, this proposal would only apply to equity investments in a nonfinancial company either made through a SBIC pursuant to section 302(b) of the Small Business Investment Act of 1958 or under the portfolio investment provisions of Regulation K. The OCC does not believe that it is likely that a substantial number of small national banks engage in these kinds of equity investment activities. Moreover, even with respect to any small national banks that might engage in the types of equity investments covered by this proposal, the OCC does not believe that the proposal rule will require these banks to raise significant amounts of new capital. For these reasons, the OCC does not believe that this proposal, if promulgated in final rule form, will have a significant economic impact on a substantial number of small national banks.

Nevertheless, the OCC specifically seeks comment on any burden that this proposal would impose on small national banks.

Board: In accordance with section 3(a) of the Regulatory Flexibility Act (5 U.S.C. 603(a)), the Board must publish an initial regulatory flexibility analysis with this rulemaking. The rule proposes and requests comment on amendments to the Board's consolidated risk-based and leverage capital adequacy guidelines for bank holding companies (Part 225, Appendix A and Appendix D) and state member banks (Part 208, Appendix A and Appendix D).

These amendments would establish the regulatory capital requirements applicable to the merchant banking investments of financial holding companies and similar investment activities of bank holding companies and state member banks. The Board hereby certifies, pursuant to 5 U.S.C. 605(b), that the proposed capital amendments will not, if promulgated through a final rule, have a significant economic impact on a substantial number of small entities because small entities that the Board regulates, specifically, financial or bank holding companies or state member banks that have less than $150 million in consolidated assets, generally do not engage in these investment activities to any significant degree. In addition, because the Board's risk-based and leverage capital guidelines do not generally apply to bank holding companies, including financial holding companies, that have less than $150 million in consolidated assets, the proposed rule will have no impact upon such organizations.

For the reasons discussed above, the Board believes that the proposed amendments to its capital guidelines are necessary and appropriate to ensure that bank holding companies and state member banks maintain capital commensurate with the levels of risk associated with their equity investment activities and that these activities do not pose an undue risk to the safety and soundness of insured depository institutions. This notice of proposed rulemaking contains a detailed discussion of the Board's reasons for issuing the proposed rule and of the alternatives to the rule that the Board has considered.

The Board specifically seeks comment on the likely burden that the proposed rule will impose on bank holding companies and state member banks.

FDIC: The rule proposes and requests comment on amendments to the FDIC's risk-based and leverage capital standards for state nonmember banks (Part 325). These amendments would establish the regulatory capital requirements applicable to certain nonfinancial equity investments of state nonmember banks. The FDIC hereby certifies, pursuant to section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 605(b), that the proposed capital amendments will not, if promulgated through a final rule, have a significant economic impact on a substantial number of small entities because small entities that the FDIC regulates, specifically, state nonmember banks that have less than $100 million in consolidated assets, generally do not engage in nonfinancial equity investment activities covered by this proposed rule to any significant degree.

OCC: In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320 App. A.1), the OCC has reviewed the proposal under the authority delegated to the OCC by the Office of Management and Budget. No collections of information pursuant to the Paperwork Reduction Act are contained in the proposal.

Board: In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320 App. A.1), the Board has reviewed the proposed rule under the authority delegated to the Board by the Office of Management and Budget. No collections of information pursuant to the Paperwork Reduction Act are contained in the proposed rule.

FDIC: The FDIC has determined that this proposal does not involve a collection of information pursuant to the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et seq.).

OCC: The Comptroller of the Currency has determined that this proposed rule, if adopted as a final rule, would not constitute a “significant regulatory action” for the purposes of Executive Order 12866.

OCC: Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532 (Unfunded Mandates Act), requires that an agency prepare a budgetary impact statement before promulgating any rule likely to result in a Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. If a budgetary impact statement is required, section 205 of the Unfunded Mandates Act also requires the agency to identify and consider a reasonable number of regulatory alternatives before promulgating the rule. The OCC has determined that this proposed regulation will not result in expenditures by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. Accordingly, the OCC has not prepared a budgetary impact statement or specifically addressed the regulatory alternatives considered.

Section 722 of the GLB Act requires the agencies to use “plain language” in all proposed and final rules published after January 1, 2000. The agencies invite comments about how to make the proposed rule easier to understand, including answers to the following questions:

(1) Have the agencies organized the material in an effective manner? If not, how could the material be better organized?

(2) Are the terms of the rule clearly stated? If not, how could the terms be more clearly stated?

(3) Does the rule contain technical language or jargon this is unclear? If so, which language requires clarification?

(4) Would a different format (with respect to the grouping and order of sections and use of headings) make the rule easier to understand?

(5) Would increasing the number of sections (and making each section shorter) clarify the rule? If so, which portions of the rule should be changed in this respect?

(6) What additional changes would make the rule easier to understand?

The agencies also solicit comment about whether including factual examples in the rule in order to illustrate its terms is appropriate. Are there alternatives that the agencies should consider to illustrate the terms in the rule?

For the reasons set out in the preamble, part 3 of chapter I of title 12 of the Code of Federal Regulations is proposed to be amended as follows:

How do I comment on this proposed AD? We invite your comments on the proposed rule. You may send whatever written data, views, or arguments you choose. You need to include the rule's docket number and send your comments in triplicate to the address named under the caption ADDRESSES. We will consider all comments received by the closing date specified above, before acting on the proposed rule. We may change the proposals contained in this notice because of the comments received.

Are there any specific portions of the proposed AD I should pay attention to? The FAA specifically invites comments on the overall regulatory, economic, environmental, and energy aspects of the proposed rule that might call for a need to change the proposed rule. You may examine all comments we receive. We will file a report in the Rules Docket that summarizes each FAA contact with the public that concerns the substantive parts of this proposal.

The FAA is reexamining the writing style we currently use in regulatory documents, in response to the Presidential memorandum of June 1, 1998. That memorandum requires federal agencies to communicate more clearly with the public. We are interested in your comments on the ease of understanding this document, and any other suggestions you might have to improve the clarity of FAA communications that affect you. You can get more information about the Presidential memorandum and the plain language initiative at http://www.faa.gov/language/.

How can I be sure FAA receives my comment? If you want us to acknowledge the receipt of your comments, you must include a self-addressed, stamped postcard. On the postcard, write “Comments to Docket No. 2000-CE-25-AD.” We will date stamp and mail the postcard back to you.

What events have caused this proposed AD? The FAA has received several reports of blower motors failing, seizing, smoking, and producing a burning odor that enters the cabin and passenger compartment. These events are the result of the blower motor having circuit protection of more than 1 ampere. This amount of circuit protection does not prevent the blower motor from smoking and creating a burning odor should it fail or seize.

What are the consequences if the condition is not corrected? This condition could result in smoke or burning odor entering the cockpit or passenger compartments.

What service information applies to this subject? Raytheon has issued these Service Bulletins:

What are the provisions of these service bulletins? These service bulletins specify and include procedures for the following:

What has FAA decided? After examining the circumstances and reviewing all available information related to the incidents described above, we have determined that:

What does this proposed AD require? This proposed AD would require you to incorporate the electrical installations presented in the service bulletin.

What are the differences between the service bulletin and the proposed AD? Raytheon specifies in the service information that you are to do this modification at the next scheduled inspection or before 6 months or 600 hours time-in-service, whichever comes first. We propose a requirement that you do the modification within the next 6 calendar months or 600 hours time-in-service (TIS), whichever comes first, after the effective date of the proposed AD. We cannot enforce a compliance time of “at the next scheduled inspection.” We believe that 6 calendar months or 600 hours TIS will give the owners/operators of the affected airplanes enough time to have the proposed actions done without compromising the safety of the airplanes. This will allow the owners/operators to work this proposed modification into regularly scheduled maintenance.

How many airplanes does this proposed AD impact? We estimate the proposed AD would affect 3,403 airplanes in the U.S. registry:

What is the cost impact of the proposed action for the affected airplanes on the U.S. Register? We estimate the following costs to do the proposed inspection for Beech Models F33A, A36, B36TC, and 58/58A airplanes:

The manufacturer will allow warranty credit for labor and parts to the extent noted in the service bulletin.

Does this proposed AD impact relations between Federal and State governments? The proposed regulations would 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. We have determined that this proposed rule would not have federalism implications under Executive Order 13132.

Does this proposed AD involve a significant rule or regulatory action? For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) if put into effect, will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We have placed a copy of the draft regulatory evaluation prepared for this action in the Rules Docket. You may get a copy of it by contacting the Rules Docket at the location provided under the caption ADDRESSES.

