The Office of Personnel Management (OPM) is issuing interim regulations on compensation for employees of temporary organizations established by law or Executive order. Section 1101 of the Floyd D. Spence National Defense Authorization Act for fiscal year 2001 (Public Law 106-398, October 30, 2000), adds a new subchapter IV to chapter 31 of title 5, United States Code. Subchapter IV provides that the head of a temporary organization may make excepted service appointments of up to 3 years to fill positions of the temporary organization. The appointments may be extended for an additional 2 years consistent with regulations published by OPM. This authority is available to executive and legislative branch agencies. In addition, subchapter IV provides that, upon request by the head of a temporary organization, the head of any department or agency of the Government may detail employees on a nonreimbursable basis to the temporary organization to assist the temporary organization in carrying out its duties.

Subchapter IV defines a temporary organization as a commission, committee, board, or other organization that is established for a specific period of time, not in excess of 3 years, for the purpose of performing a specific study or other project. Such a temporary organization generally terminates upon completion of the study or project.

Subchapter IV provides OPM with authority to establish regulations to determine the rate of basic pay for employees of temporary organizations without regard to the provisions of chapter 51 and subchapter III of chapter 53 of title 5, United States Code. (See 5 U.S.C. 3161(d).) These interim regulations do not apply to temporary organizations established prior to October 30, 2000.

Subchapter IV also provides that the rate of basic pay for the chairman, a member, an executive director, a staff director, or other executive level position of a temporary organization may not exceed the maximum rate of basic pay established for the Senior Executive Service (SES) under section 5382 of title 5, United States Code. The rate of basic pay for other positions in a temporary organization may not exceed the maximum rate of basic pay for GS-15. However, the rate of basic pay for a senior staff position of a temporary organization may, in a case determined by the head of the agency to be exceptional, exceed the maximum rate of basic pay for GS-15, but may not exceed the maximum rate of basic pay for the SES. Subchapter IV defines basic pay as including locality pay provided under section 5304 of title 5, United States Code.

In setting rates of basic pay for staff and other non-executive level positions, the interim regulations require that the head of a temporary organization give consideration to the significance, scope, and technical complexity of the position and the qualifications required for the work involved. This is consistent with a parallel requirement established under regulations published by the General Services Administration for setting basic pay for advisory committee members and staff under the Federal Advisory Committee Act. (See 41 CFR 101-6.1033.) The interim regulations also require the head of a temporary organization to take into account rates of basic pay paid to Federal employees who have duties that are similar in terms of difficulty and responsibility.

The interim regulations provide General Schedule locality payments to all executive level and staff positions of temporary organizations. The regulations set maximum rates of basic pay and locality-adjusted rates of pay for employees of temporary organizations. This will make it easier to determine pay when employees move from General Schedule positions to positions in temporary organizations, and vice versa.

The compensation authority in 5 U.S.C. 3161(d) is limited to determining rates of basic pay and locality-adjusted rates of pay for employees of temporary organizations. In addition, subchapter IV provides that an employee of a temporary organization is entitled to the same benefits provided to temporary employees under title 5, United States Code. The interim regulations clarify, however, that subchapter IV provides no new independent authority for the head of a temporary organization to establish other forms of compensation and benefits not authorized by title 5, United States Code, or another specific authority. For example, the law does not create any new authority for providing premium pay, bonuses, awards, leave, or benefits differently than under title 5 or any other already existing statute.

The interim regulations require that the head of a temporary organization comply with section 5504 of title 5, United States Code, including the requirement for biweekly pay periods and requirements for converting an annual rate of basic pay to a basic hourly, daily, weekly, or biweekly rate. The regulations also require that employees of temporary organizations receive basic pay on an hourly basis. These requirements will facilitate compliance with the laws and regulations on crediting and using leave on an hourly basis, or fractions thereof.

Finally, subchapter IV provides criteria under which the head of a temporary organization may accept volunteer services without regard to section 1342 of title 31, United States Code.

Pursuant to 5 U.S.C. 553(b)(3)(B) and 5 U.S.C. 553(d)(3), I find that good cause exists for waiving the general notice of proposed rulemaking and making this rule effective on the date of its publication in the Federal Register . This waiver is appropriate because the interim regulations are being published to implement changes in law that are already in effect.

This rule has been reviewed by the Office of Management and Budget in accordance with E.O. 12866.

I certify that these regulations will not have a significant economic impact on a substantial number of small entities because they will apply only to Federal agencies and employees.

In an interim rule effective August 29, 2000, and published in the Federal Register on September 5, 2000 (65 FR 53528-53531, Docket No. 00-036-1), we amended the citrus canker regulations, contained in 7 CFR 301.75-1 through 301.75-16, in response to the detection of the disease in areas outside of the previously quarantined areas. On September 26, 2000, we published a correction (65 FR 57723, Docket No. 00-036-2) that clarified the description of quarantined areas contained in the interim rule. The interim rule, as corrected by that document, added portions of Hendry and Hillsborough Counties, FL, to the list of quarantined areas and expanded the boundaries of the quarantined areas in Broward, Collier, Dade, and Manatee Counties, FL. The interim rule imposed restrictions on the interstate movement of regulated articles from and through the quarantined areas.

Comments on the interim rule were required to be received on or before November 6, 2000. We did not receive any comments. Therefore, for the reasons given in the interim rule, we are adopting the interim rule as a final rule.

This action also affirms the information contained in the interim rule concerning Executive Orders 12372, 12866, and 12988, the Paperwork Reduction Act, and the National Environmental Policy Act.

Further, for this action, the Office of Management and Budget has waived the review process required by Executive Order 12866.

This rule affirms an interim rule that amended the regulations by adding portions of Hendry and Hillsborough Counties, FL, to the list of quarantined areas and by expanding the boundaries of the quarantined areas in Broward, Collier, Dade, and Manatee Counties, FL, due to the detection of citrus canker in those areas. The interim rule imposed certain restrictions on the interstate movement of regulated articles from and through the quarantined areas. The interim rule was necessary to prevent the spread of citrus canker into noninfested areas of the United States.

In accordance with 5 U.S.C. 604 of the Regulatory Flexibility Act, we have performed a final regulatory flexibility analysis regarding the economic effects of the interim rule on small entities. The Small Business Administration (SBA) defines a firm engaged in agriculture as “small” if it has less than $750,000 in annual receipts.

The entities who could be affected by the interim rule include those businesses that produce, sell, process, handle, or move regulated articles, such as commercial groves, grove maintenance services, fruit transporters, fruit processors, nurseries, nursery stock dealers, fresh fruit retail stores, fruit packers, gift fruit shippers, fruit harvesting contractors, lawn maintenance businesses, and flea markets. Because the interim rule restricted the interstate movement of regulated articles from and through the quarantined areas, entities that are located within the new or expanded quarantined areas, as well as entities located outside the quarantined areas, could be affected.

The number of these entities that meet the SBA definition of a small entity is unavailable. However, it is reasonable to assume that most of these entities are small in size because the majority of the same or similar businesses in southern Florida, as well as the rest of the United States, are small by SBA standards. For example, we have identified a total of 317 commercial citrus groves in those counties in which quarantined areas were established or expanded by the interim rule. Approximately 285 of the 317 commercial citrus groves in those counties meet the SBA definition of a small entity.

Commercial citrus growers, processors, packers, and shippers within the quarantined areas will still be able to move their fruit interstate, provided that, among other things, the fruit is treated and not shipped to another citrus-producing State. Growers will have to bear the cost of treatment, but that cost is expected to be minimal. The prohibition on moving the fruit to other citrus-producing States is not expected to negatively affect entities within the quarantined areas because most States do not produce citrus and growers are expected to be able to find a ready market in non-citrus-producing States.

Alternatively, owners of commercial citrus groves whose trees were removed because of citrus canker pursuant to a public order between 1986 and 1990 or on or after September 28, 1995, may, subject to the availability of funding, receive payments to replace commercial citrus trees. Eligible commercial citrus grove owners may also, subject to the availability of funding, receive payments to recover income from production that was lost as a result of the removal of commercial citrus trees to control citrus canker. These lost production and tree replacement payments will help to reduce the economic effects of the citrus canker quarantine on affected commercial citrus growers.

The nurseries and commercial groves affected by the interim rule will be required to undergo periodic inspections. These inspections may be inconvenient, but the inspections will not result in any additional costs for the nurseries or growers because the Animal and Plant Health Inspection Service or the State of Florida will provide the services of an inspector without cost to the nursery or grower.

Fresh fruit retail stores, nurseries, and lawn maintenance companies, for the most part, operate locally; they do not typically move regulated articles outside of the State of Florida during the normal course of their business, and consumers do not generally move products purchased from those entities out of the State. The fruit sold by grocery stores and other retail food outlets is generally sold for local consumption. Retail nurseries also market their products for local consumption. Lawn maintenance businesses collect yard debris, but they do not normally transport that debris outside the State for disposal.

The fresh fruit retailers affected by the interim rule will be required to abide by restrictions on the interstate movement of regulated articles. They may be affected by the interim rule because fruit sold within the quarantined areas in retail stores cannot be moved outside of the quarantined areas. However, we expect any direct costs of compliance for fresh fruit retailers will be minimal.

The lawn maintenance companies affected by the interim rule will be required to perform additional sanitation measures when maintaining an area inside the quarantined areas. Lawn maintenance companies will have to clean and disinfect their equipment after grooming an area within the quarantined areas, and they must properly dispose of any clippings from plants or trees within the quarantined areas. These requirements will slightly increase costs for lawn maintenance companies affected by the interim rule.

The alternative to the interim rule was to make no changes in the citrus canker regulations. We rejected this alternative because failure to quarantine portions of Hendry and Hillsborough Counties, FL, and additional portions of Broward, Collier, Dade, and Manatee Counties, FL, could result in greater economic losses for domestic citrus producers due to citrus canker.

The interim rule contained no new information collection or recordkeeping requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

The Commission's Announcement No. 108, dated December 24, 1998, announced its decision to abolish the Office for Analysis and Evaluation of Operational Data (AEOD), effective January 3, 1999. The emergency response function of AEOD was transferred to the Office of Incident Response Operations (IRO). Any future general correspondence and technical documents relating to incident response should be addressed to IRO. This final rule also corrects the telephone number for the NRC Operations Center.

In 1995 the NRC transferred responsibility for receiving advance notification of shipments of licensed materials from the Division of Industrial and Medical Nuclear Safety (IMNS) and NRC Regional Administrators to the Spent Fuel Project Office (SFPO). Future applications and reports as required under parts 72 and 73 should be addressed to the SFPO rather than IMNS or the Regional Administrators. The attached final rule will inform the public of these previous organizational changes and will eliminate duplicate filings.

Because these minor amendments only reflect organizational changes, the notice and comment provisions of the Administrative Procedures Act do not apply pursuant to 5 U.S.C. 553(b)(A). The amendment is effective on publication in the Federal Register . Good cause exists to dispense with the usual 30-day delay in the effective date because this amendment is of a minor and administrative nature, dealing with the NRC's organization.

NRC has determined that this final rule is the type of action described in categorical exclusion 10 CFR 51.22 (c)(2). Therefore, neither an environmental impact statement nor an environmental assessment has been prepared for this final rule.

This final rule decreases the burden on licensees to eliminate the submittal of multiple copies of reports to the NRC Regional Administrator and the Director, Office of Nuclear Material Safety and Safeguards for 10 CFR 72.44(f) and 72.186(b). The public burden reduction for this information collection is estimated to average 0.20 hour(s) per request. Because the burden for this information collection is insignificant, Office of Management and Budget (OMB) clearance is not required. Existing requirements were approved by the Office of Management and Budget, approval number 3150-0132.

If a means used to impose an information collection does not display a currently valid OMB control number, the NRC may not conduct or sponsor, and a person is not required to respond to, the information collection.

