This rule has been determined under Executive Order 12866 to be not significant and was not reviewed by the Office of Management and Budget.

The Agency certifies that this rule will not have a significant economic effect on a substantial number of small entities, because it does not require additional actions by the borrower. The Agency, therefore, is not required to perform a Regulatory Flexibility Analysis as required by the Regulatory Flexibility Act, Pub. L. 96-534, as amended (5 U.S.C. 601). This rule does not impact small entities to a greater extent than large entities.

The environmental impacts of this proposed rule have been considered in accordance with the provisions of the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et seq. , the regulations of the Council on Environmental Quality (40 CFR Parts 1500-1508), and the FSA regulations for compliance with NEPA, 7 CFR parts 799, and 1940, subpart G. FSA completed an environmental evaluation and concluded the rule requires no further environmental review. No extraordinary circumstances or other unforeseeable factors exist which would require preparation of an environmental assessment or environmental impact statement. A copy of the environmental evaluation is available for inspection and review upon request.

This rule has been reviewed in accordance with E.O. 12988, Civil Justice Reform. In accordance with that Executive Order: (1) All State and local laws and regulations that are in conflict with this rule will be preempted; (2) no retroactive effect will be given to this rule; and (3) administrative proceedings in accordance with 7 CFR parts 11 and 780 must be exhausted before requesting judicial review.

As stated in the Notice related to 7 CFR part 3015, subpart V (48 FR 29115, June 24, 1983) the programs and activities within this rule do not require consultation with state and local officials under the scope of Executive Order 12372.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. L. 104-4, requires Federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments or the private sector of expenditures of $100 million or more in any one year. This rule contains no Federal mandates, as defined by title II of the UMRA; therefore, this rule is not subject to sections 202 and 205 of the UMRA.

The policies contained in this rule do not have any substantial direct effect on 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. Nor does this rule impose substantial direct compliance costs on state and local governments. Therefore, consultation with the states is not required.

The amendments to 7 CFR part 770 contained in this proposed rule require no revisions to the information collection requirements that were previously approved by OMB and assigned OMB control number 0560-0198 under the provisions of 44 U.S.C. chapter 35, nor do they significantly affect the aggregate information collection burden of the Agency. Removing the requirement for an appraisal and replacing it with a market value rent study report, which is much smaller in scope, reduces the amount of information provided by the appraiser at the expense of the borrower. The number of estimated annual respondents and the time burden to provide a copy of the report is the same.

The proposed changes affect the following program listed in the Catalog of Federal Domestic Assistance: 10.421—Indian Tribes and Tribal Corporation Loans.

This proposed rule revises and clarifies the write-down servicing policies of the Farm Service Agency's Indian Tribal Land Acquisition Loan Program. The first proposed change is to clarify “rental value”. Applicants and borrowers have misunderstood this term. Therefore, a definition is added in the proposed rule at § 770.2(b). A second revision changes the current appraisal needed to apply for a rental value write-down. An appraisal provides a substantial amount of information at the borrower's expense that is not necessary for calculating rental value write-downs. The information FSA needs can be provided by a rental value market study report prepared by a certified general appraiser. This change will dramatically reduce the borrower's costs. Also, since it requires less work for the appraiser, it reduces the appraiser's delay in completing the report, thus reducing FSA's processing time.

A third change is proposed in the eligibility requirements for both ITLAP land value and rental value write-downs. The eligibility requirements currently in the reamortization paragraph at § 770.10(a)(1) are being proposed for the write-down sections as well in §§ 770.10(e)(3)(v) and (e)(4)(v). These standards would require borrowers to submit complete application forms and establish that the delinquency is beyond the borrowers' control which cannot be brought current within one year and borrowers cannot meet the annual loan payments. These eligibility requirements will help assure that write-downs will be provided only to those financially distressed borrowers who are faced with circumstances outside their control. Several FSA loan servicing programs contain similar eligibility requirements. See 7 CFR 1951.909(c).

For rental value write-downs , the current rule at § 770.10(e)(4)(iv) prevents additional write-downs only when the specific ITLAP loan has received a rental value write-down previously and the specific loan has received a land value write-down within the last 5 years. The proposed rule would modify this paragraph to preclude an additional rental value write-down when any loan has ever received a rental value write-down or any loan has received a land value write-down within the last 5 years. The proposed revisions will limit FSA's losses when it provides rental value write-downs.

Similarly, the proposed rule seeks to add an additional loan eligibility requirement to § 770.3. Since write-downs are the consequence of a borrower's seriously deteriorating financial condition, the proposed rule adds a requirement for additional ITLAP loan eligibility requiring that borrowers must not have received an ITLAP rental value or land value write-down within the last five years. The additional eligibility requirement will enable FSA to make more creditworthy loans and decrease the possibility of further Agency losses.

The proposed rule will result in better service and substantial monetary and time savings for borrowers who apply for a write-down based on rental value. In addition, it will increase the protection of the taxpayers from potential loss and reduce the agency official's burden in administering the servicing of the Indian Tribal Land Acquisition Program Loans.

Accordingly, for the reasons stated in the preamble, 7 CFR part 770 is proposed to be amended as follows:

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

This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have retroactive effect. This proposed rule would not preempt any state or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

The Cotton Research and Promotion Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 12 of the Act, any person subject to an order may file with the Secretary a petition stating that the order, any provision of the plan, or any obligation imposed in connection with the order is not in accordance with law and requesting a modification of the order or to be exempted therefrom. Such person is afforded the opportunity for a hearing on the petition. After the hearing, the Secretary would rule on the petition. The Act provides that the District Court of the United States in any district in which the person is an inhabitant, or has his principal place of business, has jurisdiction to review the Secretary's ruling, provided a complaint is filed within 20 days from the date of the entry of ruling.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ) AMS has considered the economic impact of this action on small entities and has determined that its implementation will not have a significant economic impact on a substantial number of small businesses.

There are an estimated 10,000 importers who are presently subject to rules and regulations issued pursuant to the Cotton Research and Promotion Order. This proposed rule would affect importers of cotton and cotton-containing products. The majority of these importers are small businesses under the criteria established by the Small Business Administration. This proposed rule would lower the assessments paid by the importers under the Cotton Research and Promotion Order. Even though the assessment would be lowered, the decrease is small and will not significantly affect small businesses. The current assessment on imported cotton is $0.00862 per kilogram of imported cotton. The proposed assessment is $0.008267, a decrease of $0.000353 or a 4.1 percent decrease. From January through December 2002 approximately $24 million was collected. Should the volume of cotton products imported into the U.S. remain at the same level in 2003, one could expect the decreased assessment to generate approximately $23 million or a 4.1 percent decrease from 2002.

In compliance with Office of Management and Budget (OMB) regulations (5 CFR part 1320) which implement the Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq. ) the information collection requirements contained in the regulation to be amended have been previously approved by OMB and were assigned control number 0581-0093.

The Cotton Research and Promotion Act Amendments of 1990 enacted by Congress under Subtitle G of Title XIX of the Food, Agriculture, Conservation and Trade Act of 1990 on November 28, 1990, contained two provisions that authorized changes in the funding procedures for the Cotton Research and Promotion Program.

These provisions are: (1) The assessment of imported cotton and cotton products; and (2) termination of the right of cotton producers to demand a refund of assessments.

An amended Cotton Research and Promotion Order was approved by producers and importers voting in a referendum held July 17-26, 1991, and the amended Order was published in the Federal Register on December 10, 1991, (56 FR 64470). A proposed rule implementing the amended Order was published in the Federal Register on December 17, 1991, (56 FR 65450). Implementing rules were published on July 1 and 2, 1992, (57 FR 29181) and (57 FR 29431), respectively.

This proposed rule would decrease the value assigned to imported cotton in the Cotton Board Rules and Regulations (7 CFR 1205.510(b)(2)). This value is used to calculate supplemental assessments on imported cotton and the cotton content of imported products. Supplemental assessments are the second part of a two-part assessment. The first part of the assessment is levied on the weight of cotton produced or imported at a rate of $1 per bale of cotton which is equivalent to 500 pounds or $1 per 226.8 kilograms of cotton.

Supplemental assessments are levied at a rate of five-tenths of one percent of the value of domestically produced cotton, imported cotton, and the cotton content of imported products. The agency has adopted the practice of assigning the calendar year weighted average price received by U.S. farmers for Upland cotton to represent the value of imported cotton. This is done so that the assessment on domestically produced cotton and the assessment on imported cotton and the cotton content of imported products remain similar. The source for the average price statistic is “Agricultural Prices”, a publication of the National Agricultural Statistics Service (NASS) of the Department of Agriculture. Use of the weighted average price figure in the calculation of supplemental assessments on imported cotton and the cotton content of imported products yields an assessment that approximates assessments paid on domestically produced cotton in the prior calendar year.

The current value of imported cotton as published in the Federal Register (67 FR 36793) on May 28, 2002, for the purpose of calculating supplemental assessments on imported cotton is $.8422 per kilogram. This number was calculated using the annual weighted average price received by farmers for Upland cotton during the calendar year 2001 which was $0.382 per pound and multiplying by the conversion factor 2.2046. Using the Average Weighted Price received by U.S. farmers for Upland cotton for the calendar year 2002, which is $0.35 per pound, the new value of imported cotton is $0.7716 per kilogram. The proposed value is $.0706 per kilogram less than the previous value.

An example of the complete assessment formula and how the various figures are obtained is as follows:

One bale is equal to 500 pounds.

One kilogram equals 2.2046 pounds.

One pound equals 0.453597 kilograms.

A 500 pound bale equals 226.8 kg. (500 x .453597).