Therefore, under the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

How do I comment on the proposed AD? We invite your comments on the proposed rule. You may send whatever written data, views, or arguments you choose. You need to include the rule's docket number and send your comments in triplicate to the address specified under the caption ADDRESSES. We will consider all comments received by the closing date specified above, before acting on the proposed rule. We may change the proposals contained in this notice in light of the comments received.

Are there any specific portions of the proposed AD I should pay attention to? The FAA specifically invites comments on the overall regulatory, economic, environmental, and energy aspects of the proposed rule that might require a change to the proposed rule. You may look at all comments we receive. We will file a report in the Rules Docket that summarizes each FAA contact with the public that concerns the substantive parts of this proposal.

We are re-examining the writing style we currently use in regulatory documents, in response to the Presidential memorandum of June 1, 1998. That memorandum requires federal agencies to communicate more clearly with the public. We are interested in your comments on the ease of understanding this document, and any other suggestions you might have to improve the clarity of FAA communications that affect you. You can get more information about the Presidential memorandum and the plain language initiative at http://www.faa.gov/language/.

How can I be sure FAA receives my comment? If you want us to acknowledge the receipt of your comments, you must include a self-addressed, stamped postcard. On the postcard, write “Comments to Docket No. 2000-CE-33-AD.” We will date stamp and mail the postcard back to you.

What events have caused this proposed AD? The LBA, which is the airworthiness authority for Germany, recently notified FAA that an unsafe condition may exist on certain Rolladen Schneider Models LS 3, LS 4, and LS 6c sailplanes. The LBA reports one occurrence of corroded bearings on the lower ends of air brake levers found on the above-referenced sailplanes. The damage was possibly the result of improper postflight checks. It has been reported that in some cases, the corrosion, occurring over a long time, could cause bearing failure and consequent locking of air brakes in the extended position.

What are the consequences if the condition is not corrected? If the airbrakes lock in the extended position, inadvertent off-field or short landing conditions might occur.

Is there service information that applies to this subject? Rolladen Schneider has issued these technical bulletins dated September 14, 1999:

What are the provisions of these service bulletins? These service bulletins specifies procedures for:

What action did the LBA take? The LBA classified these service bulletins as mandatory and issued these German AD's, dated March 9, 2000, to ensure the continued airworthiness of these sailplanes in Germany:

Was this in accordance with the bilateral airworthiness agreement? These sailplane models are manufactured in Germany and are type certificated for operation in the United States under the provisions of § 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement.

Complying with this bilateral airworthiness agreement, the LBA has kept FAA informed of the situation described above.

What has FAA decided? The FAA has examined the findings of the LBA; reviewed all available information, including the service information referenced above; and determined that:

What would the proposed AD require? This proposed AD would require you to do the actions specified in the previously referenced service information.

How many sailplanes would the proposed AD impact? We estimate that the proposed AD would affect 175 sailplanes in the U.S. registry.

What would be the cost impact of the proposed AD on owners/operators of the affected sailplanes? We estimate the following costs to do the proposed inspection:

What would be the compliance time of the proposed AD? The compliance time of this proposed AD is within the next 30 calendar days after the effective date of this AD.

Why is the compliance time presented in calendar time instead of hours time-in-service (TIS)? Because of the typical use of sailplanes, calendar days compliance time was deemed more suitable than time in service. For example, one sailplane operator may use the sailplane 50 hours in 1 month while another may only accumulate 50 hours in 1 year.

Why is the compliance time of the proposed AD different from the German AD and the service information? The service information specifies the actions required in this proposed AD “before next flight” and the German AD mandates these actions “before next take-off, when play at levers is existent” for sailplanes registered for operation in Germany. The FAA does not have justification for requiring the action before further flight. Compliance times such as these are used for urgent safety of flight conditions. Instead, FAA has determined that 30 calendar days is a reasonable time period for doing the inspection in this proposed AD.

Would this proposed AD impact various entities? The regulations proposed would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this proposed rule would not have federalism implications under Executive Order 13132.

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

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

Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this action may be changed in light of the comments received.

Submit comments using the following format:

• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.

• For each issue, state what specific change to the proposed AD is being requested.

• Include justification (e.g., reasons or data) for each request.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this notice must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2000-NM-347-AD.” The postcard will be date stamped and returned to the commenter.

Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2000-NM-347-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.

Transport Canada Civil Aviation (TCCA), which is the airworthiness authority for Canada, notified the FAA that an unsafe condition may exist on certain Bombardier Model DHC-8-100, -200, and -300 series airplanes. TCCA advises that certain foam filters for the cabin exhaust system were incorporated erroneously on production airplanes. (There is no requirement that these filters be installed.) These filters failed to pass the flammability tests specified in Appendix F of part 25 of the Federal Aviation Regulations (14 CFR part 25). This condition, if not corrected, could increase the risk of spreading a fire on the airplane.

In addition, pressurization tests are required by § 25.843(b) of the Federal Aviation Regulations [14 CFR 25.843(b)]; however, these tests were conducted without foam filters installed in the cabin exhaust system of the airplane. The impact on pressurization of the airplane to proper levels is unknown for airplanes on which these filters are installed; therefore, pressurization tests would have to be reaccomplished on any airplane having the filters. Installation of these filters could result in failure of the cabin to pressurize adequately.

The manufacturer has issued Bombardier Repair Drawing RD8-21-23, Issue 2, dated December 16, 1999, which describes procedures for removing certain foam filters from the cabin ducting installation located below the dado panels on the left- and right-hand sides of the airplane. These procedures include: verifying that certain foam filters are installed behind the grille assemblies, inspecting the grille assemblies on both the port and starboard sides and along the entire length of the interior of the airplane, removing all foam filters and ensuring that no pieces remain, and reinstalling the grille assemblies by locating the fasteners and pressing each with a quarter-turn. Accomplishment of the actions specified in the repair drawing is intended to adequately address the identified unsafe condition. TCCA classified this repair drawing as mandatory and issued Canadian airworthiness directive CF-2000-25, dated August 28, 2000, in order to assure the continued airworthiness of these airplanes in Canada.

These airplane models are manufactured in Canada and are type certificated for operation in the United States under the provisions of § 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, TCCA has kept the FAA informed of the situation described above. The FAA has examined the findings of TCCA, reviewed all available information, and determined that AD action is necessary for products of this type design that are certificated for operation in the United States.

Since an unsafe condition has been identified that is likely to exist or develop on other airplanes of the same type design registered in the United States, the proposed AD would require accomplishment of the actions specified in the repair drawing described previously.

The FAA estimates that 38 Bombardier Model DHC-8-100, -200, and -300 series airplanes of U.S. registry would be affected by this proposed AD, that it would take approximately 8 work hours per airplane to accomplish the proposed actions, and that the average labor rate is $60 per work hour. Based on these figures, the cost impact of the proposed AD on U.S. operators is estimated to be $18,240, or $480 per airplane.

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

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

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

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

Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this action may be changed in light of the comments received.

Submit comments using the following format:

• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.

• For each issue, state what specific change to the proposed AD is being requested.

• Include justification (e.g., reasons or data) for each request.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this action must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2000-NM-261-AD.” The postcard will be date stamped and returned to the commenter.

Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2000-NM-261-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.

The Direction Generale de l'Aviation Civile (DGAC), which is the airworthiness authority for France, notified the FAA that an unsafe condition may exist on certain Airbus Model A310 and Model A300 B4-600, A300 B4-600R, and A300 F4-600R (collectively called A300-600) series airplanes.

The DGAC advises that an anomaly of the ejection jack of the ram air turbine (RAT) was found in production. Follow-up analyses showed that the nut at the end of the ejection jack piston rod has insufficient thread engagement to absorb impact loads when the RAT is deployed at high speed. This condition, if not corrected, could lead to a loss of ability to properly restrain the movement of the RAT, possibly resulting in damage to the RAT itself and to other airplane components. In the event of an emergency, failure of the ejection jack on the RAT could also result in a reduction of hydraulic pressure or electrical power on the airplane.

Airbus has issued service bulletin A300-29-6048, Revision 01 (for A300-600 series airplanes) and service bulletin A310-29-2086, Revision 01 (for A310 series airplanes), both dated July 12, 2000. These service bulletins describe procedures for replacing the ejection jack in the RAT and testing the modified RAT. Replacing the ejection jack reduces impact loads by dampening the deployment of the RAT. Accomplishment of the actions specified in the service bulletins is intended to adequately address the identified unsafe condition. The DGAC classified these service bulletins as mandatory and issued French airworthiness directive 2000-284-317(B), dated July 12, 2000, to assure the continued airworthiness of these airplanes in France.

