This rule is issued under Marketing Agreement and Order No. 989 (7 CFR part 989), both as amended, regulating the handling of raisins produced from grapes grown in California, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Order 12866.

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

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. Such handler is afforded the opportunity for a hearing on the petition. After the hearing USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

This rule revises the list of varietal types of raisins specified under the order. The order regulates the handling of raisins produced from grapes grown in California and is administered locally by the RAC. The order provides authority for volume and quality regulations that are applied according to varietal type of raisin. This action combines the Oleate varietal type with the Natural varietal type, and makes conforming changes to the order's volume and quality regulations. This action was unanimously recommended by the RAC at a meeting on May 15, 2003, and addresses changing cultural practices in the California raisin industry.

The order provides authority for quality and volume regulations that are applied according to varietal type of raisin. Section 989.10 of the order defines the term varietal type to mean raisins generally recognized as possessing characteristics differing from other raisins in a degree sufficient to make necessary or desirable separate identification and classification. That section includes a list of eight varietal types, and provides authority for the RAC, with the approval of USDA, to change this list. A description of these varietal types, along with additional varietal types, may be found in § 989.110 of the order's administrative rules and regulations. There are currently 10 different varietal types of raisins listed in this section.

Paragraph (a) in § 989.110 currently defines the Natural varietal type to include all sun-dried seedless raisins that possess characteristics similar to Natural Thompson Seedless (NTS) raisins which, for the purpose of expediting drying, have not been dipped in or sprayed with water, with or without soda, oil or other chemicals prior to or during the drying process. Naturals are the predominant varietal type of California raisin, comprising about 90 percent of California's raisin production.

Paragraph (c) in § 989.110 defines the Oleate varietal type to include all raisins produced by sun-drying or artificial dehydration of seedless grapes which, in order to expedite drying, are dipped in or sprayed with water with soda, oil, Ethyl Oleate, Methyl Oleate or any other chemicals either while such grapes are on the vine or after they have been removed from the vine.

Cultural practices are evolving in the raisin industry in an effort to reduce production and harvest costs. Traditionally, most California raisins have been made by hand picking grapes from the vine and drying them in the sun on trays laid on the ground. The process is labor intensive and expensive. Thus, in an effort to reduce costs, some growers have switched to sun-drying their grapes on the vine, and then mechanically harvesting them (“dried on the vine” or DOV). A drying agent such as Oleate may be applied to the grapes on the vine to hasten the drying process.

Additionally, there is concern that Oleate could be applied to sun-dried Natural raisins, and that the raisins could be represented as Oleates to circumvent the volume regulations that are typically in effect for Naturals. With the exception of the 1998-99 crop year, volume regulation has been in place for Naturals every year since 1983-84. (The raisin crop year (season) runs from August 1 through July 31.) For the 1992-93 through the 1999-2000 seasons, average acquisitions of Oleates were 441.38 tons. For the 2000-01 and 2001-02 seasons, Oleate acquisitions were 3,669 and 6,495 tons, respectively. Volume regulation was in place for the beginning of the 2001-02 season for Oleates, but was lifted in November 2001 due to no acquisitions up to that time. Once volume regulation was lifted, Oleates were acquired. For the 2002-03 season, the RAC recommended final volume regulation percentages for Oleates in January 2003. However, by the week ending February 1, 2003, Oleate acquisitions were at 2,121 tons, and far below the 5,268-ton trade demand. Because the supply of Oleates was well below demand, volume regulation was lifted in mid-February 2003. Since that time, 2002-03 Oleate acquisitions have increased to 6,217 tons through the week ending April 26, 2003. Based on this data, and the fact that most raisins are typically acquired much earlier in the crop year, the RAC is concerned that Oleate could be sprayed on bins of Naturals and that the raisins could be represented as Oleates to circumvent volume regulation.

These different types of Oleate-treated grapes/raisins are difficult to distinguish from non-Oleate treated raisins. At its May 15, 2003 meeting, the RAC recommended eliminating the Oleate varietal type, and revising the Natural varietal type to include Oleates. Specifically, Naturals will include all sun-dried raisins possessing similar identifiable characteristics as raisins produced from Natural Thompson Seedless grapes, or similar grape varieties, whether dried on trays or on the vine, with or without application of a drying agent that is a food-grade additive, such as, soda, oil, Ethyl Oleate, or Methyl Oleate prior to, during, or after the drying process. The Committee recommended using “accepted food-grade drying agent” in the definition rather than “drying agent that is a food-grade additive”. USDA changed the Committee's recommendation so it conforms more closely to accepted U.S. Food and Drug Administration terminology. Soda was also added to the examples of drying agents because soda has been used by the industry for this purpose in past years. Accordingly, paragraph (c) in § 989.110 regarding Oleates is removed, and paragraph (a) regarding Naturals is revised to include Oleates.

Industry members considered the merits of revising the definition for Dipped Seedless raisins. Dipped Seedless includes all raisins produced by artificial dehydration of seedless grapes that possess the characteristics similar to Thompson Seedless grapes which, in order to expedite drying, have been dipped in or sprayed with water only after such grapes have been removed from the vine. The current Oleate definition includes raisins produced by artificially dehydrating grapes with the application of a drying agent to the grapes. The question was raised regarding how raisins made from artificially dehydrated Oleate-treated grapes would be classified if sun-dried Oleates are included with Naturals. Industry members concluded that no such raisins are currently produced. Accordingly, the definition of Dipped Seedless raisins will not be revised to include artificially dehydrated Oleate-treated grapes.

The order provides authority for volume regulation designed to promote orderly marketing conditions, stabilize prices and supplies, and improve producer returns. When volume regulation is in effect, a certain percentage of the California raisin crop may be sold by handlers to any market (free tonnage) while the remaining percentage must be held by handlers in a reserve pool (reserve) for the account of the RAC. Reserve raisins are disposed of through various programs authorized under the order. For example, reserve raisins may be sold by the RAC to handlers for free use or to replace part of the free tonnage they exported; carried over as a hedge against a short crop the following year; or may be disposed of in other outlets not competitive with those for free tonnage raisins, such as government purchase, distilleries, or animal feed. Net proceeds from sales of reserve raisins are ultimately distributed to producers.

Section 989.66 of the order specifies general requirements for reserve tonnage. Reserve tonnage acquired by handlers from producers and reserve tonnage transferred to a handler from the RAC must be held by the handler for the account of the RAC. Reserve tonnage must be stored separate and apart from other raisins and identified according to rules and procedures specified by the RAC and approved by the Secretary. Handlers may, under the direction and supervision of the RAC, substitute for any reserve tonnage raisins a like quantity of standard raisins of the same varietal type and of the same or more recent year's production.

Section 989.166 of the order's administrative rules and regulations specifies additional requirements for reserve raisins. Paragraph (a)(1) of that section prescribes identification, delivery, and transfer requirements for Natural reserve raisins. Specifically, lots of Natural reserve raisins that have been dipped in or sprayed with water, with or without chemicals, prior to or during the drying process, for purposes other than to expedite drying, or that have been produced from seedless varieties of grapes other than Thompson Seedless, must be identified by the Inspection Service affixing to one container on each pallet or to each bin in each lot, a prenumbered RAC control card which must remain affixed until the raisins are processed or disposed of as natural condition raisins. Additionally, such reserve raisins cannot be delivered to the RAC nor transferred to another handler without approval of the RAC or the receiving handler.

The current language in § 989.166(a)(1) regarding chemicals applied to Naturals for purposes other than to expedite drying was added to the regulations in 1984 and refers to MP-11, a fungicide. The language regarding Naturals produced from grapes other than Thompson Seedless was added in 1991. In these respective instances, some handlers had indicated that they would not pack MP-11 raisins nor raisins made from grapes other than Thompson Seedless. In both cases, the RAC determined that these categories of Naturals should be considered as Naturals for volume and quality control purposes, but that additional requirements should be in place regarding identification, delivery, and transfers of reserve raisins.

As the RAC considered the merits of combining Oleates with Naturals, some handlers indicated that they would not pack Naturals treated with a drying agent such as Oleate. Thus, at its May 2003 meeting, the RAC recommended revising § 989.166(a)(1) to include reserve Naturals treated with drying agents. Such reserve raisins will have to be tagged and identified accordingly, and cannot be delivered to the RAC nor transferred to another handler without the approval of the RAC or the receiving handler. Handlers with only Oleate-treated reserve could substitute non-Oleate treated free tonnage Naturals if necessary. The RAC also recommended adding in this section authority for the RAC to specify additional categories of Naturals that have been produced using other cultural practices and that will be subject to these additional requirements. Any such additions will be made with USDA approval. This will give the RAC flexibility to address changing cultural practices regarding different categories of Naturals in the future. Section 989.166(a) will be revised accordingly.

Another concern regarding this issue is the impact of volume regulation on handlers that may have built up a market for Oleate-treated raisins. There is concern that volume regulation would contribute to handlers losing this market. However, pursuant to § 989.66(b)(3), handlers of Oleate-treated Naturals will have the flexibility to substitute free tonnage Naturals that will be acceptable to the RAC. Thus, handlers could substitute non-Oleate treated free tonnage Naturals for their Oleate-treated reserve raisins, and use their Oleate-treated fruit to meet their market needs.

This rule also revises the quality requirements specified in the order's regulations to remove references to Oleates. Specifically, this rule revises: The incoming quality requirements; the table of factors for converting between natural condition and processed weight; and the outgoing quality requirements. The details of these changes are discussed below.

Section 989.58(a) of the order provides authority for quality control regulations whereby natural condition raisins that are delivered from producers to handlers must meet certain incoming quality requirements. Section 989.701 of the order's regulations specifies minimum grade and condition standards for natural condition raisins for each varietal type. Paragraph (b) of that section currently specifies requirements for three varietal types of raisins—Dipped Seedless, Oleate, and Other-Seedless Sulfured. Specifically, such raisins must have been prepared from sound, wholesome, matured grapes properly dried and cured, and shall: (1) Be fairly free from damage by sugaring, mechanical injury, sunburn, or other similar injury; (2) have a normal characteristic flavor and odor of properly prepared raisins; (3) contain no more than 5 percent, by weight, of substandard raisins (raisins that show development less than that characteristic of raisins prepared from fairly well-matured grapes), and also contain at least 50 percent well-matured or reasonably well-matured raisins; (4) not exceed 14 percent moisture; and (5) be of such quality and condition as can be expected to withstand storage as provided in the order and that when processed in accordance with good commercial practice will meet the minimum standards for processed raisins established by the RAC. This rule revises this paragraph to remove reference to the Oleate varietal type.

Paragraph (a) of § 989.701 specifies incoming quality requirements for Naturals, Monukka and Other Seedless raisins. This rule combines Oleates with the Natural varietal type. Thus, the incoming quality requirements specified in § 989.701(a) will apply to Oleates. With the exception of the moisture requirement, the specifications in paragraphs (a) and (b) of § 989.701 are identical. Paragraph (a) specifies that Naturals, Monukkas, and Other Seedless raisins cannot exceed 16 percent moisture. The RAC's recommendation includes Oleates meeting a less restrictive moisture tolerance of 16 percent as opposed to the 14 percent currently required for Oleates.

Section 989.58(a) also contains authority for handlers to acquire natural condition raisins that fall outside the tolerance established for maturity, which includes substandard raisins, under a weight dockage system. Handler acquisitions of raisins and payments to producers are adjusted according to the percentage of substandard raisins in a lot, or the percentage of raisins that fall below certain levels of maturity. Section 989.210(a) of the order's regulations lists the varietal types of raisins that may be acquired pursuant to a weight dockage system. Sections 989.212 and 989.213 contain tables with dockage factors applicable to lots of raisins that fall outside the tolerances for substandard raisins and maturity, respectively, specified in § 989.701. The substandard and maturity dockage factors are identical for Oleates and Naturals. This rule simply removes all references to Oleates contained in §§ 989.210(a), 989.212, and 989.213. This rule also removes paragraph (e) in § 989.213 that was applicable only to the 1998-99 crop year and is thus obsolete.

Section 989.601 of the order's regulations specifies a list of conversion factors for raisin weights. The factors are used to convert the net weight of reconditioned raisins acquired by handlers as packed raisins to a natural condition weight. The net weight of the raisins after the completion of processing is divided by the applicable factor to obtain the natural condition weight. If the adjusted weight exceeds the original weight, the original weight is used. This rule removes the reference to Oleates and its 0.92 conversion factor. Additionally, the table specifies a conversion factor for Naturals of 0.92. Thus, combining Oleates with the Natural varietal type results in no change to the conversion factor. Section 989.601 is revised accordingly.

Section 989.59 of the order provides authority for quality control regulations for raisins subsequent to their acquisition by handlers (outgoing requirements). Section 989.702 of the order's regulations specifies minimum grade standards for packed raisins. Paragraph (a) of that section specifies identical requirements for four varietal types of raisins—Natural, Dipped Seedless, Oleate, and Other-Seedless Sulfured. Since the outgoing requirements for Naturals and Oleates are identical, this rule removes the reference to Oleates from paragraph (a).

Accordingly, Naturals must meet the requirements of U.S. Grade C as defined in the United States Standards for Grades of Processed Raisins (§§ 52.1841 through 52.1858) issued under the Agricultural Marketing Act of 1946 (7 U.S.C. 1622 through 1624). At least 70 percent, by weight, of the raisins in a lot must be well-matured or reasonably well-matured. With respect to select-sized and mixed-sized lots, the raisins must at least meet the U.S. Grade B tolerances for pieces of stem, and underdeveloped and substandard raisins, and small (midget) sized raisins must meet the U.S. Grade C tolerances for those factors.

All raisin handlers are currently required to submit various reports to the RAC where the data collected is segregated by varietal type of raisin. These reports include: (1) Weekly Report of Standard Raisin Acquisitions (RAC-1); (2) Weekly Report of Standard Raisins Received for Memorandum Receipt or Warehousing (RAC-3); (3) Monthly Report of Free Tonnage Raisin Disposition (RAC-20); (4) Weekly Off-Grade Summary (RAC-30); (5) Inventory of Free Tonnage Standard Quality Raisins On Hand (RAC-50); and (6) Inventory of Off-Grade Raisins On Hand (RAC-51). This rule requires that these forms be revised to remove the columns for Oleates. The current total annual reporting burden for these six forms is 660 hours. This rule will not change this burden on handlers.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), these information collection requirements have been previously approved by the Office of Management and Budget (OMB) under OMB Control Number 0581-0178.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this initial regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf. Thus, both statutes have small entity orientation and compatibility.

There are approximately 20 handlers of California raisins who are subject to regulation under the order and approximately 4,500 raisin producers in the regulated area. Small agricultural service firms are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $5,000,000, and small agricultural producers are defined as those having annual receipts of less than $750,000. Thirteen of the 20 handlers subject to regulation have annual sales estimated to be at least $5,000,000, and the remaining 7 handlers have sales less than $5,000,000. No more than 7 handlers, and a majority of producers, of California raisins may be classified as small entities.

The order provides authority for volume and quality regulations that are applied according to varietal type of raisin. This rule combines the Oleate varietal type with the Natural varietal type, and makes conforming changes to the order's volume and quality regulations. Pursuant to § 989.10 of the order, § 989.110 of the regulations is revised to remove the Oleate varietal type, and to include sun-dried raisins that may or may not be treated with Oleate or similar food-grade drying agent in the definition of the Natural varietal type. Pursuant to § 989.66, § 989.166(a)(1) is revised to add identification, delivery, and transfer requirements for Naturals treated with Oleate, or similar drying agents. Finally, pursuant to §§ 989.58 and 989.59, the order's quality regulations are revised to remove references to Oleates as follows: incoming quality requirements specified in §§ 989.210, 989.212, 989.213, and 989.701; a table of factors for converting between natural condition and processed weight specified in § 989.601; and outgoing quality requirements specified in § 989.702.

Regarding the impact of this action on affected entities, this rule helps ensure that sun-dried Natural Thompson raisins or raisins produced from similar grape varieties will be subject to the same volume regulation percentages. Concerns about circumventing volume regulation by representing Naturals as Oleates will be addressed. If volume regulation were in effect, handlers who have a market for Oleate-treated raisins will have the opportunity to substitute free tonnage non-Oleate treated Naturals for their reserve Oleates to meet their market needs.

The RAC considered several alternatives to this action. In the spring of 2002, the RAC recommended, and USDA approved, conducting a research study to determine if it is possible to distinguish whether Oleate or a similar agent was applied to a grape as opposed to a raisin. This would assist in determining if Oleate or a similar drying agent was being applied to raisins to circumvent volume regulation. Preliminary information indicates that distinguishing if Oleate or similar drying agent were applied to grapes or raisins may not be possible. There were also some discussions on establishing color specifications to differentiate between non-Oleate Naturals, Oleate-treated Naturals, and DOV. However, the general consensus is that raisins darken with time so that color specifications would be very difficult to apply. Further, there were discussions about requiring producers to file a declaration with the RAC prior to the beginning of the crop year regarding the use of Oleate or similar agent. However, such a producer declaration could not be required.

Regarding the impact of this action on reporting requirements under the order, all raisin handlers are currently required to submit various reports to the RAC where the data collected is segregated by varietal type of raisin. As previously listed, these reports include: (1) Weekly Report of Standard Raisin Acquisitions (RAC-1); (2) Weekly Report of Standard Raisins Received for Memorandum Receipt or Warehousing (RAC-3); (3) Monthly Report of Free Tonnage Raisin Disposition (RAC-20); (4) Weekly Off-Grade Summary (RAC-30); (5) Inventory of Free Tonnage Standard Quality Raisins On Hand (RAC-50); and (6) Inventory of Off-Grade Raisins On Hand (RAC-51). This rule requires that these forms be revised to remove the columns for Oleates. The current total annual burden for these six forms is 660 hours. This rule will not change this burden on handlers.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the information collection requirements referenced above have been approved by the Office of Management and Budget (OMB) under OMB Control No. 0581-0178. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

Additionally, except for applicable section 8e import regulations, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule. However, as previously stated, Natural raisins must at least meet U.S. Grade C as defined in the United States Standards for Grades of Processed Raisins (§§ 52.1841 through 52.1858) issued under the Agricultural Marketing Act of 1946 (7 U.S.C. 1622 through 1624).

Further, this action was reviewed at several industry meetings as follows—the RAC's Industry Solutions Subcommittee on April 21, 2003, the Administrative Issues Subcommittee on April 23, 2003, work group meetings on April 29 and May 12, 2003, and an Administrative Issues Subcommittee and a RAC meeting on May 15, 2003. All of these meetings where this action was deliberated were public meetings widely publicized throughout the raisin industry. All interested persons were invited to attend the meetings and participate in the industry's deliberations. Finally, interested persons are invited to submit information on the regulatory and informational impact of this action on small businesses.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html . Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

Comments are invited concerning this rule. A 60-day comment period is provided to allow interested persons to respond to this rule. All written comments received will be considered before a final decision is made on this matter.

After consideration of all relevant material presented, including the Committee's recommendation, and other information, it is found that this interim final rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

Pursuant to 5 U.S.C. 553, it is also found and determined upon good cause that it is impracticable, unnecessary and contrary to the public interest to give preliminary notice prior to putting this rule into effect and that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register because: (1) This rule needs to be implemented as soon as possible because the 2003-04 crop year begins August 1, 2003; (2) the RAC unanimously recommended these changes at a public meeting and interested parties had an opportunity to provide input; and (3) a 60-day comment period is provided and all comments received will be considered in finalizing this rule.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) by superseding AD 90-24-09, amendment 39-6815 (55 FR 48228, November 20, 1990), which is applicable to certain Boeing Model 747 series airplanes, was published in the Federal Register on December 2, 2002 (67 FR 71497). The action proposed to continue to require inspections for cracking of the forward end clevis lugs of the flap track, and replacement of the flap track with a new flap track if necessary. The action also provided for an optional modification of the forward end clevis lugs, which would terminate the required inspections. The action proposed to expand the applicability of the existing AD, require new repetitive inspections for evidence of rotation or migration of the bushings or cracking of the lugs of the forward end clevis of the flap tracks that support the wing trailing edge flaps, and require corrective actions if necessary. The action also proposed to require eventual accomplishment of a terminating action.

Interested persons have been afforded an opportunity to participate in the making of this amendment. The FAA has given due consideration to the single comment received.

One commenter notes that the procedures for the Terminating Action in part 2 of Boeing Service Bulletin 747-57-2307, Revision 1, dated January 17, 2002, include a magnetic particle inspection of the clevis bore of a machined flap track assembly. The commenter points out that no corrective action is specified if a crack is found, though the commenter assumes that the flap track must be replaced. The commenter states that both the service bulletin and proposed AD should specify a corrective action.

We partially agree with the commenter. We note that, where the service bulletin specifies a magnetic particle inspection, the service bulletin refers to Boeing Standard Overhaul Practices Manual 20-20-01, Class A, Critical, for information pertaining to the inspection. We note that the acceptance criteria in that document do not allow cracking. Thus, a cracked flap track may not be used and must be replaced with a new flap track.