Title XIII of the Housing and Community Development Act of 1992, Public Law 102-550, entitled the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (1992 Act), established OFHEO. OFHEO is an independent office within the Department of Housing and Urban Development with responsibility for ensuring that the Enterprises are adequately capitalized and operate safely and in conformity to the requirements of applicable statutes, rules and regulations, including their respective charter acts. 1 The Enterprises were established to effect specific public purposes under Federal law, including the provision of liquidity to the residential mortgage market and the promotion of the availability of mortgage credit benefiting low- and moderate-income families and areas that are underserved by lending institutions. 2

The enumerated statutory authorities of the Director explicitly include the authority to issue rules to carry out the duties of the Director, 3 as well as other broad supervisory powers essentially similar to those of the Federal bank regulatory agencies. OFHEO is empowered to conduct examinations of the Enterprises; to require the Enterprises to provide reports; 4 to establish capital standards for the Enterprises; 5 and, in appropriate circumstances, to exercise administrative enforcement authority. OFHEO's range of enforcement authorities include, among other things, the power to issue temporary and permanent cease and desist orders to an Enterprise or its executive officers or directors, and to otherwise sanction or impose civil money penalties when appropriate. 6 OFHEO's enforcement regime, addressing the scope of these authorities and the applicable rules of practice and procedure, is set forth in part 1780 of OFHEO's regulations. 7

In addition, subtitle B of the 1992 Act requires OFHEO to establish certain capital thresholds for the Enterprises. 8 The statute directs OFHEO to assign capital classifications to the Enterprises based on those capital thresholds, and authorizes OFHEO to reclassify an Enterprise notwithstanding the thresholds. 9 An Enterprise that is not classified as “adequately capitalized” is required to obtain OFHEO's approval for, and carry out, a formal plan to restore the Enterprise's capital. Statutory provisions also prohibit an Enterprise from making any capital distribution that would result in the Enterprise not meeting the capital thresholds, absent OFHEO's approval, and imposes additional restrictions on capital distributions so long as the Enterprise is not classified as adequately capitalized. An Enterprise that is not classified as adequately capitalized may also be subject to a variety of regulatory limitations and restrictions as deemed to be appropriate by OFHEO. 10

On April 10, 2001, OFHEO published a notice of proposed rulemaking at 66 FR 18694 seeking public comment on a proposal to issue a rule describing the scope of the actions the agency is authorized to take under certain prompt corrective action statutory provisions applicable to the Enterprises at 12 U.S.C. 4614 through 4618, 4619(b) through (e), 4622 and 4623, as well as the procedures by which such actions will be carried out. OFHEO also sought public comment on adopting a proposed prompt supervisory response procedure, separate from the capital-based prompt corrective action regime, under which OFHEO proposed to monitor various supervisory concerns in addition to an Enterprise's capital classification, and to pursue early action by an Enterprise to preclude losses or possible losses, or to address particular threats to safety and soundness. The proposed procedure would be part of OFHEO's ongoing supervisory program that includes monitoring and examination of Enterprise activities on a continuous basis. The prompt supervisory response approach would complement and not supplant ongoing review programs. Similar to the procedures under the capital-based, prompt corrective action regime, as proposed the prompt supervisory response provision would have established a set of “tripwires,” looking to specifically enumerated developments proposed to be appropriate junctures for a supervisory review to ascertain the financial or operational consequences of such developments upon the Enterprise. Under the proposal, the occasion of a specified tripwire event or condition would have triggered an automatic supervisory response by OFHEO.

OFHEO received comments on these proposals from Fannie Mae, Freddie Mac, and one former senior government official. The three commenters questioned the need for the prompt supervisory response regime. They similarly asserted that, since OFHEO already conducts continuous and comprehensive on-site supervision of the Enterprises and can work with the Enterprises informally to resolve any significant supervisory issues that arise, the prompt supervisory response approach would add nothing to OFHEO's ability to exercise supervisory oversight for the Enterprises.

The prompt supervisory response approach reflects OFHEO's commitment to use a broad-based method to effectuate early identification of and supervisory action regarding potentially adverse developments or conditions affecting the Enterprises, by moving beyond the capital-based focus of prompt corrective action in appropriate circumstances. The prompt supervisory response approach mandates no specific conduct by the Enterprises; indeed, the need for action is to be ascertained on a case-by-case basis. In those instances in which the Enterprise has already undertaken appropriate steps, OFHEO anticipates that no additional action will be necessary. The approach also increases the transparency of the procedures and analytical framework OFHEO is to use in such matters. The role of OFHEO to ensure the safety and soundness of the Enterprises is not restricted to examination and capital monitoring functions on the one hand and to an enforcement or prompt corrective action procedures on the other. OFHEO's duty to ensure the Enterprises are adequately capitalized and operate safely  11 means that the agency is charged by Congress to act to ensure the safety and soundness of the Enterprises at all points on the supervisory spectrum between examination and enforcement. 12 Thus, OFHEO is also charged with ensuring that each Enterprise acts prudently in dealing with perceived problems as they emerge.

OFHEO has taken the comments provided into consideration and is now issuing a final rule, with several modifications. In formulating Subpart A, the final prompt supervisory response rule, OFHEO has adopted a less rigid approach to identify developments warranting specific supervisory response under the rule, while the supervisory response process set out in the rule has been adopted as proposed, without substantive change. OFHEO has also made certain modifications to Subpart B, the prompt corrective action provisions of the rule. The final rule, along with the comments and modifications, are described below.

Subpart A establishes a system of prompt supervisory response to be taken when developments internal or external to an Enterprise, as identified by OFHEO, warrant special supervisory review. In order to provide a broad early intervention regime that addresses both capital-related and non-capital-related supervisory concerns, the rule describes how OFHEO may initiate specified prompt supervisory responses to address non-capital considerations that are outside the primary focus of the prompt corrective action regime, of Subpart B.

In their comments, each Enterprise asserted that the prompt supervisory response rule, as proposed, exceeded OFHEO's statutory authority, and should be wholly withdrawn. The rule—as proposed, and as adopted in final form here—contemplates that a letter be issued directing an Enterprise to respond to OFHEO's inquiry or that OFHEO may require an Enterprise to prepare and carry out an acceptable action plan. The Enterprises argue that this procedure would bypass specified statutory thresholds and procedural protections contained in the 1992 Act, under which OFHEO may only issue cease and desist orders or require capital restoration plans in certain narrowly defined circumstances, pursuant to defined due process procedures. Moreover, the Enterprises asserted that OFHEO has no explicit statutory mandate to establish safety and soundness standards by regulation or other guidance.

As OFHEO discussed in the preamble to the proposed rule, the prompt supervisory response approach is simply a procedural framework through which OFHEO may employ its current array of supervisory tools and regulatory authority to confront special factual scenarios. The 1992 Act, at 12 U.S.C. 4631(a)(3)(A), sets out OFHEO's authority to order an Enterprise to cease and desist unsafe or unsound practices. 13 By identifying and working with an Enterprise to eliminate perceived unsafe or unsound conditions or practices through an interactive supervisory process, such as is reflected in the prompt supervisory response approach, instead of resorting directly to an adjudicative enforcement action, OFHEO seeks to carry out its oversight responsibilities and neither exceeds its statutory authority nor circumvents the procedural scheme contained in 12 U.S.C. 4631. Any subsequent use of formal or informal enforcement procedures will be dependent, in large part, upon Enterprise action to address supervisory concerns, and will be undertaken pursuant to the applicable statutory procedures.

OFHEO rejects assertions that the agency has no explicit statutory mandate to establish safety and soundness standards by regulation or guideline. The 1992 Act, at 12 U.S.C. 4513, particularly 12 U.S.C. 4513(b)(1) and (b)(5), explicitly establishes such authority without reservation. More pertinently, the prompt supervisory response rule does not establish supervisory standards or specify remedies; rather, it establishes a supervisory process.

As described in § 1777.1(a) and 1777.1(b) of the final rule, the regulation is being issued under OFHEO's broad statutory authority to take such actions as the Director of OFHEO deems appropriate to ensure that the Enterprises operate in a safe and sound manner, together with OFHEO's reporting  14 and examination  15 authorities. As set out in § 1777.1(b), the purpose of subpart A of the rule is to fashion an early intervention regime to address matters of supervisory concern to OFHEO under its congressional mandate in addition to the capital considerations already focused upon by the prompt corrective action regime. However, as stated in § 1777.1(b) of the final rule, OFHEO's initiation of the procedures under the rule does not necessarily indicate that an unsound condition exists; rather, the final rule is consistent with the process that OFHEO employs in reviewing the conduct of an Enterprise's affairs as a safety and soundness regulator. The possible supervisory responses described below, including a supervisory letter, an action plan, or a notice to show cause, as they might be used under the rule, do not constitute orders under the 1992 Act for purposes of 12 U.S.C. 4631 or 4636. They are simply steps in a predictable and organized process under which OFHEO will review issues and, as necessary and appropriate, provide supervisory guidance to an Enterprise.

In § 1777.10 of the proposed rule, OFHEO proposed to adopt a list of nine possible developments that would cause OFHEO to initiate a special review under the prompt supervisory response process. The proposed list included both external indicators tied to market factors, as well as internal indicators tied to factors within a particular Enterprise. The Enterprises submitted separate comments objecting to each of the nine proposed “triggers” on various grounds. In some instances, the Enterprises agreed that occurrence of a particular trigger event might indicate a potential for financial difficulties for the Enterprise, but asserted that the proposed triggers generally failed to take into account countervailing factors that could ameliorate any supervisory concern about a particular development. The Enterprises also asserted that the proposed triggers focused on matters that would most often have innocuous underlying causes, and would likely have already been subject to identification and assessment by the Enterprises and by OFHEO prior to the time that a prompt supervisory response inquiry might be initiated under the rule. OFHEO does not agree with the Enterprises' conclusions. OFHEO does agree that ongoing supervision and examination are central to its regulatory oversight, and OFHEO notes that ameliorative actions and prudent planning by an Enterprise to address a particular development would be relevant to a supervisory inquiry or suggested remedy under the prompt supervisory response approach.

The final version of § 1777.10 revises the approach of the proposed rule. In response to the comments, the list of developments prompting a supervisory response has been revised by deleting certain proposed developments and by retaining others, either as proposed or with modifications. The revised list retains proposed § 1777.10(a) (relating to declines in the Housing Price Index) and proposed paragraph (j) , redesignated as paragraph (e) (as to the discretionary authority of the Director to initiate a supervisory letter in other circumstances). The final rule modifies § 1777.10(c) to provide only that changes in “publicly reported” net income are the type of development addressed, and similarly paragraph (d) to provide only that changes in “publicly reported” net interest margin are the type of development addressed. The final rule modifies § 1777.10(d) to raise the threshold amount of change in delinquent loans contemplated under this paragraph from one half of one percent to one percent, more appropriately defining the point that prompts a supervisory response. Based on comments received, the final rule does not include earlier proposed paragraphs (b) (relating to interest rate risk measures), (f) (matters related to equity calculations), (g) (matters related to data system operational problems), (h) (matters related to external auditor changes) and (i) (matters related to board meetings). The deletion of those paragraphs does not preclude their consideration as developments that might merit a supervisory response either under routine examination and supervision procedures of OFHEO or under the discretionary authority retained by the Director, under redesignated subsection (e). 16 OFHEO will continue to review and refine the list of early warning indicators and to identify additional developments that may signal a significant possibility of difficulties so as to warrant a prompt supervisory response.

In their comments, both Enterprises noted that proposed § 1777.10 (j), redesignated (e) in the final rule, would be sufficient to encompass all of the possible developments with which OFHEO was concerned under proposed § 1777.10. In addition, Freddie Mac noted that proposed § 1777.10 (j) most closely approximates OFHEO's existing oversight practices because it incorporates discretionary elements and implicitly suggests that OFHEO will consider the context of particular developments before initiating the prompt supervisory response process. Under § 1777.10 (e) of the final rule, the Director of OFHEO has the discretion to initiate the prompt supervisory response process whenever he or she is concerned about a development or condition relating to an Enterprise's safety and soundness, regardless of whether it has manifested an impact on the Enterprise's capital level. Developments and conditions of concern to the Director under § 1777.10 (e) might be detected by OFHEO in connection with an examination of the Enterprises, or in some other manner as the agency conducts its continuous supervisory and oversight functions.

Section 1777.11 of the final rule sets out the various forms of supervisory response that may be taken under the regulation. As noted earlier, all elements of the response process are recognized and existing elements of OFHEO's oversight authorities. The final rule adopts the approach of the proposal with only conforming changes and one clarification. Under the procedures set forth under the final rule, there are several levels of response.

In each case, OFHEO is to initiate a Level I supervisory action under § 1777.11(a) within five days of OFHEO's determination under § 1777.10 that a development or condition warrants supervisory response. The Enterprise will receive a supervisory letter advising the Enterprise that OFHEO has begun the prompt supervisory response process to address the development or condition and setting forth such other information and specific directions as the Director deems appropriate in light of the circumstances. For example, OFHEO may direct the Enterprise to provide information about the situation, to respond to OFHEO's specific questions or concerns, to take corrective or remedial action, or other preventative action as deemed appropriate.