The Airbus service bulletins refer to Hamilton Sundstrand Service Bulletin No. ERPS03/04EJ-29-1 as an additional source of service information for accomplishment of the modification of the RAT and testing of the modified RAT.

These airplane models are manufactured in France and are type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.19) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the DGAC has kept the FAA informed of the situation described above. The FAA has examined the findings of the DGAC, reviewed all available information, and determined that AD action is necessary for products of this type design that are certificated for operation in the United States.

Since an unsafe condition has been identified that is likely to exist or develop on other airplanes of the same type design registered in the United States, the proposed AD would require accomplishment of the actions specified in the service bulletins described previously.

The FAA estimates that 117 airplanes of U.S. registry would be affected by this proposed AD, that it would take approximately 6 work hours per airplane to accomplish the proposed modification, and that the average labor rate is $60 per work hour. There would be no charge for required parts. Based on these figures, the cost impact of the proposed AD on U.S. operators is estimated to be $42,120, or $360 per airplane.

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

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

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

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

Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this action may be changed in light of the comments received.

Submit comments using the following format:

• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.

• For each issue, state what specific change to the proposed AD is being requested.

• Include justification (e.g., reasons or data) for each request.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this action must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2000-NM-212-AD.” The postcard will be date stamped and returned to the commenter.

Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2000-NM-212-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to add an airworthiness directive (AD), applicable to certain Raytheon Model BAe.125, Hawker 800 (U-125A), and Hawker 800XP series airplanes, was published as a notice of proposed rulemaking (NPRM) in the Federal Register on August 14, 2000 (65 FR 49523). That NPRM would have required removal of existing clamps, bedding tapes, and rubber connecting sleeves at the ends of the turbine air discharge duct and the water separator, and replacement of the clamps and rubber connecting sleeves with new, improved components.

Since the issuance of that NPRM, the FAA has received reports indicating that aluminum bedding strips may inhibit proper torquing of the clamp. Such improper torquing of the clamp may allow separation of the turbine air discharge duct or water separator outlet duct from the cold air unit turbine or from the water separator, which could result in the loss of air supply to maintain adequate cabin pressure. Loss of adequate cabin pressure at high altitude would require emergency procedures, such as use of oxygen, auxiliary pressurization, or emergency descent.

The FAA has reviewed and approved Raytheon Service Bulletin SB 21-3414, Revision 1, dated July 2000, that describes procedures for removing certain aluminum bedding strips on the air conditioning duct sleeves attached to both ends of the turbine air discharge duct and at the outlet end of the water separator. That service bulletin also specifies additional airplane models to the effectivity specified in Raytheon Service Bulletin SB 21-3377, Revision 1, dated July 2000, which was specified as the appropriate service information in the original NPRM.

Since this change expands the scope of the originally proposed rule, the FAA has determined that it is necessary to reopen the comment period to provide additional opportunity for public comment.

There are approximately 270 Model BAe.125 series 800A (C-29A and U-125 military), 1000A, and 1000B airplanes, Hawker 800 (U-125A military) airplanes, and Hawker 800XP and 1000 series airplanes of the affected design in the worldwide fleet.

The FAA estimates that 154 airplanes of U.S. registry would be affected by paragraph (a) of this proposed AD. We estimate that the actions required by paragraph (a) of this AD would take approximately 8 work hours per airplane to accomplish, and that the average labor rate is $60 per work hour. Required parts would cost approximately $492 per airplane. Based on these figures, the cost impact of the proposed AD on U.S. operators is estimated to be $149,688, or $972 per airplane.

The FAA estimates that an additional 36 airplanes of U.S. registry would be affected by paragraph (b) of this proposed AD. We estimate that the actions required by paragraph (b) of this AD would take approximately 2 hours per airplane to accomplish the proposed actions, and that the average labor rate is $60 per work hour. There is no cost for required parts. Based on these figures, the cost impact of paragraph (b) of the proposed AD on U.S. operators is estimated to be $4,320, or $120 per airplane.

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

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

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

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

Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this action may be changed in light of the comments received.

Submit comments using the following format:

• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.

• For each issue, state what specific change to the proposed AD is being requested.

• Include justification (e.g., reasons or data) for each request.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this action must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2000-NM-45-AD.” The postcard will be date stamped and returned to the commenter.

Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2000-NM-45-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.

Transport Canada Civil Aviation (TCCA), which is the airworthiness authority for Canada, notified the FAA that an unsafe condition may exist on all Model DHC-8-102, -103, -106, -201, -202, -301, -311, -314, and -315 series airplanes. TCCA advises that fatigue cracks have been found in the outer closing angles at both front and rear spar locations on the airplane fuselage. The closing angles consist of three segments (left, center, and right), which are part of the structure that connects the fuselage to the wing front and rear spar webs located in the wing/fuselage interface area. Reports received by the FAA indicate that cracks were detected in the closing angles on a number of in-service Model DHC-8-102 and -103 series airplanes. Investigation revealed that those cracks were generated by metal fatigue due to cyclic loading on the wing. Cracking of any closing angles identified as principal structural elements (PSE's) could adversely affect the structural integrity of the airplanes.

The manufacturer has issued de Havilland Temporary Revisions (TR's) to the DHC-8 Maintenance Program Manuals, as listed in Table 1 of this AD. The TR documents include inspection procedures of the Airworthiness Limitations List, Structural Inspection Program Task No. 5310/31A, which specify threshold and repetitive inspections. Those documents are to be incorporated into the DHC-8 Maintenance Program Manuals to revise the Bombardier maintenance program.

TCCA has approved the TR documents and has issued Canadian airworthiness directive CF-2000-07, dated March 3, 2000, to assure the continued airworthiness of these airplanes in Canada. The Canadian airworthiness document includes procedures for revising the Bombardier maintenance program and detecting and correcting fatigue cracking in the wing/fuselage PSE closing angles.

Accomplishment of the actions specified in these documents is intended to adequately address the identified unsafe condition.

These airplane models are manufactured in Canada and are type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the TCCA has kept the FAA informed of the situation described above. The FAA has determined that the DHC-8 Maintenance Program Manuals, Airworthiness Limitations List (AWL), must be revised by incorporating the threshold and repetitive inspection intervals of the AWL, Structural Inspection Program Task No. 5310/31A, specified by the TR documents, into the Bombardier maintenance program. The FAA has examined the findings of the TCCA, reviewed all available information, and determined that AD action is necessary for products of this type design that are certificated for operation in the United States.

Since an unsafe condition has been identified that is likely to exist or develop on other airplanes of the same type design registered in the United States, the proposed AD would require accomplishment of the actions specified in the TR documents and in this proposed AD, except as discussed below.

Operators should note that the previously referenced Canadian airworthiness directive specifies contacting the manufacturer for the disposition of any cracking found in any closing angle identified as a principal structural element. However, this proposal would require the repair of any such cracking or replacement of the closing angles per a method approved by the FAA.

Operators should note that TR AWL-71, dated September 3, 1999, lists Model DHC-8-101 series airplanes in the table of the Structural Inspection Program included in that TR. However, that airplane model is not cited in the Canadian airworthiness directive or in the applicability of the proposed rule. In addition, the manufacturer has informed the FAA that Model DHC-8-101 no longer exists, as it was converted into Model DHC-8-102 in 1986.

The FAA estimates that 195 Model DHC-8-102, -103, -106, -201, -202, -301, -311, -314, and -315 series airplanes of U.S. registry would be affected by this proposed AD.

It would take approximately 1 work hour per airplane to revise the Bombardier maintenance program, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the proposed AD on U.S. operators is estimated to be $11,700, or $60 per airplane.

It would take approximately 5 work hours per airplane to accomplish the structural inspections, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the proposed AD on U.S. operators is estimated to be $58,500, or $300 per airplane.

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

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

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

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

Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications should identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments will be considered before taking action on the proposed rule. The proposals contained in this document may be changed in light of the comments received.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed rule. All comments submitted will be available in the Rules Docket for examination by interested persons. A report summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their mailed comments submitted in response to this proposal must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. 2000-SW-38-AD.” The postcard will be date stamped and returned to the commenter.

Any person may obtain a copy of this NPRM by submitting a request to the FAA, Office of the Regional Counsel, Southwest Region, Attention: Rules Docket No. 2000-SW-38-AD, 2601 Meacham Blvd., Room 663, Fort Worth, Texas 76137.

