The HUBZone Program was established pursuant to the HUBZone Act of 1997 (HUBZone Act), Title VI of the Small Business Reauthorization Act of 1997, Public Law 105-135, enacted December 2, 1997. The purpose of the HUBZone Program is “to provide for Federal contracting assistance to qualified HUBZone small business concerns.” 15 U.S.C. 657a(a). The HUBZone Act authorizes the Administrator of the U.S. Small Business Administration (SBA or Agency) to publish regulations implementing the program. Public Law 105-135, section 605. On April 2, 1998, SBA published its proposed rules for the HUBZone Program. 63 FR 16148. After the close of the public comment period and review of the comments, SBA published its final regulations. 63 FR 31896 (June 11, 1998). These regulations amended parts 121 and 125 of title 13 of the Code of Federal Regulations (CFR), and added part 126. On October 3, 2000, SBA published a proposed rule amending the definition of principal office, the affiliation requirement, the non-manufacturer eligibility requirement, and the non-manufacturer contract performance requirement. 65 FR 58963. SBA published this rule as final on January 18, 2001. 66 FR 4643.

Since that time, SBA has received more applications for certification, has certified over four thousand concerns into the program, and has become aware of additional amendments that should be made to the program's regulations. Many of these amendments are technical, while others are proposed to clarify existing regulations. Some amendments, such as the amendment to the definition of “employee,” propose to ease program eligibility requirements perceived to be burdensome on concerns and streamline the operation of the HUBZone Program. SBA has also proposed to remove any regulatory provisions that it deems duplicative.

In addition, the proposed regulations address the recent amendments made to the HUBZone Act by the Small Business Reauthorization Act of 2000, Public Law 106-554. Specifically, Congress amended the eligibility requirements for small business concerns (SBCs) owned by Tribal Governments or Community Development Corporations (CDCs). Further, Congress amended the definition of HUBZone to include “redesignated areas,” and added definitions for the terms Indian Reservation and Alaska Native Corporation. This regulation addresses those amendments.

SBA also proposes to amend part 125 of its regulations to add language that addresses requests for changes in subcontracting percentages for small business set-asides and for SBA's various programs. In order to be awarded a small business set-aside or partial small business set-aside contract, an 8(a) contract, a HUBZone contract, a woman-owned small business (WOB) contract, or a contract awarded pursuant to an unrestricted procurement where a concern claims a 10 percent price evaluation preference/adjustment, the concern must agree that it will perform a certain percentage of the contract itself. In other words, there is a limit on the percentage of work that the concern can subcontract. Currently, § 125.6 sets forth these limitations on subcontracting percentages for SBCs, 8(a) concerns, and small and disadvantaged business concerns. Current § 126.700 addresses the subcontracting limitations for qualified HUBZone SBCs.

SBA does not propose changing these percentages; rather, SBA proposes adding language in § 125.6 explaining how such percentages may be changed through requests from interested parties. In addition, SBA proposes adding the subcontracting limitations for qualified HUBZone SBCs, currently set forth in § 126.700, to § 125.6 so that all such subcontracting limitations will be located in one place and, thus, be easy for SBCs and contracting officials to locate.

Finally, SBA proposes to amend its size regulations to make SBA's application of the nonmanufacturer rule consistent for all programs. This change corresponds to a similar change made in this rule with respect to HUBZone contracts. For contracts below the simplified acquisition threshold, SBA proposes to permit a small business nonmanufacturer to submit the product of any manufacturer, including a large business, and still be considered small.

SBA invites comments on the proposed rule and on any additional ways to improve the HUBZone Program.

SBA proposes to amend § 121.406(b) of SBA's size regulations pertaining to the application of the nonmanufacturer rule. Proposed § 121.406(b)(6) would permit a nonmanufacturer to supply the product of any domestic business, small or large, and be considered small with respect to any contract below the simplified acquisition threshold. This change corresponds to a similar change made in this rule for the HUBZone program in proposed § 126.601(e)(2). SBA believes that procurements below the simplified acquisition threshold were intended to be quick and easy, and that small business nonmanufacturers should not be restricted in this limited contracting arena. In addition, SBA proposes to remove current paragraph (d) because it would be superceded by the above amendment.

The proposed rule also revises § 121.1001 to permit the AA/HUB to protest the size status of a concern in connection with a HUBZone contract, and authorizes the AA/HUB to request a formal size determination in connection with a HUBZone application or continued HUBZone eligibility.

SBA proposes to amend 13 CFR 125.6 by adding the subcontracting limitations for qualified HUBZone SBCs, currently set forth in § 126.700, so that all such subcontracting limitations will be located in one place and thus easy for SBCs and contracting officials to locate. In addition, SBA proposes language explaining when it may use different percentages. According to the proposed rule, SBA may use different percentages if the Administrator determines that such action is necessary to reflect conventional industry practices among small business concerns in that industry group. Representatives of a national trade or industry group or any interested SBC may request a change in subcontracting percentage requirements for the categories defined by the six digit industry codes in the North American Industry Classification System (NAICS). The proposed rule sets forth the procedures by which an interested party may request a change (in writing, with information supporting its request). If SBA determines that there is an adequate preliminary showing, it will publish a notice in the Federal Register of its receipt of a request to consider a change in the subcontracting percentage requirements for a particular industry. The notice will identify the party making the request, and give the public an opportunity to submit information and arguments in both support and opposition.

SBA proposes several amendments to 13 CFR part 126.

SBA proposes to amend § 126.101, which addresses the government departments and agencies subject to the HUBZone Program. Prior to September 30, 2000, the HUBZone Program applied to the procurements of only ten agencies and departments. These agencies and departments are currently set forth in the regulations. The HUBZone Program now applies to more than those ten agencies and departments. Thus, SBA proposes to remove the names of those agencies and departments and simply state that the HUBZone Program applies to all agencies and departments that employ one or more contracting officers.

SBA proposes several amendments to the definitions contained in § 126.103. This rule would amend the definitions of the Associate Administrator for 8(a) Business Development (AA/8(a)BD) and Associate Deputy Administrator for Government Contracting and 8(a) Business Development (ADA/GC&8(a)BD). The rule would also change the name of the AA/8(a)BD to the Associate Administrator for Business Development and change the name of the ADA/GC&8(a)BD to the Associate Deputy Administrator for Government Contracting and Business Development. In addition, SBA is amending the definition of the term AA/HUB to mean the Associate Administrator for the HUBZone Empowerment Contracting Program. SBA proposes these changes in response to a re-organization within SBA's Office of Government Contracting and Business Development.

SBA proposes to define the term “Agricultural Commodity,” because Congress recently amended the HUBZone Act's application of the price evaluation preference in procurements involving agricultural commodities. This definition appearing in this rule is the same as the one mandated by Congress in Public Law 106-554.

SBA proposes to define the terms “Alaska Native Corporation (ANC)” and “Alaska Native Village” as those terms are defined in Public Law 106-554. Currently, the HUBZone regulations define the term “Alaska Native Corporation” under its definition of “person.” SBA proposes to define the terms “ANC” and “person” separately, to avoid confusion.

SBA proposes moving the definition of “attempt to maintain,” which is currently found in two places in the HUBZone regulations, to the definition section so that it is easier to find. The proposed rule would not change the substance of this definition, but would merely move it to the definition section for ease of use.

The proposed rule adds a definition for the term “Community Development Corporation (CDC).” Public Law 106-554 defines CDC and adds an eligibility criterion for SBCs owned by CDCs so that such concerns can participate in the HUBZone Program. The proposed definition is the same as the one enacted by Congress—a CDC is a corporation that receives financial assistance under 42 U.S.C. 9805.

SBA proposes to add a definition for the term “Contracting Officer (CO).” According to the HUBZone Act, a CO has the meaning given that term in 41 U.S.C. 423(f)(5). That statute defines a CO as a person who, by appointment in accordance with applicable regulations, has the authority to enter into a Federal agency procurement contract on behalf of the Government and to make determinations and findings with respect to such a contract.

SBA proposes to amend the definition of the term “employee.” Currently, the regulations provide that an “employee” of a concern includes “full-time equivalents.” SBA proposes to remove the provision concerning “full-time equivalents” because SBA believes it is confusing. SBA proposes a definition that allows persons employed on a full-time or part-time basis to be considered employees of the concern. This proposed definition is similar to the one used for size, set forth in part 121 of SBA's regulations.

In addition, SBA proposes to allow leased or temporary employees to be counted as employees of the concern. It is believed that such employees comprise approximately 2-5% of the work force in the U.S. economy. In addition, small businesses account for the employment of about 40% of such employees. SBA believes that counting leased, temporary and part-time employees will fulfill the statutory purpose and intent of the HUBZone Act by providing more job opportunities for HUBZone residents, albeit temporary or part-time.

Finally, the proposed definition of the term “employee” specifically states that volunteers are not to be counted. The rule would define a volunteer as a person who receives no compensation for work performed. SBA intends the term compensation to be read broadly and to be more than wages. Thus, a person who receives food, housing, or other non-monetary compensation in exchange for work performed would not be considered a volunteer under this regulation. SBA believes that allowing volunteers to be counted as employees would not fulfill the purpose of the HUBZone Act—job creation and economic growth in underutilized communities.

The proposed rule would amend the definition of the term “HUBZone” to include redesignated areas. As part of the Small Business Administration Reauthorization Act of 2000, Congress made “redesignated areas” qualified HUBZones because governmental data, which determines whether census tracts and non-metropolitan counties are qualified HUBZones, changes periodically. Non-metropolitan counties that qualify based upon unemployment level, may, as a result of updated U.S. Department of Labor, Bureau of Labor Statistics data, shift in and out of eligibility year after year. Also, individual census tracts and non-metropolitan counties that qualify based upon certain income levels may lose their status as a result of data developed during the decennial census—the results of which are due shortly. As a result, SBCs that locate to a HUBZone may lose their eligibility in only one year due to changes in such data. Consequently, Congress sought to stabilize this situation and determined that “redesignated areas” should be HUBZones. A “redesignated area” is a qualified census tract or qualified non-metropolitan county that ceases to be qualified as a result of a change in official government data. This “redesignated” status lasts for a period of 3 years following the date of the census tract's or non-metropolitan county's disqualification. It is important to note that the redesignated status applies to concerns currently in the program and concerns seeking certification to the program. Thus, because a redesignated area is a HUBZone, concerns may seek certification to the program if their principal office is located in and the required percentage of their employees reside in such an area. SBA has also proposed defining the term “redesignated area,” as set forth below.

SBA proposes to amend the term “HUBZone SBC.” The current definition is redundant of the eligibility criteria set forth in § 126.200 and does not set forth the new eligibility criteria for SBCs owned by Tribal governments or CDCs. The proposed definition would state that a “HUBZone SBC” is: (1) One that is owned and controlled by 1 or more persons, each of whom is a United States citizen; (2) an ANC owned and controlled by Natives (determined pursuant to the Alaskan Native Claims Settlement Act (ANCSA), 43 U.S.C. 1626(e)(1)); (3) a direct or indirect subsidiary corporation, joint venture, or partnership of an ANC qualifying pursuant to ANCSA, if that subsidiary, joint venture, or partnership is owned and controlled by Natives (determined pursuant ANCSA); (4) one that is wholly-owned by 1 or more Indian Tribal Governments, or by a corporation that is wholly owned by 1 or more Indian Tribal Governments; (5) one that is owned in part by 1 or more Indian Tribal Governments, or by a corporation that is wholly owned by 1 or more Indian Tribal Governments, if all other owners are either United States citizens or SBCs; or (6) one that is wholly owned by a CDC; or, (7) one that is owned in part by 1 or more CDCs, if all other owners are either United States citizens or SBCs. This proposed definition is the same as the one set forth in the HUBZone Act.

SBA proposes to amend its definition of “Indian reservation” to conform to Public Law 106-554. According to that law, the term “Indian reservation” has the same meaning as the term “Indian country” in 18 U.S.C. 1151, with certain exceptions. According to 18 U.S.C. 1151, the term “Indian country” means (a) all land within the limits of any Indian reservation under the jurisdiction of the United States Government, notwithstanding the issuance of any patent, and, including rights-of-way running through the reservation, (b) all dependent Indian communities within the borders of the United States whether within the original or subsequently acquired territory thereof, and whether within or without the limits of a state, and (c) all Indian allotments, the Indian titles to which have not been extinguished, including rights-of-way running through the same. The amendments to the HUBZone Act, however, excepted the following land from being treated as an “Indian reservation” for purposes of the HUBZone Program: (a) lands that are located within a State in which a tribe did not exercise governmental jurisdiction as of the date of enactment (December 21, 2000), unless that tribe is recognized after that date of enactment by either an Act of Congress or pursuant to regulations of the Secretary of the Interior for the administrative recognition that an Indian group exists as an Indian tribe (25 CFR part 83); and (b) lands taken into trust or acquired by an Indian tribe after the date of enactment of this paragraph if such lands are not located within the external boundaries of an Indian reservation or former reservation or are not contiguous to the lands held in trust or restricted status on that date of enactment.

In addition, Congress provided that for the state of Oklahoma, the term “Indian reservation” will include lands within the jurisdictional areas of an Oklahoma Indian tribe (as determined by the Secretary of Interior) and lands that are recognized by the Secretary of the Interior as eligible for trust land status under 25 CFR part 151 (as in effect as of December 21, 2000).

Essentially, the statutory definition of “Indian Reservation,” for HUBZone Program purposes, includes federally-recognized Indian reservations, Indian communities dependent on the Federal Government, and certain federal Indian allotments (parcels of land created out of a diminished Indian reservation and held in trust by the Federal Government for the benefit of individual Indians). The new statutory definition of “Indian Reservation” does not include lands transferred to Alaskan Natives pursuant to the Alaskan Native Claims Settlement Act. See Alaska v. Native Village of Venetie Tribal Government, 522 U.S. 520 (1998). In the state of Oklahoma, an “Indian Reservation” includes a federally recognized Indian reservation and trust land. SBA has been and intends to keep working with the U.S. Department of the Interior to appropriately identify these areas.

The proposed rule defines for the first time the term “Indian Tribal Government.” The recent amendments to the HUBZone Program set forth specific eligibility criteria for concerns owned by “Indian Tribal Governments.” The statutory amendments, however, do not define that term. Thus, SBA proposes to define the term “Indian Tribal Government” to mean “the governing body of any Indian tribe, band, nation, pueblo, or other organized group or community which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians.” The Bureau of Indian Affairs of the U. S. Department of the Interior (BIA) publishes in the Federal Register a list of tribes that it recognizes as eligible for special Federal programs. See 65 FR 13298 (March 13, 2000). An Indian Tribal Government is essentially the governing body of one of the tribes or entities set forth on that list. This definition does not include ANCs because the recent amendments to the HUBZone Program establish specific eligibility criteria solely for ANCs and concerns owned by ANCs.

SBA proposes to amend the definition of “person” by removing the provision relating to ANCs. ANCs and their subsidiaries were made eligible by Public Law 106-554 and therefore the discussion on ANCs in this definition is unnecessary.

SBA proposes to amend the terms “qualified census tract” and “qualified non-metropolitan county” to address technical changes made by Public Law 106-554. The changes to the definitions are based entirely on the changes made by Public Law 106-554.

SBA proposes defining the term “redesignated area,” discussed above, to mean any census tract and any non-metropolitan county that ceases to be a qualified HUBZone, except that a census tract or a non-metropolitan county may be a “redesignated area” only for the 3-year period following the date on which the census tract or non-metropolitan county ceased to be so qualified. This is the same definition that is set forth in the HUBZone Act, as recently amended. In addition, SBA proposes to use the public release date of the official government data, which affects the eligibility of the HUBZone, as the date on which the census tract or non-metropolitan county ceases to be qualified. It is important to note that it is the formerly qualified census tract or qualified non-metropolitan county that is designated as a HUBZone area (as a “redesignated area”) for three years from the date that it ceases to be qualified. As such, a concern that applies for and receives HUBZone certification based on its location in a redesignated area would not receive three years of HUBZone participation unless the tract or county again becomes qualified as a HUBZone based on new data. Such a firm would remain eligible as a qualified HUBZone concern until three years from the date that the tract or county became a redesignated area, regardless of the amount of time it had participated in the HUBZone Program.

SBA proposes a definition for the term “small business concern (SBC).” The recent amendments to the HUBZone Act allow a HUBZone SBC to be owned in part by a SBC, with certain restrictions. SBA proposes defining the term SBC to mean a concern that, with its affiliates, meets the size standard for its primary industry.

SBA proposes to amend the definition of “small disadvantaged business” to clarify that such a concern is one that is certified by SBA pursuant to subpart B, part 124, of this chapter.

SBA proposes to remove the definition of woman-owned business because that term is no longer referenced in this part of the regulations.

SBA proposes to amend § 126.200, which sets forth the eligibility requirements for the program, because Congress recently changed these requirements in Public Law 106-554. To be eligible, all applicants must (together with all their affiliates) be small. In addition, according to Public Law 106-554, concerns owned by Indian Tribal Governments or tribal corporations must certify: (1) That they are owned by an Indian Tribal Government, by a wholly-owned tribal corporation, or owned in part by a Indian Tribal Government or tribal corporation and in part by another SBC or U.S. citizens, and (2) when the concern obtains a HUBZone contract, at least 35 percent of its employees engaged in performing that contract will reside within any Indian reservation governed by one or more of the Indian Tribal Government owners, or reside within any HUBZone adjoining any such Indian reservation. When enacting this legislation, Congress believed that no firm should be made eligible solely by virtue of who owns the concern. Thus, for example, concerns owned by Indian Tribal Governments will not be eligible solely because they are tribally-owned. Instead, such concerns will be eligible only if they agree to advance the goals of the HUBZone Program—job creation and economic development in the areas that need it most. See S. Rpt. 422, 106th Cong., 2d Sess. 21 (2000).