Based on the Enterprise's response to the supervisory letter and other relevant concerns, OFHEO will promptly determine whether additional supervisory response under the rule is necessary. The Enterprise's response to the supervisory letter may cause OFHEO to conclude that the subject development creates no substantial supervisory concern or that the Enterprise's management of the risks and concerns presented by the development is adequate. In other instances, the supervisory letter process may cause OFHEO to conclude that a heightened level of supervisory concern is warranted, yet the letter process itself and continuing supervisory dialogue may be all that is needed to ensure that the Enterprise undertakes sufficient preventative or remedial measures.

If additional supervisory action is deemed necessary, OFHEO has a variety of alternatives under § 1777.11. Level II supervisory action, as set out in § 1777.11(b), provides for a special review of an Enterprise. A special review may be useful in supplementing information already obtained by OFHEO through the examination process, and might provide OFHEO with a clearer picture of the situation than could otherwise be obtained through letters or reports. Such review could be conducted by OFHEO's Office of General Counsel, Office of Research and Model Development, Office of Examination and Oversight, Office of Policy Analysis and Research, or such other department or individual as designated by the Director. In light of such a special review, OFHEO will determine whether further supervisory action is warranted.

Under Level III supervisory action set out in § 1777.11(c), OFHEO may direct an Enterprise to prepare and submit an action plan addressing the development or condition. Among other things, the Enterprise's action plan may be required to include information about the circumstances leading up to the subject condition or development and an assessment of its possible effects upon the Enterprise. The Enterprise may also be asked to describe its proposed course of action for dealing with the development, including an analysis of available alternatives. If OFHEO determines that the action plan is insufficient to resolve the supervisory issues created by the development, OFHEO may direct the Enterprise to revise the plan. However, if OFHEO determines that the supervisory issues will not be resolved even under a revised plan, OFHEO may determine to initiate other supervisory responses.

Under Level IV supervisory action, as set out in § 1777.11(d), OFHEO will require the Enterprise to show cause why OFHEO should not initiate formal enforcement action against the Enterprise. OFHEO is not, however, required to issue a show cause notice prior to initiating an administrative enforcement action.

The three commenters alleged that the prompt supervisory response process represents a “one-size-fits-all” approach that would unnecessarily limit OFHEO's flexibility and discretion, as well as the agency's ability to formulate timely, fact-specific, and flexible responses to emerging supervisory issues. OFHEO disagrees with that characterization. OFHEO is well aware of the necessity for a regulatory agency to apply its expertise to specific supervisory problems in light of the particular attendant facts, and to do so swiftly. Nothing in the prompt supervisory response process limits the flexibility necessary for OFHEO to meet its supervisory responsibilities. As the exclusive safety and soundness regulator of the Enterprises, OFHEO has been constituted with broad supervisory authorities in order to detect and address any safety and soundness concerns that may arise, and has broad enforcement powers to ensure that any safety and soundness deficiency or violation of law is promptly remedied, possibly long before harm to an Enterprise reaches the level of capital impairment. OFHEO's concerns may include an array of considerations—ranging, for example, from matters such as declining collateral values to asset quality, liquidity, and operational difficulties—that could result in substantial harm to an Enterprise before capital is impaired. OFHEO will analyze the totality of each situation, rather than awaiting a decline in capital to initiate agency action. If an analysis reveals a supervisory concern, then OFHEO's response might reasonably include a mixture of early warning and early action initiatives that would be effective before specific problems seriously affect an Enterprise.

OFHEO designed the prompt supervisory response process to provide it flexibility as a supervisor, both in structuring the scope of the review and in overseeing the Enterprise's implementation of responsive measures. Under § 1777.11(a), OFHEO will issue a supervisory letter commencing the prompt supervisory response review, but the content of the letter will depend entirely on the “particular circumstances and the nature of the development.” There are then three additional levels of available supervisory responses under § 1777.11(b) through (d), but OFHEO's decision as to which, if any, of the levels to use will be based on the Enterprise's “response to the supervisory letter and other appropriate factors.” At every level of supervisory response in § 1777.11(b) through (d), the rule expressly states that OFHEO will assess the effectiveness of actions as well as other relevant factors in determining whether additional supervisory action is appropriate. As stated in the preamble to the proposed rule, the levels of supervisory response need not be carried out sequentially, and OFHEO may pursue simultaneous actions. In the final rule, OFHEO has expanded the text of the rule at § 1777.11(a)(4), so as to avoid confusion on this point. 17 In addition, as reflected in § 1777.2 and § 1777.12, the prompt supervisory response process in no way limits OFHEO's discretion to use any of its other supervisory tools and authorities to respond to the particular situation. OFHEO also rejects the suggestion that the prompt supervisory response process would not be rapid. The supervisory letter is to be issued within five days after OFHEO determines that a development or condition warrants review under the rule, and the text of § 1777.11 requires OFHEO to implement any additional levels of supervisory response promptly and review the effectiveness of such response promptly.

Finally, the commenters expressed concerns that, if the prompt supervisory response approach results in public disclosure of supervisory actions, discussions, or correspondence, the contents could be misunderstood by the public and could cause the markets to lose confidence in the Enterprises. However, as reflected in § 1777.2(b), supervisory responses issued under § 1777.11 do not constitute public orders enforceable under 12 U.S.C. 1371 or 1376, and, as noted in § 1777.1(b), OFHEO's initiation of procedures under the prompt supervisory response regime does not necessarily indicate that an unsound condition exists.

Subpart B of the final rule describes the scope of actions OFHEO is authorized to take under the prompt corrective action provisions applicable to the Enterprises under the 1992 Act at 12 U.S.C. 4614 through 4618, 4619(b) through (e), 4622 and 4623, as well as the procedures by which such an actions are to be carried out. The following is an overview of the provisions of the final rule and the statutory authorities implemented thereby. Freddie Mac and Fannie Mae submitted numerous comments on proposed Subpart B, which OFHEO has taken into account in formulating the final rule. These comments are addressed below, as part of the description of the section of the final rule to which each comment pertains.

The authority, purpose, and scope of subpart B are set out in § 1777.1(a) and (c), which briefly review the statutes underlying the rule. Subpart B is issued under OFHEO's broad authorities to take such actions as are deemed appropriate by the Director of OFHEO to ensure that the Enterprises maintain adequate capital and operate in a safe and sound manner, as established by 12 U.S.C. 4513, 4631, 4632, and 4636, as well as under the specific prompt corrective action provisions contained in subtitle B of the 1992 Act (12 U.S.C. 4611 through 4623), the Federal Home Loan Mortgage Corporation Act at 12 U.S.C. 1452(b)(2), and the Federal National Mortgage Association Charter Act at 12 U.S.C. 1718(c)(2). These provisions authorize OFHEO to administer certain capital requirements for the Enterprises, to classify the capital of the Enterprises based on capital levels specified in the 1992 Act, and, in appropriate circumstances, to exercise discretion to reclassify an Enterprise into a lower capital category. Under these provisions, there are also automatic consequences for an Enterprise that is not classified as adequately capitalized, as well as discretionary authority for OFHEO to require an Enterprise to take remedial actions.

As discussed in § 1777.1(d), the 1992 Act directs OFHEO to determine capital classifications for the Enterprises by reference to three capital “triggers” (the minimum capital level, the critical capital level, and the risk-based capital level). Notably, however, 12 U.S.C. 4614(d) delays consideration of the risk-based capital level until one year after OFHEO's risk-based capital rule becomes effective, that is, September 13, 2001. Section 4615 of Title 12, which sets out the supervisory actions to be taken as applicable to an Enterprise that is classified as undercapitalized, similarly provides that its provisions will not take effect until one year after OFHEO's risk-based capital rule becomes effective. Section 4614(d) provides that, until that time, an Enterprise shall be classified as adequately capitalized if the Enterprise maintains an amount of capital that equals or exceeds the minimum capital level.

Therefore, under subpart B of the final rule at § 1777.20, different sets of capital classifications will apply before and after September 13, 2002. Section 1777.20(a) contains the “permanent” set of capital classifications taking the risk-based capital level into account as well as the minimum capital level and critical capital level. This set of capital classifications will apply any time after September 13, 2002.

The currently applicable “temporary” set of capital classifications is contained in § 1777.20(c) as an exception to § 1777.20(a) that applies until September 13, 2002. This currently applicable set of classifications is based on an Enterprise's minimum capital level and critical capital level, reflecting the classification criteria presently used by OFHEO. Section 4614(a) of Title 12, when read together with 12 U.S.C. 4616(c)  18 and 12 U.S.C. 4617(d), 19 indicates that Congress intended OFHEO to classify the Enterprises for prompt corrective action purposes by reference to minimum capital and critical capital levels, pending expiration of the one-year post-effectiveness period for the risk-based capital test.

As set forth in § 1777.2(b) through (c), the prompt corrective action provisions are but one aspect of OFHEO's broad supervisory authority to ensure that each Enterprise maintains capital that is adequate for its safe and sound operation. In their comments, the Enterprises objected to language in § 1777.2(b) that states OFHEO has authority to require an Enterprise to hold capital in addition to that necessary to comply with the minimum and risk-based capital levels, when in OFHEO's judgment circumstances indicate additional capital is necessary or appropriate in light of the overall strength of the Enterprise and market conditions. The Enterprises argue that the minimum and risk-based capital levels defined by the statute are exclusive, and OFHEO is not vested under law with discretion to require the Enterprises to hold additional capital.

OFHEO disagrees and has adopted § 1777.2(b) without change. Subtitle B of the 1992 Act, establishing the minimum and risk-based capital levels, contains no language to the effect that such levels are exclusive. The 1992 Act taken as a whole demonstrates congressional understanding that capital by itself is but one indicator of the financial health or weakness of an Enterprise. All circumstances must be weighed in determining the capital adequacy of an Enterprise. That is, differing conditions may warrant greater capital to ensure the strength and viability of an Enterprise. Thus, under 12 U.S.C. 4513(a), it is the supervisory responsibility of OFHEO to ensure that the Enterprises are adequately capitalized and operating safely. Under 12 U.S.C. 4513(b), OFHEO has exclusive authority to take such actions as it determines necessary regarding the safety and soundness of the Enterprises.

An Enterprise's maintenance of capital sufficient to meet the minimum capital level and risk-based capital level does not alone establish that the Enterprise possesses sufficient capital to operate safely and soundly in all circumstances. The legislative history of the 1992 Act indicates that Congress specifically debated whether subtitle B established the exclusive capital levels for the Enterprises or instead represented a minimum “floor” level. In the end, Congress concluded that subtitle B takes the “floor” approach, and that OFHEO's safety and soundness authority includes the ability to require an Enterprise to hold additional capital whenever circumstances indicate supplementary capital is appropriate in consideration of the Enterprise's overall safety and soundness. 20 Similarly, the language of 12 U.S.C. 4614(a)(1) provides that, for an Enterprise to be classified as adequately capitalized, the Enterprise should “meet or exceed” the minimum and risk-based capital levels (emphasis added).

In addition to its authority to require the Enterprises to maintain additional capital as a safety and soundness matter, OFHEO is authorized, as reflected in § 1777.2(c) of the final rule, to take various kinds of supervisory action to deal with capital deficiencies at an Enterprise, other than or in addition to the prompt corrective action provisions. The 1992 Act grants OFHEO broad discretion to take other supervisory actions as may be deemed by OFHEO to be appropriate, including issuing temporary and permanent cease and desist orders, imposing civil money penalties, appointing a conservator, entering into a written agreement the violation of which is actionable through enforcement proceedings, or entering into any other formal or informal agreement with an Enterprise. Moreover, the initiation of a particular action or a combination of actions does not foreclose OFHEO from pursuing any other action.