This document proposes adopting a new AD for certain nickel cadmium batteries produced by Marathon. The AD would require inspecting any affected battery to verify that each #10-32 socket head cap screw (screw) is part number (P/N) 10488-020 with two rows of straight knurls, which is the correct screw hardware. This AD also requires, before further flight, replacing any screw found with only one knurl or no knurl with a screw, P/N 10488-020, with two knurls. This proposal is prompted by an explosion of a G.E./Saft battery during routine maintenance on a McDonnell Douglas DC-9 aircraft. Marathon battery, P/N 27183-001, is similar to the GE/Saft battery that exploded. A battery cell screw head broke off causing an electrical short circuit between the internal battery cell positive and negative posts. This resulted in a rapid discharge of energy, heat, and gases. Investigation revealed unapproved screws were installed, and maintenance procedures did not comply with the manufacturer's recommendations. Metallurgical tests cited chloride as a factor in causing the heads of the failed screws to shear and the eventual explosion of the battery. The actions specified by the proposed AD are intended to prevent an explosion of a battery, structural damage, and subsequent loss of power to the electrical systems.

We have identified an unsafe condition that is likely to exist or develop on other aircraft with Marathon batteries installed that are similar in design to the GE/Saft battery that exploded. Both are designed with similar #10-32 screws, P/N 10488-020. The proposed AD would require visually inspecting each #10-32 screw in certain Marathon batteries within 12 months or the next scheduled battery maintenance and, before further flight, replacing any unairworthy screw with an airworthy screw, P/N 10488-020.

The FAA estimates that 1814 aircraft would be affected by this proposed AD, that it would take approximately 2 work hours to replace any unairworthy screws with airworthy screws for each battery, and that the average labor rate is $60 per work hour. Required parts would cost approximately $100 per battery if all screws were replaced. Based on these figures, the total cost impact of the proposed AD on U.S. operators is estimated to be $399,080.

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

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

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

Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule.

The proposals contained in this notice may be changed in light of the comments received.

Submit comments using the following format:

• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.

• For each issue, state what specific change to the proposed AD is being requested.

• Include justification (e.g., reasons or data) for each request.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this action must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 97-NM-98-AD.” The postcard will be date stamped and returned to the commenter.

Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 97-NM-298-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to add an airworthiness directive (AD), applicable to certain McDonnell Douglas Model DC-9, DC-9-80, and C-9 (military) series airplanes, Model MD-88 airplanes, and Model MD-90 airplanes, was published as a notice of proposed rulemaking (NPRM) in the Federal Register on October 14, 1999 (64 FR 55644). That NPRM would have required, among other actions, a visual check to determine the part and serial numbers of the upper lock link assembly of the nose landing gear (NLG); repetitive inspections of certain upper lock link assemblies to detect fatigue cracking; and replacement of the upper lock link assembly with an assembly made from aluminum forging material, if necessary. Such replacement would have constituted terminating action for the requirements of this AD. That NPRM was prompted by a report indicating that, due to fatigue cracking, a NLG upper lock link fractured prior to landing and jammed against the NLG shock strut, restricting the NLG from fully extending. That condition, if not corrected, could result in injury to passengers and flight crew, and damage to the airplane.

Due consideration has been given to the comments received in response to the NPRM.

One commenter supports the proposed AD.

Two commenters request that the compliance time of paragraph (a) of the proposed AD be revised to eliminate the words “5,000 landings since the last inspection in accordance with paragraph (a) of AD 97-02-10, [amendment 39-9895 (62 FR 3781, January 27, 1997)] whichever occurs first.” The commenters state that paragraph (a) of AD 97-02-10 requires classification of the subject links as exempt or non-exempt. According to AD 97-02-10, no further action is required if an airplane has an exempt link. One commenter also states that the proposed AD would require re-inspection of all NLG links regardless of classification findings in AD 97-02-10. As the compliance time is currently written in the proposed AD, the commenters state that their airplanes could exceed the 5,000-landing requirement for previously classified “exempt” links. The commenters also state that the proposed compliance time could severely limit the timeframe to inspect non-exempt links approaching the 5,000-landing repetitive inspection interval required by paragraph (c)(1) of AD 97-02-10.

Based on the commenters' statements and after reviewing the wording of the compliance time of paragraph (a) of the proposed AD, the FAA finds that clarification is necessary. As indicated in the preamble of the proposed AD, unlike in Boeing Alert Service Bulletins MD90-32A019 and DC9-32A298, there are no lock link assemblies specified as “exempt” or “non-exempt” in this proposed AD. Instead, a one-time inspection is required to determine whether the upper lock link assembly is from an “affected lot,” as specified in Boeing Service Bulletin MD90-32-033 or DC9-32-315.

In addition, we find that operators that are currently accomplishing the 5,000-landing repetitive inspection required by paragraph (c)(1) of AD 97-02-10 may have already exceeded or be near the threshold specified in paragraph (a) of the proposed AD [i.e., 5,000 landings since the last inspection accomplished in accordance with paragraph (c)(1) of AD 97-02-10]. Therefore, we have determined that a 90-day grace period is necessary to preclude those airplanes from being grounded unnecessarily. In developing an appropriate compliance time for this action for the subject airplanes, we considered not only the manufacturer's recommendation, but the degree of urgency associated with addressing the subject unsafe condition, the average utilization of the affected fleet, and the time necessary to perform the inspections (one hour). In light of all of these factors, we find a 90-day grace period for initiating the proposed actions to be warranted, in that it represents an appropriate interval of time allowable for affected airplanes to continue to operate without compromising safety.

Therefore, for airplanes on which the inspection required by paragraph (c)(1) of AD 97-02-10 has been accomplished, the proposed actions required by paragraph (a) of this AD must be accomplished prior to accumulation of 5,000 landings since the last inspection accomplished in accordance with paragraph (c)(1) of AD 97-02-10, or within 90 days after the effective date of this AD, whichever occurs later. For airplanes on which the inspection required by paragraph (c)(1) of AD 97-02-10 has NOT been accomplished, the proposed actions required by paragraph (a) of the AD must be accomplished within 2,500 landings on the NLG after the effective date of this AD. We have revised paragraph (a) of the supplemental NPRM accordingly.

One commenter questions whether the FAA's intent in paragraph (c)(2)(iii) of the proposed AD was to require both a high frequency eddy current (HFEC) inspection “and” Type 1 fluorescent penetrant inspection or to require either one of those inspections. The commenter notes that the service bulletins referenced in the proposed AD recommend performing either an HFEC “or” a Type 1 fluorescent inspection, and that AD 97-02-10 requires accomplishment of either inspection.

The FAA's intent was that paragraph (c)(2)(iii) of the proposed AD require either a HFEC inspection OR a Type 1 fluorescent penetrant inspection. We have revised paragraph (c)(2)(iii) of the supplemental NPRM accordingly.

One commenter, the airplane manufacturer, requests that the FAA revise paragraph (c)(2)(iii)(A) of the proposed AD to require a second inspection and, within 2,500 landings following accomplishment of the second inspection, replacement of the lock link specified in that paragraph. The commenter states that this second inspection and eventual replacement were identified in the referenced service bulletins. The commenter also states that the 5,000-landing delay of the replacement is necessary because there may be a parts-availability problem.

The FAA agrees. Our intent was to follow the procedures recommended in the referenced service bulletins for these actions. We have revised paragraph (d) of the supplemental NPRM [paragraph (c)(2)(iii)(A) of the original NPRM] accordingly.

Since issuance of the NPRM, the FAA has reviewed and approved Revision 01 of Boeing (McDonnell Douglas) Service Bulletins DC9-32-315 and MD90-32-033, both dated October 24, 2000. The effectivity listing of Revision 01 of the services bulletins has been revised to remove certain manufacturer's fuselage numbers from the effectivity listing and to add certain others. Revision 01 of these service bulletins also has been revised to:

1. Update the list of affected serial numbers of the NLG upper lock link that are identifed as hand forging material;

2. Redefine the type of etching method to be used when marking certain parts; and

3. Clarify that, under a certain condition, the upper lock link must be reidentified with a “black” paint stripe.

In addition, the revised service bulletins clarify the wording “aluminum forging” as die forged aluminum to differentiate from hand forged aluminum and provide a method to identify materials made from a specific process. We have revised the supplemental NPRM accordingly to reference Revision 01 of the subject service bulletins as an appropriate source of service information.