However, we agree that we could clarify the need to replace the existing flap track with a new flap track if any cracking is found during the magnetic particle inspection that is included in the procedures for the terminating action required by this AD. Therefore, we have revised paragraph (h) of this final rule to specify that, if a crack is found during any inspection required by paragraph (d), (i), or (j) of this AD (or paragraph (e), (f), or (g)(2)(i) of this AD, as specified in paragraph (h) of the proposed AD), the cracked flap track must be replaced with a new flap track before further flight.

We have revised paragraph (f) of this AD to make it clear that accomplishment of the terminating modification in paragraph (d) or (i) of this AD ends the repetitive inspections required by paragraph (f) of this AD.

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

On July 10, 2002, the FAA issued a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs the FAA's airworthiness directives system. The regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. Because we have now included this material in part 39, we no longer need to include it in each individual AD. However, for clarity and consistency in this final rule, we have retained the language of the NPRM regarding that material.

After the proposed AD was issued, we reviewed the figures we use to calculate the labor rate to do the required actions. To account for various inflationary costs in the airline industry, we find it appropriate to increase the labor rate used in these calculations from $60 per work hour to $65 per work hour. The economic impact information, below, has been revised to reflect this increase in the specified hourly labor rate.

There are approximately 1,002 Model 747-100, 747-100B, 747-100B SUD, 747-200B, 747-200F, 747-200C, 747- 300, 747-400, 747-400D, 747-400F, and 747SR series airplanes of the affected design in the worldwide fleet. The FAA estimates that 219 airplanes of U.S. registry will be affected by this AD.

The actions that are currently required by AD 90-24-09 take approximately 2 work hours per airplane, at an average labor rate of $65 per work hour. Based on these figures, the cost impact of the currently required actions is estimated to be $130 per airplane, per inspection cycle.

The new inspections that are required by this AD take approximately 2 work hours per airplane, at an average labor rate of $65 per work hour. Based on these figures, the cost impact of the new inspections on U.S. operators is estimated to be $28,470, or $130 per airplane, per inspection cycle.

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

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

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

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain Lockheed Model 382G series airplanes was published in the Federal Register on April 29, 2003 (68 FR 22644). That action proposed to require repetitive general visual inspections of certain bearings located in the emergency exit door for evidence of excessive wear; and repair of certain bearings, which would terminate the repetitive inspections.

Interested persons have been afforded an opportunity to participate in the making of this amendment. No comments were submitted in response to the proposal or the FAA's determination of the cost to the public.

The FAA has determined that air safety and the public interest require the adoption of the rule as proposed.

On July 10, 2002, the FAA issued a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs the FAA's airworthiness directives system. The regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. However, for clarity and consistency in this final rule, we have retained the language of the NPRM regarding that material.

After the proposed AD was issued, we reviewed the figures we use to calculate the labor rate to do the required actions. To account for various inflationary costs in the airline industry, we find it appropriate to increase the labor rate used in these calculations from $60 per work hour to $65 per work hour. The economic impact information, below, has been revised to reflect this increase in the specified hourly labor rate.

There are approximately 10 airplanes of the affected design in the worldwide fleet. The FAA estimates that 1 airplane of U.S. registry will be affected by this AD, that it will take approximately 16 work hours per airplane to accomplish the required actions, and that the average labor rate is $65 per work hour. Based on these figures, the cost impact of the AD on the single U.S. operator is estimated to be $1,040.

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

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

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

A proposal to amend 14 CFR part 39 to include an AD for Sikorsky Model S76A, B, and C helicopters was published in the Federal Register on February 7, 2003 (68 FR 6382). That action proposed to require, within 60 days, determining if discs, part number (P/N) 5014067, are installed. If so, replacing them with discs, P/N 5007672, and re-identifying brake assembly, P/N 5007555 and P/N 5007555-1, as brake assembly P/N 5007555-3, and brake assembly, P/N 5007555-2, as brake assembly, P/N 5007555-4, was proposed to be required within 90 days. The action also proposed to require revising the RFM to adjust the Category A rejected takeoff distance, the Category A landing distance, and the Category B landing distance by multiplying the distance by 1.67 to obtain the corrected distance until the discs are replaced.

Sikorsky has issued Alert Service Bulletin (ASB) No. 76-32-27, dated April 30, 2002, which contains Aircraft Braking Systems Corporation ASB S76-32-A24, dated April 10, 2002; and Sikorsky Aircraft Corporation ASB No. 76-32-28, dated May 17, 2002, which contains Aircraft Braking Systems Corporation ASB S76-32-A25, dated May 15, 2002. The ASBs describe procedures for replacing any non-conforming discs, reidentifying brake assemblies, and revising takeoff and landing distances in the RFM until the discs are replaced.

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

The one commenter, the manufacturer, states that the AD should state that a manufacturer's warranty exists. The commenter states that the service information issued by Aircraft Braking Systems Corporation states that the replacement discs, P/N 5007672, are available at no cost to the owners or operators. The FAA agrees, and that information is added to the economic impact paragraph of the AD.

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

On July 10, 2002, the FAA issued a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs the FAA's AD system. The regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. However, for clarity and consistency in this final rule, we have retained the language of the NPRM regarding that material.

The FAA estimates that 180 helicopters of U.S. registry will be affected by this AD, that it will take approximately 0.5 work hour per helicopter to determine if non-conforming discs are installed, and 1.25 work hours per helicopter to remove, replace and re-identify any non-conforming discs. The average labor rate is $60 per work hour. Required parts will cost approximately $1,902 per disc, and there are two discs per helicopter. The Aircraft Braking Systems Corporation ASB's state that “operators should contact their usual supply source for replacement of 5014067 Rotating Discs with free of charge 5007672 Rotating Discs on an exchange basis.” Based on these figures, the total cost impact of this AD on U.S. operators is estimated to be $703,620 ($18,900 assuming brake discs are provided free of charge) to replace the discs throughout the fleet.

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

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

Has FAA taken any action to this point? Reports of cracking and other discrepancies on rudder control lever shaft assemblies on certain ASTA Models N22B and N24A airplanes caused us to issue AD 82-12-06, Amendment 39-4399. AD 82-12-06 currently requires the following on certain ASTA Models N22B and N24A airplanes:

What has happened since AD 82-12-06 to initiate this proposed action? The Civil Aviation Safety Authority (CASA), which is the airworthiness authority for Australia, recently notified FAA of the need to change AD 82-12-06. The CASA reports failures of the rudder control lever shaft. All the failures have occurred during ground operations and nosewheel steering/rudder loads are now considered the primary cause of the failure.

Some of the failures occurred on airplanes where the terminating action of AD 82-12-06 was incorporated.

What is the potential impact if FAA took no action? This condition, if not detected and corrected, could result in failure of the rudder control lever torque shaft. Such failure could lead to reduced controllability of the airplane.

Has FAA taken any action to this point? We issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply to certain ASTA Models N22B and N24A. This proposal was published in the Federal Register as a notice of proposed rulemaking (NPRM) on April 29, 2003 (68 FR 22636). The NPRM proposed to require you to repetitively inspect, using either dye penetrant or magnetic particle methods and measurements, rudder control lever shafts for cracks; inspect (one-time) all lever shaft side plates by measuring the thickness; and if cracks or discrepancies in thickness are found, replace unserviceable parts with new or serviceable parts.

Was the public invited to comment? The FAA encouraged interested persons to participate in the making of this amendment. We did not receive any comments on the proposed rule or on our determination of the cost to the public.

What is FAA's final determination on this issue? After careful review of all available information related to the subject presented above, we have determined that air safety and the public interest require the adoption of the rule as proposed except for minor editorial corrections. We have determined that these minor corrections:

How does the revision to 14 CFR part 39 affect this AD? On July 10, 2002, FAA published a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs FAA's AD system. This regulation now includes material that relates to special flight permits, alternative methods of compliance, and altered products. This material previously was included in each individual AD. Since this material is included in 14 CFR part 39, we will not include it in future AD actions.

How many airplanes does this AD impact? We estimate that this AD affects 10 airplanes in the U.S. registry.

What is the cost impact of this AD on owners/operators of the affected airplanes? We estimate the following costs to accomplish the initial inspection:

We estimate the following costs to accomplish any necessary repetitive inspections:

We estimate the following costs to accomplish any necessary lever shaft replacements that would be required based on the results of the proposed inspections. We have no way of determining the number of airplanes that may need such replacement:

We estimate the following costs to accomplish any necessary lever shaft side plate replacements that would be required based on the results of the proposed inspection. We have no way of determining the number of airplanes that may need such replacement:

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

Does this AD involve a significant rule or regulatory action? For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A copy of the final 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 .

Airworthiness Directive (AD) 2003-14-06, amendment 39-13225, applicable to certain Boeing Model 737-200, -200C, -300, -400, and -500 series airplanes, was published in the Federal Register on July 9, 2003 (68 FR 40759). That AD requires repetitive inspections for cracking of certain lap splices, and corrective action if necessary.

As published, the AD number appears as “2003-14-60” in the Product Identification line in the regulatory text of the AD. The correct AD number is 2003-14-06. The number is referenced correctly throughout the remainder of the document.

Since no other part of the regulatory information has been changed, the final rule is not being republished in the Federal Register .

The effective date of this AD remains July 14, 2003.

A proposal to amend 14 CFR part 39 to include an AD for the specified model helicopters was published in the Federal Register on March 14, 2003 (68 FR 12318). That action proposed to require determining whether specified rotor parts are installed and, if so, updating and recording the correct hours TIS or cycles of each part. If the hours TIS or cycles of any rotor part exceed its life limit, this AD would also require replacing that part with an airworthy part within 50 hours TIS.

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 FMEs.

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 AD requires, 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 requires 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.

Interested persons have been afforded an opportunity to participate in the making of this amendment. No comments were received on the proposal or the FAA's determination of the cost to the public. The FAA has determined that air safety and the public interest require the adoption of the rule as proposed.

On July 10, 2002, the FAA issued a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs the FAA's AD system. The regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. However, for clarity and consistency in this final rule, we have retained the language of the NPRM regarding that material.

The FAA estimates that this AD will affect 760 helicopters of U.S. registry, and the required actions will 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). The average labor rate is $60 per work hour. Required parts will cost approximately $64,560 depending on which part will be replaced. Based on these figures, we estimate the total cost impact of the AD on U.S. operators will be $2,517,120.

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

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

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) by superseding AD 2000-17-10 R1, Amendment 39-12378 (66 FR 44030 August 22, 2001), which is applicable to Lockheed Martin Models L-1011 airplanes and Rolls-Royce plc RB211 series turbofan engines was published in the Federal Register on March 11, 2003 (68 FR 11476). That action proposed to require:

• Modifications of the engine turbine cooling air panel at the flight engineer/second officer's console, pilot's caution and warning light panel on the main instrument panel.

• Installation of an engine turbine air temperature monitoring system.

• Installation of a revised engine front bearing housing assembly.

• Installation of speed probe loom electrical support assembly part number (P/N) FW15212, if applicable.

• Installation of an LP compressor shaft extreme axial movement detector system. The actions would be required to be done in accordance with RR service bulletin (SB) RB.211-72-6149, Revision 9, dated November 24, 1999, RR SB RB.211-72-C178, Revision 1, dated March 9, 2001, RR SB RB.211-77-C144, Revision 1, dated February 13, 2002, RR mandatory service bulletin RB.211-71-E047, dated August 2, 2002, Lockheed Martin SB 093-77-059, Revision 2, dated April 11, 2002, and Lockheed Martin SB 093-77-060, dated April 11, 2002.

These actions must be done so that the installation of the HSGB overheat detector system and installation of the LP compressor shaft extreme axial movement detector system into the engine turbine cooling air overheat monitoring system are complete.

Interested persons have been afforded an opportunity to participate in the making of this amendment. The comments received are all from Lockheed Martin. Due consideration has been given to the comments received.

Lockheed Martin requests that the second sentence of the proposal summary be changed to read “That AD currently requires modifications of the engine turbine cooling air overheat monitoring panel at the flight engineer/second officer's console, pilot's caution and warning light panel on the main instrument panel, and the installation of a high speed gearbox (HSGB) overheat detector system into the monitoring system for the engine turbine air temperature.” The commenter states that this change clarifies that the modification adds the HSGB overheat detection system in series with the engine turbine cooling air overheat monitoring system. The sentence as-written in the proposal incorrectly states to require installation of an engine turbine air temperature monitoring system.

The FAA agrees and has changed the summary in the final rule accordingly.

Lockheed Martin also requests that the fourth sentence of the proposal summary be changed to read “Also, this proposal would require additional modifications to the engine turbine cooling air overheat monitoring panel at the flight engineer/second officer's console and the pilot's caution and warning light panel on the main instrument panel.” The commenter states that this change clarifies which two panels are to be modified.

The FAA agrees and has changed the summary in the final rule accordingly.

Lockheed Martin requests that the first sentence of the proposal discussion be changed to read “On August 15, 2001, the FAA issued airworthiness directive (AD) 2000-17-10 R1, Amendment 39-12378 (66 FR 44030 August 22, 2001), to require modifications of the engine turbine cooling air panel at the flight engineer/second officer's console, pilot's caution and warning light panel on the main instrument panel, and the installation of an HSGB overheat detector system into the engine turbine cooling air overheat monitoring system.” The commenter states that this change clarifies that the modification adds the HSGB overheat detection system in series with the engine turbine cooling air overheat monitoring system. The sentence as-written in the proposal incorrectly states to require installation of an engine turbine air temperature monitoring system.

The FAA agrees and has changed the summary, which is where this information appears in the final rule, accordingly.

Lockheed Martin requests that model RB211-524B-B-02 engines be deleted from the proposal discussion and from the proposal applicability. The commenter states that model RB211-524B-B-02 engines are not FAA-approved for installation on Lockheed L-1011 model airplanes.

The FAA does not agree. The model RB211-524B-B-02 engine is not currently approved for installation in the Lockheed L-1011 model airplane. However, this model may be in service on other airplanes and therefore the requirements of paragraph (b) of this AD would also be applicable for those installations. Please note that the CAA ADs and the Rolls-Royce service bulletins referenced in this AD apply to the model RB211-524B-B-02 engine as well as those engine models installed on the Lockheed L-1011 model airplane. Based on this, no change is made to the final rule.

Lockheed Martin requests that the last sentence in the second paragraph of the proposal discussion be changed to read “The manufacturer states that the method used to detect pending failure of the LP compressor shaft location bearing is to monitor the airborne vibration monitoring system on the flight engineer/second officer's console.” The commenter states that the engine vibration monitoring system successfully detected LP location bearing failures.

The FAA does not agree. The vibration monitoring system has detected imminent failures of LP compressor shaft location bearing failures in the past. However, bearing and shaft failures have occurred, suggesting that flight crew reaction time due to workload or other circumstances have rendered vibration monitoring only partially effective. Therefore, no change is made to the final rule.

Lockheed Martin requests that the second sentence in the third paragraph of the proposal discussion be changed to read “Those actions must be done so that the installation of the HSGB overheat detector system and installation of the LP compressor shaft extreme axial movement detector system into the engine turbine cooling air overheat monitoring system are complete.” Lockheed Martin states that this change clarifies that the modification adds the HSGB overheat detection system in series with the engine turbine cooling air overheat monitoring system. The sentence as-written in the proposal incorrectly states to require installation of an engine turbine air temperature monitoring system.

The FAA agrees and has changed the supplementary information paragraph, which is where this information appears in the final rule, accordingly.

Lockheed Martin requests that the fifth service bulletin listed under Manufacturer's Service Information in the proposal be changed to read “Lockheed Martin SB 093-77-059, Revision 2, dated April 11, 2002, which introduces modifications to the airplane instrument panels and consoles, necessary for compatibility with the installation of the HSGB overheat detector system and installation of the LP compressor shaft extreme axial movement detector system into the engine turbine cooling air overheat monitoring system.” The commenter states that this change clarifies that the modification adds the HSGB overheat detection system in series with the engine turbine cooling air overheat monitoring system. The sentence as-written in the proposal incorrectly states to require installation of an engine turbine air temperature monitoring system.

The FAA agrees. However, because SB 093-77-060, Revision 1, dated June 30, 2003, replaces SB 093-77-059 in its entirety, all references to SB 093-77-059 are deleted from the final rule.

Lockheed Martin requests that the sixth service bulletin listed under Manufacturer's Service Information in the proposal be changed to read “Lockheed Martin SB 093-77-060, dated April 11, 2002, which introduces modifications to the airplane instrument panels and consoles, necessary for compatibility with the installation of Lockheed Martin SB 093-77-059 and the LP compressor shaft extreme axial movement detector system into the engine turbine cooling air overheat monitoring system.” The commenter states that this change is needed to clarify that the modification is necessary for compatibility with SB 093-77-059 and the LP compressor shaft extreme axial movement detector system into the engine turbine cooling air overheat monitoring system.

The FAA agrees. However, because SB 093-77-060, Revision 1, dated June 30, 2003, replaces SB 093-77-059 in its entirety, all references to SB 093-77-059 are deleted from the final rule.

Lockheed Martin requests that the first requirement listed in the proposal under proposed requirements of this AD, be changed to read: “Modifications of the engine turbine cooling air overheat monitoring panel at the flight engineer/second officer's console, pilot's caution and warning light panel on the main instrument panel.” The commenter states that this change is needed to clarify that the panel is the engine turbine cooling air overheat monitoring panel.

The FAA agrees and has changed the summary, which is where this information appears in the final rule, accordingly.

Lockheed Martin requests that the second requirement listed in the proposal under proposed requirements of this AD, be changed to read “Installation of an HSGB overheat detector system.” The commenter states that the existing second proposed requirement is referencing a system that already exists on the airplane.

The FAA agrees and has changed the summary, which is where this information appears in the final rule, accordingly.

Lockheed Martin requests that the economic analysis be changed to reflect that instead of one engine requiring a speed probe loom electrical support assembly part number FW15212, ten engines require this part, and to reflect that the total cost of the AD to U.S. operators is estimated to be $19,996,560.

The FAA agrees and has made these changes in the economic analysis in the AD.

Lockheed Martin requests that paragraph (a)(2) be deleted from the AD. The commenter states that Lockheed Martin SB 093-77-059 will be reconfigured when complying with Lockheed Martin SB 093-77-060.

The FAA agrees. SB 093-77-060, Revision 1, dated June 30, 2003, replaces SB 093-77-059 in its entirety, and therefore, paragraph (a)(2) is not required. Paragraph (a)(2) has been deleted and the following substeps have been relettered in the final rule.

Lockheed Martin requests that proposal paragraph (a)(5) be changed to read: “Modify airplane instrument panels and consoles with the installation of the engine failure indicators, failure lenses, and marker, in accordance with Lockheed Martin SB 093-77-060, dated April 11, 2002. The commenter states that this change provides clarity on how the panels and consoles are modified.

The FAA agrees and has changed the affected paragraph by referencing SB 093-77-060, Revision 1, dated June 30, 2003.

After careful review of the available data, including the comments noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the changes described previously.

There are approximately 492 engines and 164 airplanes of the affected design in the worldwide fleet. The FAA estimates that 270 engines installed on 90 airplanes of U.S. registry would be affected by this AD. The FAA estimates that it would take approximately 40 work hours per engine to accomplish the actions, and that the average labor rate is $60 per work hour. Required parts would cost approximately $58,956 per engine. The FAA estimates that it would cost approximately $37,920 per airplane to do the airframe panel modifications. In addition, ten airplanes of U.S. registry would require speed probe loom electrical support assemblies P/N FW15212 installed on all three engines, at an estimated cost of $588 per engine. Based on these figures, the total cost of the AD to U.S. operators is estimated to be $19,996,560.

This final rule does not have federalism implications, as defined in Executive Order 13132, because it 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. Accordingly, the FAA has not consulted with state authorities prior to publication of this final rule.

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

The Rule

This action amends Title 14 Code of Federal Regulations (14 CFR) part 71 (part 71) by amending the legal descriptions of eight Federal airways and seven jet routes that have “Farmington VORTAC” included as part of their route structure. Currently, the Farmington, NM, VORTAC and the Four Corners Regional Airport, NM, share the same location identifier. The fact that the VORTAC and the airport are not co-located has led to confusion among users. To eliminate this confusion, the Farmington VORTAC will be renamed the “Rattlesnake VORTAC.” All airways with “Farmington VORTAC” included in their legal descriptions will be amended to reflect the name change. The name change of the VORTAC will coincide with the effective date of this rulemaking action.

Since this action merely involves editorial changes in the legal description of eight Federal airways and seven jet routes, and does not involve a change in the dimensions or operating requirements of that airspace, notice and public procedure under 5 U.S.C. 553(b) are unnecessary.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this regulation: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Jet routes and domestic VOR Federal airways are published in paragraphs 2004 and 6010(a), respectively, of FAA Order 7400.9J, dated August 31, 2001, and effective September 16, 2001, which is incorporated by reference in 14 CFR 71.1. The jet routes and airways listed in this document will be published subsequently in the order.

There are no changes to the lateral limits. Therefore, the FAA has determined that this action is not subject to environmental assessments and procedures in accordance with FAA Order 1050.1D, Policies and Procedures for Considering Environmental Impacts, and the National Environmental Policy Act.