$1 per bale assessment equals $0.002000 per pound (1/500) or $0.004409 per kg. (1/226.8).

The 2002 calendar year weighted average price received by producers for Upland cotton is $0.35 per pound or $0.7716 per kg. (0.35 x 2.2046).

Five tenths of one percent of the average price in kg. equals $0.003858 per kg. (0.7716 x .005).

The total assessment per kilogram of raw cotton is obtained by adding the $1 per bale equivalent assessment of $0.004409 per kg. and the supplemental assessment $0.003858 per kg. which equals $0.008267 per kg.

The current assessment on imported cotton is $0.008620 per kilogram of imported cotton. The proposed assessment is $0.008267, a decrease of $0.000353 per kilogram. This decrease reflects the decrease in the Average Weighted Price of Upland Cotton received by U.S. Farmers during the period January through December 2002.

Since the value of cotton is the basis of the supplemental assessment calculation and the figures shown in the right hand column of the Import Assessment Table 1205.510(b)(3) are a result of such a calculation, the figures in this table have been revised. These figures indicate the total assessment per kilogram due for each Harmonized Tariff Schedule (HTS) number subject to assessment.

A thirty day comment period is provided to comment on the changes to the Cotton Board Rules and Regulations proposed herein. This period is deemed appropriate because this proposal would lower the assessments paid by importers under the Cotton Research and Promotion Order. Accordingly, the change proposed in this rule, if adopted, should be implemented as soon as possible.

For the reasons set forth in the preamble 7 CFR part 1205 is proposed to be amended as follows:

The Board's Regulation Y currently authorizes bank holding companies (“BHCs”) to engage as principal in forward contracts, options, futures, options on futures, swaps, and similar contracts, whether traded on exchanges or not, based on a rate, price, financial asset, nonfinancial asset, or group of assets (other than a bank-ineligible security) (“Commodity Contracts”). A BHC's authority to enter into Commodity Contracts is subject to certain restrictions that are designed to limit the BHC's activity to trading and investing in financial instruments rather than dealing directly in commodities. In particular, Regulation Y provides that a BHC may enter into a Commodity Contract only if (i) the commodity underlying the contract is eligible for investment by a state member bank; or (ii) the contract requires cash settlement; or (iii) the contract allows for assignment, termination, or offset prior to delivery or expiration (the “Contractual Offset Requirement”), and the BHC makes every reasonable effort to avoid taking or making delivery of the underlying commodity (the “Delivery Avoidance Requirement”). 1

The effect of these restrictions is to allow a BHC to engage as principal in derivative contracts involving any type of commodity (other than bank-ineligible securities) but to limit the authority of a BHC to physically settle derivative contracts. Under these restrictions, a BHC may take or make delivery on derivative contracts based on commodities that a state member bank is permitted to own. 2 For all other types of physically settled commodity derivatives, 3 a BHC must make reasonable efforts to avoid delivery, and the contract must have assignment, termination, or offset provisions.

The Bank Holding Company Act (“BHC Act”), as amended by the Gramm-Leach-Bliley Act (Pub. L. No. 106-102, 113 Stat. 1338 (1999)) (“GLB Act”), permits a BHC to engage in activities that the Board had determined were closely related to banking, by regulation or order, prior to November 12, 1999. A BHC must conduct these activities in accordance with the terms and conditions contained in such regulations and orders, unless modified by the Board.

Citigroup Inc., New York, New York (“Citigroup”), and UBS AG, Zurich, Switzerland (“UBS”), have asked the Board to modify the restrictions in Regulation Y to allow BHCs to enter into derivative contracts that typically result in taking and making delivery of title to, but not physical possession of, commodities on an instantaneous, pass-through basis (regardless of whether the contracts contain specific assignment, termination, or offset provisions). 4

In response to these requests, the Board has determined to seek public comment on the proposed rule described below.

As noted, Citigroup and UBS have urged the Board to permit BHCs to enter into Commodity Contracts that are settled by the BHC receiving and transferring title to the underlying commodity instantaneously, by operation of contract, and without taking physical possession of the commodity. Citigroup and UBS also have urged the Board to remove its regulatory requirement that BHCs only enter into Commodity Contracts that require cash settlement or specifically provide for assignment, termination, or offset prior to delivery.

These requests arise in large part because, in certain over-the-counter forward markets (U.S. energy markets, for example), the physically settled derivative contracts traded by market participants do not specifically provide for assignment, termination, or offset prior to delivery and, thus, do not conform to the Contractual Offset Requirement of Regulation Y. Moreover, participants in these markets generally settle the derivative contracts by temporarily taking and making delivery of title to the underlying commodities and, thus, do not comply with the Delivery Avoidance Requirement of Regulation Y.

Financial intermediary participants in these markets generally enter into back-to-back derivative contracts with third parties that effectively offset each other. That is, financial intermediaries in these markets that enter into a contract to buy, for example, a certain number of barrels of oil from a certain counterparty in a certain future month generally also will enter into another contract, prior to the expiration of the original contract, to sell the same number of barrels of oil to another counterparty in the same future month on substantially identical delivery terms. These market practices typically result in the creation of a chain of contractual relationships that begins with a commodity producer, passes through a number of intermediaries who have entered into matched contracts both to buy and sell the same commodity at the same future time, and ends with a purchaser that intends to take physical delivery of the commodity. On the maturity date of the derivative contracts, the producer will be responsible for making physical delivery and the ultimate buyer will be responsible for accepting physical delivery, while each intermediate participant in the chain will be deemed, by operation of contract, to have instantaneously received and transferred legal title to the commodity.

The Board adopted the restrictions in Regulation Y on the types of Commodity Contracts that a BHC may enter into as principal to reduce the potential that BHCs would become involved in and bear the risks of physical possession, transport, storage, delivery, and sale of bank-ineligible commodities. The restrictions ensure that the commodity derivatives business of a BHC is largely limited to acting as a financial intermediary that facilitates transactions for customers who use or produce commodities or are otherwise exposed to commodity price risk as part of their regular business.

Citigroup and UBS contend that a BHC that takes title to a commodity on an instantaneous, pass-through basis takes no risk that is greater than or different in kind from the risk that it has as a holder of a commodity derivative contract that meets the current requirements of Regulation Y. Instantaneous receipt and transfer of title to (but not physical possession of) commodities does not appear to involve the usual activities relating to, or risks attendant on, commodity ownership. Instead, such transactions involve the routine operations functions of passing notices, documents, and payments—functions that BHCs regularly perform in their role as financial intermediaries in other markets. Moreover, although BHCs that receive and transfer title to commodities on an instantaneous, pass-through basis face default risks, they are not significantly different than the default risks associated with cash-settled derivative contracts or derivative contracts that include the assignment, termination, or offset provisions required by Regulation Y.

In this light, the Board proposes to modify Regulation Y by changing the Delivery Avoidance Requirement to allow BHCs to take or make delivery of title to commodities underlying commodity derivative transactions on an instantaneous, pass-through basis.

In addition, the Board proposes to modify Regulation Y by changing the Contractual Offset Requirement to permit BHCs to participate in physically settled derivative markets where the standard industry documentation does not allow for assignment, termination, or offset. In particular, the proposal would allow BHCs to enter into Commodity Contracts that do not require cash settlement or specifically provide for assignment, termination, or offset prior to delivery so long as the contracts involve commodities for which futures contracts have been approved for trading on a U.S. futures exchange by the Commodity Futures Trading Commission (“CFTC”) (and the BHC complies with the revised Delivery Avoidance Requirement). Limiting this relief from the Contractual Offset Requirement to derivative contracts based on commodities approved for exchange trading (which are more likely to have reasonably liquid markets) is intended to provide some assurance that a BHC's reasonable efforts to avoid delivery would be successful. This requirement would, therefore, serve the same purpose as the current Contractual Offset Requirement, which facilitates the financial settlement of Commodity Contracts by requiring BHCs to have contractual rights to avoid taking or making delivery of the underlying commodities.

The proposed modifications of the derivatives provisions in Regulation Y would apply to all BHCs. Although the GLB Act prohibited the Board from adding to the list of activities permissible for all BHCs after November 11, 1999, the Act preserved the Board's authority to modify the terms and conditions that applied to such activities before that date. 5 The Board had authorized BHCs to engage as principal in commodity derivative transactions prior to November 11, 1999. The proposed rule would represent a relaxation of the current limitations that apply to a BHC's commodity derivative activities under Regulation Y and would not create a new permissible activity for BHCs.

The Board invites comment on all aspects of the proposed rule and particularly seeks comment on whether the proposed modifications to Regulation Y would expand the ability of BHCs to participate in commodity derivative markets without exposing them to significant additional risks.

Section 722 of the GLB Act requires the Board to use “plain language” in all proposed and final rules published after January 1, 2000. In light of this requirement, the Board has sought to present the proposed rule in a simple and straightforward manner. The Board invites comment on whether the Board could take additional steps to make the proposed rule easier to understand.

In accordance with section 3(a) of the Regulatory Flexibility Act (5 U.S.C. 603(a)), the Board must publish an initial regulatory flexibility analysis with this proposed rule. The proposed rule, if adopted, would expand the scope of permissible commodity derivatives activities for a bank holding company. A description of the reasons for the Board's decision to issue the proposed rule and a statement of the objectives of, and legal basis for, the proposed rule are contained in the supplementary material provided above.

The proposed rule would apply to bank holding companies regardless of their size and should enhance the ability of all bank holding companies, including small ones, to compete with other providers of financial services in the United States and to respond to changes in the marketplace in which banking organizations compete. The Board specifically seeks comment on the likely burden the proposed rule would have on bank holding companies, especially small bank holding companies.