As discussed above, the statutory amendments provide that an Indian Tribal Government or tribal corporation may own a HUBZone SBC “in part” with a SBC or U.S. citizens. For example, an SBC in which a Tribal Government or tribal corporation owned 1% or less could claim that it qualified for the program if the other owners were SBCs or U.S. citizens. Further, there is no principal office eligibility requirement for such applicants. Thus, SBA is considering whether or not to require a Tribal Government or tribal corporation to own at least 51 percent of the HUBZone SBC. SBA is specifically requesting comments on this issue, and whether or not the Agency should require the Tribal Government or tribal corporation own a certain percentage (e.g., 51% or more) of the HUBZone SBC. SBA believes Congress intended the HUBZone benefits to assist Native American Indian Tribes, their Indian Reservations, and the HUBZone communities adjoining those reservations. If a Tribal Government or tribal corporation were able to own an inconsequential amount of a HUBZone SBC, the intended benefits may not reach that community or those people.

It must be noted that SBA is not considering such a limitation on ownership for HUBZone SBC owned by CDCs. As discussed below, a HUBZone SBC may be owned in part by a CDC and in part by U.S. citizens or SBCs. SBA is not considering a limit on how much or little of the applicant the CDC must own because the qualified HUBZone SBC that is owned “in part” by a CDC must also have its principal office located in a HUBZone and must meet the 35% HUBZone residence requirement. Therefore, the benefits of the program must necessarily flow to a HUBZone community, regardless of the percentage of ownership by a CDC.

Finally, proposed § 126.200(a)(3) defines the term “adjoining.” When tribally-owned concerns obtain a HUBZone contract, at least 35 percent of the qualified HUBZone SBC's employees engaged in performing that contract must reside within any Indian reservation governed by one or more of the qualified HUBZone SBC's Tribal Government owners, or reside within any HUBZone adjoining any such Indian reservation. The common meaning of the term “adjoining” is “to be next to” or “to be in contact.” SBA believes that tribal members often may not reside on the reservation, but may still live next to the reservation. Thus, SBA believes the common meaning of the term is in harmony with the purpose of this amendment, the HUBZone Act and the employee residency requirement. Thus, this rule proposes that a HUBZone and Indian reservation are “adjoining” when the two areas are right next to and in contact with each other.

SBA also proposes to address the eligibility requirements for all other SBCs in § 126.200. According to the HUBZone statute, an applicant that is not tribally-owned must: be small; have a principal office located in a HUBZone; have at least 35% of its employees residing in a HUBZone; represent that it will attempt to maintain this percentage during the performance of any HUBZone contract; and represent that it will ensure compliance with certain contract performance requirements in connection with contracts awarded to it as a qualified HUBZone SBC, as set forth in § 126.700. The recent amendments to the HUBZone Act provide that an applicant may be owned by a CDC or owned in part by a CDC and the rest by U.S. citizens or SBCs.

SBA also proposes to amend § 126.201 concerning who owns a HUBZone SBC. The proposed rule would clarify Example 1 to § 126.201, addressing ownership of stock options. In addition, the proposed rule would move Example 2 from § 126.201 to § 126.200 because it provides a better example of the U.S. citizen ownership requirement set forth in that section. In addition, SBA has proposed addressing who it considers to own a concern owned by an Employee Stock Option Plan (ESOP). According to the proposed rule, SBA will deem the employees that participate in the ESOP and the ESOP's trustees to be owners because these persons have legal and equitable ownership in the ESOP. Likewise, SBA proposes addressing who it considers to own a concern owned by a trust. SBA believes that where the ownership interest in a HUBZone SBC is held under a trust, all of the trustees and trust beneficiaries must be deemed owners.

SBA proposes to amend § 126.202 to add “managing member” to the list of persons who share control of a concern because such persons share control of limited liability companies.

In § 126.203, SBA proposes a technical correction in paragraph (b). SBA recently amended its size regulations and established a new table of small business size standards based upon the NAICS rather than the Standard Industrial Classification (SIC) code. Thus, SBA proposes changing the reference in paragraph (b) from SIC codes to NAICS codes.

SBA proposes to amend § 126.205 to clarify that all SBCs, and not just 8(a) Participants, WOBs, and small disadvantaged businesses (SDBs), may be qualified HUBZone SBCs, if they meet the HUBZone Program's eligibility requirements.

SBA proposes amending § 126.207 to state that HUBZone SBCs may have offices located outside of a HUBZone, so long as the concern's principal office is located in a HUBZone (when required by § 126.200 to have a principal office located in a HUBZone). As noted above, Congress recently amended the HUBZone Act to no longer require certain tribally-owned concerns to have a principal office in a HUBZone.

SBA proposes to remove parts of § 126.300 that are duplicative of § 126.304. In addition, SBA has proposed language that allows SBA to draw an adverse inference from the failure of a HUBZone SBC to cooperate or submit additional information.

SBA proposes amendments to § 126.303 to address how the electronic HUBZone application may be submitted to SBA online.

SBA proposes to amend §§ 126.304(a)-(b) and move the certification requirement currently set forth in § 126.501 to this section. Currently, paragraph (a) reiterates all of the eligibility requirements set forth in § 126.200. SBA proposes to amend paragraph (a) to state that to be certified, concerns must submit a completed application (paper or electronic) and represent that they meet the eligibility requirements of § 126.200. In addition, paragraph (b) currently requires all concerns applying for HUBZone status based on a location within the external boundaries of an Indian reservation to submit official documentation from the appropriate BIA Land Titles and Records Office confirming that it is located within such an area. When SBA first promulgated the HUBZone regulations, it did not have available electronic data for lands within the external boundaries of an Indian reservation, as it did for qualified census tracts and qualified nonmetropolitan counties. SBA now has this data available electronically. However, SBA understands that there may be rare instances when a concern believes a certain location is within the external boundaries of an Indian reservation, but the HUBZone maps indicate otherwise. Thus, the proposed regulation provides that upon such an occurrence, the concern may obtain certification from the appropriate BIA Land Titles and Record Offices confirming that the location is within the external boundaries of an Indian Reservation, as defined by the HUBZone Act and regulations.

Finally, SBA proposes adding a new paragraph (c) to § 126.304 stating that if the concern was decertified for failure to notify SBA of a material change affecting its eligibility, it must include with its application for certification a full explanation of why it failed to notify SBA of the material change. If SBA is not satisfied with the explanation provided, SBA may decline to certify the concern. This requirement is currently set forth in § 126.501, which addresses a qualified HUBZone SBC's ongoing obligations. SBA believes it would be appropriate to place this requirement in this section, which addresses application requirements.

SBA proposes amending § 126.306 by deleting part of paragraph (b). Currently, the first sentence of paragraph (b) states that SBA will base its certification on facts existing on the date of submission. However, SBA can only certify a concern into the program that meets all of the eligibility requirements. If circumstances change from the date of submission of the application that affect the concern's eligibility, then SBA can not certify the concern into the program.

Section 126.307 would be amended to reflect the change in the Internet website where SBA maintains its List of qualified HUBZone SBCs and the change in SBA's HUBZone e-mail address. SBA believes that in addition to having a separate List of qualified HUBZone SBCs, Pro-Net may also be used as the List. Pro-Net is a database containing profiles of over 200,000 SBCs. The information in the Pro-Net system includes data from SBA's files and other available databases. Pro-Net is designed to be used as a search engine for COs and a marketing tool for SBCs.

Section 126.308 would be amended to reflect the change in SBA's HUBZone e-mail address.

Section 126.401, addressing program examinations, would be amended to clarify that examiners will verify that the concern currently meets the HUBZone eligibility requirements, and that it met such requirements at the time of its initial certification or most recent recertification. This provision would also permit an examination of a HUBZone certification in connection with a HUBZone contract. In addition, paragraph (b) would be amended to clarify how the examiners will conduct the review. SBA proposes to add a sentence explaining that the review, or parts of the review, may be conducted at one or all of the concern's offices. SBA also proposes an amendment that specifically allows the examiners to determine the location of the examination.

SBA proposes to amend § 126.403 to provide that SBA may draw an adverse inference from the failure of a concern to cooperate with a program examination or provide requested information. This provision should discourage firms from being unresponsive to SBA's request for more information. SBA also does not want firms to be able to purposely delay the examination process. SBA should be allowed to draw an adverse inference to make the process more efficient.

SBA proposes to remove § 126.405. This regulation currently provides that if SBA verifies that a concern is eligible after conducting a program examination or a protest, then SBA will amend the date of certification on the List to reflect the date of verification. Protests and program examinations do not always cover all of the program's eligibility requirements. Therefore, the List should not be amended to reflect a new “eligibility” date. In addition, even if a protest or program examination does cover all of the eligibility requirements, SBA believes that amending the List will be confusing to the SBC as to when its next recertification submission is due.

SBA proposes to amend § 126.500 concerning continued eligibility in the program. Currently, a qualified HUBZone SBC must recertify annually that it continues to be eligible for the program. SBA believes that such an annual recertification is burdensome to SBCs, and proposes that qualified HUBZone SBCs recertify every three years that they continue to meet all of the program eligibility requirements. SBA believes that the program examination process and protest mechanism will effectively eliminate concerns that are not eligible, and, therefore, annual recertification is unnecessary. SBA also believes that three years is a reasonable period of time to give effect to a HUBZone certification. SBA notes that a small disadvantaged business (SDB) certification generally lasts for three years. See 13 CFR 124.1014. In addition, under the new statutory language identified above, three years will correspond with the amount of time an area losing its HUBZone status is classified as a redesignated area.

SBA proposes amending § 126.501 to state that failure to notify SBA of a material change in the circumstances of a qualified HUBZone SBC's eligibility may result in decertification. In addition, SBA proposes moving the last sentence of this section, which requires the concern to submit with any new application for HUBZone certification a statement explaining why it failed to notify SBA of a material change, to § 126.304, which addresses what a concern must submit to SBA to be certified into the program.

SBA proposes combining the substance of current § 126.404, concerning what happens if SBA is unable to verify a concern's eligibility, with § 126.503, regarding decertification. In addition, SBA proposes to revise § 126.503 to clarify the procedures by which SBA decertifies a concern. These procedures ensure that due process is followed before any firm is decertified from the program. Under these procedures, SBA must generally first propose to decertify the concern and allow the concern to respond to all allegations that it is ineligible. The current regulations require a concern to respond within 10 business days from the date that it receives notification of SBA's intent to decertify. This rule changes the amount of time a concern has to respond to SBA's notification of intent to decertify from 10 business days to 30 calendar days. SBA believes that it is important to give a HUBZone SBC ample opportunity to respond to SBA's notification of its intent to decertify the concern. This is particularly true in the context of the 35% HUBZone residency requirement. Where a HUBZone SBC is experiencing economic hardships, it may be required to temporarily reduce its number of employees, and may fall below the 35% requirement. SBA would give the concern the opportunity to explain its situation and meet the 35% requirement. Although the firm would not be able to certify itself to be a qualified HUBZone SBC in connection with a HUBZone contract during the time that it did not meet the 35% requirement, if SBA believes that the firm will come into compliance, it may determine not to decertify the firm. The AA/HUB will review any responses submitted by a concern receiving a notification of SBA's intent to decertify and will make a written determination, which is the final agency decision. Where decertification emanates from an adverse finding in the resolution of a HUBZone protest, SBA need not propose the firm for decertification. The same due process rights afforded a concern through proposing a concern for decertification are available in the protest context. In both cases, the firm is apprised of allegations against it, and has the opportunity to rebut those allegations and prove its eligibility.

SBA proposes to amend § 126.601 to change the reference in paragraph (a) from SIC to NAICS, in light of SBA's change to the NAICS system. In addition, SBA proposes to add a new paragraph (b) that would specify that a firm must be a qualified HUBZone SBC both at the time of its initial offer and at the time of award in order to be eligible for a HUBZone contract. Further, SBA proposes to amend § 126.601 to clarify that a qualified HUBZone SBC must make certain representations to a CO at the time it submits its initial and final offers for a HUBZone contract. A concern that is not a qualified HUBZone SBC at the time it submits its initial offer can not submit an offer on a HUBZone sole source or set-aside contract, or receive the benefits of the HUBZone price evaluation preference. Similarly, a concern that is not qualified at the time of award can not receive a HUBZone contract. The proposed rule would also require SBCs owned by Indian Tribal Governments (as set forth in § 126.200(a)) to certify on a HUBZone contract that at least 35 percent of its employees engaged in performing the HUBZone contract will reside within any Indian reservation governed by one or more of the HUBZone SBC's tribal government owners or within any HUBZone adjoining any such Indian reservation. This is a statutory requirement for such concerns, added by Public Law 106-554.

Finally, SBA proposes to amend paragraph (e) to address confusion regarding the nonmanufacturer rule. The statutory nonmanufacturer rule generally requires a small business nonmanufacturer to supply the product of a small business in connection with an 8(a) or small business set aside contract. The SBA Administrator may waive that requirement in certain cases. The nonmanufacturer rule that applies to HUBZone contracts requires a HUBZone nonmanufacturer to supply the product of a manufacturer, which is a qualified HUBZone SBC. This rule would clarify that for purposes of a HUBZone contract, there are no waivers of the nonmanufacturer rule. The program is designed to assist HUBZones by assuring that individuals residing in those areas are employed generally by a qualified HUBZone SBC and specifically in connection with the performance of a HUBZone contract. SBA believes that allowing a non-HUBZone manufacturer to be the firm ultimately supplying the product for a HUBZone contract would be contrary to the intent of the program. The proposed rule would provide, however, that for HUBZone contracts at or below the simplified acquisition threshold (currently $100,000), a qualified HUBZone SBC may supply the end item of any manufacturer, including a large business.

SBA proposes to amend § 126.602 to address the employee residency requirements for qualified HUBZone SBCs performing HUBZone contracts. The requirements are different, depending on the ownership of the qualified HUBZone SBC, as mandated by Public Law 106-554. In addition, SBA proposes deleting the definition for “attempt to maintain” currently set forth in this regulation and moving it to the definition section of the regulations.

SBA proposes to replace the term “procuring agencies” in § 126.603 with “contracting activities” for consistency in the regulations and conformance with the Federal Acquisition Regulations (FAR).

SBA proposes to amend § 126.605 by deleting paragraph (c) to allow HUBZone contracts for micropurchases. SBA believes this will open up the market to the program's participants. In addition, SBA proposes to amend § 126.608 to explain that HUBZone contracts at or below the micropurchase threshold are not mandatory. Further, SBA proposes to clarify § 126.608 and allow HUBZone contract opportunities “at or below” the simplified acquisition threshold, as opposed to just below the simplified acquisition threshold. This change will conform the regulation to FAR part 13.

SBA proposes to amend § 126.606 to change the reference of “AA/8(a)BD” to “AA/BD,” as a result of a reorganization in SBA's Office of Government Contracting and Business Development that occurred more than a year ago, and to clarify that the AA/BD will consult with the AA/HUB before determining whether to release an 8(a) requirement to the HUBZone Program.

In response to several inquiries, SBA proposes to amend § 126.607 to clarify the interaction between the HUBZone and 8(a) Programs. The proposed rule would provide for parity between the two programs. A CO must look first to the HUBZone and 8(a) Programs in determining how to fulfill a particular procurement requirement. In deciding which contracting vehicle to use, a CO must consider where the contracting activity is in fulfilling its HUBZone and 8(a) goals, as well as other pertinent factors. The CO is directed to exercise his/her discretion on whether to offer the requirement to the 8(a) or HUBZone Program. For example, if the contracting activity has met 0% of its HUBZone goals and has met its 8(a) goals, then the CO should restrict the requirement for competition among HUBZone SBCs, if all other criteria are met. If the activity has met half of its HUBZone and half of its 8(a) goals, then the CO has the discretion to offer the requirement to the 8(a) Program or restrict the requirement for competition among HUBZone SBCs. At this point, other factors, including knowledge of a particular HUBZone or 8(a) SBC that is capable of performing the requirement, become more important. SBA believes that this determination should be made by the contracting activity, based upon the activity's needs at that time. Further, the regulation restates the position in the FAR that HUBZone set-asides procurements take priority over small business set-asides. A CO must consider using a HUBZone set-aside to fulfill a requirement before considering whether award can be made as a small business set-aside.

SBA proposes amending § 126.611 to clarify that SBA may appeal a CO's decision to not use a HUBZone contract for a certain requirement to the Secretary of the department or the head of the agency, rather than the head of the contracting activity. This proposed change conforms with the statute.

SBA proposes amending § 126.612 to address the conversion from the SIC to NAICS code. In addition, SBA has proposed adding language in paragraph (e), addressing when a CO may issue a sole source award to a qualified HUBZone SBC, to state that it is the CO's determination (not SBA's) that the contract can be made at a fair and reasonable price. This language is the same as set forth in the HUBZone Act.