History

In April 2002, the DOE signed an agreement transferring responsibility for the daily use of R-4809 to the USAF. On May 14, 2003, the USAF submitted a request to add the Los Angeles ARTCC as the controlling agency of R-4809, and to change the area's using agency from the DOE to the USAF.

This action responds to the above agreement and requested changes. Specifically, this action adds “FAA, Los Angeles ARTCC,” as the controlling agency for R-4809, and changes the using agency from the “DOE, Albuquerque Operations Office, NM,” to the “USAF, Headquarters Air Warfare Center, Nellis AFB, NV.” These changes will designate R-4809 as a joint-use area, and make the airspace accessible to nonparticipating aircraft. This action does not change any boundaries, times of designation, or activities conducted in the restricted airspace area.

Section 73.48 of part 73 of the Federal Aviation Regulations was republished in FAA Order 7400.8K, dated September 26, 2002.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this regulation: (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1D, Policies and Procedures for Considering Environmental Impacts. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

On March 13, 2003, the Commission published in the Federal Register  1 proposed rule amendments regarding the computation and presentation of rate of return information and other disclosures concerning past performance of accounts over which the CTA has had trading authority. In that release, the Commission also sought comment on whether a core principle should replace detailed performance requirements.

The Commission received thirteen comments on the proposal. The commenters included one industry association, 2 one CTA, 3 one bar association, 4 one consumer organization, 5 one accounting firm, 6 the National Futures Association (“NFA”), and seven members of the public. 7 The industry and bar associations, NFA, and the CTA supported the amendments, particularly the use of nominal account size as the basis for computing rates of return. The seven members of the public and the consumer organization submitted comments expressing concern over the use of nominal account size rather than actual funds as the basis for presentation of a CTA's past performance. Commenters who addressed the core principle approach indicated that specific standards for performance presentation should exist in an area in which continuity and comparability are important, although several indicated that additional flexibility in the application of those standards would be welcome. These comments are discussed more fully below.

Boehringer Ingelheim Vetmedica, Inc., 2621 North Belt Highway, St. Joseph, MO 64506-2002, filed NADA 141-213 that provides for use of METACAM (meloxicam) Oral Suspension for the control of pain and inflammation associated with osteoarthritis in dogs. The NADA is approved as of April 15, 2003, and the regulations are amended in 21 CFR part 520 by adding new § 520.1350 to reflect the approval. The basis of approval is discussed in the freedom of information summary.

In accordance with the freedom of information provisions of 21 CFR part 20 and 21 CFR part 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Dockets Management Branch (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday.

Under section 512(c)(2)(F)(i) of the Federal Food, Drug, and Cosmetic Act (the act) (21 U.S.C. 360b(c)(2)(F)(i)), this approval qualifies for 5 years of marketing exclusivity beginning April 15, 2003.

The agency has determined under 21 CFR 25.33(d)(1) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

Cross Vetpharm Group Ltd., Broomhill Rd., Tallaght, Dublin 24, Ireland, filed a supplement to ANADA 200-144 that provides for a new pouch size of TETROXY (oxytetracycline HCl) Soluble Powder used to make medicated drinking water for administration to swine. The supplemental application is approved as of April 21, 2003, and the regulations are amended in 21 CFR 520.1660d to reflect the approval. The basis of approval is discussed in the freedom of information summary.

In accordance with the freedom of information provisions of 21 CFR part 20 and 21 CFR 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday.

The agency has determined under 21 CFR 25.33(a)(1) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

Schering-Plough Animal Health Corp., 1095 Morris Ave., Union, NJ 07083, filed a supplement to NADA 119-807 for BEUTHANASIA-D-SPECIAL Solution and Delmarva Laboratories, Inc., 1500 Huguenot Rd., suite 106, Midlothian, VA 23113, filed a supplement to ANADA 200-071 for EUTHASOL Solution. The supplemental applications provide for the addition of environmental warning statements to product labeling. The supplemental applications are approved as of May 2, 2003, and the regulations are amended in § 522.900 (21 CFR 522.900) to reflect the approvals.

In addition, the agency has found that the regulations do not reflect the 1996 change of sponsorship (61 FR 5505, February 13, 1996) of NADA 128-967 for REPOSE Euthanasia Solution from Syntex Animal Health, Division of Syntex Agri-business, Inc., to Fort Dodge Animal Health, Division of Wyeth. At this time, § 522.900 is revised to reflect that change of sponsorship and a current format.

The agency has determined under 21 CFR 25.33(d)(1) that these actions are of a type that do not individually or cumulatively have a significant effect on the human environment. Therefore, neither environmental assessments nor environmental impact statements are required.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

Phoenix Scientific, Inc., 3915 South 48th St. Terrace, St. Joseph, MO 64503, filed ANADA 200-287 that provides for use of gentamicin sulfate, United States Pharmacopeia (USP); betamethasone valerate, USP; and clotrimazole, USP; (GBC) Ointment for the treatment of canine otitis externa associated with yeast ( Malassezia pachydermatis , formerly Pityrosporum canis ) and/or bacteria susceptible to gentamicin. Phoenix Scientific's GBC Ointment is approved as a generic copy of Schering-Plough Animal Health's OTOMAX Ointment approved under NADA 140-896. The ANADA is approved as of March 28, 2003, and the regulations are amended in § 524.1044g (21 CFR 524.1044g) to reflect the approval. The basis of approval is discussed in the freedom of information summary.

In addition, § 524.1044g is being amended to reflect the supplemental approval of several additional container sizes under NADA 140-896 and ANADA 200-229, which were not codified, and to reflect a current format.

In accordance with the freedom of information provisions of 21 CFR part 20 and 21 CFR 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday.

The agency has determined under 21 CFR 25.33(a)(1) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

Background

Section 4975(e)(7) provides that an ESOP is a defined contribution plan that is designed to invest primarily in qualifying employer securities and that is either a stock bonus plan which is qualified, or a stock bonus plan and money purchase pension plan both of which are qualified, under section 401(a). Section 4975(e)(7) authorizes the Secretary to issue regulations imposing additional requirements for ESOPs ( see § 54.4975-11 of the Excise Tax Regulations). A plan is not treated as an ESOP under the Code unless it meets the following requirements, to the extent applicable: Section 409(h) (relating to participants' right to receive employer securities; put options); section 409(o) (relating to participants' distribution rights and payment requirements); section 409(n) (relating to securities received in transactions to which section 1042 applies); section 409(p) (relating to prohibited allocations of securities in an S corporation); section 664(g) (relating to qualified gratuitous transfers of qualified employer securities); and section 409(e) (relating to participants' voting rights if the employer has a registration-type class of securities). As authorized by section 4975(e)(7), additional requirements are imposed under § 54.4975-11.

Section 1361(b)(1)(D) provides that a Subchapter S corporation (S corporation) may not have more than one class of stock. Section 1361(b)(1)(B) provides that an S corporation may not have as a shareholder a person that is not an estate, a trust described in section 1361(c)(2), an organization described in section 1361(c)(6), or an individual. In 1996, section 1361(c)(6) was amended to permit a qualified plan under section 401(a) to be a shareholder in an S corporation. Section 1316(a) of the Small Business Job Protection Act of 1996 (SBJPA) (110 Stat. 1755) (1996).

Section 511(a)(1) imposes a tax on the unrelated business taxable income (as defined in section 512(a)) of organizations described in section 511(a)(2), which include plans that qualify under section 401(a). Section 512(e)(1) provides that if an organization described in section 1361(c)(6) holds stock in an S corporation, the interest is treated as an interest in an unrelated trade or business and, notwithstanding the organization's general tax-exempt status, all items of income, loss, or deduction taken into account under section 1366(a) and any gain or loss on the disposition of the stock in the S corporation are taken into account in computing the unrelated business taxable income of the organization. In 1997, section 512(e) was amended to provide that section 512(e) does not apply to employer securities (within the meaning of section 409(l)) held by an ESOP described in section 4975(e)(7). Section 1523 of the Taxpayer Relief Act of 1997 (TRA ‘97) (111 Stat. 788) (1997). Accordingly, S corporation income allocable to stock held by an ESOP is not subject to regular income or unrelated business income tax, but S corporation income allocable to stock held by any other qualified plan or tax-exempt entity under section 501(c)(3) is subject to the unrelated business income tax under section 511.

Congress became aware that the tax exemption for earnings on S corporation stock held by an ESOP may lead to inappropriate tax deferral or avoidance in some cases. In order to address these concerns, Congress enacted section 409(p) as part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) (115 Stat. 38) (2001). Section 409(p) is intended to limit the tax benefits of ESOPs maintained by S corporations unless the ESOP provides meaningful benefits to rank-and-file employees. As explained in the legislative history:

Section 409(p)(1) requires an ESOP holding employer securities consisting of stock in an S corporation to provide that no portion of the assets of the plan attributable to (or allocable in lieu of) such employer securities may, during a nonallocation year, accrue (or be allocated directly or indirectly under any plan of the employer meeting the requirements of section 401(a)) for the benefit of any disqualified person, as defined in section 409(p). 1

Section 409(p)(3)(A) provides that a “nonallocation year” includes any plan year during which the ownership of the S corporation is so concentrated among disqualified persons that they own at least 50 percent of its shares. Section 409(p)(3)(B) provides that, in determining the shares owned by an individual for purposes of section 409(p)(3)(A), the attribution rules of section 318(a) apply, with certain exceptions, and the individual is treated as owning his or her deemed-owned ESOP shares.

Under section 409(p)(4)(C)(i), the term deemed-owned shares includes, with respect to any person, the stock in the S corporation constituting employer securities of an ESOP which is allocated to that person under the ESOP, and that person's share of the stock in the S corporation which is held by the ESOP but which is not allocated to participants under the ESOP. Suspense account stock is deemed to be allocated to participants in the same proportion as the most recent plan allocation.

Section 409(p)(4) provides, in general, that whether someone is a “disqualified person” depends on a person's ownership of deemed-owned shares of S corporation stock held by an ESOP (deemed-owned ESOP shares). Section 409(p)(4) provides, in general, that a “disqualified person” means any person whose deemed-owned ESOP shares are at least 10 percent of the number of deemed-owned ESOP or for whom the aggregate number of deemed-owned ESOP shares of such person and the members of such person's family is at least 20 percent of the number of deemed-owned ESOP shares.

The determination of whether someone is a disqualified person and whether a plan year is a nonallocation year is made without regard to “synthetic equity” attributable to that person and is also made separately taking into account synthetic equity. Synthetic equity is a general classification unique to section 409(p). The provisions relating to synthetic equity do not modify the rules relating to S corporations, e.g. , the circumstances in which options or similar interests are treated as creating a second class of stock. H.R. Conf. Rep. No. 107-84, at 102 n.52. Under section 409(p)(6)(C), synthetic equity is defined as:

Section 409(p)(7)(A) authorizes the Secretary to prescribe such regulations as may be necessary to carry out the purposes of section 409(p). As indicated by the legislative history above, section 409(p) is intended to limit the tax benefits of ESOPs maintained by S corporations unless the ESOP provides meaningful benefits to rank-and-file employees. See H.R. Rep. No. 107-51, part 1, at 100 (2001). Section 409(p)(7)(B) provides that the Secretary may, by regulation or other guidance of general applicability, provide that a nonallocation year occurs in any case in which the principal purpose of the ownership structure of an S corporation constitutes an avoidance or evasion of section 409(p). “For example, this might apply if more than 10 independent businesses are combined in an S corporation owned by an ESOP in order to take advantage of the income tax treatment of S corporations owned by an ESOP.” H.R. Conf. Rep. No. 107-84, at 277 (2001).

Under section 656 of EGTRRA, section 409(p) is effective for plan years ending after March 14, 2001, except for those ESOPs eligible for a delayed effective date applicable to certain ESOPs that were established on or before March 14, 2001. See Rev. Rul. 2003-6, 2003-3 I.R.B. 286.

Section 4979A imposes a 50 percent excise tax in certain cases, including an allocation of employer securities that is prohibited by section 409(p), the ownership of any synthetic equity by a disqualified person during a nonallocation year, and the occurrence of the first nonallocation year of an ESOP, as described in section 4979A(e)(2)(C).

Section 409(p) was enacted to address concerns about ownership structures involving S corporations and ESOPs that concentrate the benefits of the ESOP in a small number of persons. Under the statute as amended, an ESOP is still permitted to hold S corporation stock, provided that the ESOP benefits a sufficiently broad-based group of employees.

These temporary regulations reflect the statutory language under section 409(p)(1) prohibiting an accrual or allocation in a nonallocation year, but do not provide additional guidance on what constitutes a prohibited accrual or allocation. It is expected that this issue will be addressed in additional regulations.

An ESOP has a nonallocation year for any plan year during which, at any time, disqualified persons hold at least 50 percent of the outstanding shares of stock in the S corporation or 50 percent of the outstanding shares of stock and synthetic equity in the S corporation. These temporary regulations provide guidance on the rules applicable for this purpose. In addition, pursuant to section 409(p)(7)(B), these temporary regulations authorize the Commissioner to provide that a nonallocation year exists in any year in which the principal purpose of the ownership structure is avoidance or evasion of section 409(p). These temporary regulations also provide guidance on identification of disqualified persons.

As discussed above, disqualified persons and nonallocation years are identified both with and without synthetic equity. Section 409(p) defines synthetic equity very broadly. Synthetic equity includes restricted stock, rights to acquire stock in the corporation, such as stock options or warrants, and other similar interests. It also includes payments denominated in share value, including a phantom stock unit, stock appreciation right, or similar interest.

In addition, under these temporary regulations, synthetic equity includes two other categories of interests or payments: Nonqualified deferred compensation (even though it is neither payable in, nor calculated by reference to, stock in the S corporation) and rights to acquire interests in certain related entities. In each case, treatment of these interests as synthetic equity is necessary to carry out the Congressional purpose of section 409(p) of limiting the tax deferral opportunities provided by an S corporation ESOP to those situations in which the benefits of the ESOP ownership are available, at a minimum, to a broad group of rank-and-file employees who have the opportunity to be the primary beneficiaries of the growth of the business through the ESOP. Unless these interests are treated as synthetic equity, the benefits associated with ownership of an interest in an S Corporation by means of the ESOP could be concentrated in a small group, and diverted away from the rank-and-file employees, through use of these interests. In this respect, these interests have the same effect as stock appreciation rights payable in cash, which are explicitly included in synthetic equity by statute.

Since the addition of section 409(p), arrangements have been promoted to taxpayers in which an S corporation that is either entirely or substantially owned by an ESOP is used to shelter the income of an active business while the profits of the business are primarily provided for certain management employees of the business through various obligations to make future payments to the employees. Typically in these arrangements, the obligation to make future payments to the management employees suppresses the value of the company's stock that is allocated to rank-and-file employees through the ESOP, depriving them of the opportunity to be the primary beneficiaries of the growth of the business through the ESOP.

For example, under some of these arrangements, the owners of the operating company establish a management company and the operating company agrees to pay management fees equal to substantially all (or most) of the profits of the operating company. The management company agrees to provide future compensation to certain executives or other employees of the operating company or the management company in an amount equal to substantially all of the profits of the management company. Finally, the management company elects to be treated as an S corporation and transfers all, or a substantial portion, of its stock to an ESOP established to cover rank-and-file employees. Under this arrangement, the operating company claims a deduction for the fees paid to the management corporation. The management corporation in turn retains these fees to satisfy its obligations to pay future compensation. Although the stock of the management corporation is owned by the ESOP, the ownership interest held for rank-and-file employees through the ESOP has a substantially reduced value. Rather than being a mechanism for the transfer of not only ownership, but also the rights associated with ownership, to the employees of the S corporation, the ESOP is used as part of a structure designed to shelter profits that will be paid as future compensation for a small group of executives or management employees.

These temporary regulations treat nonqualified deferred compensation provided by the S corporation or certain related entities as synthetic equity, including deferred compensation that is neither payable in stock of the S corporation nor calculated by reference to stock of the S corporation. S Corporations that do not maintain ESOPs typically do not provide nonqualified deferred compensation to owners. By treating nonqualified deferred compensation provided by the S corporation (or certain related entities) as synthetic equity, these temporary regulations address ownership structures that are designed to avoid or evade section 409(p) and provide guidance allowing individuals to determine when these interests result in a failure to comply with section 409(p). Nonqualified deferred compensation is appropriately characterized as synthetic equity because it functions similarly to other forms of synthetic equity by diverting value away from shareholders, thereby reducing the value of the S corporation and diminishing the ESOP's interest in the value that, absent the nonqualified deferred compensation, would be reflected in the shares of the S corporation held by the ESOP. This effect occurs even if the nonqualified deferred compensation is a fixed dollar amount, and even if such deferred compensation is not payable in stock of the S corporation or measured by reference to that stock (directly, such as a stock appreciation right payable in cash, or less directly, such as percentage of the future profits of the S corporation).

Under these temporary regulations, rights to acquire stock or other similar interests in a related entity are treated as synthetic equity if the ownership of such interests in the related entity is the only significant asset of the S corporation and the S corporation is the only significant holder of stock (or other similar interests) of the related entity. For this purpose, related entities are entities in which the S corporation holds an interest and with respect to which income is passed through to the S corporation. These rights are properly treated as synthetic equity because they provide the holders of these rights with an opportunity to benefit from the S corporation ESOP structure that is comparable to the opportunity provided through synthetic equity issued directly by the S corporation. Taking rights to acquire stock or other similar interests in a related entity into account as synthetic equity provides a method for identifying situations in which the interests in the S corporation (and its assets) have, directly or indirectly, become concentrated in a manner that should result in a nonallocation year under section 409(p).

These temporary regulations provide that synthetic equity does not include rights to acquire goods or services at fair market value in the ordinary course of business. The temporary regulations do not address, at this time, rights to acquire other assets of the S Corporation or assets of the related entity or other related entities. This absence should not be interpreted as a conclusion that a right to acquire these other assets cannot be synthetic equity. It may be appropriate to treat the right to acquire assets of the S Corporation, other than its interest in a related entity (such as its ownership of a manufacturing plant), as synthetic equity. It may also be appropriate to treat rights to acquire assets held by the related entity as synthetic equity.

The temporary regulations also do not address rights to acquire interests in related entities if the ownership of such interests in the related entity is not the only significant asset of the S corporation or the S corporation is not the only significant holder of stock (or other similar interests) of the related entity. Rights to acquire interests in other related entities is reserved because, for example, it may be appropriate in cases in which a related entity is not the only significant asset of the S Corporation to treat as synthetic equity only a portion of the value of the rights to acquire stock or other similar interests in the related entity.

The IRS and Treasury intend to issue additional regulations providing guidance on the definition of synthetic equity on a number of issues, including issues identified as reserved in these temporary regulations. For example, the IRS and Treasury intend to issue additional guidance relating to rights to acquire interests in other related entities and rights to acquire assets of an S corporation or related entity. The additional regulations are expected to address the treatment of these interests, including how any such interests treated as synthetic equity should be converted into shares of synthetic equity in the S corporation and whether such conversion should take into account the extent to which income of the related entity is allocated to a shareholder that is subject to regular income tax or unrelated trade or business income tax. These items are reserved in order to allow for additional consideration of these issues, including consideration of comments on the proposed regulations accompanying these regulations. The additional regulations are expected to be issued in conjunction with guidance on prohibited accruals or allocations to disqualified persons in a nonallocation year, which is also identified as reserved in these temporary regulations.

In the meantime, these temporary regulations provide an anti-abuse provision treating acquisition rights as synthetic equity in certain situations. Specifically, this treatment applies to an option or right to acquire assets of the S corporation, or a related person, that is part of a structure that provides rights to the holder comparable to the rights provided by arrangements identified as synthetic equity under these temporary regulations and in which the principal purpose of the structure is the avoidance or evasion of section 409(p). In addition, the temporary regulations delegate authority to the Commissioner to provide, through revenue rulings, notices and other guidance published in the Internal Revenue Bulletin (see § 601.601(d)(2)(ii)(b) of this chapter), that synthetic equity includes a right to acquire stock or other similar interests in a related entity in cases in which the S corporation's interest in the related entity is not the only significant asset of the S corporation or the S corporation is not the only significant owner of the related entity.

The definition of synthetic equity provides that rights to acquire shares in an S corporation with respect to shares that are, at all times during the period when such rights are effective, both issued and outstanding and held by persons other than the ESOP, S corporation, or a related entity are not synthetic equity. These arrangements include, for example, rights of first refusal held by one shareholder in the S corporation with respect to the shares of another taxable shareholder ( i.e., shares held outside the tax-exempt structure created by the ESOP). However, in certain limited cases, a disqualified person who has the right to acquire such issued and outstanding stock is treated as owning the stock if such treatment results in a nonallocation year.