The definitions in § 1777.3 cross-reference to OFHEO's capital rules at 12 CFR part 1750 in defining core and total capital. Section 1777.3 defines the minimum capital level as the minimum amount of core capital specified for an Enterprise pursuant to 12 U.S.C. 4612, as determined under OFHEO's capital rules at § 1750.4. The definition of the critical capital level in § 1777.3 refers to the calculation of core capital required to meet the minimum capital level under § 1750.4 of OFHEO's capital rules, making the appropriate adjustments thereto in order to implement the lower percentages specified in 12 U.S.C. 4613 as compared to 12 U.S.C. 4612. Thus, § 1777.3 defines the critical capital level as the amount of core capital that is equal to the sum of one half of the amount determined under § 1750.4(a)(1) and five-ninths of the amounts determined under § 1750.4(a)(2) through § 1750.4(a)(7). Section 1777.3 defines the risk-based capital level to mean the amount of total capital specified for an Enterprise pursuant to 12 U.S.C. 4611, as determined under OFHEO's risk-based capital regulations in 12 CFR part 1750. 21

The definitions of “affiliate” and “Enterprise” are taken from 12 U.S.C. 4502(1) and 4502(6), respectively. The 1992 Act, in defining an Enterprise to include the Enterprise's affiliates, vests OFHEO with the same broad jurisdiction over the supervision and regulation of such affiliates as the agency has over the operations and activities of the federally chartered entity. Section 4502(1) defines an affiliate to be any entity that controls, is controlled by, or is under common control with an Enterprise. The 1992 Act does not, however, define control, thereby leaving the term to be interpreted by OFHEO in light of the context in which the term is to be used and the particular provision of the 1992 Act at issue. 22 In its comments, Freddie Mac disagreed with OFHEO's statement to this effect in the preamble to the proposed rule, and instead asserted that the term should be interpreted to have a single meaning throughout the 1992 Act. However, as seen in other laws, when Congress intends that an agency use a single definition of “control” throughout an entire act in connection with an “affiliate” definition, Congress enacts a statutory definition of “control,” including language in the definition that specifies the test to be applied. See, e.g., 12 U.S.C. 1813(w)(5); 12 U.S.C. 1841(a)(2). Where, as is the case in the 1992 Act, the term is not defined, Congress leaves the term to be defined by the expert agency in light of the particular context in which it is to be used and the particular substantive provision at issue.

The term “capital distribution” as defined in the rule is taken from 12 U.S.C. 4502(2). Both Enterprises' comments included objections to one aspect of OFHEO's proposed definition, under which an Enterprise's payment to repurchase its shares for the purpose of fulfilling an obligation of the Enterprise under an employee stock ownership plan that is qualified under section 401 of the Internal Revenue Code of 1986 (26 U.S.C. 401 et seq. ) or any substantially equivalent plan would not be treated as a capital distribution so long as it was approved in writing by OFHEO in advance. The Enterprises argue that, under 12 U.S.C. 4502(2)(B), OFHEO's only proper approval function goes to the issue of whether an employee stock ownership plan is substantially equivalent to a plan that is qualified under section 401 of the Internal Revenue Code, and the Enterprises are not required to obtain OFHEO's approval of payments made to fulfill the Enterprises' repurchase obligations under the plan.

The language of 12 U.S.C. 4502(2)(B) is susceptible to either the proposed or the subsequently suggested interpretation. Upon further review, OFHEO has modified the final version of § 1777.3 to eliminate the requirement that the Enterprises obtain OFHEO's prior written approval for stock repurchases by employee stock ownership plans and such substantially equivalent plans. Under the revised language, payments made by an Enterprise to repurchase its shares for the purpose of fulfilling the Enterprise's obligation under an ESOP that is qualified under IRC 401 will not be defined as capital distributions. The same types of payments made to ESOPs that are substantially equivalent to 401-qualified ESOPs will also enjoy the exception, so long as OFHEO determines that the plan in question is substantially equivalent to a 401-qualified ESOP.

Section 4502(2) authorizes OFHEO to define additional transactions as capital distributions by regulation for these purposes. OFHEO has at this time identified no other transactions to be deemed capital distributions beyond those listed in the statutory definition.

Section 1777.20(a) sets out the capital classifications that, as discussed above, will be applicable to the Enterprises after September 13, 2002, taking the risk-based capital level into account as well as the minimum and critical capital levels. Until then, the classifications under § 1777.20(c), discussed below, apply to the Enterprises. Section 1777.20(a) sets out the capital classifications as follows:

• Adequately capitalized: An Enterprise will be classified as adequately capitalized if the Enterprise meets the risk-based capital level and the minimum capital level, unless OFHEO has exercised its discretion to reclassify the Enterprise into a lower capital classification;

• Undercapitalized: An Enterprise will be classified as undercapitalized if it meets the minimum capital level but does not meet the risk-based capital level, unless OFHEO has exercised its discretion to reclassify the Enterprise into a lower capital classification;

• Significantly undercapitalized: An Enterprise will be classified as significantly undercapitalized if the Enterprise meets the critical capital level but fails to meet the minimum capital level, unless OFHEO has exercised its discretion to reclassify the Enterprise as critically undercapitalized;

• Critically undercapitalized: An Enterprise will be classified as critically undercapitalized if the Enterprise does not meet the critical capital level; and

• Discretionary reclassification: As is set out in more detail below, 12 U.S.C. 4614(b) authorizes OFHEO to reclassify an Enterprise into the next lower capital classification at any time, in the discretion of the Director of OFHEO. Appropriate grounds for reclassification include a finding by the Director that the Enterprise is either engaging in conduct that could result in a rapid depletion of the Enterprise's core capital, or that the value of property subject to mortgages held or securitized by the Enterprise has decreased significantly. Other reclassifications, based on other sections of subtitle B of the 1992 Act pertaining to failure to submit an acceptable capital restoration plan or implement it, are located in § 1777.7, the section addressing capital restoration plans.

Under § 1777.20(a), the minimum and critical capital levels are the determinative standards for assessing whether an Enterprise falls into the significantly undercapitalized or critically undercapitalized classification based on capital, without regard to whether the Enterprise maintains total capital at or above its risk-based capital level. Under the 1992 Act, the minimum and critical capital levels act as the “tripwires” for the prompt corrective actions specified in 12 U.S.C. 4616 and 4617. The amount of capital an Enterprise is required to hold to meet its risk-based capital level could be either less or more than the amount of the capital required to meet its minimum capital level or even its critical capital level. The rule therefore avoids a result under which an Enterprise that fails to meet its minimum capital level or critical capital level might avoid classification as significantly undercapitalized or critically undercapitalized by maintaining total capital in compliance with its risk-based capital level.

The final version of § 1777.20(a)(5) sets forth the grounds for reclassification of an Enterprise. Under section 4614(b), grounds for reclassification include a finding by the Director that the Enterprise is either engaging in action or inaction (including a failure to respond appropriately to changes in circumstances or unforeseen events) that could result in a rapid depletion of the Enterprise's core capital, or that the value of property subject to mortgages held or securitized by the Enterprise has decreased significantly. In their comments, the Enterprises objected to language proposed in § 1777.20(a)(5) to the effect that OFHEO could also issue a discretionary reclassification if OFHEO deems it to be necessary to ensure that the Enterprise holds adequate capital and operates safely. OFHEO disagrees. Section 4614(b) recites that OFHEO may issue a discretionary reclassification if the Director determines that an Enterprise is engaging in conduct that could result in a rapid depletion of core capital, or that the value of the Enterprise's mortgage collateral has decreased significantly. Notably, section 4614(b) is silent with regard to whether the statutorily recited grounds for reclassification are exclusive. Section 4513(b) empowers the Director of OFHEO to make other determinations, including those necessary to determine the capital classification of an Enterprise and those necessary for other matters that the Enterprises are adequately capitalized and operating safely.

Taken together, the above-referenced statutory provisions evidence a Congressional purpose that the Director of OFHEO have the discretionary authority to reclassify Enterprise if the Director determines that the Enterprise's capital position is not deemed by the Director to be sufficient to ensure its safety and soundness. OFHEO is therefore adopting § 1777.20 (a)(5) as proposed.

For purposes of OFHEO's discretionary authority to reclassify an Enterprise based on “conduct that could result in a rapid depletion of core capital” under 12 U.S.C. 4614(b), OFHEO interprets the term “conduct” to include action or inaction (including a failure to respond appropriately to changes in circumstances or unforeseen events). In its comments, Fannie Mae objected to inclusion of this language in proposed § 1777.20(a)(5)(i). However, the regulatory language is well within the ordinary meaning of the term “conduct,” and OFHEO has included it in the final version of § 1777.20(a)(5) without change. Freddie Mac also objected to OFHEO's assertion in the preamble to the proposed rule that the rapid depletion of core capital referred to in section 4614(b) and § 1777.20(a)(5) need only be a possible consequence of the conduct in question. Freddie Mac argues that OFHEO appears to be implementing too liberal a standard in light of the more extreme formulation contained in section 4614(b) itself. OFHEO reiterates the point, as stated in the preamble to the proposed rule, that the statutory language under section 4614(b) does not require OFHEO to find that the rapid depletion is underway or imminent, but requires only that OFHEO determine that such rapid depletion “could result,” i.e., that it is a possible outcome or result of the conduct in question, or that the conduct could contribute significantly to deepening losses. Congress, having already established the capital classifications based on capital levels to address cases in which an Enterprise's capital has already declined, established a broad standard for discretionary reclassification, to authorize early intervention by OFHEO when appropriate.

Section 1777.20(d) of the final rule provides that OFHEO will not reclassify an Enterprise for conduct that was previously approved by the Director of OFHEO in connection with the Director's approval of the Enterprise's capital restoration plan or of a written agreement that is enforceable in accordance with 12 U.S.C. 4631. The Enterprises argued in their comments that OFHEO proposal impermissibly would narrow section 4614(b), and that the statutory language thereunder immunizes any conduct however approved by the Director.

Section 4614(b) provides that OFHEO may reclassify an Enterprise that engages in conduct “not approved by the Director” that could result in a rapid depletion of core capital. However, the statute is silent as to what constitutes an approval for these purposes, leaving OFHEO to define the term by regulation pursuant to the authority granted by section 4513(b). An administrative agency is entitled under law to establish reasonable procedures in such manner as to enable the agency to channel and manage its approval processes.

The Enterprises suggest that the only reasonable interpretation of section 4614(b) is that it immunizes all conduct “approved by the Director” of OFHEO in any context or manner. However, such interpretation is so open-ended as to be unreasonable. In light of the significance of an approval for purposes of section 4614(b), the statute can be reasonably read to require an approval to be made through a formal mechanism, in a context in which OFHEO can evaluate the consequences thereof for purposes of capital classification. Thus, it is reasonable to define the approvals exception under section 4614(b) as referring to approvals made as part of a capital restoration plan under subtitle B and to formal supervisory agreements. The inclusion of formal written agreements serves the underlying purpose of fairness to the Enterprise, particularly since such written agreements may be used simultaneously with a capital restoration plan.

As provided in § 1777.20(b), if an Enterprise is reclassified by OFHEO on grounds that the Enterprise is engaging in action or inaction that could result in a rapid depletion of core capital, OFHEO will continue to take such conduct into account for each subsequent determination of the Enterprise's capital classification, until OFHEO determines that the action, inaction, or condition in question has ceased and been remedied to OFHEO's satisfaction. For example, if OFHEO reclassified an Enterprise from adequately capitalized to undercapitalized based on such conduct, and during the pendency of such conduct, the Enterprise's total capital declined below the risk based capital level (which, standing alone, would result in classification in the undercapitalized category), the resulting classification could be to the significantly undercapitalized category. In addition, as provided in § 1777.20(b), nothing in 12 U.S.C. 4614(b) prohibits OFHEO from subsequently reclassifying an Enterprise again if the action, inaction or condition has not ceased or been eliminated and remedied to OFHEO's satisfaction within a reasonable time. The foregoing would also apply for a discretionary reclassification under § 1777.20(a)(5), based on a decline in collateral values.

The Enterprises also objected to proposed § 1777.20(b), on various grounds. Freddie Mac argues that once OFHEO has issued a reclassification based on conduct and the Enterprise has submitted an acceptable capital restoration plan, OFHEO may not subsequently reclassify the Enterprise for failure to eliminate the objectionable conduct within a reasonable time, so long as the Enterprise continues to make good faith reasonable efforts to comply with the capital restoration plan. However, section 4614(b) contains no explicit restriction or limitation on reasonable successive reclassifications, and such a limit could inhibit OFHEO's ability to meet its supervisory obligations under evolving circumstances. Thus, OFHEO is adopting the text of § 1777.20(b)(2) without change.

Fannie Mae suggests § 1777.20(b)(2) should be revised to ensure the Enterprises are given advance notice of what constitutes a reasonable period to remedy or eliminate conduct or conditions forming the basis of a discretionary reclassification. However, this issue is too fact-driven for OFHEO to specify by rule. The question of timing will be resolved as it arises. OFHEO would specify such timing matters reasonably and fairly, in light of relevant circumstances.

Fannie Mae further suggests that it would be unfair that OFHEO might attempt to exercise unbridled discretion over so significant a question as to when a discretionary reclassification should be terminated. Fannie Mae suggests discretionary reclassifications should be presumptively terminated fifteen days after an executive officer certifies that the condition that led to reclassification has been corrected for at least one calendar quarter. However, given that initiation of a reclassification under section 4614(b) is vested in OFHEO's discretion, as is approval of the capital restoration plan designed to restore the Enterprise to a secure condition, OFHEO rejects Fannie Mae's assertion that OFHEO's discretion over termination of such reclassification is somehow unfair, or of such significance to be beyond the agency's supervisory authority. Moreover, the quarterly classification process gives the Enterprise formal written notice of OFHEO's intention with regard to continuation or termination of a discretionary reclassification; provides the Enterprise with an opportunity to submit information that OFHEO might take into consideration; and provides the Enterprise with the opportunity for judicial review (if the Enterprise is not classified as critically undercapitalized). The Enterprises are thus adequately insulated from possible unfair treatment by the agency.