SBA proposes amending § 126.613 to conform to the recent statutory amendments made by Public Law 106-554. According to that statute, for purchases by the Secretary of Agriculture of agricultural commodities, the price evaluation preferences is 10 percent for the portion of a contract to be awarded that is not greater than 25 percent of the total volume being procured for each commodity in a single invitation; 5 percent for the portion of a contract to be awarded that is greater than 25 percent, but not greater than 40 percent, of the total volume being procured for each commodity in a single invitation; and zero for the portion of a contract to be awarded that is greater than 40 percent of the total volume being procured for each commodity in a single invitation. HUBZone contracts awarded pursuant to this preference may not be counted toward the fulfillment of any requirement partially set aside for competition restricted to SBCs.

In addition, SBA proposes to add other examples to § 126.613, regarding the price evaluation preference for a qualified HUBZone SBC in full and open competition, to clarify that only qualified HUBZone SBCs should benefit from the preference. SBA also proposes to amend the current example by correcting a mathematical error. According to the current example, if the qualified HUBZone SBC's offer was $101 and the large business' offer was $93, the award would go to the large business. This is inaccurate because at $101, the HUBZone SBC's offer is not more than 10% higher than the large business' offer. SBA has amended the example to state that if the qualified HUBZone SBC's offer was $103 and the large business' offer was $93, the award would go to the large business because the qualified HUBZone SBC's offer would be more than 10% higher than the lowest, responsive, responsible offeror.

SBA proposes to correct a typographical error in § 126.614. That regulation currently refers to the price evaluation preference described in “126.614.” The regulation should refer to the price evaluation preference described in “126.613.” In addition, SBA proposes to amend the regulation by providing examples of how to apply the HUBZone and SDB price evaluation preferences when a CO receives offers from two such concerns and must apply both preferences, and when a CO receives an offer from a concern that qualifies for both preferences. SBA had proposed similar examples when it issued its first proposed regulations for the HUBZone Program. See 63 FR 16148, 16152 (April 2, 1998). SBA did not provide these examples in the final rule because the Agency decided to leave the mechanics for implementation in the FAR. 63 FR 31896, 31904 (June 11, 1998). Although the FAR has addressed these issues, SBA has received numerous requests for further clarification. Therefore, SBA proposes to provide examples explaining clearly how this process works.

SBA proposes to amend § 126.616 to allow for joint ventures comprised of only qualified HUBZone SBCs and not 8(a) concerns or women-owned businesses. SBA believes the proposed eligibility requirements allowing qualified HUBZone SBCs to be owned in part by SBCs, makes joint ventures with other SBCs and large businesses unnecessary. Allowing HUBZone contracts to go to qualified HUBZone SBCs that are owned in part by a non-qualified HUBZone SBC, and which joint venture with another non-qualified HUBZone SBC, will dilute the benefits intended to go to the HUBZone area and residents. In addition, SBA proposes clarifying that the joint venture, which is comprised of two or more qualified HUBZone SBCs, does not itself have to be certified as a qualified HUBZone SBC, because joint ventures are limited entities that are formed for the purpose of performing on a specific contract. In addition, SBA proposes to amend the reference of SIC to NAICS.

SBA proposes to add § 126.617 to address disputes arising under a HUBZone contract. Oftentimes, qualified HUBZone SBCs request SBA's assistance with contract disputes between the procuring activity and the concern. However, it is not within SBA's authority to decide disputes arising under a HUBZone contract. Therefore, SBA proposes a regulation specifically stating that for purposes of the Disputes Clause of a HUBZone contract, the procuring activity will decide disputes arising between a qualified HUBZone SBC and the procuring activity.

SBA proposes to add a new § 126.618, which would explain how the participation of an applicant to the HUBZone Program or a HUBZone SBC in a Mentor-Protégé relationship affects its participation in the HUBZone Program. This section would provide that qualified HUBZone SBCs may enter into Mentor-Protégé relationships in connection with other Federal programs, provided that such relationships do not conflict with the underlying HUBZone requirements. For example, SBA may approve mentor-protégé agreements for purposes of its 8(a) BD program in which the mentor owns up to 40% of the 8(a) protégé firm. See 13 CFR 124.520(d)(2). Because such a relationship would violate the statutory requirement that a HUBZone SBC be 100% owned and controlled by persons who are United States citizens, a protégé firm in such a relationship would not be eligible for the HUBZone Program. For purposes of determining whether an applicant to the HUBZone Program or a HUBZone SBC qualifies as small, proposed § 126.618(b) would exempt a protégé firm from being considered affiliated with its mentor based on its mentor-protégé agreement. SBA could still find affiliation on other grounds. Proposed § 126.618(c) would permit a qualified HUBZone SBC to team with and subcontract work under a HUBZone contract to its mentor, but would not permit a joint venture between a protégé and its mentor on a HUBZone contract unless the mentor was also a qualified HUBZone SBC.

SBA proposes to amend § 126.700 to state that the performance of work requirements for qualified HUBZone SBCs are set forth in 13 CFR 125.6. SBA proposes adding the performance of work requirements for qualified HUBZone SBCs to § 125.6 so that all of the performance of work requirements will be located in one place and thus easy to locate.

In addition, SBA is considering adding a new paragraph to § 126.700, which would add an additional contract performance requirement for construction HUBZone contracts. Specifically, in the case of a HUBZone construction contract (either general construction or specialty trade construction), SBA is considering requiring qualified HUBZone SBCs to perform at least 50 percent of the contract, either at the prime or subcontracting level. Such a provision would not affect the prime performance of work requirements set forth in § 125.6 (i.e., 15% for general construction and 25% for specialty trade construction); rather, the Agency is considering a new overall performance of work requirement for HUBZone construction contracts. Thus, for general construction, if a prime contractor will perform 15% of the contract, it would be required to subcontract at least 35% of the contract to one or more other qualified HUBZone SBCs. For a specialty trade construction contract, if a prime contractor will perform 25% of the contract, it would be required to subcontract at least 25% of the contract to one or more other qualified HUBZone SBCs.

The HUBZone Program is intended to stimulate historically underutilized business zones through job creation and capital investment. Where a qualified HUBZone SBC is able to subcontract up to 85% of a general construction contract or up to 75% of a specialty trade construction contract to non-HUBZone SBCs (which may in fact be large businesses), SBA is concerned that it would not be adequately meeting the underlying Congressional purpose of the program. At the same time, however, SBA is not seeking to impose a barrier that could dissuade COs from using the HUBZone Program. If such a requirement in any way would cause a CO to use a contracting vehicle other than a HUBZone set-aside because he or she believes that there are not at least two qualified HUBZone SBCs that could meet it, then the requirement would have the opposite effect of what is intended. In such a case, instead of causing more work to be done by one or more qualified HUBZone SBCs, and hopefully increasing jobs in a HUBZone, the requirement would have caused 15% (or 25% for specialty trade construction) of the work that would have been performed by a qualified HUBZone SBC to be taken away from the Program and go elsewhere.

Thus, SBA is also considering several alternatives that would attempt to encourage increased performance by qualified HUBZone SBCs, but that would not adversely affect the HUBZone Program. One alternative that SBA is considering is requiring that HUBZone SBCs perform at least 50% of a construction contract through prime or subcontracting arrangements, but allow the CO to waive this requirement where he or she believes it cannot be met for a particular procurement. Where a CO believes that the 50% requirement can be met, it would continue to apply. Where a CO waives the 50% requirement, the solicitation would have to specify that the 50% requirement does not apply to the HUBZone procurement. The 15% or 25% prime contractor performance of work requirement would continue to apply. As another alternative, SBA is also considering imposing an evaluation factor in the award of negotiated HUBZone set-asides relating to overall performance by qualified HUBZone SBCs. SBA specifically requests comments on these proposals, including whether the 50% requirement is one that can be met by the affected concerns, and whether and to what extent the CO waiver and evaluation factor can be used to make the requirement acceptable to COs and the procurement community.

In addition, SBA proposes to amend § 126.702 to state that the procedures for requesting changes in the subcontracting percentages are set forth in 13 CFR 125.6. As noted above, SBA has proposed a regulation amending § 125.6, which outlines the procedures for requesting changes in subcontracting percentages for all of SBA's program, including the HUBZone Program. Because it is redundant and unnecessary to have these procedures listed twice in the regulations, SBA proposes to remove § 126.703.

SBA proposes to amend paragraph (b) of § 126.800 to clarify that SBA and the CO may protest the apparent successful offeror's qualified HUBZone SBC status.

SBA proposes amending § 126.801 to clarify that SBA does not review protest issues concerning the conduct or administration of a HUBZone contract. In addition, SBA proposes amending paragraphs (d) to state that any protest received after the time limits is untimely, unless it is from SBA or the CO. This is similar to SBA's size protest procedures and will allow SBA or the CO to file HUBZone status protests any time either obtains information that a qualified HUBZone SBC may not be eligible. Further, SBA proposes amending paragraph (e) to state the information a CO should include in his or her protest referral letter to SBA. The CO's protest referral letter, in which he or she refers a HUBZone protest, should include certain information about the procurement so that SBA can determine issues of standing and timeliness.

SBA proposes amending paragraph (d) of § 126.803. Currently, that paragraph states that if SBA denies a protest, it will amend the date of certification on the List of qualified HUBZone SBCs to reflect the date of the protest decision. SBA believes that because protests often do not decide all eligibility issues, the Agency should not change the date of certification for the concern.

SBA proposes to change the references in § 126.805 of the ADA/GC&8(a)BD to ADA/GC&BD, to conform to SBA's recent re-organization and change in title of this position.

SBA proposes a technical change to § 126.900(b). SBA proposes to replace the term “civil remedies” with “civil penalties,” in accordance with the statute.

OMB has determined that this rule constitutes a “significant regulatory action” under Executive Order 12866. A copy of the Regulatory Impact Analysis is set forth below.

Yes. The U.S. Small Business Administration (SBA) is statutorily authorized to administer the HUBZone Empowerment Contracting Program (HUBZone Program). In addition, the SBA is required to implement and administer all statutory changes to the program. The HUBZone Act has been amended by the 2000 Reauthorization Act. These amendments must be implemented pursuant to regulations. There are no practical alternatives to the implementation of the proposed regulatory changes. In addition, the SBA believes these changes are necessary and appropriate to better service the needs of small business concerns (SBCs) and the statutory goals of the HUBZone Program.

There are several baselines being considered in the formulation of this proposed rule change. These include the present set of HUBZone Program regulations and definitions that would be modified by this proposal, the estimated universe of potential HUBZone SBCs, the existing statutory requirements, the achievement of HUBZone contracting goals by Federal agencies, and current procurement practices of Federal agencies. The SBA estimates that over 30,000 small businesses may be eligible and may be certified for the HUBZone Program. As of the end of fiscal year 2001, there were 4000 firms participating in the HUBZone Program. There are, at present, approximately 8000 designated HUBZone areas and approximately one HUBZone certified firm for every two designated HUBZone areas. As of the end of fiscal year 2000, Federal agencies (according to the Federal Procurement Data Center—FPDC) are, on average, achieving only 22% of their statutorily mandated goals for HUBZone contracting. This means that agencies are well below the required HUBZone goal of 2-3 percent of the total contracting dollars.

It is difficult to obtain precise quantitative estimates of the impact these changes might have on these baseline criteria. However, we estimate that adoption of this proposed regulation will significantly increase the number of HUBZone SBCs, increase the number of HUBZone procurement actions by Federal agencies, and result in better and more efficient administration of the program. Ultimately, the program would move closer to meeting its statutory objectives of creating jobs and infusing capital into distressed communities.

There are no alternatives to implementing or changing the statutorily mandated items detailed in the proposed rule. Issuance of policy notices, for example, which are not published material like regulations, would hinder a SBC's access to this needed information. However, SBA did consider proposing that no regulatory changes, other than those required by the amendments to the HUBZone Act, be made to the HUBZone Program. We also considered the proposal of less stringent and more stringent regulatory changes that were either well-short of or well-beyond what is included in this proposal. Those alternatives were disregarded on the basis of market, economic and administrative considerations. The utilization of HUBZone SBCs, while growing, lags far behind congressional goals. The SBA has observed and investigated this phenomenon and has concluded that our current rules are insufficient to propel the program to the legislatively established levels. The alternatives to propose less or more stringent regulatory changes were abandoned by the SBA as they precluded the Agency from striking a balance between the competing considerations of program integrity, program viability and program resources.

In addition, the “program achievement costs” of implementing less stringent regulations or not changing the regulations are unacceptably high. At the other end of the spectrum, the potential increases in program achievement to be gained by writing more stringent rules are far outweighed by the exponential increase in administrative and operating costs necessary to enforce regulations of that nature.

Our proposal maintains the legislative intent of the HUBZone Program. It facilitates the growth of the program to congressionally established levels, and provides balanced give and take among the needs to manage the program, maintain program integrity, service the program's small business participants and meet the procurement needs of other Federal agencies.

The three most significant benefits to implementing the changes included in this proposal are:

1. Improved efficiency of the HUBZone Program and its added benefits to both small businesses and Federal agencies. SBA believes that the changes in this proposal will increase the base number of small businesses in the HUBZone Program and increase the viability and practicability of using the HUBZone Program by Federal agencies. We consider these to be mutually dependent in that the more firms that are in the program, the more Federal agencies will use the program, and when more Federal agencies use the program, more concerns will want to be able to take advantage of the benefits (contracts) available in the program. According to FPDC data, in fiscal year 2000 Federal agencies executed 3500 HUBZone actions worth over $650,000,000. We estimate that these changes in the rule have the potential to triple the number of participating concerns and the number of contract actions directed to the HUBZone Program.

2. Greater administrative efficiency and program integrity. SBA believes that this proposal will allow the program to be run more effectively with existing resources relative to program activity while simultaneously permitting SBA to more precisely focus the benefits of the program on the businesses and those areas of low income or high unemployment.

3. Greater contracting efficiency for Federal agencies. SBA believes that by increasing the level of activity and participation in the HUBZone Program, it will increase economic savings to the Federal government on HUBZone awards. By having more HUBZone eligible concerns, procuring agencies will have a larger base of HUBZone vendors, which will ultimately reduce the cost of HUBZone contracts through increased competition among HUBZone SBCs.

Pursuant to this proposed rule, SBA expects significant increases in the number of concerns participating in the HUBZone Program and in the number of contract dollars spent in the program by Federal agencies. To the extent that this materializes, there may be attendant cost increases to the government in terms of the costs of goods and services and slightly increased administrative costs. However, existing provisions of the Federal Acquisition Regulations concerning the determination of “fair and reasonable” pricing will mitigate any significant monetary costs to the government of this proposal.

The SBA does not believe these changes will result in significantly higher increased costs to HUBZone SBCs because SBA is attempting to streamline the program and ease burdensome restrictions on SBCs.

SBA anticipates that the distribution of contracts among different procurement vehicles will change. Non-HUBZone concerns currently participating in the Federal marketplace will be affected economically as a result of their not being eligible to compete for the contracts that are restricted to the HUBZone Program. These costs will vary based on the goods and services provided by newly eligible HUBZone SBCs. In some industries there may be very little impact, while in other industries there may be substantial impact.

Large Federal prime contractors will see some decrease in contract opportunities as Federal agencies begin to utilize the HUBZone Program. However, these changes are insignificant in light of the magnitude of Federal procurement versus HUBZone procurement. The Federal government annually spends about $200 billion on goods and services. However, in fiscal year 2000, the HUBZone Program accounted for only $650 million of that amount (less than half of one percent). This is significantly less than the estimated $1-6 billion goal set by Congress for the program.

Current and future HUBZone participants will see a tightening of definitions concerning contract performance. However, additional contracting opportunities and clearer regulations should offset these additional restrictions.

Most of the benefits of this proposal will accrue to HUBZone communities. Expanded eligibility for designated areas, increased HUBZone contacting and a refocusing of HUBZone subcontracting should result in more Federal contract dollars going to distressed communities.

Overall, projecting winners and losers from regulatory changes in the HUBZone Program cannot be done with certainty. SBA believes that increasing the efficiency and access to the HUBZone Program to both Federal agencies and small businesses will, over time, result in increased use of the program and a higher probability that the HUBZone Program will meet its original objectives to create jobs and increase capital investment in HUBZone communities. The HUBZone Act of 1997 increased the small business goal from 20% to 23%, to include the HUBZone contracting goal (maximum level 3%), and ensure that small business contracting would not be impacted. In every case, the mix of winners and losers will be affected by the decisions of contracting agencies to use or not to use the HUBZone Program.

SBA has determined that this rule, if adopted in final form, may have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. The amendments proposed in this rule involve revising several definitions, including the definition of “HUBZone” and “employee.” These amendments may affect a large percentage of the over 30,000 SBCs that SBA believes are eligible or will become eligible for certification as qualified HUBZone SBCs over the life of the program. Thus, SBA has prepared an Initial Regulatory Flexibility Analysis (IRFA) and has submitted a complete copy of the IRFA to the Chief Counsel for Advocacy of the SBA. The IRFA explains that this proposed rule will affect those SBCs that participate in Federal procurements, that hire leased or temporary employees, or are owned by Indian Tribal Governments or tribal corporations. The proposed rule will make it easier for such entities to apply to and become eligible for the program. For a complete copy of the IRFA, please contact Michael McHale at (202) 205-8885.