Operators should note that Revision 01 of Boeing Service Bulletin DC9-32-315 misidentifies the date of the original issue as June 21, 1999. The correct date is March 11, 1999. Boeing is planning to correct this error in the next revision of the service bulletin.

Because the effectivity listing in these revised service bulletins described above reflects the most current composition of operators and airplanes affected by this AD, the FAA has revised the applicability statement of the supplemental NPRM to reference these revised service bulletins.

The FAA finds that it is not necessary to perform a “detailed visual” inspection to to determine a certain serial number of the lock link in paragraph (b) of the proposed AD.

We have deleted the reference to “detailed visual” throughout the supplemental NPRM and deleted NOTE 2 (definition of a detailed visual inspection).

Since these changes expand the scope of the originally proposed rule, the FAA has determined that it is necessary to reopen the comment period to provide additional opportunity for public comment.

There are approximately 2,100 Model DC-9, DC-9-80, and C-9 (military) series airplanes; Model MD-88 airplanes; and Model MD-90 airplanes of the affected design in the worldwide fleet. The FAA estimates that 1,400 airplanes of U.S. registry would be affected by this proposed AD.

It would take approximately 1 work hour per airplane to accomplish the proposed inspections of the NLG upper lock link, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of this inspection proposed by this AD on U.S. operators is estimated to be $84,000, or $60 per airplane.

It would take approximately 4 work hours per airplane to accomplish each proposed replacement of the NLG upper lock link, at an average labor rate of $60 per work hour. Required parts would cost approximately $5,803 per airplane. Based on these figures, the cost impact of each replacement proposed by this AD on U.S. operators is estimated to be $8,460,200, or $6,043 per airplane.

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

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

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

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

The collection of information contained in this notice of proposed rulemaking has been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, W:CAR:MP:FP:S:O, Washington, DC 20224. Comments on the collection of information should be received by April 16, 2001. Comments are specifically requested concerning:

Whether the proposed collection of information is necessary for the proper performance of the functions of the Internal Revenue Service, including whether the information will have practical utility;

The accuracy of the estimated burden associated with the proposed collection of information (see below);

How the quality, utility, and clarity of the information to be collected may be enhanced;

How the burden of complying with the proposed collection of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and

Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

The collections of information in these proposed regulations are in §§ 1.6041-2(a)(5), 1.6050S-1(a), 1.6050S-2(a), and 31.6051-1(i). These temporary regulations state that furnishers may provide the written statements required by sections 6041(d), 6050S(d), and 6051 in an electronic format in lieu of a paper format. In addition, the proposed regulations provide furnishers with a method to furnish a statement in connection with a Form 1098-T or Form 1098-E under section 6050S(d), or a Form W-2 under section 6041(d) or 6051, electronically using website technology. In general, a furnisher may furnish the statement electronically using the method described in the proposed regulations if the recipient consents to receive the statement electronically, and if the furnisher makes certain disclosures to the recipient, annually notifies the recipient that the statement is available on a website, and provides access to the statement on that website for a prescribed period of time. This collection of information is required only for persons who wish to furnish the statements electronically using the method described in the proposed regulations. The likely respondents are businesses, other for-profit institutions, and eligible educational institutions.

Estimated total annual reporting/recordkeeping burden: 2,844,950 hours.

Estimated average annual burden hours per response: 6 minutes.

Estimated number of responses: 28,449,495.

Estimated annual frequency of responses: Once.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number assigned by the Office of Management and Budget.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

Temporary regulations in the Rules and Regulations section of this issue of the Federal Register amend the Regulations on Income Taxes (26 CFR part 1) relating to sections 6041 and 6050S(d), the Regulations on Employment Taxes and Collection of Income Tax at Source (26 CFR part 31) relating to section 6051, and the Regulations on Procedure and Administration (26 CFR part 301) relating to section 6724. The text of those temporary regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the regulations.

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. Chapter 5) does not apply to these regulations. An initial regulatory flexibility analysis has been prepared for this notice of proposed rulemaking under 5 U.S.C. 603 and is set forth under the heading “Initial Regulatory Flexibility Act Analysis” in this preamble. Pursuant to section 7805(f), this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

This initial analysis is required under the Regulatory Flexibility Act. (5 U.S.C. chapter 6). The collection of information contained in §§ 1.6041-2(a)(5), 1.6050S-1(a), 1.6050S-2(a), and 31.6051-1(i) is required if a furnisher implements the method described in the proposed regulations to furnish statements electronically.

The types of small entities to which the proposed regulations may apply are small eligible educational institutions (such as colleges and universities), certain payees of interest on qualified education loans, and small employers. It is estimated that furnishers will seek consents from approximately 28,449,495 individuals to receive these statements electronically. There are no known Federal rules that duplicate, overlap, or conflict with these proposed regulations. The regulations proposed are considered to have the least economic effect on small entities of all alternatives considered.

Before these proposed regulations are adopted as final regulations, consideration will be given to any electronic or written comments (a signed original and eight (8) copies) that are submitted timely to the IRS. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying.

A public hearing has been scheduled for June 4, 2001, beginning at 10 a.m., in the IRS Auditorium of the Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must enter at the 10th Street entrance, located between Constitution and Pennsylvania Avenues, NW. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 15 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit written comments and an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight (8) copies) by May 14, 2001. A period of ten minutes will be allotted to each person for making comments. An agenda showing the scheduling of speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

The principal author of these proposed regulations is Eric Lucas, formerly of the Office of Associate Chief Counsel (Procedure and Administration). However, other personnel from the IRS and Treasury Department participated in their development.

Accordingly, 26 CFR parts 1, 31, and 301 are proposed to be amended as follows:

This document contains proposed amendments to the Procedure and Administration Regulations (26 CFR part 301) relating to the return of property under section 6343 of the Internal Revenue Code (Code). Section 501(b) of the Taxpayer Bill of Rights 2 (TBOR2), Public Law 104-168 (110 Stat. 1452), amended section 6343 to authorize the IRS to return property in certain cases and, to the extent possible, but without payment of interest, return the taxpayer to the same position as if the levy had not been issued. These proposed regulations reflect the amendments made by section 501(b) of TBOR2.

These proposed regulations also reflect modifications made by the Internal Revenue Service Restructuring and Reform Act (RRA 1998), Public Law 105-206 (112 Stat. 685), which added new sections 6331(i) and (j) of the Code, prohibiting the issuance of levies during the pendency of proceedings for refund of divisible taxes or prior to completion of an investigation of the status of property (effective for unpaid tax attributable to tax periods beginning after December 31, 1998). RRA 1998 also added section 6331(k), prohibiting levies during the period an offer-in-compromise is pending or an installment agreement is pending or in effect (effective for offers-in-compromise pending on or made after December 31, 1999, and for installment agreements submitted after July 22, 1998). In addition, the RRA 1998 added section 6330, which provides in certain circumstances for notice and an opportunity for a hearing prior to the imposition of a levy.

Section 6343(b) provides for the return of levied upon property, including levied upon money and money received from the sale of levied upon property, if the property was wrongfully levied upon. Section 501(b) of TBOR2 enacted section 6343(d) of the Code authorizing the IRS to return levied upon property to the taxpayer in certain other prescribed circumstances. Property returned under new section 6343(d) will be returned in accordance with section 6343(b) of the Code as if the property had been wrongfully levied upon, except that no interest will be allowed. The provision is designed to permit the IRS, to the extent possible, to restore the taxpayer to a pre-levy position. These proposed regulations provide guidance on the circumstances under which levied upon property will be returned by the IRS and the manner in which a request for return of property must be made.

The proposed regulations apply to the return of (1) levied upon money that has been applied toward the taxpayer's liability, (2) money received from the sale of levied upon property under section 6335 of the Code, and (3) levied upon property that the United States has purchased in a sale under section 6335 of the Code. This property may be returned if one of the conditions enumerated in paragraph (c) of the proposed regulations exists.

The regulations also clarify that, other than as provided in § 301.6343-1(b) and paragraph (d) of this section, the IRS, in its discretion, may return levied upon property in its possession pending sale. The return of levied upon property in the IRS's possession pending sale is not limited by these proposed regulations. The IRS has the authority to determine what property of the taxpayer to levy. As part of that authority, the IRS may release a levy and return levied upon property in its possession pending sale.