As noted above, § 1777.20(c) contains a set of capital classifications based on an Enterprise's minimum capital level and critical capital level, reflecting the classification criteria presently used by OFHEO. These classifications apply until September 13, 2002, which is one year following the initial effective date of OFHEO's regulations establishing the risk-based test:

• Adequately capitalized: Until September 13, 2002, an Enterprise is deemed to be classified as adequately capitalized so long as it meets the minimum capital level, as required by 12 U.S.C. 4614(d);

• Undercapitalized: Until September 13, 2002, 12 U.S.C. 4614(d) provides that an Enterprise that meets the minimum capital level is to be classified as adequately classified, notwithstanding whether the Enterprise maintains an amount of total capital that equals or exceeds the risk-based capital level as otherwise required by 12 U.S.C. 4614(a)(2)(A);

• Significantly undercapitalized: An Enterprise will be classified as significantly undercapitalized if it meets the critical capital level but fails to meet the minimum capital level, unless OFHEO has exercised its discretion to reclassify the Enterprise as critically undercapitalized;

• Critically undercapitalized: An Enterprise will be classified as critically undercapitalized if it does not meet the critical capital level; and

• Discretionary reclassification: As set out above, 12 U.S.C. 4614(b) authorizes OFHEO to reclassify an Enterprise into a lower capital classification in certain circumstances, in the discretion of the Director of OFHEO.

The Enterprises specifically objected to proposed § 1777.20(c)(5)(i)(A) and (B), under which OFHEO notes that the agency can reclassify an Enterprise that otherwise meets the minimum capital requirement. The Enterprises assert that, during the one-year transition period following the effective date of OFHEO's risk-based capital rules, OFHEO may not make a discretionary reclassification of an Enterprise otherwise classified as “adequately capitalized,” because 12 U.S.C. 4614(d) and 4615(c) prohibit OHFEO from issuing such a reclassification.

OFHEO disagrees. Sections 4614(d) and 4615(c) are merely transition provisions designed to give the Enterprises one year to optimize their operations in light of the new risk-based capital rules before OFHEO begins periodically issuing capital classifications based on risk-based capital as well as minimum capital. Nothing in the law or its legislative history indicates a Congressional intention to make the OFHEO powerless to confront circumstances that might threaten the viability of the Enterprises during the transition period. Nor were the referenced sections intended by Congress to immunize an Enterprise engaged in conduct that might result in rapid depletion of core capital. OFHEO is therefore adopting § 1777.20(c)(5) as proposed.

The Enterprises' comments on proposed § 1777.20(a)(5)(i), concerning the scope of the conduct included therein, and on proposed § 1777.20(a)(5)(ii), concerning the scope of conduct approved by the Director, as well as OFHEO's responses to those comments as discussed above, apply equally to § 1777.20(c)(5) of the final rule. The Enterprise's comments on § 1777.20(b), concerning successive reclassifications, specification of reasonable periods to remedy conduct upon which reclassification was based, and OFHEO's discretion over termination of reclassifications, as well as OFHEO's response to these comments as discussed above, apply equally to reclassifications under § 1777.20(a)(5) as they do to reclassifications under § 1777.20(c)(5) of the final rule.

Section 1777.21, implementing 12 U.S.C. 4618, sets out the procedure by which OFHEO classifies the Enterprises. These procedures apply to routine classifications that OFHEO issues for each Enterprise at least once a quarter based on capital reports from the Enterprise and any other additional relevant information. These procedures would also be used by OFHEO to reclassify an Enterprise pursuant to its discretionary authority to do so under subtitle B of the 1992 Act, or if OFHEO otherwise determines that a new classification would be appropriate. OFHEO's current classification procedures at 12 CFR 1750.5 are terminated as part of this rulemaking, but procedures for submitting capital reports to OFHEO will continue to be addressed in part 1750.

OFHEO may determine capital classifications using different “as of” dates for the Enterprise's risk-based capital level and minimum and critical capital levels. The respective “as of” dates will be specifically identified in the proposed and final capital classifications. Thus, OFHEO may assess compliance by an Enterprise with the minimum capital level more often than it would calculate the Enterprise's risk-based capital level.

As § 1777.21(a)(4) provides, OFHEO may initiate a capital classification proceeding at any time. If another proposed capital classification is pending at such time, OFHEO will advise the Enterprise whether the later proposed classification supersedes the pending one.

Under the classification procedure in 12 U.S.C. 4618, OFHEO is to deliver written information to the Enterprise describing the proposed capital classification and the agency's basis for such classification, as described in § 1777.21(a)(1) of the final rule. In their comments, the Enterprises argued that OFHEO's proposed procedure in § 1777.21(a)(1)(ii), for reclassifying an Enterprise for failure to file an acceptable capital plan, without additional notice, is inconsistent with 12 U.S.C. 4618(a) and (b), under which an Enterprise is entitled to additional notice when OFHEO takes new action. The Enterprises assert that OFHEO may not combine notices in this way.

OFHEO disagrees. 12 U.S.C. 4618(b) evidences Congress' express authorization that the notice required under 12 U.S.C. 4618(a) may be a combined notice. Section 4618(b) states that, in providing notice under 12 U.S.C. 4618(a), OFHEO may combine a notice of classification or reclassification under 12 U.S.C. 4614 (classifications based on capital levels or discretionary reclassification based on conduct or housing prices) with a notice of discretionary supervisory action under 12 U.S.C. 4615 (reclassification from undercapitalized to significantly undercapitalized for failure to file an acceptable capital plan or to comply with an approved plan). The statute's language can be given meaning only if a notice of proposed classification as undercapitalized is permitted to be combined with a notice of proposing to reclassify the Enterprise as significantly undercapitalized in the event the Enterprise fails to submit an acceptable capital plan. Similarly, 12 U.S.C. 4618(b) provides that OFHEO may combine notice of discretionary supervisory action under 12 U.S.C. 4616 (issuance of certain orders to the Enterprise, as well as reclassification from significantly undercapitalized to critically undercapitalized based on failure to file an acceptable plan or comply with an approved plan) with notices of classification or reclassification under 12 U.S.C. 4614.

Contrary to Freddie Mac's comments, such a notice is also consistent with the remainder of 12 U.S.C. 4618. It satisfies the requirements of 12 U.S.C. 4618(a), since the combined notice describes both proposed actions, the reasons therefore, and the information upon which they are based. During the Enterprise's response period under 12 U.S.C. 4618(c), the Enterprise has an opportunity to submit information and arguments as to why the Enterprise should not be further reclassified. OFHEO's notice to Congress under 12 U.S.C. 4618(d) will provide all information required therein. OFHEO is therefore adopting proposed § 1777.21(a)(1)(ii), as well as § 1777.23(c)(1) and § 1777.23(c)(3), without change.

As described in § 1777.21(a)(2), an Enterprise is to have thirty days from the date it is provided notice of capital classification to submit any relevant information in response to a notice. 12 U.S.C. 4618 authorizes OFHEO to extend the response period up to an additional thirty days for good cause or to reduce the response period if the condition of the Enterprise so requires; the Enterprise may also consent to an abbreviated response period. In exigent circumstances, the response period afforded to an Enterprise may be quite brief. In its comments, Fannie Mae objected to proposed § 1777.21(a)(2)(i), to the extent the proposed rule suggests that OFHEO can shorten an Enterprise's response period to less than thirty days as OFHEO determines to be appropriate. Fannie Mae points out that the statutory standard, at 12 U.S.C. 4618(c)(3), is that the condition of the Enterprise requires the period to be shortened. OFHEO's determination as to whether an curtailment is “appropriate,” as under the language of proposed § 1777.21(a)(2)(i), is to be made in consideration of the statutory standard under 12 U.S.C. 4618(c)(3). In light of the comment, OFHEO has changed the language of the final version of § 1777.21(a)(2)(i) to reflect the language of 12 U.S.C. 4618(c)(3).

An Enterprise's failure to respond within the applicable period waives the opportunity to comment on the proposed classification. Once the response period has closed, OFHEO will make a final determination of the Enterprise's capital classification. OFHEO will take into consideration any relevant information submitted by the Enterprise during the response period in reaching the final decision. The final capital classification is to be provided to the Enterprise in writing, including a description of OFHEO's basis for the classification.

OFHEO proposed a requirement under § 1777.21(b)(1) that the Enterprise notify OFHEO of any material event that may reasonably be expected to cause the Enterprise's minimum, critical, or risk-based capital level to fall to a point that could result in a capital classification lower than the Enterprise's existing or proposed capital classifications. In their comments, the Enterprises objected to this requirement as being overly vague. Freddie Mac suggested it be narrowed, to require notice only when the Enterprise has reason to believe it has failed to meet a capital requirement. Fannie Mae called for elimination of any such notice requirement. In response to the Enterprises' expressed concerns about vagueness, OFHEO has decided to model its standard on a similar standard successfully used by the Federal bank regulatory agencies under their PCA system. See, e.g. , 12 CFR 325.102(c)(1). Thus, OFHEO has revised final § 1777.21(b)(1) to require notice of any material development that would cause the Enterprise's core or total capital to fall to a point that would cause the Enterprise to be placed in a lower capital classification.

As suggested by one commenter, OFHEO has deleted the words “as appropriate” from the proposed version of § 1777.21(a)(1)(i), as unnecessary. In addition, various erroneous citations and cross-references have been corrected in the final rule. 23

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) by superseding AD 96-21-06, amendment 39-9783 (61 FR 55080, October 24, 1996), which is applicable to certain Boeing Model 767 series airplanes, was published in the Federal Register on August 24, 2001 (66 FR 44553). The action proposed to continue to require inspections and various follow-on actions to detect cracking and corrosion of the aft trunnion of the outer cylinder of the main landing gear (MLG). The action also proposed to continue to require termination of the inspections by repairing the outer cylinder and installing new aft trunnion bushings. Finally, the action proposed to prohibit the use of a particular corrosion inhibiting compound during accomplishment of the terminating action.

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

One commenter requests that the FAA revise the proposed AD to supersede AD 96-21-06, AD 95-19-10, amendment 39-9372 (60 FR 47689, September 14, 1995), and AD 95-20-51, amendment 39-9398 (60 FR 53109, October 12, 1995), with one AD. The commenter sees no benefit in having four ADs (i.e., the three listed previously and the proposed AD) that address the same area of the aft trunnion of the MLG on Model 767 series airplanes. The commenter states that superseding all of the ADs related to the aft trunnion would ease the administrative burden and simplify the recordkeeping associated with these ADs.

The FAA does not concur with the commenter's request. We note that this AD does supersede AD 96-21-06, one of the ADs to which the commenter refers. We also note that the applicability statements of all three ADs differ; that is, all three ADs apply to different groups of airplanes. With this in mind, combining the three ADs into one superseding AD would result in a lengthy, highly complex AD, which may be confusing for operators. For this reason, we find that a combined AD would be likely to impose more of an administrative and recordkeeping burden, rather than less of one, as the commenter suggests, and could increase the potential for recordkeeping mistakes. For these reasons, we find it inappropriate to supersede the three ADs listed above with a single AD action. No change to the final rule is needed in this regard.

The same commenter presents an alternative if we do not agree to supersede the three ADs identified previously. It asks that we revise paragraph (e) of the proposed AD to refer to Part 4 of Boeing Service Bulletin 767-32A0192, dated May 31, 2001, as an acceptable terminating action for paragraph (e) of the proposed AD. The commenter states that the actions in Part 4 of that service bulletin are equivalent to those in Boeing Service Bulletin 767-32A0148, Revision 2, dated November 30, 2000, which is identified in paragraph (e) of the proposed AD as the appropriate source of service information for the actions in that paragraph.