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

For the reasons set forth in the preamble, the Board proposes to amend 12 CFR part 225 as follows:

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

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

Commenters wishing the FAA to acknowledge receipt of their mailed comments submitted in response to this proposal must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. 2002-SW-56-AD.” The postcard will be date stamped and returned to the commenter.

The Direction Generale De L'Aviation Civile (DGAC), the airworthiness authority for France, notified the FAA that an unsafe condition may exist on ECF Model SA330F, G, and J; AS332C, L, and L1; SA341G; SA342J; AS350B, BA, B1, B2, B3, and D; AS355E, F, F1, F2 and N; SA-365C, C1, and C2; SA-365N and N1; and AS-365 N2 and N3 helicopters. The DGAC advises of the discovery of a discrepancy in the computer program used to carry over the number of operating hours of parts following repair or overhaul, which is the cause of incorrect completion of FME's.

ECF has issued the following Alert Telexes for the helicopter model series specified: Nos. 65.110 for SA330, 62.00.58 for AS332, 65.60 for SA341 and SA342, 62.00.25 for AS350, 62.00.27 for AS355, 65.41 for SA-365C, and 62.00.19 for AS-365N, all dated August 13, 2002. These alert telexes specify correcting the FME to list the correct total number of operating hours and cycles for specified parts installed on dynamic components. After correcting the FME, if the parts have exceeded their life limit, the alert telexes specify removing or monitoring the parts. The DGAC classified these alert telexes as mandatory and issued AD No. 2002-452(A), dated September 4, 2002, to ensure the continued airworthiness of these helicopters in France.

These helicopter models are manufactured in France and are type certificated for operation in the United States under the provisions of 14 CFR 21.29 and the applicable bilateral agreement. Pursuant to the applicable bilateral agreement, the DGAC has kept the FAA informed of the situation described above. The FAA has examined the findings of the DGAC, reviewed all available information, and determined that AD action is necessary for products of these type designs that are certificated for operation in the United States.

This unsafe condition is likely to exist or develop on other helicopters of the same type designs registered in the United States. Therefore, the proposed AD would require, within 10 hours TIS, determining whether the specified rotor part and serial numbers are installed by reference to the FME and, if installed, correcting the hours TIS and cycles. If a part exceeds its life limit, the AD would require replacing the part within 50 hours TIS. The actions would be required for the parts listed in the appendix of the alert telexes described previously.

The FAA estimates that this proposed AD would affect 760 helicopters of U.S. registry. The FAA also estimates that it would take approximately 1 work hour to determine the part and serial number and 8 hours to replace each affected part on 38 helicopters (5 percent of the total affected helicopters), and that the average labor rate is $60 per work hour. Required parts would cost approximately $64,560 depending on which part would be replaced. Based on these figures, the total cost impact of the proposed AD on U.S. operators is estimated to be $2,517,120.

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

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

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

Commission Rule 1.35(a-1), in effect since August 27, 1998, allows bunched orders for eligible customers to be placed on a contract market without specific customer account identification either at the time of order placement or at the time of report of execution. Rule 1.35(a-1) limits the types of customers whose orders may be bunched and requires eligible account managers  1 to make certain disclosures regarding the allocation methodology, the standard of fairness of allocations, composite or summary data of the trades, and whether the account manager has any interest in the bunched order.

Before placing an order eligible for post-execution allocation, the account manager must identify, to the FCM clearing the order, each eligible customer account to which fills will be allocated. Account managers must provide written certification that they have identified the eligible customer accounts to the FCM. Foreign account managers must provide written certification from foreign authorities that they are subject to regulation.

Currently, account managers must create and timestamp an order origination document, identify the order by group identifier on the office or floor order tickets, and identify the transaction on contract market trade registers. The current rule also requires contract markets to adopt audit procedures to determine compliance with Rule 1.35(a-1).

In December 2000, Congress passed the Commodity Futures Modernization Act (“CFMA”). One of the mandates of the CFMA was for the Commission to review its rules relating to intermediaries with an eye to identifying areas where greater flexibility might be warranted. Since the passage of the CFMA, numerous industry participants have stated to Commission staff that the regulations related to bunched orders needed to be revisited for a number of reasons.

For example, enhancements in technology have made it easier for account managers to enter orders directly, thereby making certain aspects of the current requirements less workable. Similarly, as markets become more global in scope, account managers, both domestic and foreign, have claimed that the current bunched order requirements serve as a disincentive to using U.S. futures markets.

On February 2, 2001, the National Futures Association and the Futures Industry Institute issued an industry-wide study of issues associated with order transmission and order entry process by commodity professionals (“Best Practices Study”). 2 The study found that although the current rule increased flexibility over previously applicable requirements, many commenters in the study felt that the current rule caused “unnecessary processing delays without adding customer protections that otherwise could be realized through equally effective, less costly procedures.” 3 The rule the Commission is proposing today would adopt many of the approaches recommended in the Best Practices Study.

As noted, the current rule limits eligibility for bunching to certain types of sophisticated customers. The proposed rule would expand eligibility to all customers who provide written investment discretion to account managers. 4

Bunched orders can provide advantages to account managers and their customers by facilitating the prompt execution of small orders. Customers can benefit when a bunched order is placed because a bunched order is more likely to be executed at a single price than would be the case for a series of separate orders. In fact, customers may be disadvantaged in the quality of the timing and execution of their order if their orders are not bunched. With proper protections in place under the proposed rule, customers should be assured that their trade allocations are fair and equitable. Thus, the Commission proposes to eliminate existing Rule 1.35(a-1)(5)(ii). Under the proposed rule, all customer orders would be eligible for inclusion in bunched orders and thus all customers that have granted written discretion to an eligible account manager would be able to benefit from the advantages of bunched orders.

The Commission invites comment on whether the proposed expansion of the class of eligible customers is appropriate and whether the rule contains proper protections.

On a related manner, in 1997, the Commission issued an interpretive notice currently found at Appendix C to part 1 which allows bunching under certain circumstances. 5 Specifically, the Commission allows CTAs to bunch orders if they prefile their allocation procedures with a clearing member, NFA, or an exchange. The Commission requests comments on whether this interpretive notice should be modified in any way given the proposed changes to Rule 1.35(a-1)(5).

The Commission also is proposing to expand the class of account managers permitted to bunch orders. The current rule applies to, among others, commodity trading advisors (“CTAs”) and investment advisers (“IAs”) who are registered with the Commission or the Securities Exchange Commission (“SEC”). The Commission is proposing to allow CTAs and IAs who are exempt from registration or are excluded from the definition of CTA or IA by operation of law or rule to be eligible account managers. Such entities are generally exempt from registration because their clients are sophisticated investors. Exempt account managers, however, remain subject to the antifraud provisions of the Commodity Exchange Act and the Commission's regulations. The proposed rule would not apply to associated persons or Introducing Brokers exempt from Commission registration as CTAs pursuant to Rule 4.14(a)(3) and (6). 6

The current rule allows foreign advisors to be eligible account managers only if they are subject to regulation by a foreign regulator or self-regulatory organization that has been granted an exemption pursuant to Rule 30.10 7 or have entered into a Memorandum of Understanding or other arrangement with the Commission. As proposed, Rule 1.35(a-1)(5)(i)(D) would allow foreign advisors, who exercise discretionary trading authority over the accounts of non-United States persons, to be eligible account managers. 8

The Commission, of course, would retain antifraud and antimanipulation authority. The Commission notes that foreign advisers under the proposed rule would be foreign brokers or foreign traders subject to Commission Rule 15.05, which makes the FCMs through which foreign advisers make or cause to be made trades the agents of the foreign advisers for purposes of communications from the Commission. 9

As noted above, the proposal would expand the categories of entities permitted to bunch orders. The Commission requests comments on whether it is appropriate to permit these entities to be eligible account managers and whether the proposed protections are sufficient.

The Commission proposes to amend the disclosure requirement to be an information availability requirement based upon the fact that the Commission does not generally require registrants to affirmatively disclose the mechanics of the process of trading. 10

Current Rule 1.35(a-1)(5)(iii) specifies certain disclosure requirements that account managers must provide to customers. The proposal would replace these requirements with more general requirements that eligible account managers make certain information available to customers upon request. Account managers would be required to make the following information available to customers: (1) The general nature of the allocation methodology the account manager uses; (2) summary or composite data sufficient for that customer to compare its results with those of other relevant customers and, if applicable, any account in which the account manager has an interest; and (3) whether accounts in which the account manager may have any interest may be included with customer accounts in bunched orders eligible for post-execution allocation. The Commission is proposing to delete the requirement that account managers set forth the standard by which they will judge the fairness of the post-execution allocations as this essential requirement is provided by the description of the nature of the methodology and monitoring the account manager's post execution allocations for bias over time. More importantly, the Commission is proposing to retain the requirement that summary or composite data, sufficient to compare results with the results of other comparable customers, be made available to customers. In addition, the Commission proposes to add a requirement that summary or composite data about accounts in which the account manager has an interest be made available to customers.

The Commission invites comment on whether the proposal to change the disclosure requirement into an information availability requirement is appropriate.

Current Rule 1.35(a-1)(5)(iv) requires that account managers make certain certifications to FCMs. Both account managers and FCMs have claimed that this requirement is burdensome, an impediment to the use of current procedures and that it contributes to uncertainty regarding the relative responsibility of FCMs and account managers. Accordingly, the Commission is proposing to delete this requirement.

The proposed rule would retain the essential requirement contained in the existing rule that the allocation must be fair and equitable and that no account or group of accounts may receive consistently favorable or unfavorable treatment. The proposal, however, would make several changes to the provisions governing allocation.