Synthetic equity that is determined by reference to shares of S corporation stock is treated as the corresponding number of shares of stock. Synthetic equity that is determined by reference to shares of stock (or similar interests) in a related entity is converted into an equivalent number of shares of stock of the S corporation with the same aggregate value as the number of shares of stock (or similar interests) of the related entity (with such value determined without regard to any lapse restriction as defined at § 1.83-3(i)). The value of any other synthetic equity interest, such as fixed dollar nonqualified deferred compensation, is converted into an equivalent number of shares of stock in the S corporation based on the present value of the interest or right to nonqualified deferred compensation (with such value determined without regard to any lapse restriction as defined at § 1.83-3(i)) and the fair market value of the S corporation shares on the determination date (with both values determined as of any reasonable date during the plan year).

Under these temporary regulations, a person is a disqualified person based either on deemed-owned ESOP shares or deemed-owned ESOP shares combined with synthetic equity. Whether there is a nonallocation year is then determined by taking into account the holdings of all disqualified persons, first based only on outstanding shares of stock of the corporation and then based on outstanding shares of stock and synthetic equity of the corporation. In accordance with the last sentence of section 409(p)(5), synthetic equity cannot result in a person who is treated as a disqualified person for a year, or a year that is treated as a nonallocation year, not being so treated. In addition, these temporary regulations provide that, in any year in which the Commissioner provides that a nonallocation year occurs because the principal purpose of the ownership structure of the S corporation is an avoidance or evasion of section 409(p), the Commissioner may also treat any individual as a disqualified person.

As a result of the provisions of these temporary regulations relating to synthetic equity, employees who benefit from nonqualified deferred compensation arrangements or who hold rights to acquire interests in certain related entities will be treated as owning synthetic equity and may be treated as disqualified persons. As a result, certain plan years of the ESOP may be treated as nonallocation years. This result will not occur unless the aggregate interest held by disqualified persons—through synthetic equity, direct share ownership, and deemed-owned ESOP shares—constitutes at least half of the value of the outstanding stock and synthetic equity of the S corporation.

In the case of an ESOP holding stock in an S corporation that is eligible for the delayed effective date under section 656(d)(2) of EGTRRA applicable to certain ESOPs established on or before March 14, 2001, these temporary regulations do not apply until plan years beginning on or after January 1, 2005. For an ESOP to which the delayed effective date is not applicable, these temporary regulations are applicable with respect to plan years ending after October 20, 2003. The temporary regulations permit S corporations to avoid having nonqualified deferred compensation treated as synthetic equity under paragraph (f)(2)(iv) of these temporary regulations by distributing the deferred compensation by July 21, 2004.

See the preamble of the cross-reference notice of proposed rulemaking published elsewhere in this issue of the Federal Register , which asks for comments with respect to issues raised by S corporation ESOPs.

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6) refer to the Special Analyses section of the preamble to the cross-referencing notice of proposed rulemaking published in the Proposed Rules section in this issue of the Federal Register . Pursuant to section 7805(f) of the Internal Revenue Code, these temporary regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact.

The principal author of these regulations is John T. Ricotta of the Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and Treasury participated in their development.

Under the formula mandated by 10 U.S.C. 16131(b) for Fiscal Year 2003, the rates of basic educational assistance under the Montgomery GI Bill—Selected Reserve payable to students pursuing a program of education full time, three-quarter time, and half time must be increased by 1.5%, which is the percentage by which the total of the monthly Consumer Price Index-W for July 1, 2001, through June 30, 2002, exceeds the total of the monthly Consumer Price Index-W for July 1, 2000, through June 30, 2001.

10 U.S.C. 16131(b) requires that full-time, three-quarter time, and half-time rates be increased as noted above. In addition, 10 U.S.C. 16131(d) requires that monthly rates payable to reservists in apprenticeship or other on-the-job training must be set at a given percentage of the full-time rate. Hence, there is a 1.5% raise for such training as well.

10 U.S.C. 16131(b) also requires that the Department of Veterans Affairs (VA) pay reservists training less than half time at an appropriately reduced rate. Since payment for less than half-time training became available under the Montgomery GI Bill—Selected Reserve in Fiscal Year 1990, VA has paid less than half-time students at 25% of the full-time rate. Changes are made consistent with the authority and formula described in this paragraph.

A nonsubstantive correction is made in 38 CFR 21.7636 to designate the table as paragraph (a)(2)(i).

The changes set forth in this final rule are effective from the date of publication, but the changes in rates are applied from October 1, 2002, in accordance with the applicable statutory provisions discussed above.

Substantive changes made by this final rule merely reflect statutory requirements and adjustments made based on previously established formulas. Accordingly, there is a basis for dispensing with prior notice and comment and delayed effective date provisions of 5 U.S.C. 552 and 553.

This document has been reviewed by the Office of Management and Budget under Executive Order 12866.

This document contains no provisions constituting a collection of information under the Paperwork Reduction Act (44 U.S.C. 3501-3521).

The initial and final regulatory flexibility analyses requirements of sections 603 and 604 of the Regulatory Flexibility Act, 5 U.S.C. 601-612, are not applicable to this rule, because a notice of proposed rulemaking is not required for this rule. Even so, the Secretary of Defense, the Commandant of the Coast Guard, and the Secretary of Veterans Affairs hereby certify that this final rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act. This final rule directly affects only individuals and does not directly affect small entities. Therefore, this final rule is also exempt pursuant to 5 U.S.C. 605(b) from the initial and final regulatory flexibility analyses requirements of sections 603 and 604.

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

There is no Catalog of Federal Domestic Assistance number for the program affected by this final rule.

Throughout this document, the term “me” refers to the reader of this rulemaking and the terms “we,” “us,” or “our” refer to the EPA.

Section 110 of the Clean Air Act (Act or CAA) requires states to develop air pollution control regulations and strategies to ensure that state air quality meets the national ambient air quality standards established by the EPA. Each state must submit the regulations and emission control strategies to the EPA for approval and promulgation into the federally enforceable SIP.

Each federally-approved SIP protects air quality primarily by addressing air pollution at its points of origin. The SIPs can be and generally are extensive, containing many state regulations or other enforceable documents and supporting information, such as emission inventories, monitoring documentation, and modeling attainment demonstrations.

In order for state regulations to be incorporated into the federally enforceable SIP, states must formally adopt the regulations and emission control strategies consistent with state and federal requirements. This process generally includes public notice, public hearings, public comment periods, and formal adoption by state-authorized rulemaking bodies.

Once a state has adopted a rule, regulation, or emissions control strategy it submits it to us for inclusion into the SIP. We must provide public notice and seek additional public comment regarding the proposed federal action on the state submission. If we receive adverse comments we address them prior to any final federal action (we generally address them in a final rulemaking action).

The EPA incorporates into the federally approved SIP all state regulations and supporting information it has approved under section 110 of the Act. Records of such SIP actions are maintained in 40 CFR part 52, titled “Approval and Promulgation of Implementation Plans.” The actual state regulations the EPA has approved are not reproduced in their entirety in the Code of Federal Regulations (CFR), but are “incorporated by reference,” which means that EPA has approved a given state regulation (or rule) with a specific effective date.

Enforcement of a state rule before and after it is incorporated into a federally approved SIP is primarily a state responsibility. After the rule is federally approved as part of the SIP, however, it becomes enforceable by the EPA, which can then take enforcement actions against violators. The CAA also offers citizens legal recourse to address SIP violations, as provided in section 304 of the Act.

326 Indiana Administrative Code (IAC) 8-2-9 contains Indiana's miscellaneous metal coating operation requirements, and establishes limitations on the amount of volatile organic compounds that may be discharged into the atmosphere for facilities engaged in the surface coating of miscellaneous metal parts and products. The Indiana Air Pollution Control Board originally adopted these requirements and submitted them to EPA for federal approval on October 23, 1990. EPA incorporated these requirements into Indiana's federally enforceable ozone SIP as part of the State's stationary source control strategy in partial satisfaction of the requirements of the CAA.

326 IAC 13-3 contains Indiana's gasoline Reid vapor pressure requirements, and limits the Reid vapor pressure level of gasoline during the summer ozone season in Clark and Floyd Counties to seven and eight-tenths (7.8) pound per square inch per gallon.

Lower Reid vapor pressure gasoline is a fuel control measure that is used during the summer ozone season to reduce emissions of volatile organic compounds from motor vehicles. Fuel with a lower volatility achieves emissions reductions in ozone precursors by reducing aromatic hydrocarbon emissions from gasoline and thereby reducing its ability to evaporate as quickly. The Indiana Air Pollution Control Board adopted this requirement on July 6, 1995; EPA incorporated it into Indiana's enforceable ozone SIP on February 9, 1996 (61 FR 4895).

Section 182(a) of the Act requires States with ozone nonattainment areas classified as “marginal” or above to submit SIP revisions to reduce volatile organic compound emissions. Initially, EPA had designated Clark and Floyd Counties as “moderate” for ozone. On October 9, 2001, EPA announced that Clark and Floyd Counties had monitored attainment of the national air quality standard for ozone and had met all applicable requirements of the Act. As a result, EPA approved Indiana's request to redesignate the area to attainment of the ozone standard (See 66 FR 53665).

Because of the change in Clark and Floyd Counties' attainment status, Indiana revisited a number of rules to clarify that certain requirements would continue to apply even after the change in classification. The purpose of today's action is to approve amendments to those Indiana rules which assure that certain controls in the two counties remain in effect even after the counties' redesignation to attainment.

Indiana held public hearings on this rule on June 5, 2002 and August 7, 2002, in Indianapolis, Indiana. The Indiana Air Pollution Control Board adopted final rules on August 7, 2002. The rule revisions became effective December 15, 2002, and were formally submitted to EPA on January 7, 2003, as a revision to the Indiana SIP for ozone.

Indiana's amendments to 326 IAC 8-2-9 (Miscellaneous metal coating operations) and 326 IAC 13-3-1 (Applicability, Control of gasoline Reid vapor pressure) are not a substantive change to the rules, but rather are intended to ensure that certain existing requirements stay in place in Clark and Floyd even though the area has been redesignated to attainment for ozone.

Indiana amended 326 IAC 8-2-9, Miscellaneous metal coating operations, to add language concerning the application of coating in Clark or Floyd County to assure controls in the two counties remained in effect after the counties were redesignated to attainment. Indiana amended 326 IAC 13-3-1, Control of gasoline Reid vapor pressure applicability, to delete the reference to Clark and Floyd Counties being in an ozone nonattainment area. The rest of the changes to the rule are administrative in nature and are intended to enhance the clarity of the rule.

Our review of the material submitted indicates that the changes made to Indiana's Miscellaneous metal coatings operations (326 IAC 8-2-9) and Control of gasoline Reid vapor pressure (326 IAC 13-3-1) should assure that certain existing VOC requirements remain in effect. These rule revisions are, therefore, approvable.

We are approving, through direct final rulemaking, revisions to Indiana's Miscellaneous metal coatings operations and Control of gasoline Reid vapor pressure requirements. The purpose of this action is to approve amendments to these Indiana rules which assure controls in Clark and Floyd Counties remain in effect, even after the counties' redesignation to attainment. We are publishing this action without prior proposal because we view this as a noncontroversial revision and anticipate no adverse comments. However, in a separate document in this Federal Register publication, we are proposing to approve the SIP revision should adverse written comments be filed. This action will be effective without further notice unless we receive relevant adverse written comment by August 20, 2003. Should we receive such comments, we will publish a final rule informing the public that this action will not take effect. Any parties interested in commenting on this action should do so at this time. If no such comments are received, this action will be effective on September 19, 2003.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget.

For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001).

This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ).

Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4).

This rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

This action also does not have Federalism implications because it does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely approves a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act.

This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant.

In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note ) do not apply.

This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by September 19, 2003. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. ( See section 307(b)(2).)

The following table of contents describes the format for the Supplementary Information section:

EPA is approving a revision to New York's ozone SIP submitted on November 20, 1996 as supplemented on February 24, 1997. The SIP revision addresses specific sources that were submitted by New York in response to the Clean Air Act (CAA) requirement that states require Reasonably Available Control Technology (RACT) at all major stationary sources of NO X . The SIP revision consists of a source-specific NO X RACT determination for controlling oxides of nitrogen (NO X ) from eighteen gas-fired reciprocating engines, located at three compressor stations in New York State, that are owned/operated by Tenneco Gas Corporation (also known as Tenneco Gas Pipeline Company and Tennessee Gas Pipeline Company).

The following is a summary of EPA's finding for a source-specific SIP revision for the Tenneco Gas Corporation's eighteen stationary internal combustion engines at three facilities. Tenneco Gas sought approval of, and New York agreed to, NO X RACT emission limits higher than that which are established in Subpart 227-2. It should be noted that EPA is only acting on the permitted emission rates and conditions of approval related to emissions of NO X ; action is not being taken on any other pollutants which may be permitted by New York with regard to these sources.

Tenneco Gas operates six 1400-horsepower reciprocating engines at the Hamburg (Eden) Compressor Station in Erie County, six 1400-horsepower engines at the Nassau (Chatham) Compressor Station in Columbia County, and five 1400-horsepower and one 3500-horsepower engine (Worthington model ML-12) at the West Winfield Station in Herkimer County. All 18 units are gas-fired reciprocating lean-burn internal combustion engines. The facility's RACT analysis concluded, and New York agreed, that RACT for the seventeen 1400-horsepower engines (Worthington model UTC-165) is low emission combustion, consisting of a pre-combustion chamber with modified turbochargers, whereas RACT for the one 3500-horsepower engine (Worthington ML-12) is timing controls, new air-to-fuel ratio controls and modifications of the turbochargers. The alternative NO X emission limit for each of the seventeen 1400-horsepower engines is 7.0 grams per horsepower-hour and for the one 3500-horsepower engine is 13.3 grams per horsepower-hour.

The CAA required certain states to develop RACT regulations for major stationary sources of NO X and to provide for the implementation of the required measures as soon as practicable but no later than May 31, 1995. Under the CAA, the definition of major stationary source is based on the tons per year (tpy) air pollution a source emits and the quality of the air in the area of the source. In ozone transport regions, attainment/unclassified areas as well as marginal and moderate ozone nonattainment areas, a major stationary source for NO X is considered to be one which emits or has the potential to emit 100 tpy or more of NO X and is subject to the requirements of a moderate nonattainment area. New York is within the Northeast ozone transport region established by section 184(a) of the Act. New York has defined a major stationary source of NO X as a source which has the potential to emit 25 tpy in the New York City and lower Orange County metropolitan areas and 100 tpy in the rest of the State. Consequently, all major stationary sources of NO X within the State of New York are required to implement RACT no later than May 31, 1995. For detailed information on the CAA requirements for NO X RACT see the Technical Support Document prepared for today's action.

On January 20, 1994, New York submitted to EPA for approval, as a revision to the SIP, 6 NYCRR Subpart 227-2, the State's NO X RACT plan entitled “Reasonably Available Control Technology For Oxides of Nitrogen (NO X RACT)—Stationary Combustion Installations.” Subpart 227-2 provides the NO X RACT requirements for combustion sources in New York and it became effective 30-days after being adopted on January 19, 1994. On April 29, 1999, New York submitted amendments to Subpart 227-2 as part of the State's NO X Budget Trading Program (Part 227-3) SIP revision. On April 28, 2000, the EPA final approval action on the two SIP revisions for Subpart 227-2 was published in the Federal Register (65 FR 24875).

On April 3, 2000, New York submitted to EPA for approval additional amendments to Subpart 227-2 as part of the State's NO X Budget Trading Program SIP revision (Part 204). On May 22, 2001, the EPA final approval action on the April 2000 submittal was published in the Federal Register (66 FR 28059).

Provisions within Subpart 227-2 establish a procedure for a case-by-case determination of what represents RACT for an item of equipment or source operation. This procedure is applicable in two situations: (1) If the major NO X facility contains any source operation or item of equipment of a category not specifically regulated in Subpart 227-2, or (2) if the owner or operator of a source operation or item of equipment of a category that is regulated in Subpart 227-2 seeks approval of an alternative maximum allowable emission limit.

Subpart 227-2 requires the owners and/or operators of the affected facility to submit either a RACT proposal if they are not covered by specific emission limitations or a request for an alternative maximum allowable emission limit if they are covered by specific emission limitations. For each situation, the owners/operators must include a technical and economic feasibility analysis of the possible alternative control measures. RACT determinations for an alternative maximum allowable emission limit must consider alternative control strategies ( i.e. , system wide averaging and fuel switching) in addition to considering control technologies ( e.g. , low NO X burners). In either case, Subpart 227-2 provides for New York to establish emission limits based upon a RACT determination specific to the facility. The resulting alternative maximum allowable emission limit must be submitted to EPA for approval as a SIP revision.

The source specific SIP revision that is the subject of this action was adopted by New York in August 1995 and February 1997, and found by EPA to be administratively and technically complete. The SIP revision was a request by New York for EPA approval of alternative emission limits in accordance with provisions of Subpart 227-2 for stationary combustion sources. Prior to adoption, New York published its proposed RACT determinations in the State's “Environmental Notice Bulletin” and provided 30 days for public comment and an opportunity to request a public hearing. There were no requests for public hearings and New York reviewed and responded to all comments made. New York determined that the alternative maximum allowable emission limits proposed by the owner conform with the applicable provisions of Subpart 227-2. New York has issued to the owner a revised permit to construct/certificate to operate and/or special permit conditions incorporating approved permit conditions which are fully enforceable by the State and which contain conditions consistent with Subpart 227-2. These permitted documents are identified in the “Incorporation by reference” section at the end of this rulemaking.

EPA has determined that the NO X emission limits identified in New York's approved permits to construct/certificates to operate and/or special permit conditions represent RACT for each source identified in this action. The permit conditions include emission limits, work practice standards, testing, monitoring, and record keeping/reporting requirements. These permit conditions are consistent with the NO X RACT requirements specified in Subpart 227-2 and conform to EPA's NO X RACT guidance. Therefore, EPA is approving the source-specific SIP revision submitted by New York dated November 20, 1996, as supplemented on February 24, 1997.

EPA's evaluation of the RACT submittal is detailed in a document entitled “Technical Support Document-NO X RACT Source Specific SIP Revisions-State of New York.” A copy of that document is available, upon request, from the EPA Regional Office listed in the ADDRESSES section of this document.

The EPA is approving the source-specific compliance plans described above as RACT for the control of NO X emissions from the eighteen sources located at three facilities identified in the this source-specific SIP revision. Please note that if EPA receives an adverse comment on an amendment, paragraph, or specific source addressed in this direct final rule and if the provision that relates to the adverse comment may be severed from the remainder of the rule, EPA may sever the provision and adopt as final those provisions of the rule that are not the subject of the adverse comment.

The EPA is publishing this rule without prior proposal because the Agency views this as a noncontroversial amendment and anticipates no adverse comments. However, in the proposed rules section of this Federal Register publication, EPA is publishing a separate document that will serve as the proposal to approve the same source-specific SIP revision should adverse comments be filed. This final rule will be effective September 19, 2003 without further notice unless the Agency receives relevant adverse comments by August 20, 2003.

If the EPA receives adverse comments, then EPA will publish a notice withdrawing the final rule or the portion to be severed from the final rule and informing the public that the rule did not take effect. All public comments received will then be addressed in a subsequent final rule based on the proposed rule. The EPA will not institute a second comment period on the proposed rule. Parties interested in commenting on the proposed rule should do so at this time. If no such comments are received, the public is advised that this rule will be effective on September 19, 2003 and no further action will be taken on the proposed rule.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

This rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely approves a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant.

In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. Section 804 exempts from section 801 the following types of rules: (1) Rules of particular applicability; (2) rules relating to agency management or personnel; and (3) rules of agency organization, procedure, or practice that do not substantially affect the rights or obligations of non-agency parties. 5 U.S.C. 804(3). EPA is not required to submit a rule report regarding this action under section 801 because this is a rule of particular applicability.

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by September 19, 2003. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

This is a summary of the Second Order on Reconsideration of the Third Report and Order, and Order on Reconsideration of the Fifth Report and Order , adopted on April 22, 2003 and released on May 8, 2003. The full text of this document is available for public inspection and copying during regular business hours at the FCC Reference Information Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC, 20554. This document may also be purchased from the Commission's duplicating contractor, Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC, 20554, telephone 202-863-2893, facsimile 202-863-2898, or via e-mail qualexint@aol.com.

1. In the Second Order on Reconsideration of the Third Report and Order, and Order on Reconsideration of the Fifth Report and Order , the Commission addresses five petitions for reconsideration filed in response to the Commission's Order on Reconsideration of the Part 1 Third Report and Order , 65 FR 52401 (August 29, 2000), and Fifth Report and Order , 65 FR 52323 (August 29, 2000), which clarified and amended the general competitive bidding rules for all auctionable services.

2. Specifically, in the Order on Reconsideration of the Part 1 Fifth Report and Order , the Commission:

• Clarifies that in calculating an applicant's gross revenues under the controlling interest standard, the personal net worth, including personal income, of its officers and directors will not be attributed to the applicant. To the extent that the officers and directors of the applicant are controlling interest holders of other entities, the Commission will attribute the gross revenues of those entities to the applicant.