SBA has determined that this proposed rule imposes additional reporting or recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C., chapter 35. The rule authorizes SBA to request that a HUBZone SBC submit updated financial information and information relating to the number of its employees. This information is needed to comply with the statutory requirement that SBA report to Congress “the degree to which the HUBZone program has resulted in increased employment opportunities and an increased level of investment in HUBZones.” Pub. L. 105-135, Title VI, § 606, 111 Stat. 2635. As noted in the Supplementary Information above, SBA has certified over four thousand concerns into the HUBZone Program. Each of these concerns could be subject to this request for information. SBA estimates the burden of this collection of information as follows: SBA may request updated financial information and information relating to the number of employees from a qualified HUBZone SBC annually. SBA estimates that the time needed to complete this collection will average less than one-half hour. SBA estimates that the cost to complete this collection will be approximately $30 per hour. Thus, the estimated aggregated burden for each qualified HUBZone SBC is 0.5 hours per annum costing an estimated $15 for the year. Included in the estimate is the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing each collection of information.

SBA invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of SBA's functions, including whether the information will have a practical utility; (2) the accuracy of SBA's estimate of the burden of the proposed collections of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology.

Please send comments by the closing date for comment for this proposed rule to David Rostker, Office of Management and Budget, Office of Information and Regulatory Affairs, 725 17th Street, NW, Washington, DC 20503 and to Michael McHale, Associate Administrator for the HUBZone Empowerment Contracting Program, Small Business Administration, 409 Third Street, SW, Washington, DC 20416.

For purposes of Executive Order 12988, SBA has drafted this proposed rule, to the extent practicable, in accordance with the standards set forth in section 3 of that Order.

For purposes of Executive Order 13132, SBA has determined that this proposed rule has no federalism implications warranting the preparation of a Federalism Assessment.

Accordingly, for the reasons set forth above, SBA proposes to amend 13 CFR parts 121, 125 and 126, as follows:

The FAA invites comments on this proposed rule. You may submit whatever written data, views, or arguments you choose. You need to include the rule's docket number and submit your comments to the address specified under the caption ADDRESSES. We will consider all comments received on or before the closing date. We may amend this proposed rule in light of comments received. Factual information that supports your ideas and suggestions is extremely helpful in evaluating the effectiveness of this proposed AD action and determining whether we need to take additional rulemaking action.

The FAA specifically invites comments on the overall regulatory, economic, environmental, and energy aspects of this proposed rule that might suggest a need to modify the rule. You may view all comments we receive before and after the closing date of the rule in the Rules Docket. We will file a report in the Rules Docket that summarizes each contact we have with the public that concerns the substantive parts of this proposed AD.

If you want FAA to acknowledge the receipt of your comments, you must include a self-addressed, stamped postcard. On the postcard, write “Comments to Docket No. 2001-CE-28-AD.” We will date stamp and mail the postcard back to you.

A ground test for proper inertial reference unit (IRU) function revealed a wiring defect that is attributed to a manufacturing error on certain Honeywell, Inc. part number (P/N) HG1075AB05 and HG1075GB05 IRU's. This wiring defect disables the IRU's capability to detect a loss of primary input power and transition to backup battery input power in some installations.

The affected IRU's incorporate the following:

This condition, if not corrected, could result in loss of attitude, heading, and position reference and lead to the pilot making flight decisions that put the aircraft in unsafe flight conditions.

Honeywell, Inc. has issued the following:

These service bulletins include procedures for inspecting the affected IRU's for proper function. It also specifies having the IRU returned to Honeywell and modified.

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

This proposed AD would require you to inspect any affected IRU for proper function and remove the IRU either immediately or at a certain time depending on the result of the inspection.

We estimate that this proposed AD affects 80 airplanes in the U.S. registry.

We estimate the following costs to accomplish the proposed inspection and modification:

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

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

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

On Thursday, December 27, 2001, the Bureau of Indian Affairs published a document reopening the comment period on a proposed rule, 66 FR 66847, concerning Gaming on Trust Lands Acquired After October 17, 1988. The document published on December 27 incorrectly stated in the EFFECTIVE DATE section of the preamble that the deadline for receipt of comments was February 25, 2002. In addition, the caption EFFECTIVE DATE should have read DATES . Accordingly, on page 66847, in the third column, the EFFECTIVE DATE section is corrected to read “ DATES: Comments must be received on or before March 27, 2002.”.

A notice of proposed rulemaking and notice of public hearing that appeared in the Federal Register on November 14, 2001, (66 FR 57023), announced that a public hearing on the proposed regulations relating to incentive stock options and options granted under employee stock purchase plans would be held on March 7, 2002, in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Subsequently, the date of the public hearing has changed to May 14, 2002, at 10 a.m. in the IRS Auditorium. Outlines of oral comments must be received by April 23, 2002.

Section 503(a) of the Act permits a State to assume primacy for the regulation of surface coal mining and reclamation operations on non-Federal and non-Indian lands within its borders by demonstrating that its program includes, among other things, “a State law which provides for the regulation of surface coal mining and reclamation operations in accordance with the requirements of the Act * * *; and rules and regulations consistent with regulations issued by the Secretary pursuant to the Act.” See 30 U.S.C. 1253(a)(1) and (7). On the basis of these criteria, the Secretary of the Interior conditionally approved the Kentucky program on May 18, 1982. You can find background information on the Kentucky program, including the Secretary's findings, the disposition of comments, and conditions of approval of the Kentucky program in the May 18, 1982, Federal Register (47 FR 21404). You can also find later actions concerning Kentucky's program and program amendments at 30 CFR 917.11, 917.12, 917.13, 917.15, 917.16, and 917.17.

30 CFR 917.16(f) required a program change to 405 KAR 8:010 sections 5(1)(c) and (d) to require that information required by sections 2 and 3 of 405 KAR 8:030 and 8:040 be submitted on any format prescribed by OSM, as well as any format prescribed by the Cabinet. On December 19, 2000 (65 FR 79582), we removed the requirement that states must submit information on forms approved by OSM.

Under the provisions of 30 CFR 732.17(h), we are seeking your comments on whether the amendment satisfies the applicable program approval criteria of 30 CFR 732.15. If we approve the amendment, it will become part of the State program.

Send your written or electronic comments to OSM at the address given above. Your written comments should be specific, pertain only to the issues proposed in this rulemaking, and include explanations in support of your recommendations. We will not consider or respond to your comments when developing the final rule if they are received after the close of the comment period (see DATES ). We will make every attempt to log all comments into the administrative record, but comments delivered to an address other than the Lexington Field Office may not be logged in.

Please submit Internet comments as an ASCII or Word file avoiding the use of special characters and any form of encryption. Please also include “Attn: SPATS No. KY-231-FOR” and your name and return address in your Internet message. If you do not receive a confirmation that we have received your Internet message, contact the Lexington Field Office at (859) 260-8400.

We will make comments, including names and addresses of respondents, available for public review during normal business hours. We will not consider anonymous comments. If individual respondents request confidentiality, we will honor their request to the extent allowable by law. Individual respondents who wish to withhold their name or address from public review, except for the city or town, must state this prominently at the beginning of their comments. We will make all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, available for public review in their entirety.

If you wish to speak at the public hearing, contact the person listed under FOR FURTHER INFORMATION CONTACT by 4 p.m., e.s.t. February 12, 2002. If you are disabled and need special accommodations to attend a public hearing, contact the person listed under FOR FURTHER INFORMATION CONTACT. We will arrange the location and time of the hearing with those persons requesting the hearing. If no one requests an opportunity to speak, we will not hold a hearing.

To assist the transcriber and ensure an accurate record, we request, if possible, that each person who speaks at the public hearing provide us with a written copy of his or her comments. The public hearing will continue on the specified date until everyone scheduled to speak has been given an opportunity to be heard. If you are in the audience and have not been scheduled to speak and wish to do so, you will be allowed to speak after those who have been scheduled. We will end the hearing after everyone scheduled to speak and others present in the audience who wish to speak, have been heard.

If only one person requests an opportunity to speak, we may hold a public meeting rather than a public hearing. If you wish to meet with us to discuss the amendment, please request a meeting by contacting the person listed under FOR FURTHER INFORMATION CONTACT. All such meetings are open to the public and, if possible, we will post notices of meetings at the locations listed under ADDRESSES. We will make a written summary of each meeting a part of the administrative record.

This rule does not have takings implications. This determination is based on the analysis performed for the counterpart Federal regulation.

This rule is exempted from review by the Office of Management and Budget under Executive Order 12866.

The Department of the Interior has conducted the reviews required by section 3 of Executive Order 12988 and has determined that this rule meets the applicable standards of subsections (a) and (b) of that section. However, these standards are not applicable to the actual language of State regulatory programs and program amendments because each program is drafted and promulgated by a specific State, not by OSM. Under sections 503 and 505 of SMCRA (30 U.S.C. 1253 and 1255) and the Federal regulations at 30 CFR 730.11, 732.15, and 732.17(h)(10), decisions on proposed State regulatory programs and program amendments submitted by the States must be based solely on a determination of whether the submittal is consistent with SMCRA and its implementing Federal regulations and whether the other requirements of 30 CFR Parts 730, 731, and 732 have been met.

This rule does not have Federalism implications. SMCRA delineates the roles of the Federal and State governments with regard to the regulation of surface coal mining and reclamation operations. One of the purposes of SMCRA is to “establish a nationwide program to protect society and the environment from the adverse effects of surface coal mining operations.” Section 503(a)(1) of SMCRA requires that State laws regulating surface coal mining and reclamation operations be “in accordance with” the requirements of SMCRA. Section 503(a)(7) requires that State programs contain rules and regulations “consistent with” regulations issued by the Secretary pursuant to SMCRA.

On May 18, 2001, the President issued Executive Order 13211 which requires agencies to prepare a Statement of Energy Effects for a rule that is (1) considered significant under Executive Order 12866, and (2) likely to have a significant adverse effect on the supply, distribution, or use of energy. Because this rule is exempt from review under Executive Order 12866 and is not expected to have a significant adverse effect on the supply, distribution, or use of energy, a Statement of Energy Effects is not required.

This rule does not require an environmental impact statement because section 702(d) of SMCRA (30 U.S.C. 1292(d)) provides that agency decisions on proposed State regulatory program provisions do not constitute major Federal actions within the meaning of section 102(2)(C) of the National Environmental Policy Act (42 U.S.C. 4332(2)(C).

This rule does not contain information collection requirements that require approval by OMB under the Paperwork Reduction Act (44 U.S.C. 3507 et seq. ).

The Department of the Interior certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). The State submittal, which is the subject of this rule, is based upon counterpart Federal regulations for which an economic analysis was prepared and certification made that such regulations would not have a significant economic effect upon a substantial number of small entities. In making the determination as to whether this rule would have a significant economic impact, the Department relied upon the data and assumptions for the counterpart Federal regulations.

This rule is not a major rule under 5 U.S.C.804(2), the Small Business Regulatory Enforcement Fairness Act. This rule: (a) Does not have an annual effect on the economy of $100 million; (b) Will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local governmental agencies or geographic regions; and (c) Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. This determination is based upon the fact that the State submittal, which is the subject of this rule, is based upon counterpart Federal regulations for which an analysis was prepared and a determination made that the Federal regulation was not considered a major rule.

This rule will not impose an unfunded mandate on State, local, or tribal governments or the private sector of $100 million or more in any given year. This determination is based upon the fact that the State submittal, which is the subject of this rule, is based upon counterpart Federal regulations for which an analysis was prepared and a determination made that the Federal regulation did not impose an unfunded mandate.

This proposal addresses the local rule: YSAQMD Rule 2.32. In the Rules and Regulations section of this Federal Register , we are approving this local rule in a direct final action without prior proposal because we believe these SIP revisions are not controversial. If we receive adverse comments, however, we will publish a timely withdrawal of the direct final rules and address the comments in subsequent action based on these proposed rules. We do not plan to open a second comment period, so anyone interested in commenting should do so at this time. If we do not receive adverse comments, no further activity is planned. For further information, please see the direct final action.

The Hawaiian archipelago consists of eight main islands and the numerous shoals and atolls of the northwestern Hawaiian Islands. The islands were formed sequentially by basaltic lava that emerged from the earth's crust located near the current southeastern coast of the island of Hawaii (Stearns 1985). Ongoing erosion has formed steep-walled valleys with well-developed soils and stream systems throughout the chain. Kauai, geologically the oldest and most northwesterly of the eight main islands, is characterized by deep valleys, high rainfall, abundant vegetation, and numerous streams and springs.

The island of Kauai is 1,430 square kilometers (km 2 ) (552 square miles (mi 2 )) in size, the fourth largest of the main Hawaiian islands. Most of the land mass of Kauai was formed between 5.6 and 3.6 million years ago from one or more large shield volcanoes. More recent, secondary eruptions occurred over the eastern portion of the island as recently as the Pleistocene epoch, approximately 0.6 million years ago. Due to the age and climate of the island, Kauai is heavily eroded, with numerous steep, water-carved valleys and gulches.

The prevailing northeasterly trade winds are typically laden with moisture in the central Pacific latitudes where Kauai is located. Substantial precipitation is brought to the windward and interior portions of the island as a result of uplift and cooling of the warm, moist surface airmass as it flows over the steep topography of the island. The high elevation areas in the vicinity of the Alakai Plateau such as Mt. Waialeale (1,600 meters (m), 5,248 feet (ft)), are among the rainiest places on earth, receiving an average of 11.3 m (444 inches (in)) of precipitation annually (Juvik and Juvik 1998). This large volume of rainwater flows to perennial and intermittent streams and wetlands, and infiltrates into the island's aquifers. The west and southwest coastal areas of the island lie in the rain shadow of the Alakai Plateau and interior uplands, and these areas receive considerably less rain.

Kauai has at least 61 streams that are considered perennial, and a similarly large number of intermittent streams (Hawaii Stream Assessment (HSA) 1990). The Hanalei River, for example, is 27 km (17 mi) in length and is the largest stream system in the State by volume, with a long-term mean discharge of 216 cubic feet per second (34-year average calculated from 1964 to 1997). The headwaters of the Hanalei River are near the summit of Mt. Waialeale and the river flows towards Hanalei Bay on the island's north shore. The basalts that form the bulk of the main Hawaiian islands are porous and permeable, which facilitates infiltration and storage of groundwater. A lens-shaped body of groundwater (the basal lens) exists within these porous basalts at lower elevations. In some areas, the basal lens is partially confined by lower-permeability coastal alluvial and calcareous deposits (“caprock”). Recent groundwater investigations in the southern Lihue basin indicate that permeabilities of both the basalt and the younger rock from secondary eruptions are low, which allows the basal groundwater lens to thicken and thereby reach greater elevations than on the other Hawaiian islands (Izuka and Gingerich 1998). This causes basal groundwater to enter and support stream and spring flow up to relatively high elevations. Because the basal lens groundwater reserve is very large in size, streams, springs, and rock seeps (rheocrenes) fed by basal groundwater exhibit highly permanent, stable flows. In addition to the basal lens, smaller, perched groundwater systems form at higher-elevations above dense geologic features of low permeability such as those formed by layers of ash. Groundwater bodies may also form within higher elevation geologic formations as a result of confinement by dikes, which are vertical sheets of low-permeability rock that cut through more permeable basalt in some places. Groundwater bodies that form behind these perched and dike-confined aquifers contribute water to streams and springs at higher elevations, although these aquifers are smaller in volume than basal systems and their contribution to surface water would be expected to be reduced during prolonged drought (MacDonald et al. 1960).

Human-caused modifications to surface and ground water systems on Kauai and throughout Hawaii have profoundly altered natural hydrologic regimes. Plantation irrigation systems, built to support the cultivation of sugar cane over a century ago, transfer large volumes of water out of natural watercourses and into extensive systems of ditches, tunnels, flumes, reservoirs, and ultimately to fields. Historically, stream water diversion structures were typically built to be highly efficient in their ability to entrain water. These dams usually divert all flowing stream water at moderate to low flows, leaving the stream channel below the dam dry. At least one third of all Kauai's streams are significantly dewatered for agricultural and industrial water supplies (HSA 1990); in 1994, a total of 224.17 million gallons per day (mgd) was used island-wide for irrigation, and 93.72 mgd was used for generation of hydroelectric power (Wilcox 1996).

Four species of Lymnaeidae snails are native to Hawaii (Morrison 1968, Hubendick 1952). Three of these species are found on two or more of the eight main islands. The fourth species, Newcomb's snail, is restricted to the island of Kauai. Newcomb's snail is unique among the Hawaiian lymnaeids in that the shell spire typically associated with lymnaeids has been substantially reduced. The result is a smooth, black shell formed by a single, oval whorl, 6 millimeters (mm) (0.25 in.) long and 3 mm (0.12 in.) wide. A similar shell shape is found in a Japanese lymnaeid (Burch 1968), but Burch's study of chromosome number shows that Newcomb's snail has evolutionary ties to the rest of the Hawaiian lymnaeids, all of which are derived from North American ancestors (Patterson and Burch 1978). This parallel evolution of similar shell morphology in Japan and Hawaii from two distinct lineages of lymnaeid snails is of particular scientific interest.