First, as noted above, the Commission is proposing to expand eligibility to all customers who have provided written discretion to an eligible account manager. Thus, the proposal would eliminate existing Rule 1.35(a-1)(5)(v)(A) that requires that allocations only be made among eligible customers. Second, to minimize end-of-trading session congestion, the Commission proposes to amend existing Rule 1.35(a-1)(5)(v) by requiring account managers to provide allocation information to FCMs in a time sufficiently before the end of the trading session during which the order is executed to ensure that clearing records identify the ultimate customer for each trade. Third, the Commission proposes to modify the provision addressing independent review of allocations. The proposed rule would retain the requirement that allocation methodology must be sufficiently objective and specific to permit independent verification of the fairness of the allocation. 11 The Commission, however, is deleting the requirement that appropriate allocation of a given trade should be verifiable because that requirement, along with the accompanying recordkeeping requirement in Rule 1.35(a-1)(vi) required an assessment of “appropriateness” on an order-by-order basis. Industry representatives have stated that requiring an assessment of the fairness on an order-by-order basis may not result in the most efficient allocation of trades entered by an account manager. 12 Therefore, and consistent with the recommendation of the Best Practices Study, the proposed rule would require that verification of fairness be judged over time rather than on an order-by-order basis. 13

The proposal also would clarify the respective responsibilities of account managers and FCMs. Proposed Rule 1.35(a-1)(5)(iii) would explicitly state that allocation of bunched orders must be made by account managers, not FCMs. Eliminating the certification requirements will reduce the administrative and recordkeeping burden on FCMs. Of course, FCMs will still have responsibility to monitor for unusual account activity. In an interpretive notice accompanying NFA Compliance Rule 2-10, NFA notes “[t]he FCM has certain basic duties to its customers, including the duty to supervise its own activities in a way designed to ensure that it treats its customers fairly. Specifically, the FCM would violate this duty if it has actual or constructive notice that allocations for its customers may be fraudulent and fails to take appropriate action. The FCM with such notice must make a reasonable inquiry into the matter and, if appropriate, refer the matter to the proper regulatory authorities.” 14 Thus, FCMs will have an ongoing responsibility to monitor for unusual account activity. 15

The Commission requests comment on whether the proposed changes strike the appropriate balance with regard to judging allocations and assigning responsibilities to account managers and FCMs.

Current Rule 1.35(a-1)(5)(vi) requires account managers and FCMs to keep specific information to identify customer orders and reconstruct trades. Pursuant to the proposed rule, the Commission is clarifying that the fairness of an allocation will not be assessed on an order-by-order basis but on an assessment over time. If divergent performance among client accounts occurs over time, the account manager must have records to demonstrate that the divergent performance is attributable to factors other than unfair trade allocation. Thus, the proposed rule will allow account managers and FCMs greater flexibility in recordkeeping, while retaining the ability of the Commission to determine unfair trade allocation.

Specifically, the Commission proposes to eliminate existing Rule 1.35(a-1)(5)(vi) and to replace the recordkeeping requirement with a requirement that account managers make certain information available to any representative of the Commission, the United States Department of Justice, or other appropriate regulatory agency. The information would include the information required to be made available to customers pursuant to proposed Rule 1.35(a-1)(5)(ii) and the allocation information created pursuant to proposed Rule 1.35(a-1)(5)(iii). Under proposed Rule 1.35(a-1)(5)(iv)(C), FCMs that execute trades for orders eligible for post-execution allocation, or that carry accounts to which contracts executed for such orders are allocated, must maintain records that identify each order subject to post-execution allocation and the accounts to which contracts executed for such order are allocated. 16

For example, account managers employing post-execution allocation procedures generally would be expected to forward written allocation instructions to the clearing firm by facsimile or e-mail or other electronic means. 17 In those instances in which allocation instructions are furnished orally, the FCM must create a written record of the account manager's instructions. In each case, these records will be available to the Commission and other regulatory agencies or self-regulatory organizations. The Commission should be able to reconstruct trades from these records.

The proposal contains a provision to address cases in which account managers fail to provide the Commission with the information requested pursuant to proposed Rule 1.35(a-1)(5)(iv)(A) or proposed Rule 1.35(a-1)(5)(iv)(B). Specifically, the Commission may prohibit the account manager from submitting orders for execution on designated contract markets and prohibit FCMs from accepting orders from such account managers. Commission action under this provision would not require prior notice and hearing. The failure of an account manager to respond to a request for information under this rule would be sufficient. Any account manager that believes he or she is adversely affected by this process may use the procedures outlined in Rule 21.03(g). 18 Any prohibitions imposed pursuant to this Rule 1.35(a-1)(5)(iv)(D) would be without prejudice to other remedies the Commission or other regulatory body may have against the account manager in question for violation of the rule or any other legal requirements. 19

Existing Rule 1.35(a-1)(5)(vii) requires contract markets to adopt audit procedures to determine compliance with the certification requirements of Rule 1.35(a-1)(5)(vi). As noted above, the Commission is proposing to eliminate the recordkeeping and certification requirement and, accordingly, to eliminate Rule 1.35(a-1)(5)(vii).

Although, the Commission proposes to eliminate Rule 1.35(a-1)(5)(vii), the Commission will work with NFA to evaluate NFA's audit and examination process to identify any supervisory enhancements that will be necessary to ensure that customers are adequately protected and treated fairly.

The Commission has identified throughout this release issues on which it requests comment. In addition to the specific issues raised above, the Commission welcomes comment on any aspect of the proposed rule.

The Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601 et. seq., requires that agencies, in proposing rules, consider the impact of those rules on small businesses. The Commission has previously determined that contract markets, 20 futures commission merchants, 21 registered commodity pool operators  22 and large traders  23 are not “small entities” for purposes of the Regulatory Flexibility Act. The Commission has previously determined to evaluate within the context of a particular rule proposal whether all or some commodity trading advisors should be considered “small entities” for purposes of the Regulatory Flexibility Act and, if so, to analyze the economic impact on commodity trading advisors of any such rule at that time. 24 Commodity trading advisors who would place eligible orders pursuant to these procedures would likely do so for multiple clients and would likely be participating as investment managers in more than one financial market. Accordingly, the Commission does not believe that commodity trading advisors should be considered “small entities” for purposes of this rule.

Therefore, the Chairman, on behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that the action proposed to be taken herein will not have a significant economic impact on a substantial number of small entities.

This proposed rulemaking affects information collection requirements. As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), the Commission has submitted a copy of this section to the Office of Management and Budget for its review.

Rules Pertaining to Contract Markets and Their Members, OMB Control Number 3038-0022.

The expected effect of the proposed amended rule will be to not change the burden previously approved by OMB for this collection because, although it will result in an increase in the number of filings by account managers, it will result in a decrease in filings by FCMs.

Specifically:

Estimated number of respondents: 400.

Annual responses by each respondent: 1.

Estimated average hours per response: 13.

Annual reporting burden: 52 hours.

This annual reporting burden of 52 hours represents no change in the number of hours as a result of the proposed amendments to Rule 1.35(a-1).

Organizations and individuals desiring to submit comments on the information collection requirements should direct them to the Office of Information and Regulatory Affairs, OMB, Room 10235 New Executive Office Building, Washington, DC 20503; Attention: Desk Officer for the Commodity Futures Trading Commission.

The Commission considers comments by the public on this proposed collection of information in—

• Evaluating whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information will have a practical use;

• Evaluating the accuracy of the Commission's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;

• Enhancing the quality, usefulness, and clarity of the information to be collected; and

• Minimizing the burden of collection of information on those who are to respond, including through the use of appropriate automated electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g. , permitting electronic submission of responses.

OMB is required to make a decision concerning the collection of information contained in these proposed regulations between 30 and 60 days after publication of this document in the Federal Register . Therefore, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication. This does not affect the deadline for the public to comment to the Commission on the proposed regulations.

Copies of the information collection submission to OMB are available from the CFTC Clearance Officer, 1155 21st Street N.W., Washington, DC 20581, (202) 418-5160.

Section 15(a) of the Act requires the Commission to consider the costs and benefits of its action before issuing a new regulation under the Act. By its terms, section 15(a) does not require the Commission to quantify the costs and benefits of a new regulation or to determine whether the benefits of the proposed regulation outweigh its costs. Rather, section 15(a) simply requires the Commission to “consider the costs and benefits” of its action.

Section 15(a) further specifies that costs and benefits shall be evaluated in light of five broad areas of market and public concern: Protection of market participants and the public; efficiency, competitiveness, and financial integrity of futures markets; price discovery; sound risk management practices; and other public interest considerations. Accordingly, the Commission could in its discretion give greater weight to any one of the five enumerated areas and could in its discretion determine that, notwithstanding its costs, a particular rule was necessary or appropriate to protect the public interest or to effectuate any of the provisions or to accomplish any of the purposes of the Act.

The proposed amendments are intended to facilitate increased flexibility and consistency, and to rationalize application of Commission regulations to entities subject to other regulatory frameworks. The Commission is considering the costs and benefits of these rules in light of the specific provisions of section 15(a) of the Act:

1. Protection of market participants and the public.

While certain of the proposed amendments are expected to lessen the burden imposed upon FCMs and account managers, market participants and the public will be protected by requirements in the allocation procedure. Accordingly, the proposed amendments should have no effect on the Commission's ability to protect market participants and the public.

2. Efficiency and competition.

The proposed amendments are expected to benefit efficiency in the commodity futures and options markets, resulting in greater liquidity and market efficiency.