Under paragraph (c) of the proposed regulations, the Commissioner may return levied upon property if one of the following conditions exist: (1) the levy was premature or otherwise not in accordance with the administrative procedures of the IRS; (2) the taxpayer has entered into an agreement under section 6159 of the Code to satisfy the liability for which the levy was imposed by means of installment payments, unless the agreement provides otherwise; (3) the return of property will facilitate collection of the tax liability; or (4) the return of property is in the best interest of the taxpayer, as determined by the National Taxpayer Advocate, and in the best interest of the United States, as determined by the Commissioner.

Section 6343(d)(2)(D) authorizes the return of property if it is in the best interests of both the United States and the taxpayer. Therefore, two distinct determinations must be made before the Commissioner may return property based on these grounds. Under the proposed regulations the Commissioner (or his delegate) will determine whether the return of property is in the best interest of the United States. The National Taxpayer Advocate (or his delegate) generally will determine whether the return of property is in the best interest of the taxpayer; however, a finding by the Commissioner (or his delegate) that the return of property is in the best interest of the taxpayer, as well as the United States, will be sufficient to support the return of property. Only the National Taxpayer Advocate (or his delegate) is authorized to determined that the return of property is not in the taxpayer's best interest.

Additionally, the proposed regulations provide that it is in the best interests of the United States and the taxpayer to release levies made in violation of the law. Any property received pursuant to a levy made in violation of the law will be returned unless the taxpayer gives permission to the IRS to keep the property. For example, section 6331(k)(2) of the Internal Revenue Code of 1986 prohibits levies during the period an offer to enter into an installment agreement is pending (and for a 30-day period after rejection of the offer or while a timely appeal from the rejection of an offer to enter into an installment agreement is pending) and during the period an installment agreement is in effect. If property has been received by the IRS as the result of a levy that is prohibited under section 6331(k)(2), the IRS will return the property to the taxpayer pursuant to section 6343(d)(2)(D). It may, however, be advantageous for a taxpayer in some circumstances to allow the IRS to keep the levied upon property and apply the proceeds of that levy to the taxpayer's outstanding tax liabilities. These proposed regulations allow the taxpayer to give permission to the IRS to retain the levied upon property and apply the proceeds of that levy to the taxpayer's outstanding tax liabilities. Absent taxpayer consent, the IRS is required to return the levied upon property (or the proceeds if the property had been sold) to the taxpayer.

Pursuant to the requirement of section 6343(d) that property to be returned under this provision be treated as if it were wrongfully levied upon, the proposed regulations also provide that if the United States purchases property, it will be treated as having received an amount of money equal to the minimum price determined by the Commissioner before the sale.

Property other than money may be returned at any time. Money may be returned any time within 9 months after the date of the levy. In addition, when a timely request for the return of money is filed in accordance with these regulations, or a determination to return an amount of money is made before the expiration of the 9-month period, the money may be returned within a reasonable period of time after the 9-month period if additional time is necessary for investigation or processing. This will ensure that if a timely request has been made, or the IRS timely decides to return money on its own initiative, the IRS will have sufficient time for necessary investigation or processing.

Under the proposed regulations a taxpayer may request the return of property by writing to the address on the levy form or to the Commissioner (marked for the attention of the Chief, Special Procedures Function) of the IRS office in which the levy was made. A written request for the return of property must include: (1) the name, current address, and taxpayer identification number of the taxpayer requesting the return of property; (2) a description of the property levied upon; (3) the date of the levy; and (4) the grounds upon which the return of property is being requested.

The Commissioner must consider each taxpayer's request for the return of property, determine whether any of the conditions authorizing the return of property exist, and decide whether to return the property. The Commissioner also may return the property based on information received from a source other than the taxpayer. A decision to return the property is within the Commissioner's discretion, unless the levy was in violation of law, in which case the Commissioner must return the property.

If the Commissioner returns property, and the taxpayer fails to pay the previously assessed liability for which the levy was made on the returned property, the Commissioner may administratively collect the liability. Collection may include levying again on the returned property provided statutory and administrative requirements are followed.

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Before these proposed regulations are adopted as final regulations, consideration will be given to any written comments that are submitted timely (preferably a signed original and eight (8) copies) to the IRS. Alternatively, taxpayers may submit comments electronically via the Internet by selecting the “Tax Regs” option on the IRS Home Page, or by submitting comments directly to the IRS Internet site at http://www.irs.gov/prod/tax_regs/regslist.html. All comments will be available for public inspection and copying. A public hearing may be scheduled if requested in writing by a person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the hearing will be published in the Federal Register.

The principal author of these regulations is Kevin B. Connelly, Office of Assistant Chief Counsel (General Litigation) CC:EL:GL, IRS. However, other personnel from the IRS and Treasury Department participated in their development.

Accordingly, 26 CFR part 301 is proposed to be amended as follows:

EPA encourages comments on today's action to be combined with comments on the notice published on December 27, 2000. EPA requests an original and three copies of your comments and enclosures (including references). Commenters who want EPA to acknowledge receipt of their comments should enclose a self-addressed, stamped envelope. No facsimiles (faxes) will be accepted. Please submit any references cited in your comments.

Comments may also be sent via e-mail to jett.george@epa.gov. Electronic comments must specify docket number W-00-25 and must be submitted as an ASCII, Word, or WordPerfect file avoiding the use of special characters and any form of encryption. Electronic comments on this action may be filed online at many Federal Depository Libraries. No confidential business information (CBI) should be sent via e-mail.

In this action, EPA presents seven regulatory issues related to the proposed effluent limitations guidelines and standards for the Iron and Steel Manufacturing Point Source Category. This action also contains corrections to certain portions of the proposed regulation and accompanying preamble. This action also announces March 26, 2001 as the new deadline for submitting comments on the proposed rule. EPA solicits public comment on all information presented in this action and in the administrative record supporting this action.

EPA has identified seven substantive issues related to the proposed rulemaking to bring to the public's attention. These issues are discussed below. EPA solicits comment on these issues and the various approaches the Agency is considering to resolve these issues.

In the effluent limitations guidelines and standards promulgated for the Iron and Steel Manufacturing Point Source Category in 1982, BPT and BAT for basic oxygen furnaces with semi-wet air pollution controls (semi-wet BOFs) were set at no discharge of process wastewater pollutants to waters of the United States. In the December 27, 2000 notice, we proposed to revise BAT for semi-wet BOFs in the steelmaking subcategory. We had intended to revise BPT at the same time so that BAT and BPT would be consistent. However, we failed to do that. Instead, we republished the 1982 BPT of no discharge of process wastewater pollutants for semi-wet BOFs, with the result that the BPT would be more stringent than the proposed BAT. EPA did not intend this anomalous result. Today's action advises the public that we intend to revise BPT to be consistent with BAT in the final action.

Conforming BPT to BAT, as EPA intended, would allow for the discharge of process wastewater from semi-wet BOFs, which EPA considers desirable, because certain safety concerns preclude some sites currently from balancing the water applied for BOF gas conditioning with evaporative losses to achieve zero discharge. Specifically, some sites operate their semi-wet systems with excess water, which they use to flush the air pollution control ductwork in order to prevent the buildup of debris within the ductwork. If wet debris accumulates within the ductwork, it has the potential to fall back into the BOF, and may cause explosions and process upsets. The sites thus discharge the process wastewater used for flushing. EPA does not want to discourage this flushing practice because of its safety implications. Consequently, EPA intends to revise BPT for semi-wet BOF operations to conform to the proposed BAT so as to allow for the discharge of process wastewater under BPT for the reasons set forth above. The pollutants regulated under a revised BPT for semi-wet BOF operations would be TSS and pH. EPA is not proposing to regulate oil and grease in wastewater discharges from semi-wet BOF operations because there is virtually no oil and grease is in the wastestream. (EPA notes that oil and grease was not regulated in the 1982 regulation for this segment.)

If EPA were to revise BPT limitations for semi-wet BOF operations, EPA would base the new limitations for TSS on pollutant concentrations established in the 1982 rulemaking for both wet-open combustion and wet-suppressed combustion BOFs (150 mg/L maximum daily and 50 mg/L maximum monthly average concentrations for TSS) and the production-normalized flow (PNF) (10 gpt) developed in the proposed rule for semi-wet BOFs. It is reasonable to transfer limitations from these segments to the semi-wet BOF segment because of similarity in wastewater characteristics and in the proposed treatment technology. Using these data, EPA has calculated the BPT limitations shown in Table II.A.1 for semi-wet BOFs, which EPA would promulgate under this approach:

The pH level would be maintained between 6.0 and 9.0 su at all times.

EPA solicits comment on this issue, including the limitations specified above.