• Establishes a narrow exemption for the officers and directors of a rural telephone cooperative so that the gross revenues of the affiliates of a rural telephone cooperative's officers and directors need not be attributed to the applicant. Specifically, the gross revenues of the affiliates of an applicant's officers and directors will not be attributed if either the applicant or a controlling interest, as the case may be, meets all of the following conditions: (i) The applicant (or the controlling interest) is validly organized as a cooperative pursuant to state law; (ii) the applicant (or the controlling interest) is a “rural telephone company” as defined by the Communications Act; and (iii) the applicant (or the controlling interest) is eligible for tax-exempt status under the Internal Revenue Code. However, the exemption will not apply if the gross revenues or other financial and management resources of the affiliates of the applicant's officers and directors (or the controlling interest's officers and directors) are available to the applicant.

• Declines to revise the controlling interest standard to exclude entities operating under control group structures.

• Modifies the Commission's part 1 default payment rule, § 1.2104(g)(2), to incorporate the combinatorial bidding default rule adopted in the 700 MHz Second Memorandum Opinion and Order .

• Revises the part 1 rules to make certain conforming edits in the following areas: (i) License default; (ii) definition of consortium; (iii) women- and minority-owned businesses; (iv) clarification of the attribution rule; (v) ownership disclosure requirements; and (vi) short-form disclosure requirements for small or very small business consortiums. Additionally, technical edits are made to Commission rules that refer to service-specific competitive bidding rules that have been removed, revised, or modified.

3. In the Second Order on Reconsideration of the Part 1 Third Report and Order , the Commission:

• Dismisses a repetitive challenge to modifications to the installment payment rules adopted in the Part 1 Third Report and Order , 63 FR 770 (January 7, 1998) and the Order on Reconsideration of the Part 1 Third Report and Order .

• Reorganizes § 1.2112(a) to move the requirement that each application fully disclose all “real party or parties in interest” into § 1.2112(a)(1). The Commission also conforms § 1.2112(a)(1) to the disclosure requirements as set forth in § 1.919(e) to ensure a complete disclosure of the identity and relationship of those persons or entities directly or indirectly owning or controlling (or both) the applicant.

4. In the Part 1 Fifth Report and Order , 65 FR 52323 (August 29, 2000), the Commission adopted as its general attribution rule a controlling interest standard, § 1.2110(c)(2), to be used for determining which applicants are eligible for small business status. The attribution rule is significant because, among other things, it is used to determine which applicants qualify as small businesses and therefore, may apply for bidding credits if they are available in a particular service.

5. Under the controlling interest standard, the Commission attributes to the applicant the gross revenues of the applicant, its controlling interests, the applicant's affiliates, and the affiliates of the applicant's controlling interests, in assessing whether the applicant is eligible for the Commission's small business provisions. Section 1.2110(c)(2)(i) defines a controlling interest as including “individuals or entities with either de jure or de facto control.” Thus, there may be more than one “controlling interest” whose gross revenues must be counted. The premise of this rule is that all parties that control an applicant or have the power to control an applicant, and such parties' affiliates, will have their gross revenues counted and attributed to the applicant in determining the applicant's eligibility for small business status or for any other size-based status using a gross revenue threshold.

Personal Net Worth of Officers and Directors.

6. Generally, the Commission has excluded personal net worth, including personal income and assets, from attribution for purposes of eligibility for small business provisions. In making this determination, the Commission has stated that attribution of personal net worth was not necessary because most wealthy individuals are likely to have their wealth tied to the ownership of other businesses. The Commission finds this rationale equally applicable here. Accordingly, for purposes of the controlling interest standard, the Commission clarifies that in calculating an applicant's gross revenues under § 1.2110, the personal net worth, including personal income and assets, of its officers and directors will not be attributed to the applicant. This clarification is consistent with the Commission's decisions in several service-specific rulemakings. For instance, in using the controlling interest standard to determine the eligibility of applicants in the 929-931 MHz Paging Service (“Auction No. 26”) for small business bidding credits, the Commission made clear that the personal net worth, including personal income, of controlling interests was not attributable to the applicant.

7. Personal income of officers and directors, however, is distinguishable from the gross revenues received by any business entities such individuals may control. For example, if an officer or director were to operate a separate business, the gross revenues derived from that separate business would be attributed to the applicant, although any personal income from such separate business would not be attributed. Further, if an officer or director of an applicant were an affiliate of another entity through any ownership interest or other means of affiliation, the gross revenues of such entity would be attributed to the applicant, whereas any income derived directly by an officer or director from that entity would be considered personal income and not attributed to the applicant. Finally, applicants are reminded that by operation of the Commission's rules all affiliates of controlling interests are attributable to the applicant. Thus, although the Commission does not attribute to the applicant the personal income of its officers and directors, to the extent that the officers and directors are controlling interest holders of other entities, the Commission attributes the gross revenues of those entities to the applicant.

Application of Attribution Rule to the Officers and Directors of a Rural Telephone Cooperative.

8. The Commission grants Rural Telecommunications Group's (“RTG”) request to exclude from attribution the gross revenues of entities controlled by a rural telephone cooperative's officers and directors, by providing a narrow exemption only available where the gross revenues of the affiliates of a rural telephone cooperative's officers and directors would otherwise be attributable based solely on their status as officers and directors of the rural telephone cooperative applicant or as officers and directors of a rural telephone cooperative that controls the applicant. However, if an officer or director of a rural telephone cooperative is considered a controlling interest of the applicant under another section of the controlling interest attribution rule, this exemption does not apply. For example, if an officer or director of the rural telephone cooperative manages its operations pursuant to a management agreement and either has authority to make certain decisions regarding the services offered by the applicant, or significantly influences such decisions, the gross revenues of other entities controlled by the officer or director would be attributed to the rural telephone cooperative. The Commission denies Neoworld's suggestion to broadly exempt officers and directors from the controlling interest standard where an applicant institutes a contractual mechanism in an effort to insulate officers and directors from involvement in an applicant's telecommunications activities.

Limited Exemption for Rural Telephone Cooperatives.

9. In light of the unique nature of rural telephone cooperatives, an exemption from the requirement that the gross revenues of entities controlled by a rural telephone cooperative's officers and directors are attributed to the applicant would not undermine the purpose of the controlling interest attribution rule. The attribution rules are intended to eliminate incentives for entities to create small business “fronts” that would enable large firms to secure a benefit to which they are not entitled, i.e. , small business bidding credits. The Commission agrees with the commenters' explanation that the key differences between rural cooperatives and other structures make it highly unlikely that rural telephone cooperatives would be able to participate in the types of sham transactions the rule is designed to protect against. For example, ownership and control of the cooperative remain in the hands of patrons of the cooperative ( i.e. , telephone subscribers), rather than in non-patron equity investors as is often the case with traditional corporations or other business forms. Additionally, unlike traditional corporations or other business forms, the outside business interests of individual officers and directors of rural telephone cooperatives are not financial and management resources available to the cooperative. Further, because of the democratic structure of cooperatives, the patrons of each cooperative control the cooperative. Finally, members contribute equity to, and control, the capital of the cooperative, as opposed to outside investors. In light of these factors, grant of RTG's petition does not undermine the purpose of the controlling interest attribution rule.

10. Accordingly, based upon the comments received, the Commission adopts a narrow exemption for the officers and directors of a rural telephone cooperative so that the gross revenues of the affiliates of a rural telephone cooperative's officers and directors need not be attributed to the applicant. In the Commission's experience, rural telephone cooperatives frequently create wholly owned subsidiaries, or similar entities, to participate in Commission auctions. Accordingly, this exemption for the applicant's officers and directors would also extend to situations where the applicant is not a rural telephone cooperative but is controlled by an eligible rural telephone cooperative. For example, X is a rural telephone cooperative that satisfies all the elements of the exemption. X creates a subsidiary Y. Y's officers and directors are controlling interests solely based upon their status as officers and directors— i.e. , solely pursuant to § 1.2110(c)(2)(ii)(F). Y has no other controlling interests. Then, for purposes of determining eligibility for small business provisions, the gross revenues of the affiliates of X's officers and directors and affiliates of Y's officers and directors are not attributed to Y. If, however, Y has another controlling interest (other than Y's officers and directors and X's officers and directors) that is not an eligible rural telephone cooperative or controlled by an eligible rural telephone cooperative, then the exemption does not apply to Y's officers and directors or such controlling interest's officers or directors. However, the gross revenues of the affiliates of X's officers and directors would not be attributed to Y. Specifically, the gross revenues of the affiliates of an applicant's officers and directors will not be attributed if either the applicant or a controlling interest, as the case may be, meets all of the following conditions: (i) The applicant (or the controlling interest) is validly organized as a cooperative pursuant to state law; 1 (ii) the applicant (or the controlling interest) is a “rural telephone company” as defined by the Communications Act; 2 and (iii) the applicant (or the controlling interest) is eligible for tax-exempt status under the Internal Revenue Code. 26 U.S.C. 1381(a)(2)(C); 26 U.S.C.A. 501(c)(12). However, the exemption will not apply if the gross revenues or other financial and management resources of the affiliates of the applicant's officers and directors (or the controlling interest's officers and directors) are available to the applicant. Further, the mere presence of an eligible rural telephone cooperative as a controlling interest will not ensure that the exemption is wholly applicable to the applicant. Thus, where an applicant is not an eligible rural telephone cooperative, if the applicant has a controlling interest (other than the applicant's officers and directors or the eligible rural telephone cooperative's officers and directors) that is not an eligible rural telephone cooperative, or controlled by an eligible rural telephone cooperative, the exemption will not apply to the applicant's officers and directors or such controlling interest's officers and directors. However, in that situation, the gross revenues of the affiliates of the eligible rural telephone cooperative's officers and directors would not be attributed to the applicant. The exemption the Commission creates is appropriate because where the eligible rural cooperative ultimately controls the applicant, the gating criterion of the cooperative structure precludes the applicant from being a sham entity.

11. The exemption the Commission adopts is tailored to the factual assertions and policy arguments provided by commenters. The test the Commission adopts will ensure that the Commission's general assumptions regarding cooperatives hold true with respect to each applicant seeking to avail itself of this exemption. Thus, for example, the Commission is limiting this exemption only to those rural telephone cooperatives that are eligible for Federal tax-exempt status ( i.e. , those that derive 85% or more of their income from subscribers). Adopting such an objective factor, as well as the other objective factors, will ensure that such exemption would be used only by bona fide community-based cooperatives, not sham entities. The Commission believes that this action will increase the number of rural telephone cooperatives that are eligible for small business status (and the corresponding bidding credits). Such a result will enhance the ability of rural telephone cooperatives to participate in spectrum auctions. This, in turn, will promote the deployment of advanced telecommunications services in rural areas as Congress mandated in section 309(j).

12. Accordingly, the Commission incorporates this exemption into the controlling interest standard contained in § 1.2110. If an applicant uses this exemption, its certification on its short-form application (FCC Form 175) that it “is qualified as a designated entity under § 1.2110” constitutes a certification that it is eligible for this narrow exemption. In addition, in the long-form application (FCC Form 601) and in the application for assignment or transfer of control (FCC Form 603), applicants seeking to use this exemption will be required to establish eligibility for this exemption based on the factors listed.

13. Consistent with the policy objectives underlying the Commission's decision, the Commission grants three pending waiver requests filed by rural telephone cooperative applicants in Auction No. 44. Specifically, three winning bidders that are rural telephone cooperatives (or wholly-owned by rural telephone cooperatives) filed substantively identical requests for waiver of § 1.2110(c)(2)(ii)(F). See Applications to Participate in an FCC Auction (FCC 175) of Cable and Communications Corporation, Northeast Nebraska Telephone Company, and Poka Lambro Telecommunications, Ltd. (initially filed May 8, 2002) (respectively, the “C&C Application, Northeast Application, and Poka Lambro Application”). Short form applications for Auction No. 44, including the instant applications, may be viewed on the Commission's auctions Web site. See https://auctionfiling.fcc.gov/form175/index.htm. In connection with their demonstrations of eligibility for designated entity bidding credits, these applicants argued that the gross revenues of the affiliates of the cooperative's officers and directors should not be attributed to the cooperative. They note that the outside business interests of the cooperative's officers and directors “have no impact on the cooperative's ability to raise capital or compete for FCC licenses” due to the cooperative structure under which they are organized. The Commission believes that waiver of the requirement that the gross revenues of entities controlled by a rural telephone cooperative's officers and directors are to be attributed to the applicant would be consistent with its decision to adopt an exemption for rural telephone cooperatives and would promote the development of additional wireless services in their particular rural communities. Accordingly, consistent with the Commission's decision, it grants these waivers conditioned upon the submission to the Commission of information demonstrating the applicant's compliance with the factors adopted herein.

14. The Commission denies Neoworld's suggestion to broadly exempt officers and directors from the controlling interest standard where an applicant institutes a contractual mechanism to insulate officers and directors from involvement in an applicant's telecommunications activities. Generally, § 1.2110(c)(2)(ii)(F) reflects the corporate reality that business decisions and corporate policy are established by a corporation's board of directors and officers. Providing a broad exemption for officers and directors of an applicant would ultimately underestimate the role of officers and directors in an organization; thereby potentially providing large businesses with a significant monetary benefit reserved only for eligible small businesses. Such a result is contrary to the Commission's intent when adopting the controlling interest rule. As the Commission noted in the Part 1 Fifth Report and Order , the Commission adopted the attribution rules to ensure that small business bidding credits are extended only to bona fide small businesses. Further, adoption of Neoworld's drastic revision to the Commission's rules would essentially require the Commission to conduct a case-by-case review of the specific insulating mechanism employed to ensure that the arrangements are legitimate and are not sham transactions. In contrast, the exemption the Commission adopts for rural telephone cooperatives does not require such a case-by-case analysis. The cooperative's structure coupled with the factors identified serves as gating criteria obviating a need for such a case-by-case analysis.

Application of Controlling Interest Standard to Control Group Structures.

15. TeleCorp, Tritel, Poplar, and Summit (“Petitioners”) request that the Commission revise the controlling interest standard to exclude entities operating under the Commission's previously adopted control group structure. Petitioners state that they are concerned that the controlling interest standard could be interpreted to provide that officers and directors are always considered to have a controlling interest even under a control group structure. Petitioners argue that a literal reading of the rule could be used to expand the definition of affiliates so that greater gross revenues and assets would be attributed on that basis alone. Specifically, Petitioners request that newly established affiliates of existing restricted C/F block licensees that were structured so as to establish their eligibility under a control group attribution rule be able to utilize the same structure used by the existing restricted C/F block licensee to establish their eligibility. The Petitioners did not indicate the context of their request, i.e. , whether they sought to use the control group attribution rule solely to determine eligibility to hold a restricted C/F block license, or also to determine if an unjust enrichment payment would be owed upon transfer of control or assignment of such a license.

16. To the extent Petitioners are seeking a modification to the Commission's rule, the Commission denies their petitions for reconsideration and affirms the Commission's decision in the Part 1 Fifth Report and Order to consider officers and directors as controlling interests in a licensee or applicant. However, to avoid similar questions in the future, the Commission restates the application of the attribution rules with respect to eligibility to hold restricted C/F block licenses. Generally, if an applicant does not hold a restricted C/F block license under the former control group rules it must use the controlling interest attribution rule to determine eligibility to hold restricted C/F block licenses, whether through auctions or through assignment or transfer of control. However, with respect to the acquisition of restricted C/F block licenses through assignment or transfer of control, wholly-owned subsidiaries and commonly controlled affiliates (whether newly formed or in existence prior to the adoption of the controlling interest attribution rule) that establish their eligibility directly through an existing restricted C/F block licensee, will be eligible to hold a C/F block restricted license to the same extent as the existing restricted C/F block licensees. Thus, in the context of an application to assign or transfer a restricted C/F block license, the eligibility of an existing restricted C/F block licensee (that obtained its license under the former control group rules) and its wholly owned subsidiaries and commonly controlled affiliates to hold such licenses (as opposed to eligibility for small business provisions such as bidding credits) may be determined without application of the controlling interest attribution rule. For example, X creates a wholly-owned subsidiary Y. X also has a commonly controlled affiliate Z. X obtained its restricted C/F block licenses under the former control group rules. W, an unrelated party, also obtained its restricted C/F block licenses under the former control group rules. W seeks to assign its restricted C/F block licenses to Y and Z. Because X, Y, and Z are commonly controlled, Y and Z may establish their eligibility to hold restricted C/F block licenses through X without application of the controlling interest attribution standard. Further, X, Y, and Z will continue to be eligible to hold restricted C/F block licenses provided they comply with the requirements of § 24.709. See TeleCorp Order, 16 FCC Rcd at 3725-26, ¶¶ 23-41. Significantly, X, Y, and Z can only exceed the total assets test by permissible growth pursuant to § 24.709(a)(2). Id . at ¶ 29. This explanation does not alter the determination that, as stated in the Part 1 Fifth Report and Order , for all future C/F block auctions, all applicants will be subject to the attribution rules in effect at the time of filing their short-form applications.

17. For purposes of determining an assignee's or transferee's eligibility for benefits offered to small businesses, such as bidding credits and installment financing, and the application of the unjust enrichment provisions, all applicants will be subject to the attribution rules in effect at the time of filing their applications for assignment or transfer of control. The Commission has previously determined that the fact that an existing restricted C/F block licensee may choose to retain a control group structure does not exempt it from attributing the gross revenues of its affiliates, including the gross revenues of other entities controlled by its officers and directors, to the licensee for purposes of determining eligibility for small business provisions, such as bidding credits and installment financing.

18. The Commission incorporates into the part 1 general competitive bidding rules the combinatorial bidding default rule adopted in the 700 MHz Second Memorandum Opinion and Order , 66 FR 10374 (February 15, 2001). The Commission adopts this provision because the effects of default in a combinatorial bidding auction are so detrimental to the integrity of the auctions system that they require a strong deterrent against insincere bidding and strategic default. As a commenter noted, in response to the Auction No. 31 Combinatorial Bidding Comment Public Notice, 65 FR 35636 (June 5, 2000), “[d]efault in a combinatorial auction has more far reaching consequences than does default in an auction of single items. In particular, a default in a combinatorial auction could affect the award of many other licenses and [could] be used strategically to do so.” Comments of Alekansdar Pekec and Michael H. Rothkopf, “Making the FCC's First Combinatorial Auction Work Well” (filed June 9, 2000) at section 6. Thus, the rule as adopted in the 700 MHz Second Memorandum Opinion and Order is necessary to adequately discourage defaults, deter frivolous or insincere bidding, and generally protect the integrity of the auction process. The rule will be used to calculate default payments for all auctions where a combinatorial bidding design is employed. Although the Commission adopts a new combinatorial bidding default rule, the competitive bidding rules are otherwise applicable. Thus, for example, the winning bid for a package creates the same obligation for the whole package as does a winning bid for a single license in the context of simultaneous multiple round auction without combinatorial bidding.

19. For convenience sake, the Commission provides the following explanation of the application of the rule. This substantially reiterates the explanation provided in the 700 MHz Second Memorandum Opinion and Order .

(i) Where a defaulting bidder held winning bids on individual licenses ( i.e. , not as part of a package), and in a subsequent auction the licenses are also won individually, the deficiency portion will be calculated by subtracting the subsequent winning bid from the defaulted bid. 47 CFR 1.2104(g)(3)(i)(a) as adopted herein. The deficiency portion for such bids will be calculated on a license-by-license basis ( i.e. , in the event of defaults on multiple bids, the differences between the amounts originally bid and the amounts subsequently bid will not be aggregated to determine a net amount owed). Id. For example, if a bidder defaults on two bids, one for License A for $100 and one for License B for $150, and in a subsequent auction, the licenses are won as License A for $150 and License B for $120, the default payment would be calculated separately for License A (by comparing the original bid ($100) to the amounts subsequently bid ($150), yielding no deficiency but an additional 25% payment)) and License B (by comparing the original bid ($150) to the amount subsequently bid for License B ($120), yielding a deficiency of $30, plus an additional 25% payment)). If the subsequent winning bid(s) exceed the defaulted bid(s), no deficiency portion will be assessed. Even in the absence of a deficiency portion, however, an additional 25% payment will be due. Id .

(ii) Where a defaulting bidder won licenses in package(s), and in a subsequent auction the licenses are won either (a) in the same package(s), or (b) in smaller packages or as individual licenses that correlate to the defaulted package(s), the deficiency portion will be determined on a package-by-package basis. 47 CFR 1.2104(g)(3)(i)(b) as adopted herein. In the event a defaulting bidder defaults on more than one such bid, the differences between the amount originally bid and the amounts(s) subsequently bid will not be aggregated to determine a net amount owed. Id . For example, if a bidder defaults on Package ABC ( i.e. , a package consisting of Licenses A, B and C) with a bid of $900 and Package DE with a bid of $600, and in a subsequent auction, the licenses are won as License A for $200, Package BC for $600, and Package DE for $700, the default payment would be calculated separately for Package ABC (by comparing the original bid ($900) to the amounts subsequently bid for License A and Package BC ($200 and $600, which equals $800, yielding a $100 deficiency plus the additional payment)) and Package DE (by comparing the original bid ($600) to the amount subsequently bid for Package DE ($700, yielding no deficiency, but an additional 25% payment)). Thus, in this situation, the deficiency portion will be calculated in a manner analogous to where the licenses are sold individually. However, with regard to each individual package, where the licenses are subsequently sold individually or as part of smaller packages, the amounts received in the subsequent auction will be aggregated in order to determine any deficiency.