At the present time, there is no generally accepted nomenclature for the genera of Hawaiian lymnaeids, although each of these snail species, including Newcomb's snail, is recognized as a well-defined species. Newcomb's snail was originally described as Erinna newcombi in 1855 by H. & A. Adams (see Hubendick 1952). Hubendick (1952) did not feel that the distinctive shell form (described above) and reduced structures of the nervous system of Newcomb's snail warranted a monotypic genus. In fact, Hubendick included all Hawaiian lymnaeids in the genus Lymnaea. Morrison (1968) contradicted Hubendick, and argued that the distinctive shell characters of Newcomb's snail supported the generic name Erinna . Burch (1968), Patterson and Burch (1978), Taylor (1988), and Cowie et al. (1995) all followed Morrison and referred to Newcomb's snail as Erinna newcombi. This is the currently accepted scientific name for Newcomb's snail.

The Newcomb's snail is restricted to freshwater. While the details of its ecology are not well known, Newcomb's snail probably has a life history similar to other members of the family. These snails generally feed on algae and vegetation growing on submerged rocks. Eggs are attached to submerged rocks or vegetation and there are no widely dispersing larval stages; the entire life cycle is tied to the stream system in which the adults live (Baker 1911). Very little is known about the biological or environmental factors that affect population size in Newcomb's snails. Important factors may include annual, multi-year or decadal changes in streams flows, severe-weather high-flow channel-scouring events, or periods of severe or prolonged drought. Dispersal of the snails in both upstream and downstream directions within a stream system probably plays an important function in gene flow and in colonizing or recolonizing suitable habitat, especially microhabitat that is protected from channel scour. Dispersal of Newcomb's snail between stream systems is likely very infrequent due to their freshwater habitat requirements, and historic dispersal probably relied on long-term erosional events that captured adjacent stream systems. It should be noted that this life history differs greatly from the freshwater Hawaiian neritid snails ( Neritina spp.), which have marine larvae that colonize streams following a period of oceanic dispersal (Kinzie 1990). It is likely that larvae of these neritid snails can disperse across the oceanic expanses that separate the Hawaiian Islands and colonize streams on any or all of these islands. This dispersal capacity is not available to the Newcomb's snail.

Based on past and recent field observations, the specific habitat requirements of the Newcomb's snail include fast-flowing perennial streams and associated springs, seeps, and vertical-to-overhanging waterfalls (Stephen Miller, U.S. Fish and Wildlife Service in litt. 1994a, 1994b; Polhemus et al. 1992; Burch 1968; and Hubendick 1952). Surveys of main stream channels of many of the perennial streams of Kauai indicate that the Newcomb's snail is found only in protected areas within main stream channels (Michael Kido, University of Hawaii, in litt. 1994). The limited occurrence of this snail in main stream channels is likely due to periodic channel scouring by sediment, rocks, and boulders that are moved downstream during runoff events due to the frequent heavy rains. Consequently, suitable habitat is generally associated with overhanging waterfalls located in the main channel of perennial streams supported by stable groundwater input, or with small, spring-fed tributaries. Another common element among the sites harboring snail populations is that the water source appears to be consistent and permanent, even during severe drought.

Five populations of Newcomb's snail were identified prior to 1925. These include populations from sites located in Waipahee Stream (a tributary to Kealia Stream), Wainiha River, Hanakapiai Stream, Hanakoa Stream, and Kalalau Stream. Three of these populations (Wainiha River, Hanakapiai Stream, and Hanakoa Stream) are now thought to be extirpated. Of the two remaining pre-1925 populations, one (Waipahee Stream) is small and the other (Kalalau Stream) is relatively large (see below). Since about 1993, surveys of approximately 50 sites located along numerous streams and their associated tributaries and springs on Kauai have located four previously unknown populations of Newcomb's snail (M. Kido, in litt. 1994). The current known range of Newcomb's snail is limited to very small sites located within six stream systems in north- and east-facing drainages on Kauai. They are: Kalalau Stream; Lumahai River; Hanalei River (four subpopulations); Waipahee Stream (a tributary to Kealia Stream); two subpopulations in Makaleha Stream (a tributary to Kapaa Stream); and the North Fork Wailua River.

No historic information is available on the population size of Newcomb's snail. However, recent reports indicate that two of the six known populations of Newcomb's snail are relatively large: the Kalalau Stream and Lumahai River populations. The Kalalau Stream population is found in the northeastern fork of Kalalau Stream on two permanent waterfalls and in the stream reach between the waterfalls. The high density of individuals in this population may be indicative of an undisturbed natural condition. The estimated maximum density at the base of the upper waterfall, including the area behind the falling water, is approximately 800 snails/square meter (m 2 ) (75 snails/square foot (ft 2 )) (S. Miller, in litt. 1994b). The total area occupied by these snails could not be accurately evaluated due to the extreme vertical orientation of the waterfall. Habitat used by these snails may be limited to the lower section of the waterfall that receives a high amount of spray from the falling water. Little information on specific size or area is currently available for the population of Newcomb's snail from the Lumahai River, although this population has been reported to be large (M. Kido, in litt. 1995a).

The population in Makaleha Stream is divided into two subpopulations. The subpopulation at the waterfall that forms the head of the main channel of Makaleha Stream is estimated at 30 snails/m 2 (2 to 3 snails/ft 2 ) distributed over 2 to 3 m 2 (21 to 32 ft 2 ) (M. Kido, in litt. 1994; M. Kido, pers. comm. 1995b). This is considerably smaller than the population in Kalalau Stream described above. The reasons for differences in these two populations are not known with certainty, but may be due to the presence or absence of non-native predators and biocontrol agents that feed on lymnaeid snails. The subpopulation that occupies Makaleha Springs (which forms a series of very small tributaries to Makaleha Stream) covers approximately 20 to 30 m 2 (212 to 318 ft 2 ) (S. Miller, in litt. 1994a). Snail densities at this site are difficult to estimate but may be as high as 20 to 30 snails/m 2 (1 to 3 snails/ft 2 ) (S. Miller, in litt. 1994a).

The sizes of three other populations of Newcomb's snail have been characterized as small. The population in the Waipahee tributary of Kealia Stream is estimated to cover 5 to 10 m 2 (53 to 106 ft 2 ) with a density of approximately 50 to 80 snails/m 2 (4 to 8 snails/ft 2 ) (Adam Asquith, U.S. Fish and Wildlife Service, in litt. 1994). The population of Newcomb's snail in the Hanalei River is divided into four subpopulations in the upper reach of this river (M. Kido, in litt. 1994, 1995a). One subpopulation has approximately 10 to 20 snails/m 2 (1 to 2 snails/ft 2 ) and occupies 2 to 3 m 2 (21 to 32 ft 2 ) (M. Kido, in litt. 1994). A second subpopulation supports approximately 25 snails. The two remaining subpopulations in the Hanalei River are reported to be small with very few snails (M. Kido, in litt. 1995a). The population found in the upper reaches of the North Fork of the Wailua River just upstream of a concrete agricultural water diversion intake, appears to vary over time but was made up of just a few scattered individuals during surveys in 1996 and 1997 (M. Kido, pers. comm. 1995b; M. Kido, pers. comm. 2000).

Based on these data, we estimate that the six known populations of Newcomb's snail have a total of approximately 6,000 to 7,000 individuals. The great majority of these snails, perhaps over 90 percent, are located in the populations found in Kalalau Stream and the Lumahai River.

The February 28, 1996, Federal Register Notice of Review of Plant and Animal Taxa That Are Candidates for Listing as Endangered or Threatened Species (61 FR 7596) included Newcomb's snail as a candidate species. Candidates are those species for which we have on file sufficient information on biological vulnerability and threats to support issuance of a proposed rule to list, but issuance of the proposed rule is precluded by other higher priority listing actions. We published a proposed rule on July 21, 1997 (62 FR 38953), to list this species as threatened. On January 26, 2000 (65 FR 4162), we published a final rule determining Newcomb's snail to be a threatened species.

In the final listing rule we determined that designation of critical habitat for the Newcomb's snail would be prudent because such a designation could benefit the species beyond listing as threatened by extending protection under section 7 of the Act to currently unoccupied habitat and by providing informational and educational benefits. Despite the prudency determination, we also indicated that we were not able to develop a proposed critical habitat designation for the Newcomb's snail at that time due to budgetary and workload constraints. However, on June 2, 2000, the U.S. Fish and Wildlife Service was ordered by U.S. District Court ( Conservation Council for Hawaii vs. Bruce Babbitt and Jamie Rappaport Clark , Civil No. 99-00603 SCM/BMK) to publish the critical habitat designation for Newcomb’s snail by February 1, 2002. The plaintiffs and the Service have entered into a consent decree stating that we will jointly seek an extension of this deadline to August 10, 2002 ( Center for Biological Diversity, et al. vs. Norton , Civil No. 01-2063 (JR) (D.D.C.); October 2, 2001). This proposed rule responds to the court's order.

On March 5, 2001, we mailed letters to 104 potentially interested parties informing them that the Service was in the process of designating critical habitat for the Newcomb's snail and requesting from them information concerning the range of the Newcomb's snail, observational life history accounts, current threats, and management activities on lands where Newcomb's snail currently occurs or occurred in the past. The letters contained a fact sheet describing the Newcomb's snail and included a map depicting the current range of the Newcomb's snail. Recipients of these letters included land owners and managers that own and manage land at the two sites where Newcomb's snails are found on private lands, and the various State agencies responsible for managing State of Hawaii lands and water resources at the other locations where the Newcomb's snail are known to occur. We received seven responses to our written request for information: four from various State agencies within the Hawaii Department of Land and Natural Resources (State Historic Preservation Office, Commission on Water Resource Management, Land Division, and the Office of the Chairperson of the Board of Land and Natural Resources), one from the Office of Hawaiian Affairs, one from the Office of the Mayor of Kauai County, and one from a Museum-affiliated researcher. The information provided in the responses was considered and incorporated into this proposed rule. In addition, on March 15, 2001, a public informational meeting was held on Kauai to provide an opportunity for the general public, non-governmental organizations, and representatives from government agencies to meet with Service personnel and discuss the critical habitat designation process.

Critical habitat is defined in section 3 (5)(A) of the Act as—(i) the specific areas within the geographic area occupied by a species, at the time it is listed in accordance with the Act, on which are found those physical or biological features (I) essential to the conservation of the species and (II) that may require special management considerations or protection; and (ii) specific areas outside the geographic area occupied by a species at the time it is listed, upon a determination that such areas are essential for the conservation of the species.

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

Regulations under 50 CFR 424.02(j) define special management considerations or protection to mean any methods or procedures useful in protecting the physical and biological features of the environment for the conservation of listed species. Special management and protection are not required if adequate management and protection are already in place. Adequate special management or protection may be provided by a legally operative plan/agreement that addresses the maintenance and improvement of the primary constituent elements important to the species and manages for the long-term conservation of the species. If any areas containing the primary constituent elements are currently being managed to address the conservation needs of the Newcomb's snail and do not require special management or protection, they would not meet the definition of critical habitat in section 3(5)(A)(i) of the Act and would not be included in this proposal.

In order for unoccupied habitat to be included in a critical habitat designation, it must be “essential to the conservation of the species.” Conservation is defined in section 3(3) of the Act as the use of all methods and procedures which are necessary to bring any endangered or threatened species to the point at which listing under the Act is no longer necessary.

Critical habitat receives protection under section 7 of the Act through the prohibition against destruction or adverse modification of critical habitat with regard to actions carried out, funded, or authorized by a Federal agency. Section 7 also requires conferences on Federal actions that are likely to result in the destruction or adverse modification of proposed critical habitat. Destruction or adverse modification is defined as the direct or indirect alteration that appreciably diminishes the value of critical habitat for the conservation of a listed species. Such alterations include, but are not limited to, alterations adversely modifying any of those physical or biological features that were the basis for determining the habitat to be critical. Aside from the added protection that may be provided under section 7, the Act does not provide other forms of regulatory protection to lands designated as critical habitat. Because consultation under section 7 of the Act does not apply to activities on private or other non-Federal lands that do not involve a Federal nexus, critical habitat designation does not afford any additional regulatory protection under the Act.

Critical habitat also provides non-regulatory benefits to the species by informing the public of areas that are important for species recovery and where conservation actions would be most effective. Designation of critical habitat can help focus conservation activities for a listed species by identifying areas that contain the physical and biological features that are essential for conservation of that species, and can alert the public as well as land-managing agencies to the importance of those areas. Critical habitat also identifies areas that may require special management considerations or protection, and may help provide protection to areas where significant threats to the species have been identified or help to avoid accidental damage to such areas.

When we designate critical habitat at the time of listing, as required under Section 4 of the Act, or under short court-ordered deadlines, we may not have the information necessary to identify all areas which are essential for the conservation of the species. Nevertheless, we are required to designate those areas we know to be critical habitat, using the best information available to us.

Within the geographic area of the species, we will designate only currently known essential areas. We will not speculate about what areas might be found to be essential if better information became available, or what areas may become essential over time. If the information available at the time of designation does not show that an area provides essential life cycle needs of the species, then the area will not be included in the critical habitat designation. Our regulations state that, “The Secretary shall designate as critical habitat areas outside the geographic area presently occupied by the species only when a designation limited to its present range would be inadequate to ensure the conservation of the species'' (50 CFR 424.12(e)). Accordingly, when the best available scientific and commercial data do not demonstrate that the conservation needs of the species require designation of critical habitat outside of occupied areas, we will not designate critical habitat in areas outside the geographic area occupied by the species.

Section 4(b)(2) of the Act requires that we take into consideration the economic impact, and any other relevant impact, of specifying any particular area as critical habitat. We may exclude areas from critical habitat designation when the benefits of exclusion outweigh the benefits of including the areas within critical habitat, provided the exclusion will not result in extinction of the species.

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

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

As required by the Act and regulations (section 4(b)(2) and 50 CFR 424.12), we used the best scientific information available to determine areas that contain the physical and biological features that are essential for the survival and recovery of the Newcomb's snail. This information included: Peer-reviewed scientific publications (Hubendick 1952, Morrison 1968, Patterson and Burch 1978, and Cowie et al. 1995); unpublished reports, field notes and correspondence by Service personnel, State agency biologists, and university researchers (M. Kido, in litt. 1994, 1995a, 1995b; S. Miller, in litt. 1994a, 1994b; A. Asquith, in litt. 1994; Donald Heacock, Hawaii Department of Land and Natural Resources Division of Aquatic Resources, pers. comm. 1994, D. Heacock pers. comm. 2001); and responses to the Newcomb's snail critical habitat outreach material mailed to Federal, State, and private land managers and land owners.

Most of the currently occupied Newcomb's snail sites are located in close proximity to one another. For example, the Hanalei river population is located just 3.2 km (1.9 mi) from the North Fork Wailua River population, and the Makaleha Springs population is just 2.5 km (1.6 mi) from the Waipahee Stream population. The exception is the population found in Kalalau Stream, which is located 11 km (6.3 mi) from the Lumahai River population, its nearest neighbor. Despite the relatively short distances between snail populations, the steep, rugged terrain and circular shape of the island creates conditions that allow the sites to be exposed to severe weather and other natural phenomena from markedly different directions. For example, the Hanalei River valley is aligned in a south-to-north direction, while the North Fork Wailua River valley extends from north-to-south. The two Newcomb's snail populations in these drainages are separated by a distance of a few km, but the ridge between them is over 900 m (2953 ft) in elevation. Because the terrain where Newcomb's snail is found is remote and extremely rugged, three of the six known populations (located in Kalalau Stream, Lumahai River and Waipahee Stream) have not been resurveyed since their initial discovery or rediscovery. Growth rates, life span, reproductive potential, age at first reproduction, dietary needs, and microhabitat preferences are not known. As noted above, accurate population estimates and the natural variability of populations over time are also not available. We are in the process of developing a draft recovery plan for this species. We anticipate the draft being available for public review and comment by the spring of 2002.

Because of the topography of the island and the prevalent weather patterns, torrential rains that may cause flooding, channel scour, and landslides are usually restricted to one or two quadrants of the island during any single storm event. Recent examples of such recurring natural phenomena include Hurricane Iniki (a category 4 hurricane which devastated Kauai on September 11, 1992), Hurricane Iwa (November 23, 1982), and the huge upper Olokele Valley landslide of October 31, 1981 (Fitzsimons et al. 1993, Jones et al. 1984). Each of these events markedly degraded or entirely eliminated large areas of potential Newcomb's snail habitat which had never been surveyed to locate snail populations. These physical conditions indicate that recovery through protection of the existing populations, plus reestablishment of populations in suitable areas of historical range that provide a wide geographical separation, is necessary for the ensured survival of the species. We therefore find that inclusion of three currently unoccupied areas identified as containing the primary constituent elements is essential to the conservation of the Newcomb's snail. These three sites are located in the northwest quadrant of the island, in drainages between the Lumahai River and Kalalau Stream populations. These three locations are identified as priority recovery units for translocation efforts in the draft Newcomb's snail Recovery Plan currently under preparation by the Service.

Complete recovery will require restoration of Newcomb's snails to areas of historically occupied habitat either through natural dispersal or translocation. Mere stabilization of Newcomb's snail populations within its currently occupied habitat will not achieve recovery of the species. The locations currently occupied by known Newcomb's snail populations are not sufficiently dispersed to consider the species safe from extinction. Existing known populations are found in remarkably small areas of only a few square meters of aquatic habitat, each of which is at risk from even a small, localized landslide or high flow event. Recovery actions are likely to include: Maintaining existing populations through regulatory mechanisms that protect water resources, watershed protection and stabilization efforts; control of non-native predators; and translocation of snails for the purpose of reestablishing additional self-sustaining populations in the wild. Recovery criteria will require persistence of populations of snails that are geographically separated in natural habitats to reduce the threat of total elimination of entire populations through catastrophic events such as hurricanes, landslides, fire, drought, and predator invasions.