3. Financial integrity of futures markets and price discovery.

The proposed amendments should have no effect, from the standpoint of imposing costs or creating benefits, on the financial integrity or price discovery function of the commodity futures and options markets.

4. Sound risk management practices.

The proposed amendments should have no effect on sound risk management practices.

5. Other public interest considerations.

The proposed amendments will also take into account certain effects of legislative changes and the passage of time.

After considering these factors, the Commission has determined to propose the amendments discussed above. The Commission invites public comment on its application of the cost-benefit provision. Commenters also are invited to submit any data that they may have quantifying the costs and benefits of the proposal with their comment letters.

In consideration of the foregoing, and pursuant to the authority contained in the Commodity Exchange Act and, in particular, sections 5, 5a, 5b, 6(a), 6b, 8a(7), and 8c, 7 U.S.C. 7, 7a, 7b, 8(a), 8b, 12a(7), 12a(9), and 12c, the Commission hereby proposes to amend Part 1 of Chapter I of Title 17 of the Code of Federal Regulations as follows:

The collection of information contained in this notice of proposed rulemaking has been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, W:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of information should be received by May 13, 2003.

Comments are specifically requested concerning:

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

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

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

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

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

The collection of information in these proposed regulations is in §§ 1.1502-35T(c), 1.1502-35T(c)(5)(iii), 1.1502-35T(f)(2) and 1.1502-35T(g)(3). This information is required by the IRS to verify compliance with section 1502. This information will be used to determine whether the amount of tax has been calculated correctly. The collection of information is required to properly determine the amount permitted to be taken into account as a loss. The respondents are corporations filing consolidated returns. The collection of information is required to obtain a benefit.

Estimated total annual reporting and/or recordkeeping burden: 15,000 hours.

Estimated average annual burden per respondent and/or recordkeeper: 2 hours.

Estimated number of respondents and/or recordkeepers: 7,475.

Estimated annual frequency of responses: On occasion.

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

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

Temporary regulations in the rules and regulations section of this issue of the Federal Register amend the Income Tax Regulations (26 CFR part 1) relating to section 1502. The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations contains a full explanation of the reasons underlying the issuance of the proposed regulations.

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It is hereby certified that these regulations do not have a significant impact on a substantial number of small entities. This certification is based on the fact that these regulations will primarily affect affiliated groups of corporations, which tend to be larger businesses. Moreover, the number of taxpayers affected and the average burden are minimal. Therefore, a Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, these regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small businesses.

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

A public hearing has been scheduled for June 20, 2003, beginning at 10 a.m. in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT portion of this preamble.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments must submit written or electronic comments and an outline of the topics to be discussed and the time to be devoted to each topic (a signed original and eight copies) by May 30, 2003. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

The principal author of these regulations is Aimee K. Meacham of the Office of Associate Chief Counsel (Corporate), IRS. However, other personnel from the IRS and Treasury Department participated in their development.

Accordingly, proposed regulations published on October 23, 2002 (67 FR 65066), are withdrawn, and 26 CFR part 1 is proposed to be amended as follows:

Wyoming botanist Robert Dorn discovered Yermo xanthocephalus (desert yellowhead) while conducting field work in the Beaver Rim area of central Wyoming in 1990. Dorn discovered a small population of an unusual species of Composite (Asteraceae). Dorn's closer examination revealed that the species was unknown to science and represented a new genus. Dorn (1991) named his discovery Y. xanthocephalus, or literally “desert yellowhead.”

Yermo xanthocephalus is a tap-rooted, glabrous (hairless) perennial herb with leafy stems to 30 centimeters (cm) (12 inches (in)) high. The leathery leaves are alternate, lance-shaped to oval, 4 to 25 cm (1.5 to 10 in) long and often folded along the midvein. Leaf edges are smooth or toothed. Flower heads are many (25 to 180) and crowded at the top of the stem. Each head contains four to six yellow disk flowers (ray flowers are absent) surrounded by five yellow, keeled involucre (whorled) bracts (small leaves beneath the flower). The pappus (the outer whorl of flowering parts) consists of many white bristles.

Yermo xanthocephalus flowers from mid-June to August and may flower a second time in September. The start and end of flowering, as well as the duration of flowering, vary between years and seem dependent upon temperature and other climatic variables. Fruits have been observed from mid-July to early September, but do not persist after the flower has dried and bracts ruptured (Heidel 2002).

Yermo xanthocephalus appears to be an obligate outcrosser (cannot self-pollinate) (Heidel 2002) and is likely pollinated by visually-oriented insects attracted to the yellow flowers (Dorn 1991). Several Hymenopterans (order including sawflies, ants, bees, and wasps) have been collected from Y. xanthocephalus heads, and small skipper butterflies noted on them, although the identity of these potential pollinators is not currently known (Heidel 2002). No work has been done to document the status of these potential pollinators in this vicinity. However, of the skippers known from Fremont County that most likely use Y. xanthocephalus habitat, all have Nature Conservancy Global Ranks of G-4 (apparently secure globally) and G-5 (demonstrably secure globally) with no special conservation or management needs identified by Opler et al. (1995).

The fruits of Yermo xanthocephalus are single-seeded achenes (dry fruit) with a parachute-like pappus of slender bristles. At maturity, the fruits are exposed to the wind, which may disperse the seed over long distances. However, the clustered distribution pattern of Y. xanthocephalus, often along colluvial (rock debris) washes, suggests that dispersal distances are short and perhaps fostered by water erosion (Heidel 2002).

The species is restricted to shallow deflation hollows in outcrops of Miocene sandstones of the Split Rock Formation (Love 1961, Van Houten 1964). These hollows have been shaped by the microscale dynamics of local winds, as well as erosional processes, in an unstable portion of the landscape on sites lacking desert pavement and with low vegetation exposed to strong-wind (Bynum 1993). Within the hollows, Yermo xanthocephalus occurs on low slopes, rim margins, colluvial fans, and bottoms at elevations generally ranging from 2,050 to 2,060 meters (m) (6,720 to 6,760 feet (ft)) (Heidel 2002).

Yermo xanthocephalus grows in recent soils derived from sandstones and limestones of the Split Rock Formation at its junction with the White River Formation (Heidel 2002). Bynum (1993) found these are shallow, loamy soils of the Entisol order that can be classified as a coarse-loamy over sandy-skeletal mixed Lithic Torriorthent. In contrast, the surrounding sagebrush community occupies deep sandy loam of the Aridisol order. The surface stratum is mildly alkaline with little organic matter, while subsurface layers have no accumulation of humus, clay, gypsum, salts, or carbonates (Bynum 1993).

The shape and orientation of the wind-excavated hollows may allow for accumulation of moisture from sheet wash coming off adjacent areas, so the hollows may be more mesic (moist) than surrounding areas (R. Scott, Central Wyoming College, pers. comm. 2002). The vegetation of these sites is typically sparse, with vegetative cover often as low as 10 percent, and consists primarily of low-cushion plants and scattered clumps of Indian ricegrass ( Stipa hymenoides ). Species common to these communities include Arenaria hookeri (Hooker's sandwort), Astragalus kentrophyta (thistle milkvetch), Hymenoxys acaulis (stemless hymenoxy), and Phlox muscoides (squarestem phlox) (Fertig 1995). A more complete list of frequently associated species can be found in Heidel (2002).

Yermo xanthocephalus is currently known from a single population with plants widely scattered over an area of 20 ha (50 ac). This population consists of one large subpopulation at the base of Cedar Rim and two smaller subpopulations within 0.4 kilometer (km) (0.25 mile (mi)). Originally, Dorn observed approximately 500 plants within 1 ha (2.5 ac) in 1990 on Federal land managed by the BLM (Dorn 1991). The estimate of the plant population's size has increased from 500 in 1990 to 11,967 plants in 2001 (R. Scott, Central Wyoming College, pers. comm., 2001). However, Dorn's original estimate of 500 plants was an ocular estimate and did not include two nearby subpopulations, while Scott has been conducting extensive population censuses in all three subpopulations using a monitoring grid (Heidel 2002). Therefore, the difference in estimates may be largely the result of different techniques used over differing acreages and cannot be assumed to show a significantly increasing trend in population size between 1990 and 2001. Based upon Scott's data collected from 1995 through 2001, the actual population count has increased from 9,293 in 1995 to 11,967 in 2001, possibly in response to higher than normal precipitation over the study period (R. Scott, Central Wyoming College, pers. comm., 2001).

Surveys conducted between 1990 and 1994 failed to locate additional populations of Yermo xanthocephalus on outcrops of the Split Rock, White River, Wagon Bed, and Wind River formations in the Cedar Rim and Beaver Rim areas of southern Fremont County (Fertig 1995). No additional populations were located during follow-up surveys conducted during 1997 along Beaver Rim in Fremont and Natrona counties, as well as in the Shirley Basin in Carbon County (Heidel 2002). Additional surveys were conducted during 2001 in segments of Cedar Rim and Beaver Rim and surrounding areas not previously surveyed; however, no new populations were located (Heidel 2002).

Yermo xanthocephalus is vulnerable to extinction from randomly occurring, catastrophic events, as well as even small-scale habitat degradation, due to its small population size and limited geographic range. As described by Fertig (1995), the species is characterized by a long-lived perennial growth form, adaptation to severe habitats, and low annual reproductive output. This low reproductive output would make the species increasingly vulnerable to extinction due to chance events if the population size declined, because it is unlikely that the species would exhibit a high rate of population growth, even if environmental conditions improved after such an event.