We concur with the intent of the commenter's request. We agree that accomplishment of “Part 4—Terminating Action” of the Accomplishment Instructions of Boeing Alert Service Bulletin 767-32A0192 terminates paragraph (e) of this AD. We note that we have previously issued another notice of proposed rulemaking (NPRM), Rules Docket Number 2001-NM-189-AD, which, if adopted, would apply to all Boeing Model 767-200, -300, and -300F series airplanes. Paragraph (i) of that NPRM specifies accomplishment of the terminating action in Boeing Alert Service Bulletin 767-32A0192. In addition, paragraph (j) of that NPRM states, “Accomplishment of the actions specified in paragraph (i) of this AD is considered acceptable for compliance with the requirements of paragraph (e) of AD 96-21-06, amendment 39-9783.” The provision of paragraph (j) of that NPRM applies to paragraph (e) of this AD because this AD supersedes AD 96-21-06. Therefore, for clarification, we have added a new paragraph (h) to this AD to state that accomplishment of “Part 4—Terminating Action” of the Accomplishment Instructions of Boeing Alert Service Bulletin 767-32A0192 constitutes terminating action for paragraph (e) of this AD. Paragraphs subsequent to this new paragraph (h) have been reordered accordingly.

One commenter recommends that the proposed AD prohibit the application of the corrosion inhibiting compound Desoto 823E508 (Titanine JC5A) only on the aft trunnion of the MLG. The commenter notes that the wording of paragraph (h) of the proposed rule prohibits application of that compound anywhere on an airplane. The commenter states that service history and laboratory test data have shown that typical usage of this corrosion inhibiting compound in thin layers (such as on fasteners and faying surfaces) does not promote corrosion.

While we neither accept nor reject the commenter's argument, we agree that the unsafe condition associated with this AD relates specifically to the aft trunnion of the MLG. Therefore, it is appropriate to limit the prohibition of the application of the subject corrosion inhibiting compound to the aft trunnion of the MLG. Due to the addition of a paragraph described previously, paragraph (h) of the proposed AD has been reordered as paragraph (i) in this final rule, and we have revised that paragraph accordingly.

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

There are approximately 605 Model 767 series airplanes of the affected design in the worldwide fleet. The FAA estimates that 200 airplanes of U.S. registry will be affected by this AD.

The actions that are currently required by AD 96-21-06 take approximately 252 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Required parts cost approximately $9,510 per airplane. Based on these figures, the cost impact of the currently required actions on U.S. operators is estimated to be $4,926,000, or $24,630 per airplane.

The prohibition of a certain corrosion inhibiting compound, which is the only new requirement of this AD, will not change the cost impact on U.S. operators from that associated with AD 96-21-06.

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

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

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

This amendment to part 97 of the Federal Aviation Regulations (14 CFR part 97) establishes, amends, suspends, or revokes SIAP's. The complete regulatory description of each SIAP is contained in official FAA form documents which are incorporated by reference in this amendment under 5 U.S.C. 552(a), 1 CFR part 51, and § 14 CFR 97.20 of the Federal Aviation Regulations (FAR). The applicable FAA Forms are identified as FAA Form 8260-5. Materials incorporated by reference are available for examination or purchase as stated above.

The large number of SIAP's, their complex nature, and the need for a special format make their verbatim publication in the Federal Register expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs, but refer to their graphic depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP contained in FAA form documents is unnecessary. The provisions of this amendment state the affected CFR sections, with the types and effective dates of the SIAPs. This amendment also identifies the airport, its location, the procedure identification and the amendment number.

This amendment to part 97 is effective upon publication of each separate SIAP as contained in the transmittal. The SIAP's contained in this amendment are based on the criteria contained in the United States Standard for Terminal Instrument Procedures (TERPS). In developing these SIAPs, the TERPS criteria were applied to the conditions existing or anticipated at the affected airports.

The FAA has determined through testing that current non-localizer type, non-precision instrument approaches developed using the TERPS criteria can be flown by aircraft equipped with a Global Positioning System (GPS) and or Flight Management System (FMS) equipment. In consideration of the above, the applicable SIAP's will be altered to include “or GPS or FMS” in the title without otherwise reviewing or modifying the procedure. (Once a stand alone GPS or FMS procedure is developed, the procedure title will be altered to remove “or GPS or FMS” from these non-localizer, non-precision instrument approach procedure titles.)

The FAA has determined through extensive analysis that current SIAP's intended for use by Area Navigation (RNAV) equipped aircraft can be flown by aircraft utilizing various other types of navigational equipment. In consideration of the above, those SIAP's currently designated as “RNAV” will be redesignated as “VOR/DME RNAV” without otherwise reviewing or modifying the SIAP's.

Because of the close and immediate relationship between these SIAP's and safety in air commerce, I find that notice and public procedure before adopting these SIAPs are, impracticable and contrary to the public interest and, where applicable, that good cause exists for making some SIAPs effective in less than 30 days.

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

This amendment to part 97 of the Federal Aviation Regulations (14 CFR part 97) establishes, amends, suspends, or revokes Standard Instrument Approach Procedures (SIAPs). The complete regulatory description on each SIAP is contained in the appropriate FAA Form 8260 and the National Flight Data Center (FDC) /Permanent (P) Notices to Airmen (NOTAM) which are incorporated by reference in the amendment under 5 U.S.C. 552(a), 1 CFR part 51, and § 97.20 of the Federal Aviation's Regulations (FAR). Materials incorporated by reference are available for examination or purchase as stated above.

The large number of SIAPs, their complex nature, and the need for a special format make their verbatim publication in the Federal Register expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs, but refer to their graphic depiction of charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP contained in FAA form documents is unnecessary. The provisions of this amendment state the affected CFR (and FAR) sections, with the types and effective dates of the SIAPs. This amendment also identifies the airport, its location, the procedure identification and the amendment number.

This amendment to part 97 of the Federal Aviation Regulations (14 CFR part 97) establishes, amends, suspends, or revokes SIAPs. For safety and timeliness of change considerations, this amendment incorporates only specific changes contained in the content of the following FDC/P NOTAMs for each SIAP. The SIAP information in some previously designated FDC/Temporary (FDC/T) NOTAMs is of such duration as to be permanent. With conversion of FDC/P NOTAMs, the respective FDC/T NOTAMs have been canceled.

The FDC/P NOTAMs for the SIAPs contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these chart changes to SIAPs by FDC/P NOTAMs, the TERPS criteria were applied to only these specific conditions existing at the affected airports. All SIAP amendments in this rule have been previously issued by the FAA in a National Flight Data Center (FDC) Notice to Airmen (NOTAM) as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for all these SIAP amendments requires making them effective in less than 30 days.

Further, the SIAPs contained in this amendment are based on the criteria contained in the TERPS. Because of the close and immediate relationship between these SIAPs and safety in air commerce, I find that notice and public procedure before adopting these SIAPs are impracticable and contrary to the public interest and, where applicable, that good cause exists for making these SIAPs effective in less than 30 days.

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

This amendment to part 97 of the Federal Aviation Regulations (14 CFR part 97) establishes, amends, suspends, or revokes Standard Instrument Approach Procedures (SIAPs). The complete regulatory description of each SIAP is contained in official FAA form documents which are incorporated by reference in this amendment under 5 U.S.C. 552(a), 1 CFR part 51, and § 97.20 of the Federal Aviation Regulations (FAR). The applicable FAA Forms are identified as FAA Forms 8260-3, 8260-4, and 8260-5. Materials incorporated by reference are available for examination or purchase as stated above.

The large number of SIAPs, their complex nature, and the need for a special format make their verbatim publication in the Federal Register expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs, but refer to their graphic depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP contained in FAA form documents is unnecessary. The provisions of this amendment state the affected CFR (and FAR), sections, with the types and effective dates of the SIAPs. This amendment also identifies the airport, its location, the procedure identified and the amendment number.

This amendment to part 97 is effective upon publication of each separate SIAP as contained in the transmittal. Some SIAP amendments may have been previously issued by the FAA in a National Flight Data Center (NFDC) Notice to Airmen (NOTAM) as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for some SIAP amendments may require making them effective in less than 30 days. For the remaining SIAPs, an effective date at least 30 days after publication is provided.

Further, the SIAPs contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these SIAPs, the TERPS criteria were applied to the conditions existing or anticipated at the affected airports. Because of the close and immediate relationship between these SIAPs and safety in air commerce, I find that notice and public procedure before adopting these SIAPs are impracticable and contrary to the public interest and, where applicable, that good cause exists for making some SIAPs effective in less than 30 days.

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

In a document published in the Federal Register on August 8, 2001 (66 FR 41483-41485), VA proposed to amend its adjudication regulations concerning presumptive service connection for veterans who participated in radiation-risk activities during active service. VA proposed to add cancers of the bone, brain, colon, lung, and ovary to the list of diseases which may be presumptively service connected and amend the definition of the term “radiation-risk activity.” The intended effect of this amendment was to ensure that veterans who may have been exposed to radiation during military service do not have a higher burden of proof than civilians exposed to ionizing radiation who may be entitled to compensation for these cancers under comparable Federal statutes.

The comment period ended October 9, 2001. We received written comments from the American Legion, the National Association of Atomic Veterans, the Honorable Patsy T. Mink (HI) and 14 individuals. Ten of the comments expressed support of the proposed rule.

Current law defines “radiation-risk activity” for purposes of presuming that specified diseases are the result of radiation exposure during military service to mean (1) onsite participation in a test involving the atmospheric detonation of a nuclear device; (2) the occupation of Hiroshima or Nagasaki, Japan, by United States forces during the period beginning on August 6, 1945, and ending on July 1, 1946; or (3) internment as a prisoner of war in Japan or service on active duty in Japan following such internment during World War II which resulted in an opportunity for exposure to ionizing radiation. (See 38 U.S.C. 1112(c)(3)(B) and 38 CFR 3.309(d)).

As stated in the preamble to the proposed rule, recent legislation authorized benefits for certain Department of Energy (DOE) employees and persons employed by DOE contractors, subcontractors, and vendors who were involved in DOE nuclear weapons-related programs. This includes those who worked on Amchitka Island, Alaska prior to January 1, 1974, who were exposed to ionizing radiation in the performance of duty related to certain underground nuclear tests. It also includes certain persons who worked at gaseous diffusion plants in Paducah, Kentucky; Portsmouth, Ohio; and Oak Ridge, Tennessee before February 1, 1992. Our rulemaking proposed to add these exposures to the list of radiation-risk activities in 38 CFR 3.309(d).

One commenter stated that VA's definition of radiation-risk activity, even as expanded by this rulemaking, does not cover all veterans exposed to radiation while in the service of their country, and urged VA to expand its definition to include veterans exposed to “residual contamination” of nuclear tests. Another commenter urged VA to include veterans who may have been exposed to radiation during various activities involving the development, maintenance and handling of nuclear weapons, as well as clean up operations following nuclear testing. Another commenter specifically asked that VA expand the definition to include all military personnel who participated in the clean up of Enewetak Atoll from 1977 to 1980. Another commenter suggested that the definition of “radiation-risk” activity should include military duty at all DOE nuclear weapons development, testing, and manufacturing facilities.

Congress created certain presumptions for veterans in the Radiation-Exposed Veterans Compensation Act of 1988, Public Law 100-321, section 2(a), 102 Stat. 485-86 (codified as amended at 38 U.S.C. 1112(c)). Congress has also created presumptions for certain civilians in the Radiation Exposure Compensation Act (RECA), Pub. L. 101-426, 104 Stat. 920 (1990) (codified as amended at 42 U.S.C. 2210 note), the RECA Amendments of 2000, Public Law 106-245, section 3, 114 Stat. 501, 502, and title XXXVI of the Energy Employees Occupational Illness Compensation Program Act of 2000, Public Law 106-398, 114 Stat. 1654A-1232. Under the Energy Employees Occupational Illness Compensation Program Act of 2000, if a member of the Special Exposure Cohort develops a “specified” cancer after beginning employment at a DOE facility or at an atomic weapons facility for an atomic weapons contractor, the cancer is presumed to have been sustained in the performance of duty and is compensable. The burden of proof for the Special Exposure Cohort is similar to that under 38 CFR 3.309(d). Congress has not created any presumptions for veterans or civilians based on “residual contamination” of nuclear tests, service at Enewetak Atoll, or any of the other types of duties suggested by the commenters.

This rulemaking was only intended to ensure that veterans who may have been exposed to radiation during military service do not have a higher burden of proof than civilians exposed to ionizing radiation who may be entitled to compensation for these cancers under comparable Federal statutes. We proposed to expand the definition of radiation-risk activity in § 3.309(d)(3)(ii) to include only the relevant activities listed in these civilian statutes. We therefore make no change based on these comments.

One commenter noted that the “Radiation Compensation Act of 1990” was recently amended to include civilian employees assigned to DOE nuclear weapons-related programs who were exposed to radiation, beryllium or silica. The commenter also stated that veterans involved in these programs are effectively precluded from being compensated for diseases related to such duty. The commenter urged that, in order to achieve true equity between radiation-exposed veterans and civilians, VA regulations should be amended to include veterans who were exposed to beryllium and silica during service.