(iii) Where a defaulting bidder or bidders won licenses either individually or as part of packages, and in a subsequent auction the licenses are won as larger packages or different packages (not including the situation described in preceding paragraph), the deficiency portion will be calculated by subtracting the aggregate amount originally bid for the licenses from the aggregate amount bid in the subsequent auction for the licenses. 47 CFR 1.2104(g)(3)(i)(c) as adopted herein. For example, if a bidder defaults on Package AB with a bid of $200 and Package CD with a bid of $300, and in a subsequent auction the licenses are sold as Package AC for $250 and Package BD for $250, the default payment would be calculated by aggregating the amounts originally bid ($200 plus $300 equals $500) to the amounts subsequently bid ($250 plus $250 equals $500) to determine the deficiency amount ($500 less $500 equals $0); the additional payment would be based on either the original aggregate amount or the subsequent aggregate amount, whichever is less (in this case, they are the same, $500). Thus, in this situation, the deficiency portion will not be calculated on a bid-by-bid basis.

(iv) If, in a situation requiring that bids be aggregated in order to determine the deficiency portion of the default payments for bids, there are multiple defaulting bidders, the default payment (both the deficiency portion and the additional 25% payment portion) will be allocated to the defaulting bidders in proportion to the their share of the aggregated default bids. 47 CFR 1.2104(g)(3)(i)(d) as adopted herein. For example, if Bidder 1 defaults on Package ABC for $200, and Bidder 2 defaults on Package DE for $400, and in a subsequent auction the licenses are won in Package AB for $150 and Package CDE for $350, Bidder 1 would be liable for 1/3 of the default payment and Bidder 2 would be responsible for 2/3. The total default payment would be equal to the difference between the total of the original bids ($600) and the total of the subsequent amounts bid ($500) plus an additional amount of 25% of the total of the subsequent amounts bid. The total default payment therefore would equal $100 ($600-$500) plus 25 percent of $500 ($125), for a total default payment of $225.

(v) In the event that a bidding credit applies to any applicable bids(s), the deficiency portion of the default payment will be assessed using the lesser of the difference between gross bids and the difference between net bids. 47 CFR 1.2104(g)(3) as adopted herein. (In the event that a bidder does not have a bidding credit, the bidder's gross bid and net bid are the same). In other words, the Commission will compare (i) the sum of the gross defaulted bid(s) minus the gross subsequent winning bid(s) and (ii) the sum of the net defaulted bid(s) minus the net subsequent winning bid(s). The Commission will use the lesser of (i) and (ii) to calculate the deficiency portion of the default payment.

(vi) The default payment consists of the deficiency portion and an additional 25% payment. Id . The additional payment will be 25% of the lesser of the subsequent winning bids(s) and the defaulted bid(s). 47 CFR 1.2104(g)(3)(ii) as adopted herein. The Commission will use the same gross or net bid(s) that were used to calculate the deficiency portion when assessing the additional 25% payment. Id . That is, the Commission will compare the defaulted and subsequent bid(s) according to the methods described for calculation of the deficiency portion of the default payment when determining whether the defaulted bid(s) or the subsequent winning bid(s) is the lesser amount. Id . Should there be no difference between the gross or net bid(s) for purposes of assessing the deficiency portion, the Commission will assess the additional 25% payment using the lesser of the gross or net bid(s).

20. Finally, the Commission will maintain its practice of assessing an interim default payment with a slight modification. Specifically, in the case of combinatorial bidding defaults, the Commission will assess a 25% interim default payment pending assessment of the final default payment after a subsequent auction. This procedure is appropriate because even under the most favorable set of circumstances for the defaulting bidder, i.e. , where the bid price for the package at the subsequent auction exceeds defaulted bid, the final default payment would be 25% of the defaulted bid.

21. When the Commission adopted the default rules, it stated, as a general rule, that in the event of default by a winning bidder, the best course of action would be to offer licenses for the spectrum in a subsequent auction. Currently, under the Commission's part 1 auction rules, if a bidder defaults on a bid (or bids), the Commission may offer the license(s) for the spectrum in a new auction or it may also offer the license(s) to the other highest bidders. In the 700 MHz Second Memorandum Opinion and Order , the Commission determined that for combinatorial bidding in the Upper 700 MHz band if a bidder defaults on a package bid, the Commission would auction the licenses making up the package on which the party defaulted, and only those licenses. This would occur even if, under the combinatorial bidding procedures, a different set of packages would have won had the defaulting bidder not bid. As the Commission explained in that 700 MHz Second Memorandum Opinion and Order , any other result would be extremely problematic in the context of combinatorial bidding. The Commission sees no reason to change this decision now. Accordingly, in all future combinatorial bidding auctions, the Commission will not offer the package or licenses to the next highest bidder and will instead auction the license(s) for the spectrum in a new auction.

22. The Commission revises or removes service-specific and/or part 1 competitive bidding rules in the following areas: (i) License default; (ii) definition of consortium; (iii) women- and minority-owned businesses; (iv) clarification of the attribution rule; (v) ownership disclosure requirements; and (vi) short-form disclosure requirements for small or very small business consortiums. Also, technical edits are made to Commission rules that refer to service-specific competitive bidding rules that have been removed, revised, or modified.

23. License default . Section 1.2109, among other things, provides the conditions upon which a winning bidder will be deemed to have defaulted. Specifically, § 1.2109(b) states, in pertinent part, that “[i]f a winning bidder withdraws its bid * * * the bidder will be deemed to have defaulted, its application will be dismissed, and it will be liable for the default payment specified in § 1.2104(g)(2).” However, § 1.2109(c) states, in pertinent part, that “[a] winning bidder who is found unqualified to be a licensee * * * will be deemed to have defaulted and will be liable for the payment set forth in § 1.2104(g)(2).” The language regarding the dismissal of an application was inadvertently omitted from § 1.2109(c). Thus, the Commission revises § 1.2109(c) to add dismissal language to conform to § 1.2109(b).

24. Definition of consortium . The Commission's service-specific competitive bidding rules for several services define the terms “small business consortium” and “very small business consortium.” However, neither of these terms are defined in the Commission's part 1 rules. To streamline the Commission's rules and eliminate redundancies, the Commission incorporates a definition of the term “consortium” into the part 1 rules. This definition is taken almost verbatim from the service-specific definitions. Accordingly, the Commission deletes the definitions of small and very small business consortium in the service-specific competitive bidding rules.

25. Further, the Commission has generally defined a “small or very small business consortium” as a conglomerate organization formed as a joint venture between or among mutually independent business firms, each of which individually satisfies the definition of a small or very small business as defined on a service-specific basis. In the Part 1 Third Report and Order , the Commission, in clarifying the part 1 definition of affiliate, determined that a “consortium” for purposes of determining status as a designated entity will not be treated as a “joint venture” under the Commission's attribution standards. In that Order, however, the Commission failed to also revise the part 1 definition of a “small or very small business consortium.” Thus, the Commission revises the part 1 rules to exclude the term “joint venture” from the definition of “consortium.”

26. Clarification of the attribution rules: In the Part 1 Fifth Report and Order , the Commission established a controlling interest standard for attributing to an applicant the gross revenues of the applicant, its affiliates, its controlling interest, and the affiliates of the applicant's controlling interests in determining which applicants qualify as small businesses. In doing so the Commission amended the part 1 competitive bidding rules to incorporate new rules adopting the controlling interest standard. Specifically, § 1.2110(c)(2)(ii)(F) provides, in pertinent part, that “[o]fficers and directors of an entity shall be considered to have a controlling interest in the entity.” Under the controlling interest standard, however, a controlling interest includes individuals or entities, or groups of individuals or entities, that have control of the applicant under the principles of either de jure or de facto control. Therefore, the Commission revises § 1.2110(c)(ii)(F) to read, in pertinent part, that “[o]fficers and directors of an applicant shall be considered to have a controlling interest in the applicant.”

27. Additionally, the Commission makes slight modifications to § 1.2110(b)(1)(i) to provide further guidance to applicants. Specifically, the term “their affiliates” in § 1.2110(b)(1)(i) includes both affiliates of the applicant and affiliates of the applicant's controlling interests.

28. Disclosure requirements for small businesses . Section 1.2112(a) of the Commission's rules formerly required all applications to participate in competitive bidding or for a license, authorization, assignment, or transfer of control to disclose certain information pertaining to controlling interests including “a list of names, addresses, and citizenship of all controlling interests of the applicants, as set forth in § 1.2110.” In the Part 1 Fifth Report and Order , the Commission determined that only applicants claiming small business status would be required to disclose controlling interest information under § 1.2112. Accordingly, the controlling interest disclosure requirements from § 1.2112(a) were moved to § 1.2112(b) which applies to entities claiming eligibility for small business provisions. At the same time, § 1.2112(b) was divided into two parts: Paragraph (b)(1), applying to short-form applications; and paragraph (b)(2), applying to long-form applications. The controlling interest language from § 1.2112(a), however, was inadvertently only carried over to paragraph (b)(1) instead of in both paragraphs (b)(1) and (b)(2). In addition, in dividing § 1.2112(b) into two sections, the Commission failed to specifically mention applications for an assignment or transfer of control. Accordingly, the Commission makes conforming edits to § 1.2112(b) to correct these inadvertent errors to fully implement its intent that all applicants claiming small business status, including those filing applications for a license, authorization, assignment, or transfer of control as well as those filing short-form applications, are required to disclose the controlling interest information.

29. Section 1.2112(b)(1)(i) requires an applicant to list, as part of the disclosure obligations, the “names, addresses, and citizenship of all officers, directors, and other controlling interests of the applicant.” However, in addition to these disclosures, certain service-specific rules also require the applicant to disclose the same information for affiliates and small and very small business consortium. Section 1.2112(b)(1)(i) does not require the applicant to disclose this additional information. The Commission removes the service-specific short-form disclosure requirements and revises subsection 1.2112(b)(1)(i) to add affiliate and small or very small business consortium language as part of the short-form disclosure obligations.

30. Additionally, the Commission revises § 1.2112(b)(1)(ii) to comport with the Commission's previous correction made to § 1.2112(a)(6) in the Part 1 Erratum . Specifically, the Commission revises § 1.2112(b)(1)(ii) to require applicants claiming eligibility for small business provisions to list any FCC-regulated entity (instead of the current requirement to list any FCC-licensed entity) or applicant for an FCC license in which any controlling interest of the applicant owns a 10 percent or greater interest or a total of 10 percent or more of any class of stock, warrants, options or debt securities. This revision is consistent with the Commission's intent, as stated in the Part 1 Fifth Report and Order , to require that FCC-regulated entities be reported when there is a connection between such entity and the applicant at issue through a common owner.

31. Women- and minority-owned businesses . The Commission's rules set forth certain provisions applicable to designated entities—small businesses, businesses owned by members of minority groups and/or women, and rural telephone companies. In particular, § 1.2110(c)(3) of the part 1 general competitive bidding rules defines and provides the eligibility criteria for businesses owned by members of minority groups and/or women. However, § 24.720 (c), (d), and (i)(2) also define women- and minority-owned businesses and qualifying minority and/or woman investor. In light of the Commission's ongoing efforts to eliminate from the Code of Federal Regulations service-specific competitive bidding rules that are either repetitive with or have been superseded by the part 1 general competitive bidding rules, the Commission removes § 24.720 (c), (d), and (i)(2). The Commission's action is technical in nature and does not substantively affect the status of women- and minority-owed businesses.

32. NextWave urges the Commission to restore the original installment payment rules as adopted in the Competitive Bidding Second Report and Order , 59 FR 22980 (May 4, 1994). This Order does not address the petitions for reconsideration challenging the Commission's statement that § 1.2104(g)(2) does not apply to licensees who default on their installment payments, see Order on Reconsideration of the Part 1 Third Report and Order , 66 FR 51594 (October 10, 2001). The Commission received three petitions for reconsideration on this point. NextWave Petition, TeleCorp/Tritel/Poplar/Summit Petition, and MetroPCS Petition. The Commission will address this point in a subsequent order. In its petition, NextWave again relies upon the arguments that the modifications to the rules constitute impermissible retroactive rulemaking, that the changes were unreasonable and not consistent with commercial practices, and that contract-based theories precluded the Commission from modifying the installment payment rules. These arguments were previously the subject of reconsideration and fully considered and rejected in the Order on Reconsideration of the Part 1 Third Report and Order . Part 1 Fifth Report and Order; Compare NextWave Petition, filed September 28, 2000, in response to the Order on Reconsideration of the Part 1 Third Report and Order with NextWave Petition, filed February 17, 1998, in response to the Part 1 Third Report and Order . Additionally, as also noted, the Court of Appeals for the District of Columbia Circuit has substantially addressed and rejected these arguments in the context of a challenge to the application of the revised installment payment rules to the 218-219 MHz Service licensees. In light of these circumstances, the Commission declines to grant reconsideration.

33. The Commission does not grant reconsideration for the purpose of allowing a petitioner to reiterate arguments already presented. This is particularly true where a petitioner advances arguments that the Commission previously considered and rejected in a prior order on reconsideration. If this were not the case, the Commission would be involved in a never-ending process of review that would frustrate the Commission's ability to conduct business in an orderly fashion. However, the Commission will entertain a petition for reconsideration if it is based on new evidence or changed circumstances or if the reconsideration is in the public interest. In this instance, NextWave's arguments were previously raised and fully addressed in the Order on Reconsideration of the Part 1 Third Report and Order . NextWave did not plead or otherwise establish new facts, changed circumstances, or new public interest considerations that would merit review of its request for reconsideration. Thus, the Commission dismisses NextWave's arguments here as repetitious.

34. The Commission reorders § 1.2112 to move the requirement that each application for competitive bidding, or for a license, authorization, assignment or transfer for control fully disclose all “real party or parties in interest” from § 1.2112(a) to § 1.2112(a)(1). At the same time, the Commission conforms § 1.2112(a)(1) to the disclosure requirements as set forth in § 1.919(e) to ensure that applicants include a complete disclosure of the identity and relationship of those persons or entities directly or indirectly owning or controlling (or both) the applicant. The Commission also reminds applicants that, if the information disclosed pursuant to § 1.2112(a) changes while the application is pending, § 1.65 of the Commission's rules requires that additional or corrected information be submitted. These rule revisions are consistent with the Commission's efforts to provide specific guidance to applicants, to provide transparency at all stages in the competitive bidding and licensing process; and, finally to ensure that the Commission, the public, and interested parties, are aware of the real party or parties in interest before the Commission acts on a pending application.

35. As required by the Regulatory Flexibility Act, 5 U.S.C. 604, the Commission prepared a Supplemental Final Regulatory Flexibility Analysis for the Order on Reconsideration of the Part 1 Fifth Report and Order . The Commission also prepared a second Supplemental Final Regulatory Flexibility Analysis for the Second Order on Reconsideration of the Part 1 Third Report and Order .

36. This Second Order on Reconsideration of the Part 1 Third Report and Order, and Order on Reconsideration of the Part 1 Fifth Report and Order contains new or modified information collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It was submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the PRA. OMB, the general public and other Federal agencies are invited to comment on the new or modified collection(s) contained in this proceeding.

37. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), a Final Regulatory Flexibility Analysis (FRFA) was incorporated into the report and order section of the Part 1 Fifth Report and Order in WT Docket No. 97-82. The Commission received four petitions for reconsideration, two comments, two reply comments, and ex parte filings from three parties in response to the Part 1 Fifth Report and Order . This present supplemental FRFA (SFRA) conforms to the RFA.

38. In August 2000, the Commission released the most recent comprehensive order in the part 1 proceeding, the Order on Reconsideration of the Part 1 Third Report and Order, Part 1 Fifth Report and Order, and Part 1 Fourth Further Notice of Proposed Rule Making , which clarified and amended the general competitive bidding rules for all auctionable services. Most significantly, in the Part 1 Fifth Report and Order , the Commission adopted, as its general attribution rule, a controlling interest standard to be used for determining which applicants are eligible for small business status.

39. The Commission received petitions for reconsideration from several parties in response to the Part 1 Fifth Report and Order . Petitioners request reconsideration of certain aspects of the new controlling interest standard, § 1.2110(c)(2), by which the Commission attributes to the applicant the gross revenues of the applicant, its controlling interests, the applicant's affiliates, and the affiliates of the applicant's controlling interests, in assessing whether the applicant is eligible for the Commission's small business provisions. Specifically, petitioners request reconsideration of the attribution of the personal net worth of an applicant's officers and directors to the applicant, application of the controlling interest attribution rule as applied to the officers and directors of rural telephone cooperatives, and application of the controlling interest standard to entities operating under the former control group rules. In the Order on Reconsideration of the Part 1 Fifth Report and Order the Commission resolves the petitions for reconsideration filed in response to the Part 1 Fifth Report and Order .

40. First, the Commission clarifies that in calculating an applicant's gross revenues under the controlling interest standard, the personal net worth, including personal income and assets, of its officers and directors will not be attributed to the applicant. To the extent that the officers and directors of the applicant are controlling interest holders of other entities, the Commission will attribute the gross revenues of those entities to the applicant. Second, based upon the comments received, the Commission adopts a narrow exemption for the officers and directors of a rural telephone cooperative so that the gross revenues of the affiliates of a rural telephone cooperative's officers and directors need not be attributed to the applicant. Specifically, the gross revenues of the affiliates of an applicant's officers and directors will not be attributed if either the applicant or a controlling interest, as the case may be, meets all of the following conditions: (i) The applicant (or the controlling interest) is validly organized as a cooperative pursuant to state law; (ii) the applicant (or the controlling interest) is a “rural telephone company” as defined by the Communications Act; and (iii) the applicant (or the controlling interest) is eligible for tax-exempt status under the Internal Revenue Code. However, the exemption will not apply if the gross revenues or other financial and management resources of the affiliates of the applicant's officers and directors (or the controlling interest's officers and directors) are available to the applicant. Third, the Commission declines to revise the controlling interest standard to exclude entities operating under control group structures. At the same time, the Commission restates the application of the attribution rules with respect to eligibility to hold restricted C/F block licenses.

41. Lastly, on its own motion, the Commission also modifies the part 1 default payment rule, § 1.2104(g)(2), to incorporate the combinatorial bidding default rule adopted in the 700 MHz Second Memorandum Opinion and Order . The Commission also makes certain ministerial conforming amendments and rule revisions to the part 1 general competitive bidding rules, and portions of the service-specific competitive bidding rules, to conform to the new rule revisions in part 1 in the following areas: (i) License default; (ii) definition of consortium; (iii) women- and minority-owned businesses; (iv) clarification of the attribution rule; (v) ownership disclosure requirements; and (vi) short-form disclosure requirements for small or very small business consortiums. Finally, technical edits are made to Commission rules that refer to service-specific competitive bidding rules that have been removed or revised.

42. No petitions for reconsideration or comments were filed directly in response to the FRFA. However, the Commission did receive petitions for reconsideration and comments on issues affecting small businesses. As previously noted, in this SFRFA, petitioners request reconsideration of certain aspects of the new controlling interest standard, to be used for determining which applicants are eligible for small business status. Most notably, under the controlling interest standard, officers and directors of any applicant will be considered to have a controlling interest in the applicant. Thus, in calculating an applicant's gross revenues, the gross revenues of other entities controlled by such officers and directors must be included. Specifically, RTG seeks an exemption for rural telephone cooperatives from the requirement that the gross revenues of entities controlled by a rural telephone cooperative's officers and directors are to be attributed to the applicant. NTCA and PVT reiterate points made by RTG. However, Neoworld seeks to extend RTG's proposal. In particular, Neoworld proposes that the Commission adopt a test under which an officer or director would not be considered to be a controlling interest if the applicant can demonstrate that it has developed insulating mechanisms to prevent such a director from being materially involved directly or indirectly in the management or telecommunications activities of the licensee.

43. Furthermore, TeleCorp, Tritel, Poplar, and Summit (“Petitioners”) request that the Commission revise the controlling interest standard to exclude entities operating under the Commission's previously adopted control group structure. Petitioners are concerned that a literal reading of the rule could be used to expand the definition of affiliates so that greater gross revenues and assets would be attributed to an applicant on that basis alone. Specifically, Petitioners request that newly established affiliates of existing restricted C/F block licensees that were structured so as to establish their eligibility under a control group attribution rule be able to utilize the same structure used by the existing restricted C/F block licensee to establish their eligibility. Additionally, Petitioners request that the Commission clarify that the controlling interest standard excludes from attribution the personal assets and revenues of individuals.

44. The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small organization,” “small business,” and “small governmental jurisdiction.” The term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A small business concern is one which: (i) Is independently owned and operated; (ii) is not dominant in its field of operation; and (iii) satisfies any additional criteria established by the SBA.