While not known to have impacted Yermo xanthocephalus to date, oil and gas development could impact the population of Y. xanthocephalus. The known population is encompassed by, and adjacent to, oil and gas leases with no specific lease stipulations included to protect the plant. Construction of well pads, access roads, and pipelines through occupied habitat, as well as seismic exploration of oil and gas producing formations, could result in direct destruction or crushing of plants and soil compaction and erosion. Additionally, a network of roads and well pads in the area would result in more human intrusion into what is now a relatively remote area.

The presence of locatable minerals in the area and their potential extraction could also impact the known Yermo xanthocephalus population. Uranium and zeolites, a locatable mineral with properties useful in water softening, manufacturing of catalysts, pollution control, and removal of radioactive products from radioactive waste, are found in the Beaver Rim area (BLM 1986). Private parties can stake a mining claim, explore for, and extract locatable minerals in accordance with the 1872 General Mining Law. Such activity should it occur in the vicinity of the known population could result in direct destruction of individual plants and habitat.

Recreational off-road vehicle use threatens to crush Yermo xanthocephalus plants and compact or erode soil. A two-track, four-wheel-drive vehicle trail leading to an abandoned oil well bisects the population and is open to recreationists driving four-wheel-drive trucks and other smaller all-terrain vehicles.

The Yermo xanthocephalus population is in a grazing allotment pasture where trampling may occur as cattle casually move along “cow trails” or other tracks while grazing or moving to water. Focused or prolonged use of the area by cattle could result in damage to the habitat and individual plants. Scott (2000) noted signs of moderate wild horse traffic adjacent to the habitat. However, at this time, grazing has not been documented as impacting the Y. xanthocephalus population.

Additionally, the invasion of non-native species, particularly noxious weeds, could accompany many of the activities discussed above. The resulting changes to the vegetative community could have significant adverse impacts on the population of Yermo xanthocephalus.

The current BLM Lander Resource Management Plan, which covers the area proposed for designation as critical habitat for Yermo xanthocephalus, was approved in 1987, 3 years prior to the species' discovery. Therefore, the Resource Management Plan does not specifically mention the plant. In response to the proposed listing of Y. xanthocephalus, the BLM developed a draft conservation agreement, assessment, and strategy for the plant (BLM 1998) in order to promote its conservation and recovery on BLM lands. However, the document was never finalized or signed.

In the 6 years that complete population counts have been done, the Yermo xanthocephalus population has appeared stable (Heidel 2002). Current conditions appear favorable to the species and its habitat. Even small changes to the habitat, such as protective fencing around the plant's location, or changes in livestock and wildlife use or numbers, may have negative impacts by altering water flow patterns and trails that currently carry water and soil flows. These kinds of changes also may allow native and non-native plant species to out-compete Y. xanthocephalus for water and habitat.

In the plant Notice of Review published on September 30, 1993 (58 FR 51144), we designated Yermo xanthocephalus a Category 2 species for potential listing under the Endangered Species Act (Act) of 1973, as amended (16 U.S.C. 1531 et seq. ). At that time, Category 2 species were those for which data in our possession indicated listing was possibly appropriate, but for which substantial data on biological vulnerability and threats were not currently known or on file to support a proposed rule. On February 28, 1996, we published a Notice of Review in the Federal Register (61 FR 7596) that discontinued the designation of Category 2 species as candidates. At that time, this species was upgraded to candidate status based upon its small population size, the failure to locate additional populations in similar habitats during additional surveys during 1994, and further analysis of threats. A candidate is a species for which we possess substantial information on biological vulnerability and threats to support preparation of a listing proposal.

On November 24, 1997, we received a petition from the Biodiversity Legal Foundation and Biodiversity Associates alleging that Yermo xanthocephalus warranted emergency listing. On December 22, 1997, we notified the petitioners that emergency listing was not appropriate because BLM regulations provided some conservation measures for the species, and current exploratory oil and gas activities near the known occupied habitat of Y. xanthocephalus were being coordinated with our staff in the Wyoming Field Office. In addition, we notified the petitioners that petitions for candidate species are considered second petitions, because candidate species are species for which we have already decided that listing is warranted. Therefore, no 90-day finding was required for Biodiversity Legal Foundation's petition.

We published the proposed rule to list Yermo xanthocephalus as threatened in the Federal Register on December 22, 1998 (63 FR 70745). In the proposed rule, we found that the designation of critical habitat was not prudent because the minimal benefits of such designation would be far outweighed by the increase of threats from over collection or other human activities. We believed critical habitat designation would provide no additional benefit to the species beyond that conferred under sections 7 and 9 of the Act by listing.

In a proposed rule published in the Federal Register on September 5, 2000 (65 FR 53691), we reopened the comment period. In the same proposed rule, we sought comments regarding a draft conservation agreement, assessment, and strategy submitted by BLM (BLM 1998) for our consideration when making the listing decision. The conservation agreement, assessment, and strategy was never finalized or signed and was not considered as a firm commitment to perform the actions when assessing conservation commitments in making the listing decision.

On August 9, 1999, BLM segregated (proposed withdrawal of) 1,521.26 ha (3,759.12 ac) surrounding the population of Yermo xanthocephalus for 2 years from location and entry under the general Mining Act of 1872, and from settlement, sale, location, and entry under the general land laws (64 FR 43209). However, this segregation expired on August 9, 2001, with no finalized withdrawal in place.

On November, 12, 2001, Biodiversity Legal Foundation, Biodiversity Associates, Center for Native Ecosystems, and Wyoming Outdoor Council filed a complaint in the U.S. District Court of Colorado alleging that the Service failed to make a timely final listing determination and critical habitat designation for Yermo xanthocephalus ( Biodiversity Legal Foundation v. Norton, 01-B-2204 District of Colorado). The Court approved a settlement agreement on February 28, 2002, which included a March 8, 2003, date for submission of proposed critical habitat for Y. xanthocephalus to the Federal Register for publication and a March 8, 2004, date for submission of final critical habitat for Y. xanthocephalus to the Federal Register .

After a review of the best scientific data available and all comments received in response to the proposed rule, we published a final rule on March 14, 2002, designating Yermo xanthocephalus as threatened throughout its range (67 FR 11442). We did not designate critical habitat at that time. However, we reevaluated our prudency determination under the standards mandated by various court decisions and found that designation of critical habitat for Y. xanthocephalus was prudent. We elected to list Y. xanthocephalus as threatened without designation of critical habitat to allow us to concentrate limited resources on other listing actions that needed to be addressed, while allowing us to invoke the protections needed for the conservation of this species without further delay. We committed to prepare a critical habitat designation in the future when our available resources and priorities would allow.

Critical habitat is defined in section 3 of the Act as: (i) The specific areas within the geographical 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 geographical area occupied by a species at the time it is listed, upon a determination that such areas are essential for the conservation of the species. “Conservation” means the use of all methods and procedures needed to bring an 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 with regard to actions carried out, funded, permitted, 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. In our regulations at 50 CFR 402.02, we define destruction or adverse modification as “a direct or indirect alteration that appreciably diminishes the value of critical habitat for both the survival and recovery of a listed species. Such alterations include, but are not limited to: alterations adversely modifying any of those physical or biological features that were the basis for determining the habitat to be critical.” However, in a March 15, 2001, decision of the United States Court of Appeals for the Fifth Circuit ( Sierra Club v. U.S. Fish and Wildlife Service et al. , 245 F.3d 434), the Court found our definition of destruction or adverse modification to be invalid. In response to this decision, we are reviewing the regulatory definition of adverse modification in relation to the conservation of the species.

Aside from the added protection that may be provided under section 7, the Act does not provide other forms of protection to lands designated as critical habitat. However, the designation of critical habitat provides benefits to the species in other ways. Designation of critical habitat allows for a better focus of conservation efforts by identifying those areas that contain the primary constituent elements (physical and biological features) essential to the conservation of the species. The designation alerts public land management agencies to the importance of the area for conservation of the species. Additionally, designation of critical habitat allows for long-term planning that will facilitate the conservation needs of the species.

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

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

Our regulations state that, “The Secretary shall designate as critical habitat areas outside the geographic area presently occupied by a 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, unless the best available scientific data do not demonstrate that the conservation needs of the species require it, we will not designate critical habitat in areas outside the geographic area occupied by the species.

Our Policy on Information Standards Under the Endangered Species Act, published in the Federal Register on July 1, 1994 (59 FR 34271), provides criteria, establishes procedures, and provides guidance to ensure that our decisions represent the best scientific and commercial data available. It requires Service biologists, to the extent consistent with the Act, and with the use of the best scientific and commercial data available, to use primary and original sources of information as the basis for recommendations to designate critical habitat. When determining which areas are critical habitat, a primary source of information should, at a minimum, 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, biological assessments, unpublished materials, and expert opinion.

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

In determining areas that are essential to conserve Yermo xanthocephalus, we used the best scientific information available, as required by the Act and regulations (section 4(b)(2) and 50 CFR 424.12). We reviewed available information that pertains to the habitat requirements of this species, including information from the final rule listing the species as threatened (67 FR 11442), data from research and survey observations at the known population site, status reports compiled by the Wyoming Natural Diversity Database, the BLM's Resource Management Plan/Environmental Impact Statement for the Lander Resource Area (1986), Geological Survey Bulletins regarding the geology of central Wyoming and the Beaver Rim area, data regarding soils at the known population site, and discussions with botanical experts and BLM employees.