We are aware that the RECA Amendments of 2000, Public Law 106-245, section (2)(A)(ii) and 3(c)(1), 114 Stat. at 501, 502, authorized compensation for above-ground uranium miners, millers and persons who transported ore and have a “nonmalignant respiratory disease,” which the statute defines as fibrosis of the lung, pulmonary fibrosis, cor pulmonale related to fibrosis of the lung, silicosis, and pneumoconiosis. The Energy Employees Occupational Illness Compensation Program Act of 2000, Public Law 106-398, tit. xxxvi, 114 Stat. 1654A-1232, authorized compensation for employees exposed to beryllium in the performance of duty for a DOE contractor, subcontractor, beryllium vendor, or subcontractor of a vendor.

However, under these statutes, beryllium-related diseases and silica-related diseases are clearly classified separately from radiogenic diseases. The purpose of this rulemaking is only to amend VA's presumptions for radiation exposure and radiogenic diseases.

In addition, we believe that existing regulations allow a sufficient basis to grant service connection, on a direct basis, for veterans exposed to beryllium or silica during military service who later suffer from these diseases. For these reasons, we do not revise the regulation to include diseases related to beryllium or silica exposure in this rulemaking, and we therefore make no change based on these comments.

One commenter stated that he opposed the current dose estimate requirement in 38 CFR 3.311, as being arbitrary, unreliable and inaccurate. Another commenter urged that VA should not rely on dose reconstruction estimates because they are based on lab tests, not on data collected at the atomic test sites. Another commenter also asked VA to eliminate the use of dose estimates since they are inaccurate.

Dose reconstruction is required only under 38 CFR 3.311, which is a separate and distinct basis for service connection from 38 CFR 3.309(d). The purpose of the rulemaking is only to amend VA's presumption for radiation exposure and radiogenic diseases (found in 3.309(d)), which does not require a dose estimate to establish entitlement to service connection. Therefore, these comments are outside the scope of this rulemaking and we make no change based on these comments.

Several commenters urged VA to add certain diseases to 3.309(d)(2), in addition to those we proposed to add in this rulemaking. One commenter stated that radiation is a “complete carcinogen” and therefore we should list all cancers. Another commenter urged VA to add certain non-cancer diseases, such as cardiovascular disease, chronic hepatitis, and liver cirrhosis, which have been linked to radiation exposure by the Radiation Effects Research Foundation.

The basis for enactment of the RECA Amendments of 2000 and the Energy Employees Occupational Illness Compensation Program Act of 2000 was scientific data resulting from enactment of the Radiation-Exposed Veterans Compensation Act of 1988, Public Law 100-321, and obtained from the President's Advisory Committee on Human Radiation Experiments. Based on data from these sources, Congress authorized compensation for persons suffering from these cancers who lived downwind from Government above-ground nuclear tests, were underground uranium miners, participated onsite in a test involving the atmospheric detonation of a nuclear device, or were employed at certain locations by DOE contractors or subcontractors or an atomic weapons employer. We believe this data also supports compensation for veterans suffering from the same cancers, some of whom participated in the same activities as persons entitled to be compensated under the RECA Amendments of 2000 and the Energy Employees Occupational Illness Compensation Program Act of 2000. We therefore proposed to amend 38 CFR 3.309(d)(2) to include the cancers for which compensation is payable under these other statutes.

As explained above and in the notice of proposed rulemaking, this rulemaking was only intended to ensure equity between veterans who may have been exposed to radiation during military service and civilians exposed to ionizing radiation who may be entitled to compensation for these cancers under comparable Federal statutes, including RECA. The Federal statutes referenced above do not presume that the diseases that the commenters asked VA to add to this rulemaking are due to radiation exposures in civilian occupations. Therefore, veterans do not have a higher burden of proof than civilians do, and we are making no change based on this comment.

One commenter stated that, because VA submitted a report to Congress containing its response to a report submitted to VA by the Veterans' Advisory Committee on Environmental Hazards on May 26, 1994, rather than December 1, 1993, as required by the Veterans' Radiation Exposure Amendments of 1992, Public Law 102-578, section 3, 106 Stat. 4774, 4775, radiation exposure by naval nuclear propulsion workers, those involved in weapons development for the Department of Defense, nuclear weapons maintenance workers and handlers and others have never been considered under the Veterans' Dioxin and Radiation Exposure Compensation Standards Act, Public Law 98-542, 98 Stat. 2725 (1984), or the Radiation-Exposed Veterans Compensation Act of 1988, Public Law 100-321, 102 Stat. 485.

This rulemaking does not involve VA's compliance with Public Law 102-578 and these comments are outside the scope of this rulemaking. We therefore make no change based on these comments.

One commenter stated that the effective date for claims that VA previously denied but are now granted under these new regulations should be the date of the original claim. The commenter urged that veterans exposed to radiation be given the same consideration as veterans exposed to Agent Orange under Nehmer v. United States Veterans Admin. , C.A. No. C-86-6160 TEH (N.D. Cal.).

Section 5110 of title 38 United States Code and 38 CFR 3.114 establish effective date requirements that are binding on VA. Those requirements limit retroactive awards to no earlier than the effective date of a liberalizing statute or regulation, such as this rulemaking. The Nehmer lawsuit and court rulings do create an exception to these effective date rules, but the Nehmer case is limited to only diseases linked to herbicide exposure under 38 CFR 3.309(e). We have no authority to expand the exceptions established by the Nehmer court to include claims filed under 3.309(d). We therefore make no change based on this comment.

One commenter asserted that it is very unlikely that any of the cancers developed by veterans are caused by their radiation exposure during military service. He stated that many of the premises contained in the preamble to the proposed rule are not based on valid scientific information. This commenter urged VA not to promulgate this proposed rule.

As we explained above, the basis for enactment of the RECA Amendments of 2000 and the Energy Employees Occupational Illness Compensation Program Act of 2000 was scientific data resulting from enactment of the Radiation-Exposed Veterans Compensation Act of 1988, Public Law 100-321, and obtained from the President's Advisory Committee on Human Radiation Experiments. We believe this data equally supports adding these same cancers to the list of diseases that may be presumptively service connected for radiation-exposed veterans, some of whom participated in the same activities as persons entitled to be compensated under the RECA Amendments of 2000 and the Energy Employees Occupational Illness Compensation Program Act of 2000.

This rulemaking was only intended to ensure that veterans who may have been exposed to radiation during military service do not have a higher burden of proof than civilians exposed to ionizing radiation who may be entitled to compensation for these cancers under comparable Federal statutes, including RECA. If we do not adopt this rule, veterans will have a higher burden of proof than civilians do. Therefore, we make no change based on this comment.

One commenter suggested that atomic veterans should be given a special priority for VA medical services, which should be provided without means testing and co-payments. The commenter also suggested that VA should focus on preventive measures to reduce the risk of cancer, appropriate medical treatment to keep atomic veterans healthy, and programs to educate veterans on dietary and lifestyle changes to prevent cancer. The commenter also suggested VA should work with Congress to determine if an arrangement for financial cost sharing between VA and Medicare is possible.

These comments are beyond the scope of the rulemaking. Also, some of the comments would require an amendment to title 38, United States Code, which cannot be accomplished by rulemaking. We therefore make no changes based on these comments.

We estimate that the ten-year benefits cost of this rule from appropriated funds will be $769 million in benefits costs. We estimate that during several of these years, the annual benefits costs will be more than $100 million. We also estimate that the ten-year cost in government operating expenses will be $34 million. Since we estimate that the adoption of the rule will have an annual effect on the economy of $100 million or more, the Office of Management and Budget has designated this rule as a major rule under the Congressional Review Act, 5 U.S.C. 802, and a significant regulatory action under Executive Order 12866, Regulatory Planning and Review. The following information is provided pursuant to E.O. 12866.

The Secretary has made this regulatory amendment to ensure that veterans exposed to radiation during military service receive the same consideration for the risks of this exposure as DOE employees, contractors and subcontractors. There are no feasible alternatives to this proposed rule, since it is needed to provide fairness and equity for veterans and their survivors. This rule will not interfere with state, local or tribal governments in the exercise of their governmental functions.

Over the next ten years, VA expects to process 91,567 service-connected disability compensation claims (living veterans) and 48,050 Dependency and Indemnity Compensation (DIC) claims (veterans' survivors claims for service connection for cause of death) filed as a result of this proposed rule. Historically, about 12% of all radiation related claims have been granted. If past experience proves a reliable indicator of future events, VA expects to grant approximately 10,988 of those disability compensation claims and approximately 5,766 of those DIC claims.

We estimate that the cumulative totals of benefits awards to claimants over the next ten years will be as follows: $8,040,630; $26,248,947; $44,265,910; $61,126,347; $76,565,137; $90,329,734; $102,328,198; $112,436,560; $120,555,709; and $126,704,527, for a total benefits cost of $768,601,698 over ten years.

Based on the administrative workload projected to result from this rule (discussed above), VA estimates that full time employee (FTE) resources devoted to processing claims in years one through ten will be 77, 113, 69, 64, 51, 40, 39, 35, 35, and 33 respectively. Estimated government operating expenses (GOE) costs for the next 10 years are as follows: $3,910,578; $5,047,838; $3,584,683; $4,127,798; $3,419,862; $2,817,402; $2,825,825; $2,669,755; $2,780,414; and $2,750,142, for a total GOE cost of $33,934,297 over ten years.

The Unfunded Mandates Reform Act requires , at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before developing any rule that may result in an expenditure by State, local, or tribal governments, in the aggregate, or by the private sector of $100 million or more in any given year. This rule would have no consequential effect on State, local or tribal governments.

This document contains no provisions constituting a collection of information under the Paperwork Reduction Act (44 U.S.C. 3501-3520).

This rule is economically significant under Executive Order 12866 and major under the Congressional Review Act. This rule has been reviewed by OMB.

The Secretary hereby certifies that this regulatory amendment will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612. The reason for this certification is that these amendments will not directly affect any small entities. Only VA beneficiaries will be directly affected. Therefore, pursuant to 5 U.S.C. 605(b), these amendments are exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

1. We have reviewed the open rulemaking proceedings listed in the Appendix, and have determined that the proceedings should be terminated. The matters at issue in these rulemaking proceedings are either moot or stale due to the passage of time or other regulatory and industry changes. Therefore, no further action by the Commission is required in the proceedings listed in the attached Appendix, and they are hereby closed.

2. Accordingly, pursuant to sections 4(i) and 4(j) of the Communications Act, 47 U.S.C. 154(i) and (j), it is ordered that the rulemaking proceedings set forth in the Appendix are closed and terminated, effective on January 11, 2002.

1. We have reviewed the docket proceedings listed in the Appendix, and have determined that the dockets should be terminated. None of the dockets have any outstanding issues. The matters at issue in these proceedings were resolved by the issuance of final orders that were not subject to judicial review, or if subject to judicial review, were affirmed and the court's mandate was issued. Therefore, no further action by the Commission is required in the dockets listed in the attached Appendix, and they are hereby deemed terminated.

2. Accordingly, pursuant to sections 4(i) and 4(j) of the Communications Act, 47 U.S.C. 154(i) and (j), it is ordered that the docketed proceedings set forth in the Appendix are terminated, effective on January 11, 2002.

This Order, adopted December 20, 2001, and released December 26, 2001, will be available for public inspection during regular business hours at the FCC Reference Information Center, Room CY-A257, at the Federal Communications Commission, 445 12th St., SW., Washington, DC 20554. The complete text is available through the Commission's duplicating contractor: Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone 202-863-2893, facsimile 202-863-2898, or via e-mail at qualexint@aol.com.

1. Effective upon publication in the Federal Register and until further notice, we waive our rules as follows. First, requests for review filed pursuant to §§ 54.719 through 54.725, 47 CFR 54.719 through 54.725, and any applications for review arising from such proceedings shall be filed within 60 days of the issuance of the decision being reviewed. This 60-day period will be applicable to all such pleadings that were required to be filed on or after September 12, 2001 and were received by the Commission on or after September 12, 2001. Second, parties filing requests for review, or petitions for reconsideration or applications for review of decisions on requests for review, may, at their option, file their pleadings electronically, either by electronic mail or facsimile.

2. If filed by electronic mail, pleadings shall be filed at the following e-mail address: CCBSecretary@fcc.gov. Documents filed via electronic mail may be submitted in Adobe Portable Document Format (PDF), Word, WordPerfect, or any other widely used word processing format. The Commission will automatically reply to all incoming e-mails to confirm receipt. If filed by facsimile, pleadings shall be faxed to 202-418-0187. The fax transmission should include a cover sheet listing contact name, phone number, and, if available, an e-mail address. Pleadings submitted by electronic mail will be considered filed on a business day if they are received at the Commission on that day at any time up to 12 a.m. Pleadings received after that time will be considered received on the next business day. Similarly, facsimile transmissions will be considered filed on a business day if the complete transmission is received by any time up to 12 a.m.