45. The rule modifications and clarifications adopted in the Order on Reconsideration of the Part 1 Fifth Report and Order are of general applicability to all services and do not apply on a service-specific basis. Therefore, this SFRFA provides a general analysis of the impact of the revised part 1 rule on small businesses rather than a service by service analysis. Accordingly, the revised rules will apply to all entities that apply to participate in Commission auctions, including both small and large entities. The number of entities that may apply to participate in future Commission auctions is unknown. The number of small businesses that have participated in prior auctions has varied. In all of the Commission's auctions held to date except for the auctions for broadcast licenses, 1,752 out of a total of 2,235 qualified bidders have been small businesses as that term has been defined under rules adopted by the Commission for specific services. Given these statistics, the Commission expects that, in the future, a large percentage of participants in its auctions program generally will continue to be small businesses; although there may not be a large percentage in every auction.

46. All license applicants, as contemplated by the actions the Commission takes in the Order on Reconsideration of the Part 1 Fifth Report and Order, are subject to the reporting and recordkeeping requirements of the competitive bidding rules. These requirements apply in the same way to both large and small entities. Furthermore, applicants are required to apply for spectrum auctions by filing a short-form application (FCC Form 175) prior to the auction. Applicants are also required to file a long-form application (FCC Form 601) at the conclusion of the auction. Specifically, entities seeking status as a small business must disclose on their FCC Form 175s, FCC Form 601s, and on their application for assignment or transfer of control (FCC Form 603), separately and in the aggregate, the gross revenues of the applicant (or licensee), its affiliates, its controlling interests and affiliates of the applicant's controlling interests for each of the previous three years.

47. As a result of the actions taken in the Order on Reconsideration of the Part 1 Fifth Report and Order, for purposes of the controlling interest standard, in calculating the gross revenues of any applicant under § 1.2110, the personal net worth of its officers and directors will not be attributed to the applicant. However, auction applicants will be required to disclose the gross revenues received by any business entities such individuals may control. All affiliates of controlling interests are attributable to the applicant. Additionally, in the FCC Form 601, rural telephone cooperative auction applicants, or those controlled by rural telephone cooperatives, seeking an exemption from the requirement that the gross revenues of entities controlled by an applicant's officers and directors are attributed to the applicant must establish eligibility for this exemption based upon the four factors listed.

48. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (i) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (ii) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (iii) the use of performance, rather than design, standards; and (iv) an exemption from coverage of the rule or any part thereof for small entities. The Commission has considered the economic impact on small entities of the following modifications and clarifications adopted in the Order on Reconsideration of the Part 1 Fifth Report and Order and has taken steps to minimize the burdens on small entities.

49. Personal net worth of officers and directors. The Commission clarifies that, for purposes of the controlling interest standard, in calculating an applicant's gross revenues under § 1.2110, the controlling interest standard, the personal net worth, including personal income and assets, of its officers and directors will not be attributed to the applicant. The Commission concludes that attribution of personal net worth is not necessary because most wealthy individuals are likely to have their wealth tied to the ownership of other businesses. Although the Commission does not attribute to the applicant the personal net worth of its officers and directors, to the extent that the officers and directors are affiliates of other entities, the Commission attributes the gross revenues of those entities to the applicant. Therefore, this will ensure that small business bidding credits are extended only to bona fide small businesses despite the personal net worth of wealthy individuals. An alternative action that would eliminate consideration of the gross revenues of such affiliates would provide an opportunity for large businesses to receive a significant monetary benefit reserved only for eligible small businesses.

50. Application of attribution rule to rural telephone cooperatives. The Commission adopts a narrow exemption for the officers and directors of a rural telephone cooperative so that the gross revenues of the affiliates of a rural telephone cooperative's officers and directors need not be attributed to the applicant. This exemption for the applicant's officers and directors extends to situations where the applicant is not a rural telephone cooperative but is controlled by an eligible rural telephone cooperative. Specifically, the gross revenues of the affiliates of an applicant's officers and directors will not be attributed if either the applicant or a controlling interest, as the case may be, meets all of the following conditions: (i) The applicant (or the controlling interest) is validly organized as a cooperative pursuant to state law; (ii) the applicant (or the controlling interest) is a “rural telephone company” as defined by the Communications Act; and (iii) the applicant (or the controlling interest) is eligible for tax-exempt status under the Internal Revenue Code. However, the exemption will not apply if the gross revenues or other financial and management resources of the affiliates of the applicant's officers and directors (or the controlling interest's officers and directors) are available to the applicant.

51. The Commission limits this exemption to only those rural telephone cooperatives that are eligible for Federal tax-exempt status, which will ensure that such exemption would be used only by bona fide community-based cooperatives, not sham entities. The Commission believes that this action will increase the number of rural telephone cooperatives that are eligible for small business status (and the corresponding bidding credits). Such a result will enhance the ability of rural telephone cooperatives to participate in spectrum auctions. This, in turn, will promote the deployment of advanced telecommunications services in rural areas as Congress mandated in section 309(j). At the same time, the Commission concludes that an across-the-board change to § 1.2110(c)(2)(ii)(F), as proposed as an alternative by Neoworld, to broadly exempt officers and directors from the controlling interest standard where an applicant institutes a contractual mechanism to insulate officers and directors from involvement in an applicant's telecommunications activities, is not warranted. Such a drastic revision to the Commission's rules would require additional scrutiny on the Commission's part to ensure that such contractual arrangements are legitimate and are not sham transactions that could undercut the basis of the attribution rule.

52. Application of controlling interest standard to control group structures. The Commission affirms its decision in the Part 1 Fifth Report and Order to consider officers and directors as controlling interests in a licensee or applicant. However, to avoid similar questions in the future, the Commission takes this opportunity, in the Order on Reconsideration of the Part 1 Fifth Report and Order, to clarify the application of the attribution rules with respect to eligibility to hold restrictedC/F block licenses. Generally, if an applicant does not hold a restricted C/F block license under the former control group rules it must use the controlling interest attribution rule to determine eligibility to hold restricted C/F block licenses, whether through auctions or through assignment or transfer of control.

53. However, with respect to the acquisition of restricted C/F block licenses through assignment or transfer of control, wholly-owned subsidiaries and commonly controlled affiliates (whether newly formed or in existence prior to the adoption of the controlling interest attribution rule) that establish their eligibility directly through an existing restricted C/F block licensee, will be eligible to hold a C/F block restricted license to the same extent as the existing restricted C/F block licensees. Thus, in the context of an application to assign or transfer a restricted C/F block license, the eligibility of an existing restricted C/F block licensee (that obtained its license under the former control group rules) and its wholly owned subsidiaries and commonly controlled affiliates to hold such licenses (as opposed to eligibility for small business provisions) may be determined without application of the controlling interest attribution rule. For all future C/F block auctions, however, pursuant to the Commission's determination in the Part 1 Fifth Report and Order, all applicants will be subject to the attribution rules in effect at the time of filing their short-form applications. This decision will prevent large firms from illegitimately seeking small business status. A less restrictive alternative would frustrate the Commission's achievement of its goal of preventing large firms from gaining benefits only reserved for smaller entities.

54. Conforming edits to the Part 1 competitive bidding rules. The Commission, on its own motion, makes certain ministerial conforming amendments and rule revisions to the part 1 general competitive bidding rules and portions of the service-specific competitive bidding rules to conform to the new rule revisions in part 1. These rule revisions are consistent with the Commission's efforts to provide specific guidance to future auction participants and to streamline the competitive bidding regulations by eliminating certain service-specific rules.

55. The Commission will send a copy of the Second Order on Reconsideration of the Third Report and Order, and Order on Reconsideration of the Fifth Report and Order, including this SFRFA, in a report to be sent to Congress pursuant to the Congressional Review Act. In addition, the Commission will send a copy of the Second Order on Reconsideration of the Third Report and Order, and Order on Reconsideration of the Fifth Report and Order, including this SFRFA, to the Chief Counsel for Advocacy of the Small Business Administration.

56. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), a Supplementary Final Regulatory Flexibility Analysis (SFRFA) was incorporated into the report and order section of the Order on Reconsideration of the Part 1 Third Report and Order in WT Docket No. 97-82. The Commission received three petitions for reconsideration and one reply comment in response to the Order on Reconsideration of the Part 1 Third Report and Order. This present second SFRFA conforms to the RFA.

57. In August 2000, the Commission released the most recent comprehensive order in the Part 1 proceeding, the Order on Reconsideration of the Part 1 Third Report and Order, Part 1 Fifth Report and Order, and Part 1 Fourth Further Notice of Proposed Rule Making, which clarified and amended the general competitive bidding rules for all auctionable services. The Commission received petitions for reconsideration from several parties in response to the Order on Reconsideration of the Part 1 Third Report and Order. Specifically, the Commission received a petition for reconsideration, filed by NextWave, of the Commission's installment payment rules. In this Second Order on Reconsideration of the Part 1 Third Report and Order, the Commission dismisses as repetitive NextWave's second challenge to modifications to the installment payment rules adopted in the 1997 Part 1 Third Report and Order. In addition, the Commission, on its own motion, makes certain conforming rule revisions to the part 1 general competitive bidding rules to clarify the requirement that applicants fully disclose the real party or parties in interest.

58. No petitions for reconsideration or comments were filed directly in response to the FRFA or on issues affecting small businesses.

59. The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small organization,” “small business,” and “small governmental jurisdiction.” The term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A small business concern is one which: (i) is independently owned and operated; (ii) is not dominant in its field of operation; and (iii) satisfies any additional criteria established by the SBA.

60. The rule revision adopted in this Second Order on Reconsideration of the Part 1 Third Report and Order rule is of general applicability to all services and does not apply on a service-specific basis. Therefore, this SFRFA provides a general analysis of the impact of the revised part 1 rule on small businesses rather than a service by service analysis. Accordingly, this rule revision will apply to all entities that apply to participate in Commission auctions, including both large and small entities. The number of entities that may apply to participate in future Commission auctions is unknown. The number of small businesses that have participated in prior auctions has varied. In all of the Commission's auctions held to date except for the auctions for broadcast licenses, 1,752 out of a total of 2,235 qualified bidders have been small businesses as that term has been defined under rules adopted by the Commission for specific services. Given these statistics, the Commission expects that, in the future, a large percentage of participants in its auctions program generally will continue to be small businesses; although there may not be a large percentage in every auction.

61. All license applicants, as contemplated by the actions the Commission takes take in this Second Order on Reconsideration of the Part 1 Third Report and Order, are subject to the reporting and record-keeping requirements of the competitive bidding rules. These requirements apply in the same way to both large and small entities. Applicants are required to apply for spectrum auctions by filing a short-form application (FCC Form 175) prior to the auction. Applicants are also required to file a long-form application (FCC Form 601) at the conclusion of the auction. Specifically, entities seeking status as a small business must disclose on their FCC Form 175s, FCC Form 601s, and on their application for assignment or transfer of control (FCC Form 603), separately and in the aggregate, the gross revenues of the applicant (or licensee), its affiliates, its controlling interests and affiliates of the applicant's controlling interests for each of the previous three years.

62. As a result of the actions taken in the Second Order on Reconsideration of the Part 1 Third Report and Order, all applicants, as part of the Commission's ownership disclosure requirements, are required to fully disclose all “real party or parties in interest” including a complete disclosure of the identity and relationship of those persons or entities directly or indirectly owning or controlling (or both) the applicant.

63. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (i) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (ii) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (iii) the use of performance, rather than design, standards; and (iv) an exemption from coverage of the rule or any part thereof for small entities.

64. The Commission has considered the economic impact on small entities of the reorganizing § 1.2112(a) and making other conforming revisions to this rule as adopted in this Second Order on Reconsideration of the Part 1 Third Report and Order and has taken steps to minimize the burdens on small entities.

65. Ownership disclosure requirements. In the Order on Reconsideration of the Part 1 Third Report and Order, the Commission revised § 1.2112(a) which requires each application for competitive bidding ( i.e. , short-form application), or for a license, authorization, assignment or transfer for control to disclose fully the real party or parties in interest. Specifically, the Commission deleted unnecessary language, clarified certain sections, and reordered the disclosure requirements in order to provide applicants with a clearer understanding of the information that must be disclosed. Although the reorganization has generally resulted in greater clarity for applicants, the Commission is concerned that the current structure of the rule may be construed by some applicants as allowing them to provide less than a full disclosure of all the real parties in interest.

66. Accordingly, the Commission reorders § 1.2112 to move the requirement that an applicant to fully disclose all “real party or parties in interest” in the applicant or application from § 1.2112(a) to § 1.2112(a)(1). At the same time, the Commission conforms § 1.2112(a)(1) to the disclosure requirements as set forth in § 1.919(e) to ensure that applicants include a complete disclosure of the identity and relationship of those persons or entities directly or indirectly owning or controlling (or both) the applicant to a section of the rule. This rule revision is preferred over a revision that would require disclosure of less information, because it is decidedly more consistent with the Commission's efforts to provide specific guidance to applicants, to provide transparency at all stages in the competitive bidding and licensing process; and, finally to ensure that the Commission, the public, and interested parties, are aware of the real party or parties in interest before the Commission acts on an application.

67. The Commission will send a copy of the Second Order on Reconsideration of the Third Report and Order, and Order on Reconsideration of the Fifth Report and Order, including this second SFRFA, in a report to be sent to Congress pursuant to the Congressional Review Act. In addition, the Commission will send a copy of the Second Order on Reconsideration of the Third Report and Order, and Order on Reconsideration of the Fifth Report and Order, including this second SFRFA, to the Chief Counsel for Advocacy of the Small Business Administration.

68. It is ordered that, pursuant to the authority granted in sections 4(i), 5(b), 5(c)(1), 303(r), and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 155(b), 155(c)(1), 303(r), and 309(j), the Second Order on Recon are hereby adopted and parts 1, 21, 22, 24, 27, 73, 80, 90, 95 and 101 of the Commission's rules are amended as set forth, and become effective September 19, 2003.

69. It is further ordered that the Consumer Information Bureau, Reference Information Center, shall send a copy of the Second Order on Recon, including the Supplemental Final Regulatory Flexibility Analyses to the Chief Counsel for Advocacy of the Small Business Administration.

This is a summary of the FCC's Order, FCC 03-169, adopted on July 10, 2003, and released on July 10, 2003. The full text of this document is available for inspection and copying during normal business hours in the FCC Reference Center, 445 12th Street, SW., Washington, DC 20554. The complete text may be purchased from the FCC's copy contractor, Qualex International, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. The full text may also be downloaded at: http:// www.fcc.gov. Alternative formats are available to persons with disabilities by contacting Brian Millin at (202) 418-7426 or TTY (202) 418-7365 or at bmillin@fcc.gov.

1. On April 2, 2003, the Commission released a Memorandum Opinion and Order (MO&O), 68 FR 34547, June 10, 2003, in this proceeding. Pursuant to § 1.108 of the Commission's rules, on our own motion, we issue this limited reconsideration of the MO&O by (1) replacing paragraph 201 (which addresses applications for extension of time to construct) with the language set forth herein, and (2) clarifying our action with respect to § 21.930 of the Commission's rules, which sets forth the build-out requirements for Multipoint Distribution Service (MDS) Basic Trading Authorization (BTA) holders.

2. Pending Applications for Extension of Time to Construct. With respect to pending applications for extensions of time to construct, we take this action in light of information that has come to our attention since the adoption and release of the MO&O. Specifically, in connection with petitions for reconsideration of our decision to impose a freeze on the filing of applications for new MDS and Instructional Television Fixed Service (ITFS) stations, as well as major changes to such stations, entities have represented to us that they have developed plans in the near future to deploy high-speed wireless broadband systems under our existing rules. For example, WCA estimates that approximately thirty wireless broadband operators plan to deploy systems in approximately eighty markets in the next twelve months. In light of this information, we are concerned that our decision to seek comment on how to treat pending applications for extensions of time to construct MDS and ITFS stations may hinder the deployment of MDS and ITFS systems aimed at providing broadband services. As noted in the NPRM/MO&O, one of our primary goals in this proceeding is to “present a significant opportunity to provide alternatives for the provision of broadband services to consumers in urban, suburban and rural areas and to improve opportunities for distance learning and telemedicine services.” Under those circumstances, we believe that it would be in the public interest to be able to act on those pending applications for extension of time to construct prior to the completion of this proceeding. We believe that acting on such applications will facilitate continued deployment of broadband services and promote innovation and investment therein. As a result, we are no longer seeking comment in the MO&O on the treatment of pending applications for extensions of time to construct MDS and ITFS stations.

3. Accordingly, we delete paragraph 201 of the MO&O and replace it with the following language:

4. Extension/Suspension of current performance requirements for site-based licensees. Moreover, we also believe that it is in the public interest to suspend the construction deadline for ITFS and MDS site-based licensees and permittees that have unexpired licenses or permits that have not expired as of the release date of the MO&O and that have made a timely filed extension request. We emphasize that the suspension of this construction deadline for site-based licensees does not affect the requirement for such licensees to timely file a renewal application. We stress that all site-based licensees are required to timely file renewal applications or face cancellation of their licenses regardless of the pendency of this proceeding.

5. We note that we are not modifying our decision to hold in abeyance the construction build-out requirements for site-based incumbents that have licenses or permits that had not expired as of the release date of the MO&O. Furthermore, we continue to seek comment on whether we should change criteria for granting extension of time requests prospectively.

6. MDS BTA Build-Out Rule. In the MO&O, we “suspended” the August 16, 2003 construction deadline for MDS BTA authorization holders contained in § 21.930 of the Commission's Rules. Upon further reflection, we believe that our use of the term “suspend” did not accurately reflect our intent in this matter. Our intent was to relieve MDS BTA authorization holders of the obligation to meet the build out deadline contained in § 21.930 pending the release of a Report and Order in this proceeding. In order to more accurately reflect our intention, we are reinstating § 21.930 of the Commission's Rules, but stating that MDS BTA authorization holders do not have to meet the build out obligations contained in that rule pending the release of a Report and Order in this proceeding. We continue to seek comment on how much additional time MDS BTA authorization holders should receive to meet their build out obligations after a Report and Order is issued in this proceeding.

7. The actions contained herein have not changed our Initial Regulatory Flexibility Analysis (IRFA), which was set forth in the MO&O. Thus, no supplemental IRFA is necessary. In addition, the action contained herein has been analyzed with respect to the Paperwork Reduction Act of 1995 (PRA) and found to impose no new or modified reporting and/or recordkeeping requirements or burdens on the public.

8. Pursuant to section 4(i) of the Communications Act of 1934, 47 U.S.C. 154(i), and § 1.108 of the Commission's Rules, 47 CFR 1.108, that the Memorandum Opinion and Order, FCC 03-56, is modified as set forth herein.

9. Pursuant to section 4(i) of the Communications Act of 1934, 47 U.S.C. 154(i), that § 21.930 of the Commission's Rules, 47 CFR 21.930, is reinstated.

10. Pursuant to section 4(i) of the Communications Act of 1934, 47 U.S.C. 154(i), and § 21.930 of the Commission's Rules, 47 CFR 21.930, that MDS BTA authorization holders need not comply with the build out requirements contained in § 21.930 of the Commission's rules pending the publishing of a Report and Order in this proceeding.

This is a summary of the Commission's Fourth Report and Order in CC Docket No. 99-200 and CC Docket No. 95-116, released on June 18, 2003. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 12th Street, SW., Washington, DC, 20554.

1. In this order, the Commission continues efforts to maximize the efficiency with which numbering resources in the NANP are used. The Commission addresses the issues on which it sought comment in Numbering Resource Optimization Third Order on Reconsideration, 67 FR 16347 (April 5, 2002). Specifically, the Commission reaffirms that carriers need only deploy LNP in switches within the 100 largest MSAs for which another carrier has made a specific request for the provision of LNP. The Commission also delegates authority to the state commissions to require carriers operating within the largest 100 MSAs that have not received a specific request for LNP from another carrier to provide LNP, under certain circumstances and on a case-by-case basis. The Commission also concludes that all carriers, except those specifically exempted, are required to participate in thousands-block number pooling in accordance with the national rollout schedule, regardless of whether they are required to provide LNP, including covered commercial mobile radio service (CMRS) providers that are not required to deploy LNP until November 24, 2003. The Commission specifically exempts rural telephone companies and Tier III CMRS providers that have not received a request to provide LNP from the pooling requirement. The Commission also exempts from the pooling requirement carriers that are the only service provider receiving numbering resources in a given rate center. Regarding MSAs, the Commission reaffirms its findings that the 100 largest MSAs include those MSAs identified in the 1990 U.S. Census reports as well as those areas included on any subsequent U.S. Census report of the 100 largest MSAs. Although the Commission declines to expand the list of the 100 largest MSAs to include areas in Consolidated Metropolitan Statistical Areas (CMSAs) that would not otherwise be included in the 100 largest MSAs, the Commission delegates to state commissions the authority to determine whether to require carriers to participate in pooling in such areas. The Commission also finds AT&T's petition for reconsideration of the Commission's decision to permit incumbent local exchange carriers (LECs) to recover the extraordinary costs of thousands-block number pooling through access charges to be untimely and without merit. These actions will further promote our competition policies, promote the efficient and effective use of finite numbering resources and increase the effectiveness of our numbering resource optimization measures.