We mapped critical habitat based on U.S. Geological Survey 7.5″ quadrangle maps (Dishpan Butte and Sweetwater Station, Wyoming). We included the areas occupied by the subpopulations of Yermo xanthocephalus based upon existing maps of the subpopulations, as well as site visits by Service and BLM employees. We included adjacent areas of suitable soils and vegetative communities to allow for maintenance of the seed bank and dispersal. Additionally, we identified areas with topographic features (outcroppings, cliffs, and hills) influencing the microscale dynamics of local winds, erosional processes, and hydrologic processes needed to maintain the integrity of the shallow deflation hollows providing Y. xanthocephalus habitat, as well as the sheet wash that provides increased moisture to the habitat. We believe these areas are necessary because of the unstable nature of the landscape (Bynum 1993) and the more mesic nature of the hollows than the surrounding arid landscape (R. Scott, Central Wyoming College, pers. comm. 2002). We delineated the boundary of this area using section lines and quarter-section lines where feasible, in order to facilitate BLM management and enforcement. This designation will also reduce the likelihood that extant populations would be identified and vandalized.

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 must consider those physical and biological features (primary constituent elements) that are essential to the conservation of the species, and that may require special management considerations or protection. These include, but are not limited to: space for individual and population growth, and for normal behavior; food, water, air, light, minerals, or other nutritional or physiological requirements; cover or shelter; sites for breeding, reproduction, rearing of offspring; and habitats that are protected from disturbance or are representative of the historic geographical and ecological distributions of a species. The area proposed as critical habitat for Yermo xanthocephalus is within the geographical area presently occupied by the species and contains these physical or biological features (primary constituent elements) essential for the conservation of the species.

Based on our knowledge to date, the primary constituent elements for Yermo xanthocephalus consist of, but are not limited to:

(1) Recent soils derived from sandstones and limestones of the Split Rock Formation at its junction with the White River Formation. These are shallow, loamy soils of the Entisol order that can be classified as coarse-loamy over sandy-skeletal, mixed, Lithic Torriorthent. The surface stratum has little organic matter and subsurface layers show no accumulation of humus, clay, gypsum, salts, or carbonates.

(2) Plant communities associated with Yermo xanthocephalus that include, but may not be limited to, sparsely-vegetated cushion plant communities with scattered clumps of Oryzopsis hymenoides (Indian ricegrass) between 2,043 and 2,073 m (6,700 and 6,800 ft) in Fremont County, Wyoming. Species common to these communities include Arenaria hookeri (Hooker's sandwort), Astragalus kentrophyta (thistle milkvetch), Hymenoxys acaulis (stemless hymenoxy), and Phlox muscoides (squarestem phlox). These cushion-plant communities also contain natural openings.

(3) Topographic features/relief (outcroppings, cliffs, and hills) and physical processes, particularly hydrologic processes, that maintain the shape and orientation of the hollows characteristic of Yermo xanthocephalus habitat (through microscale dynamics of local winds and erosion) and maintain moisture below the surface of the ground (through sheet wash from the adjacent outcroppings, cliffs, and hills).

We identified critical habitat essential for the conservation of Yermo xanthocephalus in the only area where it is known to occur. There are no known historic locations for this species. While we acknowledge the high degree of threat that arises from chance catastrophic events given the limited geographic distribution of this species, we find no compelling evidence that the plant ever existed at other locations. We believe conservation of the species can be achieved through management of threats to the population within this proposed critical habitat.

Given the clustered distribution pattern of Yermo xanthocephalus and our assumption that dispersal distances are short and possibly fostered by water erosion, a limited amount of critical habitat is essential for maintenance of the seed bank and dispersal. Additionally, the persistence of the species requires some surrounding habitat to maintain the ecological processes that allow the population and the primary constituent elements to persist.

Even though we did not propose sites other than where the population is currently known to occur, we do not mean to imply that habitat outside the designation is unimportant or may not be required for recovery of the species. Areas that support newly discovered populations in the future, but are outside the critical habitat designation, will continue to be subject to conservation actions that may be implemented under section 7(a)(1) of the Act and to the regulatory protections afforded by the section 7(a)(2) jeopardy standard and the prohibitions of section 9 of the Act, as determined on the basis of best available information at the time an action is proposed.

The proposed critical habitat area described below constitutes our best assessment at this time of the area essential for the conservation of Yermo xanthocephalus. The site includes the only known location where the species currently occurs and, as such, is essential.

The proposed critical habitat is approximately 146 ha (360 ac) of Federal lands managed by BLM in the Beaver Rim area approximately 10 km (6 mi) north of Sweetwater Station in southern Fremont County, Wyoming. Within this area, Yermo xanthocephalus occurs in sparsely vegetated cushion-plant communities associated with shallow soils on low slopes, rim margins, colluvial fans, and bottoms within deflation hollows. Additionally, as discussed previously, we included areas supporting topographic features (outcroppings, cliffs, and hills) influencing the microscale dynamics of local winds, erosional processes, and hydrologic processes needed to maintain the integrity of the shallow deflation hollows providing Y. xanthocephalus habitat, as well as the sheet wash that provides increased moisture to the habitat. Within the critical habitat, Y. xanthocephalus occurs in 3 subpopulations with a total population size of 11,967 plants in 2001 (R. Scott, Central Wyoming College, pers. comm. 2001). Dispersal from these subpopulations is limited and frequently occurs along colluvial washes.

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

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

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

Activities on Federal lands that may affect Yermo xanthocephalus or its critical habitat will require section 7 consultation. Federal actions not affecting listed species or critical habitat do not require section 7 consultation.

Section 4(b)(8) of the Act requires us to briefly evaluate and describe in any proposed or final regulation that designates critical habitat those activities involving a Federal action that may destroy or adversely modify such habitat, or that may be affected by such designation. Activities that, when carried out, funded, or authorized by a Federal agency, may directly or indirectly destroy or adversely modify critical habitat or may be affected by the designation include, but are not limited to:

(1) Activities that have the potential to appreciably degrade or destroy Yermo xanthocephalus habitat (and its PCEs), including mining, oil and gas exploration and development, herbicide use, intensive livestock grazing, clearing, discing, farming, residential or commercial development, off-road vehicle use, and heavy recreational use;

(2) Alteration of existing hydrology by lowering the groundwater table or redirection of sheet flow from areas adjacent to deflation hollows;

(3) Compaction of soil through the establishment of trails or roads;

(4) Activities that foster the introduction of non-native vegetation, particularly noxious weeds, or create conditions that encourage the growth of non-natives. These activities could include, but are not limited to: irrigation, supplemental feeding of livestock, and ground disturbance associated with pipelines, roads, and other soil-disturbing activities; and

(5) Appreciably decreasing habitat value or quality through indirect effects ( e.g. , construction of fencing along the perimeter of the critical habitat leading to cattle congregation at the fence and resultant focused disturbance, erosion, and changes to drainage patterns, soil stability, and vegetative community composition).

If you have questions regarding whether specific activities will constitute adverse modification of critical habitat, contact the Field Supervisor, Wyoming Field Office, U.S. Fish and Wildlife Service ( see ADDRESSES section). Requests for copies of the regulations on listed wildlife, and inquiries about prohibitions and permits may be addressed to the U.S. Fish and Wildlife Service, Ecological Services, P.O. Box 25486, DFC, Denver, Colorado 80225-0486 (telephone: 303-236-7400; facsimile: 303-236-0027).

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

We intend that any final action resulting from this proposal be as accurate and 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 particularly seek comments concerning:

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

(2) Specific information on the amount and distribution of Yermo xanthocephalus habitat, and what habitat is essential to the conservation of the species and why;

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

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

(5) Economic and other values associated with designating critical habitat for Yermo xanthocephalus, such as those derived from non-consumptive uses ( e.g. , hiking, camping, bird-watching, enhanced watershed protection, improved air quality, increased soil retention, “existence values,” and reductions in administrative costs); and

(6) Whether our approach to critical habitat designation could be improved or modified in any way to provide for greater public participation and understanding, or to assist us in accommodating public concern and comments.

If you wish to comment on this proposed rule, you may submit your comments and materials by any one of several methods ( see ADDRESSES section). If submitting comments by electronic format, please submit them in ASCII file format and avoid the use of special characters and encryption. Please include your name and return e-mail address in your e-mail message. Please note that the e-mail address will be closed out at the termination of the public comment period. If you do not receive confirmation from the system that we have received your message, contact us directly by calling our Wyoming Field Office ( see FOR FURTHER INFORMATION CONTACT section).

Our practice is to make comments, including names and home addresses of respondents, available for public review during regular business hours. Individual respondents may request that we withhold their home address, which we will honor to the extent allowable by law. In some circumstances, we would withhold from the rulemaking record a respondent's identity, as allowable by law. If you wish 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 above address ( see ADDRESSES section).

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 that our critical habitat designation is based on scientifically sound data, assumptions, and analyses. We will send these peer reviewers copies of this proposed rule immediately following publication in the Federal Register . We will invite these peer reviewers to comment, during the public comment period, on the specific assumptions and conclusions regarding the proposed designation of critical habitat.

We will consider all comments and information received during the 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/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 notice? (5) What else could we do to make the proposed rule easier to understand?

Send 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. You also may e-mail your comments to this address: Execsec@ios.doi.gov.

In accordance with Executive Order 12866, the Office of Management and Budget (OMB) has determined that this document is not a significant rule and therefore OMB is not required to review it. 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 area as critical habitat. The availability of the draft economic analysis will be announced in the Federal Register and in local newspapers so that it is available for public review and comments.

Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. , as amended by the Small Business Regulatory Enforcement Fairness 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 effect 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 an agency certifies the rule will not have a significant economic impact on a substantial number of small entities. The SBREFA amended the Regulatory Flexibility Act to require Federal agencies to provide a statement of the factual basis for certifying that a rule will not have a significant economic impact on a substantial number of small entities.