The proposed regulation at section 420.66(g) (65 FR 82076) would establish concentration-based PSES for electroplating operations in the Steel Finishing Subcategory. These concentration-based limits were carried forward from the current regulations for the Metal Finishing Category. See 40 CFR 433.15 (2000 ed.). All other limitations and standards set forth in the proposed iron and steel rule are mass-based. EPA is considering converting the proposed concentration-based limits for electroplating (see Table II.B.1) to mass-based limits using the PNFs proposed for electroplating operations (see Table II.B.2). Table II.B.3 then presents the mass-based PSES limits for electroplating operations, for which it solicits comments today.

EPA does not believe this action will result in increased costs to the industry. EPA solicits comment on whether to establish mass-based PSES limits for electroplating operations in the Steel Finishing Subcategory. EPA also solicits comment on the specific mass-based pretreatment standards set forth in Table II.B.3 and the approach employed to develop those pretreatment standards.

The proposed regulation would regulate ammonia (as N) at BAT (section 420.64(a)), NSPS (section 420.65(b)(3)), and PSNS (section 420.67(b)(1)) levels in the stainless steel segment of the Steel Finishing Subcategory. EPA intended for the limits to apply only to nitric acid picklers using urea to control NOX emissions, because ammonia (as N) is present in wastewater from stainless steel finishing operations at significant levels only when nitric acid is used in pickling baths and urea is used to control NOX emissions. However, EPA did not make this distinction in the proposal. EPA intends to correct this error with today's notice. Consistent with EPA's original intent, EPA would specify in the final action that the BAT, NSPS, and PSNS limits as presented would apply only to stainless steel finishing operations with nitric acid pickling baths in which urea is used to control NOX emissions, and solicits comment.

The Agency also solicits comment on not establishing nationwide limits for ammonia (as N) for any operations in the stainless steel segment of the Steel Finishing subcategory. EPA notes that there are no limits for ammonia (as N) under the current Part 420 regulations for this segment. We would allow permit writers and pretreatment control authorities to use best professional judgment (BPJ) to make case-by-case determinations of the need to regulate ammonia (as N) in wastewater discharges from nitric acid pickling operations. EPA is also considering providing guidance for best management practices to reduce discharges of ammonia (as N).

The proposed regulation would establish BAT (section 420.64(b)), NSPS (section 420.65(b)(4)), and PSNS (section 420.67(b)(2)) to regulate chromium (VI) in wastewaters from both segments of the Steel Finishing Subcategory. EPA proposed different limits for the carbon and alloy steel segment and the stainless steel segment of the subcategory. The following discussion pertains only to the stainless steel segment of the Steel Finishing Subcategory. Also, it does not apply to PSES standards, because EPA did not propose modification of the existing PSES standards for the Steel Finishing Subcategory.

The proposed limitations and standards for the stainless steel segment are based upon two sets of chromium (VI) data, which are described in Section 12.2.6.2 of the Technical Development Document (EPA-821-B-00-011). EPA acquired the two sets of data through self-monitoring performed by two different facilities. Prior to proposal, EPA lacked information from one facility regarding the chemical analytical method employed by that facility in analyzing the chromium (VI) data provided to EPA. Since proposal, EPA has received additional information about the chemical analytical methods for one set of these data and has verified that these data were determined by a method specified in or approved under 40 CFR Part 136, thus fulfilling one of EPA's criteria for data selection. Since proposal, EPA also has determined that the second set of data does not demonstrate effective performance of the model treatment technology. EPA believes that chromium (VI) reduction, if practiced properly, can consistently achieve effluent concentrations at or close to the minimum level of 0.01 mg/L. This is supported by sampling data from two Metal Products and Machinery (MP&M) facilities and three iron and steel finishing facilities operating chromium (VI) reduction pretreatment systems. Consequently, EPA has removed the second data set from analysis.

As a result of this change in the database, EPA recalculated the proposed limitations for BAT, NSPS, and PSNS for chromium (VI) in wastewater from the stainless steel segment of the Steel Finishing Subcategory. The limitations and standards that EPA is now considering are set forth in tables II.D.1, II.D.2 and II.D.3. The Agency believes that the data set used to establish theses limitations represents the best performing treatment system. We did not recalculate standards for PSES because EPA did not in the December, 2000 notice propose to revise the standards for existing indirect dischargers, but instead transferred them unchanged from the 1982 regulation, which did not set standards for chromium (VI). EPA is soliciting comment on this approach and on the recalculated limitations and standards.

For BAT, Table II.D.1 presents the effluent limitations that would apply to discharges in the stainless steel segment for the Steel Finishing Subcategory for each operation as applicable.

Generally, EPA establishes pretreatment standards for BAT pollutants that pass through publicly owned treatment works (POTWs) to waters of the U.S. or interfere with POTW operations or sludge disposal practices. The proposed regulation would establish PSES and PSNS for phenol for the byproducts segment of the Cokemaking Subcategory, based on the Agency's POTW pass-through analysis. To determine whether a pollutant passes through POTWs, EPA generally compares the average percentage of a pollutant removed by well-operated POTWs performing secondary treatment to the percentage of a pollutant removed by BAT treatment. When the median percentage removed nationwide by well-operated POTWs is less than the median percentage removed by direct dischargers complying with the proposed BAT effluent limitations, EPA typically determines that the pollutant passes through.

For the proposal, EPA calculated a POTW percent removal of 95% for phenol using data from the U.S. EPA Fate of Priority Pollutants in Publicly Owned Treatment Works (EPA 440/1-82/303, September 1982). The Agency calculated a cokemaking BAT percent removal of 99.9% for phenol based on data from iron and steel manufacturing facilities demonstrating BAT technology. Because the BAT percent removal is higher than the POTW percent removal, EPA concluded at the time of proposal that phenol in cokemaking process wastewater would pass through POTWs. However, in today's action EPA is considering finding that phenol does not pass through for the Cokemaking Subcategory of the proposed regulation. Instead, EPA is considering the following approach employed by EPA in the Organic Chemicals, Plastics, and Synthetic Fibers (OCPSF) guideline.

As explained in the “Supplement to the Development Document for Effluent Limitations and Guidelines and New Source Performance Standards for the Organic Chemicals, Plastics, and Synthetic Fibers Point Source Category” (EPA 821-R-93-007), EPA determined that phenol is highly biodegradable and is treated by POTWs to the same non-detect levels (10 parts per billion (ppb) or 10 μg/L) that the OCPSF direct dischargers achieve. EPA also observed that the direct dischargers had significantly higher influent concentrations than the POTWs, with the result that the OCPSF direct dischargers showed higher removals than the performance at the POTWs. EPA determined in the OCPSF rule that phenol did not pass through. EPA reasoned that application of the traditional approach to these facts would reflect the significant differences in influent concentrations rather than a real difference in the POTWs' ability to treat phenols.

For the cokemaking subcategory in the Iron and Steel Point Source Category, EPA concluded at proposal that phenol passed through because the BAT percent removal was greater than 99.9 percent, while the POTW percent removal was 95 percent. Both the POTW and the cokemaking BAT facility were capable of treating phenol to a non-detectable level. However, as was the case for the OCPSF rulemaking, the influent concentrations of phenol at the BAT facility in the cokemaking subcategory are much higher than those at the POTWs. The average influent concentrations for phenol for the cokemaking BAT facility ranged from 48,000 μg/L to greater than 400,000 μg/L. On the other hand, the average influent phenol concentration for eight POTWs that passed the editing criteria was only 387 μg/L, and the average effluent concentrations were 10 to 27 μg/L corresponding to an average percent removal of 95.25 percent. Because the data for this subcategory resemble the data in OCPSF, EPA is considering employing the OCPSF approach here. Therefore, EPA is considering making a finding that phenol does not pass through because it is treated to essentially the same level by direct dischargers and POTWs.

In addition, EPA conducted an additional POTW pass-through analysis following proposal using 1997-1998 data from a well-operated POTW performing secondary treatment on cokemaking process wastewater. This data is in the iron and steel rulemaking record. Using these alternative data, the Agency found that the POTW percent removal for phenol is 99.9%—a value equivalent to the BAT percent removal. Based upon this analysis, phenol would not pass through POTWs. Consequently, EPA is considering finding that phenol does not pass through for the Cokemaking Subcategory of the proposed regulation.

EPA solicits comment on the results of the POTW pass-through analysis using the alternative data and whether the Agency should decide not to establish pretreatment standards for phenol for the Cokemaking Subcategory.