We used several criteria to identify and select locations proposed for designation as critical habitat: (1) We began with all locations that are currently occupied by Newcomb's snail; (2) we then added three locations where Newcomb's snail was found historically but is now thought to be extirpated in the northwest extent of its range. In deciding which unoccupied areas to propose for designation as critical habitat, we gave preference to sites that (a) were most recently known to be occupied, or (b) provided the greatest geographic diversity to the array of locations under consideration for critical habitat. Two of these sites are on lands that are publicly owned (Na Pali Coast State Park and Hono O Na Pali Natural Area Reserve) and one site is on private land. These areas are in the northwest quadrant of the island and would presumably be most exposed to severe weather events such as hurricanes from the north and northwest. With the exception of the Kalalau Stream population, all other populations of Newcomb's snails are located in the northeast or southeast quadrants of the island, and these sites would be exposed to severe weather events such as hurricanes primarily from the east and northeast.

Nine critical habitat units are proposed, and these units are located within three stream complexes that share similar characteristics (Table 1). The stream complexes share common topography, watershed characteristics, population characteristics, and exposure to natural disasters. Each stream complex and the proposed critical habitat units within them are discussed below.

Within the proposed critical habitat unit boundaries, only waterbodies containing one or more of the primary constituent elements are proposed as critical habitat. Existing features and structures within the boundaries of the mapped units, such as dams, ditches, tunnels, flumes, and other human-made water features that do not contain the primary constituent elements, are not proposed as critical habitat. Federal actions limited to those areas, therefore, would not trigger a section 7 consultation unless they affect the species and/or primary constituent elements in adjacent critical habitat.

In accordance with section 3(5)(A)(i) of the Act and regulations at 50 CFR 424.12 in determining which areas to propose as critical habitat, we are required to consider those physical and biological features that are essential to the conservation of the species and that may require special management considerations and protection. Such features are termed Primary Constituent Elements, and include but are not limited to: space for individual and population growth and for normal behavior; food, water, air, light, minerals and other nutritional or physiological requirements; cover or shelter; space for breeding and reproduction; and habitats that are protected from disturbance and are representative of the historic geographical and ecological distributions of the species.

The primary constituent elements for the Newcomb's snail are those habitat components that are essential for the primary biological needs of foraging, sheltering, reproduction, and dispersal. These primary constituent elements are found in locations that, as a result of their geologic and hydrologic setting in the landscape, support permanently flowing streams, springs and seeps in mid-elevation locations in valleys on the island of Kauai. The primary constituent elements are: cool, clean, moderate-to fast-flowing water in streams, springs and seeps; the associated watersheds and hydrogeologic features that capture and direct water flow to these spring and stream systems; a hydrologic regime that supports perennial flow throughout even the most severe drought conditions; and stream channel morphology that provides protection from channel scour by having overhanging waterfalls, protected tributaries, or similar areas. All proposed critical habitat areas contain one or more of the primary constituent elements for the Newcomb's snail.

Locations proposed as critical habitat provide the full range of primary constituent elements needed by the Newcomb's snail, including foraging, sheltering, reproduction, and dispersal. Proposed critical habitat is limited to segments of perennial streams, their tributaries, and associated springs. Critical habitat boundaries were derived using topographical characteristics of the valley and nearby drainages immediately adjacent to locations where Newcomb's snails occur or occurred historically. The upper and lower elevations of critical habitat boundaries were chosen based upon the elevational distribution from each recorded population, or nearby watersheds where Newcomb's snails are found or were found historically. An area of upland riparian habitat adjacent to the actual aquatic sites is included in the designation of critical habitat. The size of the riparian area was determined based on the steepness of the adjacent valley walls, the number and size of adjacent small drainages, and the distance and elevation gain to adjacent ridge lines. The riparian areas are included in this critical habitat designation because the stream and spring systems that contain or may contain Newcomb's snails are dependent upon riparian areas for shade, moderating water flow, sediment retention, and nutrient inputs.

Areas proposed as critical habitat for the Newcomb's snail occur in nine separate watersheds and may include the main channel of a named stream, contiguous named and unnamed tributaries, and springs and seeps. Proposed critical habitat includes locations under State and private ownership and includes six sites currently known to be occupied and, in addition, includes three locations where the species was known to occur in the early 1900s, but where it is now thought to be extirpated.

Stream reaches are identified using elevations of the stream or tributary channels as upstream and downstream boundaries; these elevations were derived separately for each of the nine reaches and were delineated by recognizing unique physiographic features within each watershed such as waterfalls, small tributaries, and springs. A brief description of each stream reach and reasons for proposing it as critical habitat are presented below.

Streams of the Na Pali Coast are small, short, and flow over steep terrain. These streams are located in the northwest quadrant of the island, and, because they are located in smaller watersheds, they are directly exposed to coastal weather conditions. Rainfall in this area is lower than in the other watersheds proposed for critical habitat. The vegetation of the Na Pali Coast Stream Complex consists primarily of mixed-species mesic forest composed of native and introduced plant species. The higher elevations are primarily native forest, but the lower elevations are more disturbed and are dominated by introduced plant species. One of the three locations currently has snails present. The other two locations were known to harbor Newcomb's snail populations relatively recently but the species is now thought to be extirpated at those sites.

Critical habitat for Newcomb's snail is proposed for all flowing surface waters associated with the east fork of Kalalau Stream and its tributaries, including springs and seeps, from an elevation of 183 to 488 m (600 to 1,600 ft). This reach contains one of the two largest known populations of Newcomb's snails, and it contains the largest population of snails documented on public lands. At least two large, vertical or overhanging waterfalls in this reach appear to provide important refuge from high, channel-scouring flows (S. Miller, in litt. 1994b). This population is currently the most isolated of the Newcomb's snail populations, and it is separated from the nearest neighboring population, located in Lumahai River, by 11.8 km (7.3 mi). It is the only remaining population in the northwest quadrant of the island.

This unit is essential to the conservation of Newcomb's snail because it has the most robust population of snails ever recorded, as documented in Service surveys conducted in 1994. This unit is required to maintain one of the six known populations of snails. This stream segment is located within the Na Pali Coast State Park. Kalalau Stream has no water diversions.

Critical habitat for Newcomb's snail is proposed for all flowing surface waters associated with Hanakoa Stream and its tributaries, including springs and seeps, from an elevation of 122 to 457 m (400 to 1,500 ft). Historical records from the early 1900s indicate that Newcomb's snails were found in this stream; however, a recent survey failed to locate any snails (S. Miller in lit. 1994b). This reach is located on the northwest side of the island and is exposed to severe weather approaching from the northwest. Hanakoa Stream was heavily impacted by Hurricane Iniki in 1992 (Fitzsimons et al. 1993), prior to surveys intended to locate populations of Newcomb's snail.

This unit is essential to the conservation of Newcomb's snail because it was occupied until recently and is therefore one of only nine locations known with certainty to contain suitable habitat conditions for Newcomb's snails. For the reasons discussed above, it is essential to the conservation of the species to have stream sites in the northwest part of its range available for repopulation by Newcomb's snails either by natural dispersal or through experimental translocation. This stream segment is located within the Na Pali Coast State Park and is adjacent to the Honu O Na Pali Natural Area Reserve. Hanakoa Stream has no water diversions.

Critical habitat for Newcomb's snail is proposed for all flowing surface waters associated with Hanakapiai Stream and its tributaries, including springs and seeps, from an elevation of 183 to 457 m (600 to 1,500 ft). Historical records indicate that Newcomb's snail occurred in this reach; however, no recent surveys have located snails (M. Kido, in litt. 1994, A. Asquith pers. comm. 2001). This reach, like those in Kalalau and Hanakoa streams, is located in the northwest portion of the island and is exposed to severe weather from the north and northwest (Fitzsimons et al. 1993).

This unit is essential to the conservation of Newcomb's snail because it was occupied until recently and is therefore one of only nine locations known with suitable habitat conditions for Newcomb's snails. Because it is located in the northwest part of its range and has exhibited habitat conditions known to support Newcomb's snail in the recent past it should continue to be available for repopulation by Newcomb's snails either by natural dispersal or through experimental translocation. This stream segment is located within the Na Pali Coast State Park and is adjacent to the Honu O Na Pali Natural Area Reserve. Hanakapiai Stream has no water diversions.

The central rivers of Kauai are large relative to other streams in the State, and flow through relatively low-gradient watersheds. These rivers are located in the northern half of the island and, because their headwaters are located well inland and in large valleys, are exposed to weather conditions that are greatly influenced by the surrounding landmass. Rainfall in this area is higher than in the other watersheds proposed for critical habitat. The vegetation of the Central Rivers Complex watersheds consists primarily of mixed-species wet and mesic forest composed of native and introduced plant species. The higher elevations are primarily native forest, but the lower elevations are more disturbed and are dominated by introduced plant species. Two of the three locations currently have Newcomb's snail populations present, and the remaining location was known to harbor Newcomb's snail populations historically, but the species is now thought to be extirpated there.

Critical habitat for Newcomb's snail is proposed for all flowing surface waters associated with the Wainiha River and its tributaries, including springs and seeps, from an elevation of 244 to 457 m (800 to 1,500 ft). Historical records indicate that Newcomb's snail occurred in this stream, which is one of the largest stream systems in the State. Surveys have failed to locate snails (M. Kido, in litt. 1994). This site is located well inland in a steep-walled valley that is in the northwest portion of the island. The potential exposure to severe weather at this site is primarily from the north, but this exposure is greatly influenced by the precipitous valley walls, which rise some 975 m (3,200 ft) above the stream channel.

This stream segment is located on private land. A major water diversion structure is located at the 213 m (700 ft) elevation of Wainiha River below which the river channel is frequently dry. The dam is located approximately one kilometer downstream of the lower boundary of the area proposed for designation as critical habitat. This diversion removes an average of 50 million gallons per day (2.19 cubic meters per second) of water from the river at the 213 m (700 ft) elevation; this water is transported in ditches, tunnels, and flumes approximately 5.3 km (3.3 m) downstream to a powerhouse. This facility is the largest hydroelectric power producer in the State.

This unit is essential to the conservation of Newcomb's snail because it was historically occupied and is therefore one of only nine locations known with certainty to contain suitable habitat conditions for Newcomb's snails. This location should be considered for experimental repopulation by Newcomb's snails through translocation efforts.

Critical habitat for Newcomb's snail is proposed for all flowing surface waters associated with Lumahai River and its tributaries, including springs and seeps, from an elevation of 183 to 457 m (600 to 1,500 ft). One of the largest populations of Newcomb's snails ever documented occurs in this reach of Lumahai River and its tributaries. This stream segment is located on private land. Lumahai River has no water diversions.

This unit is essential to the conservation of Newcomb's snail because it has one of the most robust population of snails ever discovered, as recorded at the time of the discovery of the population by Hawaii Department of Land and Natural Resources division of Aquatic Resources personnel in 1994. This unit is required as critical habitat to maintain and recover one of the six known populations of Newcomb's snails.

Critical habitat for Newcomb's snail is proposed for all flowing surface waters associated with the Hanalei River and its tributaries, including springs and seeps, from an elevation of 122 to 457 m (400 to 1,500 ft), excluding ditches and flumes. The four sub-populations found within this stream system represent the largest number of Newcomb's snail sub-populations occurring within a single watershed. Segments of several named tributaries to the Hanalei River are included in this designation, and these include Kaapoko, Kaiwa, and Waipunaea Streams. This stream segment is located within the Halela Forest Reserve on State lands. The proposed critical habitat that contains the Hanalei River subpopulations of Newcomb's snail is essential to the conservation of the species because this area is needed to maintain one of the six existing known populations of snails.

A complex of stream diversion works that includes dams, ditches and tunnels, is found at the 378 m (1,240 ft) elevation of the Hanalei River, in the vicinity of the upper two main-channel Hanalei River sub-populations and upstream of the Kaapoko tributary sub-population at an elevation of 396 m (1,300 ft). These dams and associated ditches and tunnels historically diverted large volumes of water out of Kaapoko tributary and the Hanalei River to watersheds in the southeast portion of the island for irrigation use. Typical diversion structures in Hawaiian streams completely divert all of a streams flowing water during moderate-to low-flow periods, leaving the stream channel below the dam completely dry. The water diversion structures and associated ditches and tunnels in the upper Hanalei River and its tributaries are currently in disrepair and, although they locally alter flow characteristics, no water is diverted out of the Hanalei watershed at this time.

The streams proposed for critical habitat designation that flow towards the east and southeast portions of the island are intermediate in size. Rainfall is moderate in comparison to the other locations proposed as critical habitat. All three of the locations included in this stream complex are known to be occupied by extant populations of snails. The vegetation of the Eastside Mountain Stream watersheds consists primarily of mixed-species wet forest composed of native and introduced plant species. The higher elevations are primarily native forest, but the lower elevations are more disturbed and are dominated by introduced plant species.

Critical habitat for Newcomb's snail is proposed for all flowing surface waters associated with Waipahee Stream and its tributaries, including springs and seeps, from an elevation of 244 to 366 m (800 to 1,200 ft). Newcomb's snail was historically known to occur in Waipahee Stream, and a recent survey has confirmed the presence of Newcomb's snails within this reach. The proposed critical habitat that contains the Waipahee Stream population of Newcomb's snail is essential to the conservation of the species because this area is needed to maintain one of the six existing populations of snails.

Waipahee Stream is located on private land that, in the lower elevation areas, is undergoing a transition in use from commercial plantation-style sugarcane agriculture to pasture, forestry, diversified crops, and “ecotourism” use. Higher elevation areas of these private lands, such as where Newcomb's snails are found, are not used for agriculture and are relatively undisturbed. Water is diverted from Kealia Stream at several locations at lower elevations.

Critical habitat for Newcomb's snail is proposed for all flowing surface waters associated with Makaleha Stream and its tributaries, including Makaleha Springs, other springs, and seeps, from an elevation of 183 to 457 m (600 to 1,500 ft). The Makaleha Stream and Makaleha Springs Newcomb's snail populations have been surveyed several times in recent years. Two subpopulations are known to occur within this reach: Newcomb's snails are found within the complex of small tributary streams originating from Makaleha Springs, and a small number of snails are found upstream of the springs at a waterfall located in the Makaleha Stream main channel. This stream segment is located within the Kealia Forest Reserve on State lands. Water is diverted from Makaleha Stream and Kapaa Stream at several locations at lower elevations. The proposed critical habitat that contains the Makaleha Stream population of Newcomb's snail are essential to the conservation of the species because this area is needed to maintain one of the six existing populations of snails.

Critical habitat for Newcomb's snail is proposed for all flowing surface waters associated with the North Fork of the Wailua River and its tributaries, including springs and seeps, from an elevation of 305 to 427 m (1,000 to 1,400 ft), excluding ditches and flumes. This population was the most recent to be discovered and is apparently small. This is the only population located in the southwest quadrant of the island and is found in a watershed that flows to the west. This stream segment is located within the Lihue-Koloa Forest Reserve on State lands. Water is diverted from the North Fork Wailua River at an elevation of 326 m (1,070 ft), within the area proposed as critical habitat. This diversion removes approximately 13 mgd from the stream. The proposed critical habitat that contains the North Fork Wailua River population of Newcomb's snail is essential to the conservation of the species because this area is needed to maintain one of the six existing populations of snails.

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

Section 7(a) of the Act requires Federal agencies to evaluate their actions with respect to any species that is proposed or listed as endangered or threatened and with respect to its critical habitat, if any is designated or proposed. Regulations implementing this interagency cooperation provision of the Act are codified at 50 CFR part 402. Section 7(a)(4) requires Federal agencies to confer with us on any action that is likely to jeopardize the continued existence of a proposed species or result in destruction or adverse modification of proposed critical habitat. Conference reports provide conservation recommendations to assist the agency in eliminating conflicts that may be caused by the proposed action. The conservation recommendations in a conference report are advisory.

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

If a species is listed or critical habitat is designated, section 7(a)(2) of the Act requires Federal agencies to ensure that actions they authorize, fund, or carry out are not likely to jeopardize the continued existence of such a species nor to destroy or adversely modify its critical habitat. If a Federal action may affect a listed species or its critical habitat, the responsible Federal agency (action agency) must enter into consultation with us. Through this consultation we would ensure that the permitted actions do not destroy or adversely modify critical habitat.

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

Regulations at 50 CFR 402.16 require Federal agencies to reinitiate consultation on previously reviewed actions in instances where critical habitat is subsequently designated and the Federal agency has retained discretionary involvement or control over the action or such discretionary involvement or control is authorized by law. Consequently, some Federal agencies may request reinitiation of consultation with us on actions for which formal consultation has been completed if those actions may affect designated critical habitat.