The area we are proposing as critical habitat is already occupied by Yermo xanthocephalus. As a result, Federal agencies funding, permitting, or implementing activities in this area are already required to consult with us under section 7 of the Act, to avoid jeopardizing the continued existence of this species. While the designation of critical habitat will require that agencies ensure, through section 7 consultation, that their activities do not destroy or adversely modify critical habitat, we do not believe this will result in any additional regulatory burden on the Federal agencies or their applicants. As a result, this proposed rule, if finalized, would not likely result in a significant economic burden on Federal agencies or their applicants. However, the economic analysis will provide the details needed prior to certifying that this proposed rule is not expected to have a significant adverse impact on a substantial number of small entities, with no need for a regulatory flexibility analysis.

On May 18, 2001, the President issued an 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. Because this proposed rule is not expected to significantly affect energy supplies, distribution, or use, 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 et seq. ), we will use the economic analysis to further evaluate this situation.

In accordance with Executive Order 12630, the rule does not have significant takings implications. A takings implication assessment is not required. The rule will not increase or decrease current restrictions on private property concerning Yermo xanthocephalus because all of the critical habitat designated is on Federal land. Due to current public knowledge of the species' protection, and the fact that the plant receives protection through section 9 of the Act both within and outside of the designated areas, we do not anticipate that property values will be affected by the critical habitat designation.

In accordance with Executive Order 13132, the rule does not have significant Federalism effects. A Federalism assessment is not required. In keeping with Department of the Interior policy, we requested information from, and coordinated development of this critical habitat designation with, appropriate State resource agencies in Wyoming. The designation of critical habitat within the geographic range occupied by Yermo xanthocephalus imposes no additional restrictions to those currently in place and, therefore, has little additional impact on State and local governments and their activities. The designation may have some benefit to these governments in that the area essential to the conservation of the species is more clearly defined, and the primary constituent elements of the habitat necessary to the conservation of the species are specifically identified. While defining the area essential to the conservation of Y. xanthocephalus and identifying primary constituent elements does not alter where and what federally sponsored activities may occur, this information may assist these local governments in long-range planning (rather than waiting for case-by-case section 7 consultations to occur).

In accordance with Executive Order 12988, the Office of the Solicitor has determined that the rule does not unduly burden the judicial system and meets 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 rule uses standard property descriptions and identifies the primary constituent elements within the designated area to assist the public in understanding the habitat needs of Yermo xanthocephalus.

This proposed rule does not contain any information collection requirements for which OMB 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 valid OMB Control Number.

Our position is that, outside the Tenth Circuit, we do not need to prepare environmental analyses as defined by the National Environmental Policy Act (NEPA) in connection with designating critical habitat under the Act. We published a notice outlining our reasons for this determination in the Federal Register on October 25, 1983 (48 FR 49244). This assertion was upheld in the courts of the Ninth Circuit ( Douglas County v. Babbitt, 48 F .3d 1495 (Ninth Cir. Ore. 1995), cert. denied 116 S. Ct. 698 (1996)). However, when the range of the species includes States within the Tenth Circuit, pursuant to the Tenth Circuit ruling in Catron County Board of Commissioners v. U.S. Fish and Wildlife Service, 75 F .3d 1429 (Tenth Cir. 1996), we will complete a NEPA analysis. The range of Yermo xanthocephalus includes States within the Tenth Circuit; therefore, we are completing an Environmental Assessment and will announce its availability in the Federal Register .

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 512 DM 2, we readily acknowledge our responsibility to communicate meaningfully with recognized Federal Tribes on a government-to-government basis. We have determined that there are no Tribal lands essential for the conservation of Yermo xanthocephalus because these lands do not support populations, or provide essential habitat. Therefore, critical habitat for Y. xanthocephalus has not been proposed on Tribal lands.

The primary author of this proposed rule is Mary E. Jennings ( 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:

On September 24, 2002, we published a proposed rule to designate critical habitat, pursuant to the Endangered Species Act of 1973, as amended (Act), for four vernal pool crustaceans and eleven vernal pool plants (67 FR 59884). The four vernal pool crustaceans involved in this critical habitat designation are the Conservancy fairy shrimp ( Branchinecta conservatio ), longhorn fairy shrimp ( Branchinecta longiantenna ), vernal pool fairy shrimp ( Branchinecta lynchi ) and vernal pool tadpole shrimp ( Lepidurus packardi ). The eleven vernal pool plant species are Butte County meadowfoam ( Limnanthes floccosa ssp. californica ), Contra Costa goldfields ( Lasthenia conjugens ), Hoover's spurge ( Chamaesyce hooveri ), succulent (or fleshy) owl's-clover ( Castilleja campestris ssp. succulenta ), Colusa grass ( Neostapfia colusana ), Greene's tuctoria ( Tuctoria greenei ), hairy Orcutt grass ( Orcuttia pilosa ), Sacramento Orcutt grass ( Orcuttia viscida ), San Joaquin Valley Orcutt grass ( Orcuttia inaequalis ), slender Orcutt grass ( Orcuttia tenuis ), and Solano grass ( Tuctoria mucronata ). We proposed a total of 128 units of critical habitat for these 15 species, totaling approximately 672,920 hectares (ha) (1,662,762 acres (ac)) in 36 counties in California and one county in Oregon. All the species listed above live in vernal pools (shallow depressions that hold water seasonally), swales (shallow drainages that carry water seasonally), and ephemeral freshwater habitats. None are known to occur in riverine waters, marine waters, or other permanent bodies of water. The vernal pool habitats of these species have a discontinuous distribution west of the Sierra Nevada that extends from southern Oregon through California into northern Baja California, Mexico. The species have all adapted to the generally mild climate and seasonal periods of inundation and drying which help make the vernal pool ecosystems of California and southern Oregon unique. Critical habitat receives protection from destruction or adverse modification through required consultation under section 7 of the Act with regards to actions carried out, funded, or authorized by a Federal agency. Section 4(b)(2) of the Act requires that the Secretary of the Interior shall designate or revise critical habitat based upon the best scientific and commercial data available, after taking into consideration the economic impact of specifying any particular area as critical habitat.

The public comment period for the September 24, 2002, proposal originally closed on November 25, 2002, and was extended by the November 21, 2002, notice of availability of the draft economic analysis to close on December 23, 2002. The draft economic analysis estimates the foreseeable economic impacts of the critical habitat designation on government agencies and private businesses and individuals. The Service will not make any final decisions about exclusions based on economic impact, until it has obtained public comment on the economic analysis and produced an addendum to the economic analysis containing its final conclusions. The Service is interested in comments from the public on the economic analysis, on whether any of the areas identified in the economic analysis as having economic effects should be excluded for economic reasons, and whether those or any other areas should be excluded for other reasons.

For further information regarding background biological information on the 15 vernal pool species, please refer to our proposed rule published in the Federal Register on September 24, 2002, (67 FR 59884).

We solicit additional information and comments that may assist us in making a final decision on the proposed rule to designate critical habitat for the four vernal pool crustaceans and eleven vernal pool plants. We intend that any final action resulting from our proposal will be as accurate and effective as possible. Therefore, we are reopening the comment period to solicit additional information from the general public, other concerned governmental agencies, the scientific community, industry, or any other interested party concerning this proposed rule. We particularly seek comments concerning:

(1) The reasons why any habitat should or should not be determined to be critical habitat as provided by section 4 of the Act, including whether the benefits of designation will outweigh any threats to the species due to designation and whether areas under consideration require additional special management;

(2) Specific information on the amount and distribution of any of the vernal pool crustaceans or vernal pool plants and what habitat is essential to the conservation of these species and why;

(3) Land use designations and current or planned activities in the subject areas and their possible impacts on proposed critical habitat; in particular, in Oregon, we seek information related to potential of selected parcels to contribute to the species recovery, considering their zoning, adjacent land uses, watershed integrity, and potential for edge effects (related to shape of parcel);

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

(5) Economic and other values associated with designating critical habitat for vernal pool crustaceans and vernal pool plants such as those derived from non-consumptive uses ( e.g. , hiking, camping, bird-watching, enhanced watershed protection, improved air quality, increased soil retention, “existence values,” and reductions in administrative costs);

(6) Whether any areas should be excluded pursuant to section 4(b)(2);

(7) Whether our approach to critical habitat designation could be improved or modified in any way to provide for greater public participation and understanding, or to assist us in accommodating public concern and comments; and

(8) Assumptions reflected in the economic analysis regarding land use practices and current, planned, or reasonably foreseeable activities in the subject areas, including comments or information relating to the potential effects that the designation could have on private landowners as a result of actual or foreseeable State and local government responses due to the California Environmental Quality Act.

If you wish to comment on this proposed rule, you may submit your comments and materials by any one of several methods ( see ADDRESSES ). Please submit electronic mail comments as an ASCII file and avoid the use of special characters and any form of encryption. Please also include “Attn: Vernal Pool Critical Habitat” and your name and return address in your electronic message. Please note that the electronic address fw1_vernalpool@fws.gov will be closed out at the termination of the public comment period. If you do not receive a confirmation from the system that we have received your electronic message, contact us directly by calling our Sacramento Fish and Wildlife Office at phone number (916) 414-6600.

Our practice is to make comments, including names and home addresses of respondents, available for public review during regular business hours. Individual respondents may request that we withhold their home address from the rulemaking record, which we will honor to the extent allowable by law. In some circumstances, we would withhold from the rulemaking record a respondent's identity, as allowable by law. If you wish us to withhold your name and/or address, you must state this 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 made available for public inspection, by appointment, during normal business hours at the above address.

The comment period, which originally closed on December 23, 2002 (67 FR 70202), will now close on the date specified above in the DATES section.

The primary author of this notice is Susan Moore, ( see ADDRESSES section).