3. We further provide that pleadings of the type described in paragraph 1 above that were due on or after September 12, 2001 and that were submitted by non-electronic means between September 12, 2001 and the effective date of this order may be refiled electronically within 30 days of the effective date of this order in accordance with the procedures specified in the preceding paragraph. Pleadings filed electronically pursuant to this paragraph shall be accompanied by a signed affidavit or a declaration pursuant to Commission rule § 1.16 stating that the previously filed pleading was timely filed, and providing the date the pleading was originally mailed to the Commission, and by what means. For this purpose only, the original pleading will be considered filed as of the date that it was mailed.

4. Accordingly, it is ordered that, pursuant to the authority of sections 4(i) of the Communications Act of 1934, as amended, 47 U.S.C. 154 (i), the Commission ADOPTS the procedural requirements set forth in this order and waives any contrary requirements.

5. It is further ordered that the waiver shall become effective upon publication in the Federal Register .

The Federal Communications Commission has received OMB approval for the reporting requirement in its Fifth Report and Order in CC Docket No. 92-105, First Report and Order in WT Docket No. 00-110, and Memorandum Opinion and Order in CC docket No. 92-105, and WT Docket No. 00-110 (known collectively as the Order), which appears at 67 FR 1643, January 14, 2002. The effective date of the rules and regulations adopted in that decision was published as February 13, 2002, except for § 64.3002, which contains modified information collection requirements that will not be effective until approved by the Office of Management and Budget. Through this document, the Commission announces that it has received this approval (OMB Control No.: 3060-0954, Expiration Date: 06/30/02) and that § 64.3002 and other non-codified requirements adopted in the Order will also be effective on February 13, 2002. Pursuant to the Paperwork Reduction Act of 1995, Public Law 96-511. An agency may not conduct or sponsor a collection of information unless it displays a currently valid control number. Notwithstanding any other provisions of law, no person shall be subject to any penalty for failing to comply with a collection of information subject to the Paperwork Reduction Act (PRA) that does not display a valid control number. Questions concerning the OMB control numbers and expiration dates should be directed to Judy Boley, Federal Communications Commission, (202) 418-0214.

This is a summary of the Commission's Third Order on Reconsideration and Order on Clarification in CC Docket No. 96-128, FCC 01-344, adopted and released on November 21, 2001. The full text of the item is available for inspection and copying during the hours of 9 a.m. to 4:30 p.m. in the Commission's Reference Center, Room CY-A257, 445 12th Street, SW., Washington, DC 20554, or copies may be purchased from the Commission's duplicating contractor, Qualex International, 445 12th Street, SW., Suite CY-B402, Washington, DC 20554, phone (202) 863-2893. This Order contains no new or modified information collection subject to the Paperwork Reduction Act of 1995, Public Law 104-13.

To implement Section 276 of the Telecommunications Act of 1996, the Commission has adopted several rules that define the relationship between PSPs and carriers in the call path in order to ensure that PSPs are adequately compensated for calls placed from payphones. In the First Payphone Order, 61 FR 52309, October 7, 1996, the Commission concluded that the interexchange carrier (IXC), as the primary beneficiary of payphone calls, should compensate the PSP. The Commission also recognized that a reseller lacking its own facilities does not have the ability to track calls, and that the facilities-based carrier should therefore pay compensation to the PSP. A requirement to track, or arrange for tracking of, compensable calls was also established for the underlying IXC, and the IXC was permitted to recover the cost of such tracking from the reseller. In the Payphone Order on Reconsideration, 61 FR 65341, December 12, 1996, the Commission modified its rules to provide that switch-based resellers (SBRs) are responsible for paying compensation directly to PSPs. In the Coding Digit Waiver Order, 63 FR 26497, May 13, 1998, the Common Carrier Bureau responded to PSP complaints that IXCs refused to identify SBRs by clarifying that when SBRs identified themselves to the first facilities-based IXC as responsible for paying compensation, the IXC was obligated to provide this information to the PSP.

On April 5, 2001, the Commission released the Second Order on Reconsideration, 66 FR 21105, April 27, 2001, which modified the payphone compensation rules. The modified rules provided that the first facilities-based IXC to which a LEC routes a coinless payphone call must (1) Compensate the PSP for the completed call; (2) track or arrange for tracking of all compensable calls; and (3) send to the PSP call completion information to enable the PSP to verify the accuracy of compensation it receives for coinless, compensable calls and/or to bill the underlying facilities-based carrier. The first IXC may then seek reimbursement from the switchless or switch-based reseller ultimately responsible for the compensation.

In this Third Order on Reconsideration and Order on Clarification, we decline to modify the rules as established in the Second Order on Reconsideration. We also reaffirm that, for purposes of payphone compensation, only calls that are answered by the called party are “completed” and thus compensable. Further, we clarify that the Commission supports the preservation and establishment of direct relationships and agreements between PSPs and SBRs for tracking and payment of payphone compensation, and that the liability of the first facilities-based IXC is limited to the extent that SBRs enter into such direct relationships. We also reiterate that the Commission did not, by revising the payphone compensation rules, intend to nullify any current or future contractual arrangements. Finally, we clarify that carriers are only required to report to PSPs calls that are completed, and thus compensable.

Pursuant to the authority contained in Sections 1, 4(i), 4(j), and 276 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), and 276, the Bulletins Petition for Clarification is denied to the extent described herein; WorldCom, Inc. Petition for Declaratory Ruling and Petition for Reconsideration is granted in part and denied in part to the extent described herein; AT&T Petition for Clarification and/or Reconsideration is denied to the extent described herein; and Global Crossing Telecommunications, Inc. Petition for Reconsideration and Clarification is denied, to the extent described herein.

1. On October 17, 2001, the Commission released Report & Order (“ R&O ”) clarifying the manner in which noncommercial educational (“NCE”) television licensees may use their excess digital television (“DTV”) capacity for remunerative purposes. In the Matter of Ancillary or Supplementary Use of Digital Television Capacity by Noncommercial Licensees, MM Docket No. 98-203, 66 FR 58973 (November 26, 2001). Among other things, the Commission amended § 73.621 of its rules to apply to the entire digital bitstream, including ancillary or supplementary services, thereby requiring NCE licensees to use their digital capacity primarily for a noncommercial, nonprofit, educational broadcast service. The Commission also amended §§ 73.642 (a), (b), (e) and § 73.644(a) of its rules to clarify that NCE licenses may offer subscription services on their excess digital capacity. When it amended these rules, the Commission ordered that the amended rules would “be effective the later of either thirty days after publication in the Federal Register , or upon receipt by Congress of a report in compliance with the Contract with America Advancement Act of 1996, Public Law 104-121” (summary of R&O paragraph 49).

2. Under current General Accounting Office (“GAO”) procedures, submission to the GAO or publication in the Federal Register is sufficient to satisfy the requirements of the Congressional Review Act (formerly known as the Contract with America Advancement Act). The amendments to §§ 73.621, 73.642 and 73.644 of the Commission's rules were submitted to the GAO and to Congress on November 26, 2001, the same day that they were published in the Federal Register . Thus, pursuant to the Administrative Procedure Act, the amended §§ 73.621, 73.642 and 73.644 of the Commission's rules will be effective on December 26, 2001, thirty days after publication in the Federal Register .

3. Finally, in the same proceeding the Commission amended §§ 73.624(g)(1), (g)(2)(i), and (g)(2)(ii) of its rules to apply to NCE licensees the program for assessing and collecting fees upon feeable ancillary or supplementary services provided on their DTV capacity that it had previously established for commercial licensees, as required by the Telecommunications Act of 1996 (“1996 Act”). Public Law 104-104, 110 Stat. 56 section 201 (1996), codified at 47 U.S.C. 336. In addition, NCE licensees will be required to maintain documentation sufficient to show, at renewal time and in response to any complaint, compliance with the requirement to use their entire bitstream primarily for nonprofit, noncommercial, educational broadcast services on a weekly basis (summary of R&O paragraph 16). These requirements were analyzed with respect to the Paperwork Reduction Act of 1995 (PRA) and found to impose new or modified reporting and recordkeeping requirements or burdens on the public. Thus, implementation of these requirements is subject to approval by the Office of Management and Budget as prescribed by the PRA (summary of R&O paragraphs 46, 50 and 66). The Commission will publish a notice in the Federal Register when this approval is received.

Regulations implementing the Atlantic Mackerel, Squid, and Butterfish Fishery Management Plan (FMP) require NMFS to publish annual initial specifications for maximum optimum yield (Max OY), allowable biological catch (ABC), initial optimum yield (IOY), domestic annual harvest (DAH), domestic annual processing (DAP), JVP, and total allowable level of foreign fishing (TALFF) for the species managed under the FMP. In addition, regulations implemented under Framework Adjustment 1 to the FMP allow the specification of quota set-asides to be used for research purposes.

Proposed 2002 initial specifications were published on October 23, 2001 (66 FR 53575). Public comments were accepted through November 23, 2001. The final specifications are unchanged from those that were proposed except that they reflect the research set-aside (RSA) allocations that have been recommended to the NOAA Grants Office for funding. A complete discussion of the development of the specifications appears in the preamble to the proposed rule and is not repeated here.

The following table contains the final initial specifications and RSA for the 2002 MSB fisheries as recommended by the Mid-Atlantic Fishery Management Council (Council).

This final rule specifies an Atlantic mackerel JVP of 20,000 mt for the 2002 fishery, with a possible increase of up to 10,000 mt (for a total JVP of up to 30,000 mt) later in the fishing year, should additional applications for JVP be received. This adjustment would be made by NMFS, through publication of notification in the Federal Register , following consultation with the Council. The action also specifies an Atlantic mackerel DAP of 50,000 mt and a DAH of 85,000 mt, which includes a 15,000-mt recreational component.

Four special conditions recommended by the Council and imposed by NMFS in previous years continue to apply to the 2002 Atlantic mackerel fishery, as follows: (1) JVPs would be allowed south of 37°30′ N. lat., but river herring bycatch may not exceed 0.25 percent of the over-the-side transfers of Atlantic mackerel; (2) the Administrator, Northeast Region, NMFS (Regional Administrator) should ensure that impacts on marine mammals are reduced in the prosecution of the Atlantic mackerel fishery; (3) the mackerel optimum yield (OY) may be increased during the year, but it should not exceed 347,000 mt; and (4) applications from a particular nation for an Atlantic mackerel JVP allocation for 2002 may be based on an evaluation by the Regional Administrator of that nation's performances relative to purchase obligations for previous years.

Framework Adjustment 1 to the FMP allows the specification of quota set-asides to be used for research purposes. The Council recommended that up to 2 percent of the 2002 IOY be set aside for scientific research purposes for each of the species in the FMP. A Request for Proposals was published to solicit proposals for 2002 based on research priorities identified by the Council (66 FR 38636, July 25, 2001, and 66 FR 45668, August 29, 2001). The deadline for submission was September 14, 2001. On November 8, 2001, NMFS convened a Review Panel to review the comments submitted by technical reviewers. Based on discussions between NMFS staff, technical review comments, and Review Panelist comments, two Loligo squid project proposals were recommended for approval and forwarded to the NOAA Grants Office for award. Consistent with the recommendations, the quotas in this final rule have been adjusted to reflect the projects recommended for approval. If the awards are not made by the NOAA Grants Office for any reason, NMFS will publish an additional rule to restore the unused set-aside amount to the annual quota.

Due to the recommendation of two research projects that would utilize Loligo squid RSA, this final rule adjusts the quarterly allocations from those that were proposed, based on formulas specified in the FMP. The 2002 quarterly allocations are as follows:

For the 2001 fishing year, by default, quarterly underages carry over into Quarter IV because the directed fishery in Quarter IV does not close until 95 percent of the total annual quota has been harvested. This final rule modifies the method for carrying over Loligo squid quarterly underages for 2002 and subsequent fishing years by adding a provision stating that, in the event that the Quarter I landings for Loligo squid are less than 70 percent of the Quarter I allocation, the underage below 70 percent would be applied to Quarter III. Underages from Quarters II and III would continue to be added to Quarter IV by default, based on the 95-percent closure rule mentioned above.

Three commenters made five comments on the proposed specifications.

Comment 1: One commenter supported the proposed allocation of Atlantic mackerel JVP.

Response 1: This final rule implements the proposed allocation of Atlantic mackerel JVP.