Activities on Federal lands that may affect the Newcomb's snail or its critical habitat would require section 7 consultation; however, no populations of Newcomb's snail are known to exist on Federal land. Activities on private or State lands requiring a permit from a Federal agency, such as a permit from the U. S. Army Corps of Engineers (ACOE) under section 404 of the Clean Water Act, or some other Federal action, including funding (e.g., from the Federal Highway Administration, Federal Aviation Administration, Federal Emergency Management Agency, or Natural Resources Conservation Service) will also continue to be subject to the section 7 consultation process. Federal actions not affecting listed species or critical habitat and actions on non-Federal lands that are not federally funded or permitted do not require section 7 consultation.

Section 4(b)(8) of the Act requires us to evaluate briefly in any proposed or final regulation that designates critical habitat those activities involving a Federal action that may adversely modify such habitat or that may be affected by such designation. Activities that may result in the destruction or adverse modification of critical habitat include those that alter the primary constituent elements to an extent that the value of critical habitat for the conservation of the Newcomb's snail is appreciably reduced. We note that such activities may also jeopardize the continued existence of the species. Activities that may directly or indirectly adversely affect critical habitat include, but are not limited to:

(1) Destroying or degrading Newcomb's snail habitat (as defined in the primary constituent elements discussion) through activities adjacent to or upstream of Newcomb's snail habitat. Such activities may include reduction or redirection of stream or spring water flow, dam construction, channel alteration or realignment, substrate alteration, or other direct means (e.g., pesticide or herbicide application, waste discharge, groundwater withdrawal, groundwater contamination, reduction of groundwater recharge, etc.).

(2) Appreciably decreasing habitat value or quality through indirect effects (e.g., introduction or promotion of potential predators, diseases or disease vectors, vertebrate or invertebrate food competitors, invasive plant species, watershed degradation through overgrazing, augmentation of feral ungulate populations, an altered fire regime, or other activities that degrade water quality or quantity to an extent that it detrimentally affects stream structure and function).

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

Actions likely to result in the destruction or adverse modification of critical habitat would almost always result in jeopardy to the species concerned, particularly when the area of the proposed action is occupied by the species concerned. In those cases, critical habitat provides little additional protection to a species, and the ramifications of its designation are few or none. However, there is a potential benefit from critical habitat designation in unoccupied areas, and consultation under section 7 of the Act would be triggered in these areas if they were designated as critical habitat.

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

(1) Regulation of activities affecting waters of the United States by the ACOE under section 404 of the Clean Water Act;

(2) Regulation of water flows, damming, diversion, and channelization by Federal agencies;

(3) Development on private or State lands requiring permits from other Federal agencies, such as Department of Housing and Urban Development;

(4) Military training or similar activities of the U.S. Department of Defense on their lands or lands under their jurisdiction;

(5) Construction of communication sites licensed by the Federal Communications Commission;

(6) Road construction and maintenance, right-of-way designation, and regulation of agricultural activities by Federal agencies;

(7) Hazard mitigation and post-disaster repairs funded by the Federal Emergency Management Agency; and

(8) Other activities such as those funded or authorized by the U.S. Department of Agriculture (Forest Service, Natural Resources Conservation Service), Department of Transportation, Department of Energy, Department of the Interior (U.S. Geological Survey, National Park Service, Bureau of Reclamation), Department of Commerce (National Oceanic and Atmospheric Administration), Environmental Protection Agency, or any other Federal agency.

If you have questions regarding whether specific activities will constitute adverse modification of critical habitat, contact the Field Supervisor, Pacific Islands Ecological Services Field Office (see ADDRESSES section). Requests for copies of the regulations on listed wildlife and plants and inquiries about prohibitions and permits should be directed to the U.S. Fish and Wildlife Service, Endangered Species Act Section 10 Program at the same address.

Special management and protection are not required if adequate management and protection are already in place. Adequate special management or protection is provided by a legally operative plan/agreement that addresses the maintenance and improvement of the primary constituent elements important to the species and manages for the long-term conservation of the species. If any areas containing the primary constituent elements are currently being managed to address the conservation needs of the Newcomb's snail and do not require special management or protection, they would not meet the definition of critical habitat in section 3(5)(A)(i) of the Act and so would not be included in this proposed rule.

To determine if a plan provides adequate management or protection we consider: (1) Whether a current plan specifies the management actions and whether such actions provide sufficient conservation benefit to the species; (2) whether the plan provides assurances that the conservation management strategies will be implemented; and (3) whether the plan provides assurances that the conservation management strategies will be effective. In determining if management strategies are likely to be implemented, we consider whether: (a) A management plan or agreement exists that specifies the management actions being implemented or to be implemented; (b) the plan includes a timely schedule for implementation; (c) there is a high probability that the funding source(s) or other resources necessary to implement the actions will be available; and (d) the party(ies) have the authority and long-term commitment to the agreement or plan to implement the management actions, as demonstrated, for example, by a legal instrument providing enduring protection and management of the lands. In determining whether an action is likely to be effective, we consider whether: (a) The plan specifically addresses the management needs, including reduction of threats to the species; (b) such actions have been successful in the past; (c) the plan includes provisions for monitoring and assessment of the effectiveness of the management actions; and (d) adaptive management principles have been incorporated into the plan.

Based on information provided to us by land owners and managers to date, we will need to work with the land owners and managers to adequately manage to address the threats to the Newcomb's snail. Several areas are covered under current management plans and are being managed in a manner that meets some of the conservation needs of the Newcomb's snail, but we find that the management does not adequately reduce the primary threats to this species.

Section 4(b)(2) of the Act requires that we designate critical habitat on the basis of the best scientific and commercial information available, and that we consider the economic and other relevant impacts of designating a particular area as critical habitat. We may exclude areas from critical habitat designation if the benefits of exclusion outweigh the benefits of designation, provided the exclusion will not result in the extinction of the species. We will conduct an analysis of the economic impacts of designating these areas as critical habitat prior to a final determination. When completed, we will announce the availability of the draft economic analysis with a notice in the Federal Register .

Currently, no habitat conservation plans (HCPs) include the Newcomb's snail as a covered species. However, we believe that in most instances the benefits of excluding HCPs from critical habitat designations will outweigh the benefits of including them. In the event that future HCPs are developed within the boundaries of designated critical habitat, we will work with applicants to ensure that the HCPs provide for protection and management of habitat areas essential for the conservation of this species. This will be accomplished by either directing development and habitat modification to nonessential areas, or appropriately modifying activities within essential habitat areas so that such activities will not adversely modify the critical habitat.

We will also provide technical assistance and work closely with applicants throughout the development of any future HCPs to identify lands essential for the long-term conservation of the Newcomb's snail and appropriate management for those areas. The take minimization and mitigation measures provided under such HCPs would be expected to protect the essential habitat lands proposed as critical habitat in this rule. Furthermore, we will complete intra-Service consultation on our issuance of section 10(a)(1)(B) permits for these HCPs to ensure permit issuance will not destroy or adversely modify critical habitat.

We intend that any final action resulting from this proposal be as accurate and as effective as possible. Therefore, we solicit comments or suggestions from the public, other concerned governmental agencies, the scientific community, industry, or any other interested party concerning this proposed rule. We are particularly interested in comments concerning:

(1) The reasons why any area should or should not be determined to be critical habitat as provided by section 4 of the Act and 50 CFR 424.12(a)(1), including whether the benefits of designation will outweigh any threats to the species due to designation;

(2) Specific information on the number and distribution of Newcomb's snail and what habitat is essential to the conservation of this species and why;

(3) Whether lands within proposed critical habitat are currently being managed to address conservation needs of the Newcomb's snail;

(4) Land use practices and current or planned activities in the subject areas and their possible impacts on proposed critical habitat;

(5) Any foreseeable economic or other impacts resulting from the proposed designation of critical habitat, in particular, any impacts on small entities or families;

(6) Whether future development and approval of conservation measures (e.g., Conservation Agreements, Safe Harbor Agreements, etc.) should be excluded from critical habitat and, if so, by what mechanism; and

(7) Economic and other values associated with designating critical habitat for the Newcomb's snail, such as those derived from non-consumptive uses (e.g., hiking, camping, wildlife-watching, enhanced watershed protection, improved air quality, increased soil retention, “existence values,” and reductions in administrative costs).

If we receive information that any of the areas proposed as critical habitat are currently being managed to address the conservation needs of the Newcomb's snail and provide adequate management and protection, we may exclude such areas from the final rule because they would not meet the definition of critical habitat in section 3(5)(A)(i) of the Act. We may also exclude areas pursuant to section 4(b)(2) of the Act if information on impacts received during the public comment period or developed as part of the economic analysis indicates that the benefits of exclusion outweighs the benefits of inclusion, provided it will not result in extinction of the species. If you wish to comment on this proposed rule, you may submit your comments and materials concerning this proposal by any one of several methods (see ADDRESSES ):

Our practice is to make comments, including names and home addresses of respondents, available for public review during regular business hours. Respondents may request that we withhold their home address, which we will honor to the extent allowable by law. There also may be circumstances in which we would withhold a respondent's identity, as allowable by law. If you wish for us to withhold your name and/or address, you must state this request prominently at the beginning of your comment. However, we will not consider anonymous comments. To the extent consistent with applicable law, we will make all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, available for public inspection in their entirety. Comments and materials received will be available for public inspection, by appointment, during normal business hours at the Pacific Islands Fish and Wildlife Office in Honolulu.

In accordance with our policy published on July 1, 1994 (59 FR 34270), we will seek the expert opinions of at least three appropriate and independent specialists regarding this proposed rule. The purpose of such review is to ensure listing and critical habitat decisions are based on scientifically sound data, assumptions, and analyses. We will send copies of this proposed rule to these peer reviewers immediately following publication in the Federal Register . We will invite the peer reviewers to comment, during the public comment period, on the specific assumptions and conclusions regarding the proposed designations of critical habitat.

We will consider all comments and data received during the 60-day public comment period on this proposed rule during preparation of a final rulemaking. Accordingly, the final decision may differ from this proposal.

The Act provides for one or more public hearings on this proposal, if requested. Requests for public hearings must be made at least 15 days prior to the close of the public comment period. We will schedule public hearings on this proposal, if any are requested, and announce the dates, times, and places of those hearings in the Federal Register and local newspapers at least 15 days prior to the first hearing.

Executive Order 12866 requires each agency to write regulations and notices that are easy to understand. We invite your comments on how to make this proposed rule easier to understand, including answers to questions such as the following: (1) Are the requirements in the proposed rule clearly stated? (2) Does the proposed rule contain technical language or jargon that interferes with the clarity? (3) Does the format of the proposed rule (grouping and order of sections, use of headings, paragraphing, etc.) aid or reduce its clarity? (4) Is the description of the proposed rule in the SUPPLEMENTARY INFORMATION section of the preamble helpful in understanding the document? (5) Is the background information useful and is the amount appropriate? (6) What else could we do to make the proposed rule easier to understand?

Send a copy of any comments that concern how we could make this notice easier to understand to: Office of Regulatory Affairs, Department of the Interior, Room 7229, 1849 C Street, NW., Washington, DC 20240.

In accordance with Executive Order (E.O.) 12866, this document is a significant rule and has been reviewed by the Office of Management and Budget (OMB) in accordance with the four criteria discussed below. We are preparing a draft analysis of this proposed action, which will be available for public comment, to determine the economic consequences of designating the specific areas as critical habitat. The availability of the draft economic analysis will be announced in the Federal Register so that it is available for public review and comments.

(a) While we will prepare an economic analysis to assist us in considering whether areas would be excluded from critical habitat designation pursuant to section 4 of the Act, we do not believe this rule will have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, jobs, the environment, public health or safety, or State, local or tribal communities. Therefore, we do not believe a cost benefit and economic analysis pursuant to E.O. 12866 is required.

Under the Act, critical habitat may not be adversely modified by a Federal agency action; critical habitat does not impose any restrictions on non-Federal persons unless they are conducting activities funded or otherwise sponsored or permitted by a Federal agency. Section 7 of the Act requires Federal agencies to ensure that they do not jeopardize the continued existence of the species. Based on our experience with the species and its needs, we believe that any Federal action or authorized action that could potentially cause an adverse modification of the proposed critical habitat would currently be considered as jeopardy to the species under the Act in areas occupied by the species.

Accordingly, we do not expect the designation of areas as critical habitat within the geographical range of the species to have any incremental impacts on what actions may or may not be conducted by Federal agencies or non-Federal persons that receive Federal authorization or funding. The designation of areas as critical habitat where section 7 consultations would not have occurred but for the critical habitat designation may have impacts on what actions may or may not be conducted by Federal agencies or non-Federal persons who receive Federal authorization or funding that are not attributable to the species listing. We will evaluate any impact through our economic analysis (under section 4 of the Act: see the “Exclusions Under Section 4(b)(2)” section of this rule). Non-Federal persons who do not have a Federal sponsorship of their actions are not restricted by the designation of critical habitat.

(b) This rule is not expected to create inconsistencies with other agencies' actions. Federal agencies have been required to ensure that their actions do not jeopardize the continued existence of the Newcomb's snail since its listing in January of 2000. The prohibition against adverse modification of critical habitat is expected to impose few, if any, additional restrictions to those that currently exist in the proposed critical habitat on currently occupied lands. We will evaluate any impact of designating areas where section 7 consultations would not have occurred but for the critical habitat designation through our economic analysis. Because of the potential for impacts on other Federal agency activities, we will continue to review this proposed action for any inconsistencies with other Federal agency actions.

(c) This proposed rule, if made final, will not significantly impact entitlements, grants, user fees, loan programs, or the rights and obligations of their recipients. Federal agencies are currently required to ensure that their activities do not jeopardize the continued existence of the species, and, as discussed above, we do not anticipate that the adverse modification prohibition (resulting from critical habitat designation) will have any incremental effects in areas of occupied habitat on any Federal entitlement, grant, or loan programs. We will evaluate any impact of designating areas where section 7 consultations would not have occurred but for the critical habitat designation through our economic analysis.

(d) OMB has determined that this rule will raise novel legal or policy issues and, as a result, this rule has undergone OMB review.

Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. , as amended by the Small Business Regulatory Enforcement Act (SBREFA) of 1996), whenever an agency is required to publish a notice of rulemaking for any proposed or final rule, it must prepare and make available for public comment a regulatory flexibility analysis that describes the effects of the rule on small entities (i.e., small businesses, small organizations, and small government jurisdictions). However, no regulatory flexibility analysis is required if the head of the agency certifies the rule will not have a significant economic impact on a substantial number of small entities. SBREFA amended the Regulatory Flexibility Act to require Federal agencies to provide a statement of the factual basis for certifying that rule will not have a significant economic effect on a substantial number of small entities. SBREFA also amended the RFA to require a certification statement. In today's rule, we are certifying that the rule will not have a significant effect on a small number of small entities. However, should the economic analysis prepared pursuant to section 4(b)(2) of the ESA indicate otherwise, we will revisit this determination at that time. The following discussion explains our rationale.

Small entities include small organizations, such as independent non-profit organizations, and small governmental jurisdictions, including school boards and city and town governments that serve fewer than 50,000 residents, as well as small businesses. Small businesses include manufacturing and mining concerns with fewer than 500 employees, wholesale trade entities with fewer than 100 employees, retail and service businesses with less than $5 million in annual sales, general and heavy construction businesses with less than $27.5 million in annual business, special trade contractors doing less than $11.5 million in annual business, and agricultural businesses with annual sales less than $750,000. To determine if potential economic impacts to these small entities are significant, we consider the types of activities that might trigger regulatory impacts under this rule as well as the types of project modifications that may result. In general, the term significant economic impact is meant to apply to a typical small business firm's business operations.

To determine if the rule would affect a substantial number of small entities, we consider the number of small entities affected within particular types of economic activities (e.g., housing development, grazing, oil and gas production, timber harvesting, etc.). We apply the “substantial number” test individually to each industry to determine if certification is appropriate. In some circumstances, especially with proposed critical habitat designations of very limited extent, we may aggregate across all industries and consider whether the total number of small entities affected is substantial. In estimating the numbers of small entities potentially affected, we also consider whether their activities have any Federal involvement; some kinds of activities are unlikely to have any Federal involvement and so will not be affected by critical habitat designation.

Designation of critical habitat only affects activities conducted, funded, or permitted by Federal agencies; non-Federal activities are not affected by the designation. In areas where the species is present, Federal agencies are already required to consult with us under section 7 of the Act on activities that they fund, permit, or implement that may affect Newcomb's snail. If this critical habitat designation is finalized, Federal agencies must also consult with us if their activities may affect designated critical habitat. However, we do not believe this will result in any additional regulatory burden on Federal agencies or their applicants because consultation would already be required due to the presence of the listed species, and the duty to avoid adverse modification of critical habitat would not trigger additional regulatory impacts beyond the duty to avoid jeopardizing the species. An action that appreciably diminishes habitat for the conservation of the species may also jeopardize the continued existence of the species by reducing population numbers, decreasing reproductive success, or altering species distribution because of negative impacts to such habitats.

Even if the duty to avoid adverse modification does not trigger additional regulatory impacts in areas where the species is present, designation of critical habitat could result in an additional economic burden on small entities due to the requirement to reinitiate consultation for ongoing Federal activities. However, since Newcomb's snail has only been listed since January 2000, and there are no consultations involving the species, the requirement to reinitiate consultations for ongoing projects will not affect a substantial number of small entities.