EPA is requesting comment on an alternative approach to regulating discharges from by-product coke plants. Under this alternative, water added to optimize biological treatment processes would be regulated in the same manner as other flows added to cokemaking wastewaters (e.g., flows from wet desulfurization systems and coke plant NESHAP controls). In the proposed regulation published on December 27, 2000, EPA included 50 gallons per ton (gpt) of control water flow in the list of flow sources used to determine the baseline model production-normalized flow rate (PNF). EPA now recognizes that this control water is not used at all cokemaking biological treatment plants. Additionally, this flow is not necessary for the operation of physical/chemical treatment systems operated at a majority of indirect discharging facilities. Therefore, adding this flow to the baseline PNF would yield a higher PNF, and, consequently, less stringent limits than appear to be appropriate for many dischargers in the segment. For this reason, EPA is now considering not including this control water flow in the baseline cokemaking model PNFs. The result would be a decrease in the baseline cokemaking model PNF from 158 gpt to 108 gpt.

In order to accommodate the facilities that actually add water to optimize biological treatment, EPA would make available an incremental flow allowance (expressed as a footnote) for the facilities. Those facilities using control water in the operation of their biological treatment systems would be allowed an increase in limitations not to exceed 46.3 percent. Facilities not using biological treatment for cokemaking wastewaters would not be eligible for the additional allowance. (EPA would maintain the other allowances EPA proposed in December 2000, which are printed below for the sake of completeness.)

This alternative approach would not impact EPA's estimated cost of compliance. The Technical Development Document (EPA-821-B-00-011) presents the PNF development in section 7.3 and the methodology for costing in section 9.2.

For this revision, EPA would base the new limitations on the pollutant concentrations established for the proposed rulemaking and a PNF of 108 gpt. The following tables show the by-products cokemaking limitations which EPA would promulgate under this approach. Table II.F.1 presents the BAT limitations. Table II.F.2 presents the NSPS limitations. Table II.F.3 presents the Physical Chemical Treatment PSES limitations. Table II.F.4 presents the Physical Chemical plus Biological Treatment PSES limitations. Table II.F.5 presents the Physical Chemical plus Biological Treatment PSNS limitations.

The following paragraphs, (1) through (5), would appear in the regulation, following the table of effluent limitations.

(1) Increased loadings, not to exceed 9.5 percent of the above limitations, shall be provided for process wastewaters from wet desulfurization systems, but only to the extent such systems generate process wastewaters.

(2) Increased loadings, not to exceed 6.3 percent of the above limitations, shall be provided for process wastewaters generated as a result of control measures necessary for compliance with by-product coke plant NESHAPs, but only to the extent such systems generate process wastewaters.

(3) Increased loadings shall be provided for process wastewaters from other wet air pollution control systems (except those from coal charging and coke pushing emission controls), coal tar processing operations and coke plant groundwater remediation systems, but only to the extent such systems generate process wastewaters and those wastewaters are co-treated with process wastewaters from by-product cokemaking wastewaters.

(4) The effluent limitations for TRC shall be applicable only when chlorination of cokemaking wastewaters is practiced.

(5) Increased loadings, not to exceed 46.3 percent of the above limitations, shall be provided for water used for the optimization of coke plant biological treatment systems.

This is a synopsis of the Commission's Notice of Proposed Rule Making, MM Docket No. 01-25, adopted January 24, 2001, and released February 2, 2001. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC Reference Center, 445 12th Street, SW., Washington, DC. The complete text of this decision may also be purchased from the Commission's copy contractor, International Transcription Services, Inc., (202) 857-3800, 1231 20th Street, NW., Washington, DC 20036.

Provisions of the Regulatory Flexibility Act of 1980 do not apply to this proceeding.

Members of the public should note that from the time a Notice of Proposed Rule Making is issued until the matter is no longer subject to Commission consideration or court review, all ex parte contacts are prohibited in Commission proceedings, such as this one, which involve channel allotments. See 47 CFR 1.1204(b) for rules governing permissible ex parte contacts.

For information regarding proper filing procedures for comments, see 47 CFR 1.415 and 1.420.

For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 73 as follows:

This is a summary of the Commission's Notice of Proposed Rule Making, MM Docket No. 01-24, adopted January 24, 2001, and released February 2, 2001. The full text of this Commission decision is available for inspection and copying during normal business hours in the Commission's Reference Information Center, 445 Twelfth Street, SW, Washington, DC 20554. The complete text of this decision may also be purchased from the Commission's copy contractors, International Transcription Services, Inc., 1231 20th Street, NW., Washington, DC 20036, (202) 857-3800, facsimile (202) 857-3805.

Provisions of the Regulatory Flexibility Act of 1980 do not apply to this proceeding.

Members of the public should note that from the time a Notice of Proposed Rule Making is issued until the matter is no longer subject to Commission consideration or court review, all ex parte contacts are prohibited in Commission proceedings, such as this one, which involve channel allotments. See 47 CFR 1.1204(b) for rules governing permissible ex parte contact.

For information regarding proper filing procedures for comments, see 47 CFR 1.415 and 1.420.

For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CRF part 73 as follows:

This is a summary of the Commission's Notice of Proposed Rule Making, MM Docket No. 01-27, adopted January 24, 2001, and released February 2, 2001. The full text of this Commission decision is available for inspection and copying during normal business hours in the Commission's Reference Information Center, 445 Twelfth Street, SW, Washington, DC 20554. The complete text of this decision may also be purchased from the Commission's copy contractors, International Transcription Services, Inc., 1231 20th Street, NW., Washington, DC 20036, (202) 857-3800, facsimile (202) 857-3805.

Provisions of the Regulatory Flexibility Act of l980 do not apply to this proceeding.

Members of the public should note that from the time a Notice of Proposed Rule Making is issued until the matter is no longer subject to Commission consideration or court review, all ex parte contacts are prohibited in Commission proceedings, such as this one, which involve channel allotments. See 47 CFR 1.1204(b) for rules governing permissible ex parte contact.

For information regarding proper filing procedures for comments, see 47 CFR 1.415 and 1.420.

For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 73 as follows:

This is a synopsis of the Commission's Notice of Proposed Rule Making, MM Docket No. 01-26; adopted January 24, 2001 and released February 2, 2001. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC Reference Information Center (Room CY-A257), 445 12th Street, SW., Washington, DC. The complete text of this decision may also be purchased from the Commission's copy contractor, International Transcription Service, Inc., (202) 857-3800, 1231 20th Street, NW., Washington, DC 20036.

Provisions of the Regulatory Flexibility Act of 1980 do not apply to this proceeding.

Members of the public should note that from the time a Notice of Proposed Rule Making is issued until the matter is no longer subject to Commission consideration or court review, all ex parte contacts are prohibited in Commission proceedings, such as this one, which involve channel allotments. See 47 CFR 1.1204(b) for rules governing permissible ex parte contacts.

For information regarding proper filing procedures for comments, see 47 CFR 1.415 and 1.420.

For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 73 as follows:

The Council will hold a public hearing to obtain input from fishers and the general public on its proposed language for the definition of EFH for the dolphin/wahoo fishery of the U.S. Caribbean. The currently proposed language for EFH is the following: “Identify Essential Fish Habitat (EFH) for dolphin and wahoo in the U.S. Caribbean as any floating natural object in the water column, such as Sargassum or other floating algae or any other plant, plus ocean fronts where these objects accumulate. Included as EFH are those associated species that serve as prey or food for dolphin or wahoo. Man-made objects, such as fish attracting devices (FADs), refuse and lost nets, are excluded from this definition.” The Council has prepared a written statement of its proposed defintion of EFH for the dolphin/wahoo fishery of the U.S. Caribbean, which is available from the Council (see ADDRESSES) and will be available at the hearing.

The Council’s intention is to consider the public comment on this issue before adopting its final proposed definition of dolphin/wahoo EFH for inclusion in the proposed FMP. The FMP is under preparation jointly with the South Atlantic and Gulf of Mexico Fishery Management Councils. These three fishery management councils intend to hold a joint meeting on February 22, 2001, to discuss and adopt final measures for the final FMP prior to submitting it to NMFS for review, approval, and implementation under procedures of the Magnuson-Stevens Fishery Conservation and Management Act. The notice of this meeting was published at 50 66 FR 7628 on January 24, 2001.

This hearing is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Mr. Miguel A. Rolón, Executive Director, Caribbean Fishery Management Council, 268 Muñoz Rivera Avenue, Suite 1108, San Juan, Puerto Rico, 00918-2577, telephone (787) 766-5926, at least 5 days prior to the meeting date.