When the species is clearly not present, designation of critical habitat could trigger additional review of Federal activities under section 7 of the Act. Because Newcomb's snail has been listed only a relatively short time and there have been no activities with Federal involvement in these areas during this time, there is no history of consultations based on the listing of this species. Therefore, for the purposes of this review and certification under the Regulatory Flexibility Act, we are assuming that any future consultations in the area proposed as critical habitat will be due to the critical habitat designation.

None of the proposed designation is on Federal lands. Six of the nine sites are on lands owned and managed by the State of Hawaii, which is not a small entity for purposes of this analysis. This includes units within the Na Pali Coast State Park, Hono O Na Pali Natural Area Reserve, the Halela Forest Reserve and the Lihue-Koloa Forest Reserve. All of these land areas are primarily managed for conservation of natural resources, including threatened and endangered species. In state lands, activities with no Federal involvement would not be affected by the critical habitat designation.

Three of the nine units of the proposed designation are on private land. On private lands, activities that lack Federal involvement would not be affected by the critical habitat designation. No activities of an economic nature currently occur on the private lands in the area encompassed by this proposed designation. These areas are in the State Conservation District and have a very limited range of allowable activities that could occur there under the State Conservation District Use permitting program. Because of the Conservation District zoning, and because the sites are so remote and inaccessible that helicopter transport is normally required for access, even small-scale commercial or agricultural development is unlikely. Therefore, Federal agencies such as the Economic Development Administration, which is occasionally involved in funding municipal projects, is unlikely to be involved in projects in these areas. On the Island of Kauai, previous consultations under section 7 of the Act between us and other Federal agencies most frequently involved the Department of the Navy, and the U.S. Army Corps of Engineers (ACOE). In the case of ACOE consultations, the applicant is often the County of Kauai which is not considered a small entity as defined here. ACOE consultations involve permits for discharge of fill material in wetlands or waterways and occur due to the presence of threatened or endangered species (primarily the five endangered Hawaiian waterbirds) that spend at least part of their life in aquatic habitats. Because the stream channels proposed for Newcomb's snail critical habitat are so remote, no consultations due to ACOE permits are anticipated for activities such as road construction. Construction of new diversion structures in the stream segments proposed for critical habitat, or rehabilitation of the abandoned water diversion structures in the proposed Hanalei critical habitat unit, is unlikely because agriculture practices have changed and irrigation demands have greatly diminished, but if such activities do occur and involve discharge of fill, ACOE permitting and section 7 consultation would be required.

In general, two different mechanisms in section 7 consultations could lead to additional regulatory requirements. First, if we conclude, in a biological opinion, that a proposed action is likely to jeopardize the continued existence of a species or adversely modify its critical habitat, we can offer “reasonable and prudent alternatives.” Reasonable and prudent alternatives are alternative actions that can be implemented in a manner consistent with the scope of the Federal agency's legal authority and jurisdiction, that are economically and technologically feasible, and that would avoid jeopardizing the continued existence of listed species or resulting in adverse modification of critical habitat. A Federal agency and an applicant may elect to implement a reasonable and prudent alternative associated with a biological opinion that has found jeopardy or adverse modification of critical habitat. An agency or applicant could alternatively choose to seek an exemption from the requirements of the Act or proceed without implementing the reasonable and prudent alternative. However, unless an exemption were obtained, the Federal agency would be at risk of violating section 7(a)(2) of the Act if it chose to proceed without implementing the reasonable and prudent alternatives. Secondly, if we find that a proposed action is not likely to jeopardize the continued existence of a listed animal species, we may identify reasonable and prudent measures designed to minimize the amount or extent of take and require the Federal agency or applicant to implement such measures through non-discretionary terms and conditions. We may also identify discretionary conservation recommendations designed to minimize or avoid the adverse effects of a proposed action on listed species or critical habitat, help implement recovery plans, or to develop information that could contribute to the recovery of the species.

Based on our experience with section 7 consultations for all listed species, virtually all projects—including those that, in their initial proposed form, would result in jeopardy or adverse modification determinations in section 7 consultations—can be implemented successfully with, at most, the adoption of reasonable and prudent alternatives. These measures, by definition, must be economically feasible and within the scope of authority of the Federal agency involved in the consultation. As we have no consultation history for Newcomb's snail, we can only describe the general kinds of actions that may be identified in future reasonable and prudent alternatives. These are based on our understanding of the needs of the species and the threats it faces, especially as described in the final listing rule and in this proposed critical habitat designation, as well as our experience with the listed terrestrial snails in Hawaii. The kinds of actions that may be included in future reasonable and prudent alternatives include conservation set-asides, management of competing non-native species and predators, restoration of degraded habitat, construction of protective fencing, and regular monitoring. As required under section 4(b)(2) of the Act, we will conduct an analysis of the potential economic impacts of this proposed critical habitat designation, and will make that analysis available for public review and comment before finalizing this designation.

In summary, we have considered whether this proposed rule would result in a significant economic effect on a substantial number of small entities. It would not affect a substantial number of small entities. The entire designation involves six sites on state lands and three sites on privately owned land; all of which are located in areas where likely future land uses are not expected to result in Federal involvement or section 7 consultations. As discussed earlier, the private lands are within the state Conservation District and no commercial activities are undertaken at those locations and, therefore, are not likely to require any Federal authorization. In these areas, Federal involvement—and thus section 7 consultations, the only trigger for economic impact under this rule—would be limited to a subset of the area proposed. The most likely Federal involvement would be through some unforeseen activity within a stream channel that would call for a permit or authorization from the ACOE. Because of the rugged terrain and extreme remoteness of the island interior, we anticipate that projects involving the ACOE and other Federal agencies will be infrequent within the proposed designation. This rule would result in project modifications only when proposed Federal activities would destroy or adversely modify critical habitat. While this may occur, it is not expected frequently enough to affect a substantial number of small entities. Therefore, we are certifying that the proposed designation of critical habitat for Newcomb's snail will not have a significant economic impact on a substantial number of small entities, and an initial regulatory flexibility analysis is not required. However, should the economic analysis of this proposed rule indicate that there may be significant economic impacts on a substantial number of small entities, we will revisit this determination.

On May 18, 2001, the President issued Executive Order 13211, which applies to regulations that significantly affect energy supply, distribution, and use. Executive Order 13211 requires agencies to prepare Statements of Energy Effects when undertaking certain actions. Though this proposed rule is a significant regulatory action under Executive Order 12866, it is not expected to significantly affect energy supplies, distribution, or use. Therefore, this action is not a significant energy action and no Statement of Energy Effects is required.

In accordance with the Unfunded Mandates Reform Act (2 U.S.C. 1501 August 25, 2000 et seq. ):

(a) This rule, as proposed, will not “significantly or uniquely” affect small governments. A Small Government Agency Plan is not required. Small governments will be affected only to the extent that any programs having Federal funds, permits, or other authorized activities must ensure that their actions will not adversely affect the critical habitat. However, as discussed above, these actions are currently subject to equivalent restrictions through the listing protections of the species, and no further restrictions are anticipated to result from critical habitat designation of occupied areas. In our economic analysis, we will evaluate any impact of designating areas where section 7 consultations would not have occurred but for the critical habitat designation.

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

In accordance with Executive Order 12630 (“Government Actions and Interference with Constitutionally Protected Private Property Rights”), we have analyzed the potential takings implications of designating critical habitat for the Newcomb's snail in a preliminary takings implication assessment. The takings implications assessment concludes that this proposed rule does not pose significant takings implications. Once the revised economic analysis is completed for this proposed rule, we will review and revise this preliminary assessment as warranted.

In accordance with Executive Order 13132, this proposed rule does not have significant Federalism effects. A Federalism assessment is not required. In keeping with the Department of the Interior and Department of Commerce policy, we requested information from appropriate State resource agencies in Hawaii. The designation of critical habitat for Newcomb's snail would have little incremental impact on State and local governments and their activities. The designations may have some benefit to these governments in that the areas essential to the conservation of this species are more clearly defined, and the primary constituent elements of the habitat necessary to the survival of the species are identified. While this definition and identification does not alter where and what federally sponsored activities may occur, it may assist these local governments in long range planning rather than waiting for case-by-case section 7 consultation to occur.

In accordance with Executive Order 12988, the Department of the Interior's Office of the Solicitor has determined that this rule does not unduly burden the judicial system and does meet the requirements of sections 3(a) and 3(b)(2) of the Order. We are proposing to designate critical habitat in accordance with the provisions of the Act. The proposed rule uses standard property descriptions and identifies the primary constituent elements within the designated areas to assist the public in understanding the habitat needs of the Newcomb's snail.

This rule does not contain any information collection requirements for which Office of Management and Budget approval under the Paperwork Reduction Act is required. An agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.

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

In accordance with the President's memorandum of April 29, 1994, “Government-to-Government Relations With Native American Tribal Governments” (59 FR 22951), Executive Order 13175, and the Department of the Interior's manual at 512 DM 2, we readily acknowledge our responsibility to communicate meaningfully with federally recognized Tribes on a government-to-government basis. The proposed designation of critical habitat for the Newcomb's snail does not contain any Tribal lands or lands that we have identified as impacting Tribal trust resources.

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

The primary author of this document is Gordon Smith, Pacific Islands Fish and Wildlife Office (see ADDRESSES section).

Accordingly, we propose to amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations as set forth below:

The Commission promulgates regulations governing the Pacific halibut fishery under the Convention between the United States and Canada for the Preservation of the Halibut Fishery of the North Pacific Ocean and Bering Sea (Convention), signed at Ottawa, Ontario, on March 2, 1953, as amended by a Protocol Amending the Convention (signed at Washington, DC, on March 29, 1979). The Commission’s regulations are subject to approval by the Secretary of State with concurrence of the Secretary of Commerce (Secretary) (16 U.S.C. 773b). Additional management measures may be developed by the North Pacific Fishery Management Council (Council) to allocate harvesting privileges among U.S. fishermen. The Halibut Act provides NMFS with authority to implement such allocation measures through regulatory amendments approved by the Secretary in consultation with the Council. In addition to the IPHC regulations, the commercial halibut fishery off Alaska is managed under the halibut Individual Fishing Quota (IFQ) Program implemented in 1995.

Each year the Commission staff assesses the abundance and potential yield of Pacific halibut using all available data from the commercial fishery and scientific surveys. Harvest limits for 10 regulatory areas are determined by fitting a detailed population model to the data from each area. A biological target level for total removals in a given area is then calculated by multiplying a fixed harvest rate, presently 20 percent, to the estimate of exploitable biomass. This target level is called the “constant exploitation yield” (CEY) for that area in the coming year. Each CEY represents the total allowable harvest (in net pounds) for that area, which cannot be exceeded. The Commission then estimates the sport and personal use, subsistence harvests, wastage, and bycatch mortalities for each area. These are subtracted from the CEY and the remainder may be set as the catch quota for each area’s directed commercial fixed gear fishery. Allocations to the guided recreational fishery are thus unrestricted within the CEY and represent an open-ended allocation to the guided recreational fishery from quota available to the commercial halibut fishery. Hence, as the guided recreational fishery expands, its harvests reduce the pounds available to be fished in the commercial halibut fishery and, subsequently, the value of quota shares (QS) in the IFQ Program.

The Council has discussed the expansion of the halibut guided recreational fleet since 1993, when the rapid increase in guided recreational vessel effort in some small Alaskan communities, such as Sitka, gave rise to concerns about localized depletion of the halibut resource and the potential reallocation of greater percentages of the CEY from the IFQ fishery to the guided recreational vessel fishery. In 1995, the Council developed the following six-point problem statement to direct its analysis of issues attending the guided recreational halibut fishery:

In September 1997, the Council took final action on two management actions affecting the halibut guided recreational fishery, culminating more than 4 years of discussion, debate, public testimony, and analysis. First, the Council approved recording and reporting requirements for the halibut guided recreational fishery. To implement this requirement, the Alaska Department of Fish and Game (ADF&G) Sport Fish Division, under the authority of the Alaska Board of Fisheries, instituted a Saltwater Charter Vessel Logbook (Logbook) in 1998. Information collected under this program provides fishery scientists and managers with the number of fish landed and/or released, the date and primary location of fishing, the hours and number of lines fished, the number of clients and crew fishing, the ownership of the vessel, and the identity of the vessel operator.

The logbook collects such information as the Council and ADF&G determined at the time to be essential for managing the guided recreational fishery harvests of halibut. It complements additional sportfish data collected by the State of Alaska (State) through the Statewide Harvest Survey (Harvest Survey), conducted annually since 1977, and the on-site (creel and catch sampling) surveys conducted separately by ADF&G in Southeast and Southcentral Alaska.

For the second management action in September 1997, the Council recommended GHLs for the halibut guided recreational fishery in Commission regulatory areas 2C and 3A. The GHLs were based on the guided recreational sector receiving 125 percent of its 1995 harvest. This amount was equivalent to 12.76 percent and 15.61 percent of the combined commercial/guided recreational halibut quota in areas 2C and 3A, respectively. The Council stated its intent that guided recreational harvests in excess of the GHL would not lead to a mid-season closure of the fishery, but instead would trigger other management measures to take effect in years following attainment of the GHL. The overall intent was to maintain a stable guided recreational season of historical length, using area-specific harvest reduction measures. If end-of-season harvest data indicated that the guided recreational sector likely would have reached or exceeded its area-specific GHL in the following season, NMFS would implement measures to slow down guided recreational halibut harvest. Given the 1-year lag between the end of the fishing season and the availability of that year’s harvest data, management measures in response to the guided recreational fleet’s meeting or exceeding the GHL would take up to 2 years to become effective. However, the Council did not recommend specific management measures to be implemented by NMFS if the GHL were reached.

In December 1997, the NMFS Alaska Regional Administrator informed the Council that the GHL could not be published as a regulation without specific management measures to give it effect. Further, because the Council had not recommended specific management measures by which to limit harvests if the GHL were reached, no formal approval decision by the Secretary was required for the Council’s proposed GHL policy, and it was not forwarded for review.

After being notified that its 1997 GHL policy recommendation would not be submitted for review, the Council initiated a public process to identify GHL management measures. The Council formed a GHL Committee to recommend alternative management measures for analysis that would constrain guided recreational harvests below the GHL. In April 1999, the Council identified the following for analysis: (1) a suite of GHL management measure alternatives; (2) alternatives that would change the GHL as approved in 1997; and (3) area-wide and local area management plan moratorium options under all alternatives. Several factors influenced the Council to recommend a program in which the implementation of harvest reduction measures would be triggered in fishing years subsequent to a year in which the GHL was achieved or exceeded. Among these factors were (1) the unavailability of reliable in-season catch monitoring for the halibut guided recreational fishery; (2) the impracticality of making in-season adjustments to the commercial IFQ fishery; and (3) the undesirability of shortening the current guided recreational fishing season, which the Commission’s annual halibut regulations have typically set between February 1 and December 31.

In February 2000, after 7 years of discussing the halibut guided recreational fishery, the Council took final action and voted 10-1 to recommend a redefined halibut guided recreational GHL and a system of management measures, the essential design of which was forged by representatives of both the commercial halibut fishery and halibut guided recreational fleet. As part of this action, the Council also recommended expediting review of a proposal to integrate the halibut guided recreational fisheries in Commission Regulatory Areas 2C and 3A into the existing commercial IFQ Program. The Council reviewed the analysis for that proposal in February, 2001, and, at its meeting the following April, it took final action to recommend implementation of halibut guided recreational IFQs. If approved by the Secretary, a halibut guided recreational IFQ program would supersede the management of the fishery under the GHL proposed in this action.

The GHL establishes a pre-season estimate of acceptable annual harvests for the halibut fishery in Commission areas 2C and 3A. To allow for limited growth of the guided recreational fleet while approximating historical harvest levels, the GHLs would be based on 125 percent of the average of 1995-99 guided recreational harvest estimates as reported by the ADF&G’s Harvest Survey. By weight, the GHLs would equate to 13.05 percent of the combined guided recreational and commercial quota in area 2C or 1,432,000 lb (649.5 mt) net weight; and 14.11 percent of the combined guided recreational and commercial quota in area 3A or 3,650,000 lb (1,655.6 mt) net weight.

The GHL would be responsive to annual reductions in stock abundance. In the event of a reduction in either area’s halibut stocks, as determined by the Commission, the area GHL would be reduced incrementally in proportion to the stock reduction. The reductions in the GHL would be made using percentages based on the average harvests from 1999 to 2000, as a reflection of recent harvest levels.

For example, should the halibut stock in area 2C fall 15 percent or more below its 1999-2000 average, the area 2C GHL would be reduced by 15 percent, from 1,432,000 lb (649.5 mt) to 1,217,200 lb (552.1 mt). Should the area stock abundance fall a further 10 percent or more, the GHL would also be reduced by an additional 10 percent from 1,217,200 lb (552.1 mt) to 1,095,480 lb (496.9 mt), and so on with further 10 percent reductions in abundance. As abundance returns to its pre-reduction level (the 1999-2000 average), the GHL would be increased by commensurate incremental percentage points to its initial level of 125 percent of the average of 1995-99 guided recreational harvest estimates.

In the case of increases in stock abundance, the GHL would never exceed its initial level of 1,432,000 lb (649.5 mt) in Area 2C and 3,650,000 lb (1,655.6 mt) in Area 3A. Setting the GHL at 125 percent of the 1995-1999 harvest estimates would allow for limited growth of the guided recreational fishery, but would effectively limit further growth at this level. NMFS invites public comment on this feature of the proposed action.