2. Number Portability. The Commission reaffirms the Commission's decision in the Number Portability First Order on Reconsideration, 62 FR 18280 (April 15, 1997), that all local exchange carriers and covered CMRS carriers in the 100 largest MSAs are required to provide LNP upon receipt of a specific request for the provision of LNP by another carrier.

3. The Commission reemphasizes its view that LNP is still an important tool for enhancing competition, promoting numbering resource optimization, and giving consumers greater choices. The Commission believes, however, that the current requirements are sufficient to meet these important statutory goals. The Commission finds these requirements to be reasonable and efficient because they allow carriers to target their resources where the greatest need for number portability exists. They also limit expenditures in areas where there are relatively few competing service providers. The Commission finds that maintaining the current LNP requirement appropriately balances the policies and rationale supporting LNP without requiring expenditure of significant resources to deploy LNP in areas where competitors have not requested portability. Furthermore, maintaining the current requirement will not impose new burdens on small carriers operating in the 100 largest MSAs.

4. If it is true, as WorldCom's comments anticipate, that there will be new demand for LNP created by the implementation of LNP by covered CMRS providers, even where wireline competitive LECs have not yet entered the market, potential competitors can make the appropriate requests for LNP in areas they intend to serve. Carriers, including covered CMRS providers by November 24, 2003, are required to make number portability available within specified time-frames after a specific request by another telecommunication carriers in the areas in which the requesting carrier is operating or plans to operate. Requesting telecommunications carriers must specifically request portability, identify the discrete geographic area covered by the request, and provide a tentative date by which the carrier expects to utilize number portability to port prospective customers.

5. The implementation of pooling was one of the primary considerations for extending LNP to all carriers operating in the 100 largest MSAs. Initially, the Commission linked the pooling requirement to LNP because it was widely accepted that carriers without LNP capability could not participate in pooling. The Commission has since found, and the industry has confirmed, that full LNP capability is not necessary for participation in pooling. Rather, the underlying architecture, Location Routing Number (LRN), is necessary for such participation. Upon reexamination, the Commission remains convinced that it is reasonable to require LNP only in areas where competition dictates its demand, especially since the Commission now knows that pooling can be implemented without full LNP capability. Thus, the Commission finds that requiring LNP capability for all carriers in the 100 largest MSAs only when there has been a specific request will not have any significant negative effects on pooling.

6. The Commission also delegates authority to the state commissions to require carriers to provide LNP under certain circumstances and on a case-by-case basis. Thus, states may require carriers operating within the largest 100 MSAs to provide LNP, even if such carriers have not received a specific request for LNP from another carrier, if doing so would be in the public interest because there is evidence of meaningful consumer demand for LNP. Although the Commission finds that it is not necessary to expand the LNP requirement to all carriers in the 100 largest MSAs regardless of whether they have received a request for LNP, the Commission agrees with the California Commission that state commissions should have the discretion, under certain circumstances, to extend the LNP requirements to carriers in the 100 largest MSAs that would not otherwise be required to implement LNP. This delegation will allow the state commissions the flexibility to accommodate specific demand for LNP by consumers in a manner that promotes our numbering resource optimization goals, competition, and the public interest.

7. State commissions exercising this delegated authority must find that LNP would serve the public interest because there is actual, meaningful consumer demand, as evidenced by consumer requests, for LNP in specified areas within the largest 100 MSAs. State commissions also must find that consumer demand and numbering resource optimization considerations justify the cost of providing LNP in the specified areas, including impacts on small and rural telephone companies. Because there is little incentive for states to require LNP in areas where there is little or no consumer demand, and requiring LNP in such cases would be costly for the carriers and, in turn, costly, for the consumers, the Commission is confident that the state commissions will carefully consider the consumer demand for LNP when utilizing this delegated authority.

8. Thousands-Block Number Pooling. The Commission adopts its tentative conclusion that all carriers, including covered CMRS providers, should be required to participate in thousands-block number pooling, regardless of whether they are required to provide number portability, in accordance with the national rollout schedule. Because carriers can participate in pooling once they deploy the LRN architecture, thousands-block number pooling need not be linked to a carrier's ability to provide number portability. The Commission, therefore, required all carriers operating within the 100 largest MSAs, except those specifically exempted, to participate in pooling in areas where pooling has been or will be implemented in accordance with the national rollout schedule. In addition, the Commission directs the NANPA to cease assignment of NXX codes to carriers after they are required to participate in pooling. Carriers required to participate in pooling must request and receive numbering resources from the national Pooling Administrator (PA).

9. Pooling is essential to extending the life of the NANP by making the assignment and use of central office codes more efficient. As previously found, delaying the implementation of national pooling until all carriers are required to be LNP capable would needlessly prolong the inefficiencies resulting from the NXX number allocation system. The Commission continues to believe that thousands-block number pooling will provide the greatest benefits when participation is maximized. In addition, the Commission continues to believe that the industry and consumers are best served by national numbering resource optimization standards implemented consistently and in a competitively neutral manner across the nation. Expanding pooling to all carriers in the 100 largest MSAs furthers the Commission's numbering resource optimization goals by allowing telephone numbers to be assigned to carriers in smaller blocks in areas where the demand for numbering resources have proven to be the greatest.

10. Generally, the Commission believes that the inclusion of rural and other small carriers operating within the largest 100 MSAs in the pooling requirement is very important to furthering its goals of slowing the pace of area code and NANP exhaust. Because most, if not all, of these carriers have a small customer base, thousands-block number pooling allows these carriers to obtain numbering resources in quantities that better reflect their actual needs; i.e. , 1,000 blocks rather than 10,000 blocks. This results in fewer stranded numbers and thus better utilization rates. Nevertheless, the Commission recognizes that the costs associated with implementing thousands-block number pooling without having first implemented LNP can be particularly burdensome to rural and small carriers. Several commenters therefore suggest it is necessary to create an exemption from pooling for these carriers.

11. Several commenters state that many rural carriers do not operate in competitive markets. The Commission knows that pooling is most effective in areas where competition exists, because it allows multiple service providers to more effectively share limited resources. Where there is less competition, and therefore fewer carriers requiring numbering resources, pooling has less impact on numbering resource exhaust. Because many rural and other small carriers operate in areas where they are the only or one of a few service providers, they are less likely to require multiple NXX codes or blocks of numbers in a manner that will drive premature area code exhaust. The Commission therefore finds that a limited exemption for these carriers is warranted.

12. The Commission is also mindful of the concerns raised by some commenters regarding the costs to rural and small carriers associated with the implementation of thousands-block number pooling. Although the specific costs of implementing pooling for rural carriers are unknown at this time, the Commission knows that these costs may ultimately result in increased customer costs. The Commission believes, therefore, that the added benefits to be gained by requiring certain carriers that have not received a request for LNP to participate in pooling do not outweigh the potential burden, specifically the cost associated with pooling, on such carriers. The Commission therefore exempts from the pooling requirement rural telephone companies, as defined in the Communications Act of 1934, as amended, that have not received a request to provide LNP. The Commission also exempts Tier III wireless carriers, as defined in the E911 Stay Order, that have not received a request to deploy LNP. Once an exempted rural telephone company or Tier III wireless carrier has received a request to provide LNP, however, that carrier must participate in pooling. State commissions may petition the Commission for authority to require these exempted carriers to implement pooling in areas within the largest 100 MSAs if they can demonstrate that participation in pooling will further its numbering resource optimization goals.

13. In addition, because the Commission finds that pooling has less impact on numbering resource exhaust where there is no competition, the Commission declines to impose pooling costs on carriers that are not required to provide LNP operating in areas where there are no competing service providers. The Commission therefore exempts carriers operating in rate centers within the largest 100 MSAs, where they are the only service provider receiving numbering resources, from the pooling requirement in those rate centers. Once such a carrier receives a request to provide LNP, however, the carrier must then also participate in pooling in areas where it is deployed.

14. 100 Largest MSAs. The Commission reaffirms its finding that the 100 largest MSAs include those MSAs identified in the 1990 U.S. Census reports and all subsequent U.S. Census updates of the 100 largest MSAs. The Commission declines, however, to expand the list of the 100 largest MSAs to include areas in CMSAs that would not otherwise be included on the list of the 100 largest MSAs. Nevertheless, the Commission delegates to the state commissions the authority to determine whether pooling should be extended to areas included in CMSAs that otherwise would not be included as one of the 100 largest MSAs. In doing so, the Commission aims to focus pooling efforts on the nation's most densely populated areas so as to slow the further proliferation of area codes.

15. The Commission has focused on pooling efforts in the largest MSAs because those are the areas most likely to have competitive markets that would benefit from pooling. Conversely, the Commission has not required carriers to participate in pooling in less populous areas because the full benefits of pooling are less likely to be realized in areas without sufficient competition. Several commenters point out, however, that many nearby or adjoining areas within a CMSA have similar demographics to the original MSA and believe it appropriate to include CMSAs in the MSA list regardless of whether they would otherwise be included on the list of the 100 largest MSAs. The Commission finds insufficient evidence in the record to determine if these expanded areas have sufficient competition to justify extension of the MSA list, and therefore decline to determine which, if any, of these localities should be included on the MSA list. Rather, the Commission finds that the state commissions are better positioned to assess local conditions and determine whether to extend pooling to these areas. In making this determination, states should consider such factors as the number of competing service providers in the extended areas, whether the inclusion of such areas would further the Commission's competition and numbering resource optimization goals, population trends in the extended areas, and customer use patterns and volumes. Accordingly, the Commission delegates to state commissions the authority to determine whether to extend pooling to areas within CMSAs that otherwise would not be included on the list of the largest 100 MSAs. State commissions may not, however, require exempted carriers to participate in pooling in these extended areas.

16. Untimely Petition for Reconsideration and Motions. On May 6, 2002, AT&T filed a petition for reconsideration of the Numbering Resource Optimization Third Order on Reconsideration, requesting that the Commission reconsider its decision to permit incumbent LECs to recover the extraordinary costs of thousands-block number pooling through access charges. The Commission denies AT&T's petition as untimely filed. The Commissions nevertheless briefly discusses the merits of AT&T's petition on its own motion. Because the Commission finds that no new issues have been raised that were not addressed in the Numbering Resource Optimization Third Report and Order, the Commission declines to reconsider its prior findings regarding pooling cost recovery.

17. A petition for reconsideration in a rulemaking proceeding must be filed within 30 days after public notice of the Commission's action. The Commission's rules provide that public notice in a rulemaking proceeding occurs upon publication of the document, or a summary thereof, in the Federal Register . In the Numbering Resource Optimization Third Report and Order, the Commission established the appropriate cost recovery mechanism for thousands-block number pooling, and that issue was not reopened in the Numbering Resource Optimization Third Order on Reconsideration. The Numbering Resource Optimization Third Report and Order was published in the Federal Register on February 12, 2002, 67 FR 6431; and, therefore, petitions for reconsideration were due by March 14, 2002. As noted, AT&T did not file its petition until May 6, 2002. The Commission therefore finds that AT&T's petition for reconsideration was untimely filed, and dismisses it accordingly.

18. Acknowledging that its petition may be untimely, AT&T also argues that the effect of the Numbering Resource Optimization Third Report and Order was not readily apparent at the reconsideration deadline for that order and asks the Commission to reconsider its decision on its own motion. Notwithstanding its dismissal of AT&T's petition as untimely, the Commission briefly addresses the merits of AT&T's arguments and concludes that no change in pooling cost recovery should be made.

19. In the Numbering Resource Optimization Third Report and Order, the Commission determined that incumbent LECs subject to rate of return or price cap regulation may recover their extraordinary carrier-specific costs directly related to thousands-block number pooling implementation through existing cost recovery mechanisms. The Commission concluded that, because thousands-block number pooling had been mandated as a national numbering resource optimization strategy, permitting recovery of the extraordinary costs of number pooling in access charges is appropriate.

20. AT&T argues that carriers should bear their own carrier-specific pooling costs, and that allowing recovery of pooling costs through access charges inappropriately allows incumbent LECs to shift their costs to interexchange carriers (IXCs). In the Numbering Resource Optimization Third Report and Order, the Commission considered this argument and found that numbering administration is inherently access-related, explaining that without numbers, the provision of which is a basic telephone network function, IXCs would be unable to route subscriber calls. Pooling is an enhancement of ordinary numbering administration, and access charges are the means by which access customers share in the costs of operating and maintaining the telephone network. Accordingly, the Commission concluded that it is appropriate for IXCs and other access customers to share in the costs of thousands-block number pooling. AT&T also argues that permitting incumbent LECs to recover pooling costs in access charges is an impermissible subsidy in violation of section 254(e) of the Act. In the Numbering Resource Optimization Third Report and Order, the Commission addressed this claim by finding that, because access charges are intended to recover a portion of telephone network costs, permitting recovery of the extraordinary costs of number pooling in access charges is neither an implicit or explicit subsidy.

21. AT&T further argues that this pooling cost recovery mechanism is not competitively neutral, in violation of section 251(e) of the Act. To the contrary, the Commission concluded in the Numbering Resource Optimization Third Report and Order that pooling, as a numbering resource optimization strategy, is a part of numbering administration, and that access charges are intended to recover a portion of telephone network costs, which include number administration costs. Thus, permitting recovery of the extraordinary costs of thousands-block number pooling through access charges is consistent with the statutory mandate of competitive neutrality. AT&T also suggests that the Commission's decision to permit thousands-block number pooling cost recovery through access charges is inconsistent with the Numbering Resource Optimization First Report and Order and with the Commission's decision not to allow recovery of LNP costs through access charges. The Commission finds that the decision to allow recovery of thousands-block number pooling costs through access charges is fully consistent with the Commission's decisions in prior orders. In the Numbering Resource Optimization First Report and Order, the Commission adopted the same competitively neutral cost recovery framework for thousands-block number pooling that it adopted for LNP, but it also found that the determination of the appropriate cost recovery mechanism ( i.e. , recovery through access or, alternatively, end-user charge) would be decided in a future order after further comment. In the Numbering Resource Optimization Third Report and Order, the Commission followed the reasoning of the LNP Third Report and Order to conclude that unlike LNP, thousands-block number pooling is access related, and thus recovery of pooling costs through access charges is competitively neutral. AT&T otherwise raises no new evidence or arguments not already considered by the Commission. Accordingly, the Commission declines to reconsider its prior order.

22. Finally, the Commission grants the motion of the California PUC to accept its late filed comments. On its own motion, the Commission also accepts the late filed reply comments of the Texas PUC.

23. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Third Order on Reconsideration in CC Docket No. 99-200, Third Further Notice of Proposed Rulemaking in CC Docket No. 99-200, and Second Further Notice of Proposed Rulemaking in CC Docket No. 95-116 (Further Notice). The Commission sought written public comment on the proposals in the Further Notice, including comment on the IRFA. This Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.

24. In the Further Notice, we sought public comment on whether we should again extend the local number portability (LNP) requirements to all carriers in the 100 largest Metropolitan Statistical Areas (MSAs), regardless of whether they receive a request to provide LNP. We also sought comment on whether all carriers in the 100 largest MSAs should be required to participate in thousands-block number pooling regardless of whether they are required to be LNP capable. Finally, we sought comment on whether all MSAs included in the consolidated metropolitan statistical areas (CMSAs) should be included on the Commission's list of the 100 largest MSAs.

25. With this Fourth Report and Order in CC Docket No. 99-200 and Fourth Report and Order in CC Docket No. 95-116, we continue efforts to maximize the efficiency with which numbering resources in the North American Numbering Plan (NANP) are used. We also attempt to continue the implementation of telephone number portability and thousands-block number pooling with the minimum regulatory and administrative burden on telecommunications carriers. In particular, we reaffirm that carriers need only deploy LNP in switches within the 100 largest MSAs for which another carrier has made a specific request for the provision of LNP. We also delegate authority to the state commissions to require carriers operating within the largest 100 MSAs that have not received a specific request for LNP from another carrier to provide LNP, under certain circumstances and on a case-by-case basis. We also conclude that all carriers, except those specifically exempted, are required to participate in thousands-block number pooling in accordance with the national rollout schedule, regardless of whether they are required to provide LNP including covered commercial mobile radio service (CMRS) providers that are not required to deploy LNP until November 24, 2003. We specifically exempt rural telephone companies and Tier III CMRS providers that have not received a request to provide LNP from the pooling requirement. We also exempt from the pooling requirement carriers that are the only service provider receiving numbering resources in the rate center. We also find AT&T's petition for reconsideration of the Commission's decision to permit incumbent local exchange carriers (LECs) to recover the extraordinary costs of thousands-block number pooling through access charges to be untimely and without merit.

26. No comments specifically addressed the IFRA. Commenters, however, responded to several issues addressed in the Further Notice of Proposed Rulemaking that concern small entities. Generally, commenters from the state commissions support extending the LNP requirement to all carriers in the 100 largest MSAs, regardless of whether there has been a request. Most commenters agree that all carriers in the 100 largest MSAs should be required to participate in thousands-block number pooling regardless of whether they are LNP capable. Several of these commenters suggest that thousands-block number pooling should be as expansive as possible in order to promote efficient and effective numbering resource optimization. Other commenters suggested that an exemption should be established for small carriers.

27. The RFA directs agencies to provide a description of, and, where feasible, an estimate of the number of small entities that may be affected by the rules adopted herein. The RFA defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” The term “small business” has the same meaning as the term “small business concern” under the Small Business Act, unless the Commission has developed one or more definitions that are appropriate for its activities. Under the Small Business Act, a “small business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.

28. The most reliable source of information regarding the total number of certain common carriers and related providers nationwide, as well as the number of commercial wireless entities, appears to be data the Commission publishes bi-annually in its Trends in Telephone Service Report. According to data in the most recent report, there are 5,679 interstate carriers. These carriers include, inter alia, local exchange carriers, wireline carriers and service providers, interexchange carriers, competitive access providers, operator service providers, pay telephone operators, providers of telephone service, providers of telephone exchange service, and resellers.

29. We have included small incumbent LECs in this present RFA analysis. As noted above, a “small business” under the RFA is one that, inter alia, meets the pertinent small business size standard ( e.g. , a telephone communications business having 1,500 or fewer employees), and “is not dominant in its field of operation.” The SBA's Office of Advocacy contends that, for RFA purposes, small incumbent LECs are not dominant in their field of operation because any such dominance is not “national” in scope. We have therefore included small incumbent LECs in this RFA analysis, although we emphasize that this RFA action has no effect on Commission analyses and determinations in other, non-RFA contexts.

30. Wired Telecommunications Carriers. The SBA has developed a small business size standard for Wired Telecommunications Carriers, which consists of all such companies having 1500 or fewer employees. According to Census Bureau data for 1997, there were 2,225 wired telecommunications carriers that had 1,500 or fewer employees. Of this total, 2,201 firms had 999 or fewer employees, and 24 firms had employment of 1,000 employees or more. Thus, we estimate that no more than 2,225 wired telecommunication carriers are small businesses that may be affected by the regulations.

31. Local Exchange Carriers. Neither the Commission nor the SBA has developed a definition specifically for small LECs. The closest applicable definition under the SBA rules is for Wired Telecommunications Carriers. According to the Trends in Telephone Service data, 1,329 incumbent carriers reported that they were engaged in the provision of local exchange services. Of these 1,329 companies, an estimated 1,024 have 1,500 or fewer employees and an estimated 305 have more than 1,500 employees (alone or in combination with affiliates). Consequently, we estimate that no more than 1,024 providers of local exchange service are small businesses that may be affected by the regulations.

32. Interexchange Carriers. Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to providers of interexchange services (IXCs). The closest applicable definition under the SBA rules is for Wired Telecommunications Carriers. According to the Trends in Telephone Service data, 229 carriers reported that they were engaged in the provision of interexchange services. Of these 229 companies, 181 have 1,500 or fewer employees and 48 have more than 1,500 employees (alone or in combination with affiliates). Consequently, we estimate that no more than 181 small entity IXCs may be affected by the regulations.

33. Competitive Access Providers (CAPs). Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to CAPs. The closest applicable definition under the SBA rules is for Wired Telecommunications Carrier. According to the Trends in Telephone Service data, 532 CAPs and competitive LECs and 55 other LECs reported that they were engaged in the provision of competitive local exchange services. Of these 587 companies, 411 CAPs and competitive LECs and 53 other LECs have 1,500 or fewer employees and 121 CAPs and competitive LECs and 2 other LECs have more than 1,500 employees (alone or in combination with affiliates). Consequently, we estimate that no more than 411 small entity CAPs and 53 other LECs may be affected by the regulations.

34. Resellers (including debit card providers). Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to resellers. The closest applicable SBA definition for a reseller is for Wired Telecommunications Carriers. According to the Trends in Telephone Service data, 576 toll resellers and 134 local resellers reported that they were engaged in the resale of telephone service. Of these 710 companies, 669 have 1,500 or fewer employees and 41 have more than 1,500 employees (alone or in combination with affiliates). Consequently, we estimate that no more than 669 small entity resellers may be affected by the regulations.

35. Wireless Telephony including Cellular, Personal Communications Service (PCS) and Specialized Mobile Radio (SMR) Telephony Carriers. Wireless telephony includes cellular, PCS or SMR service providers. The SBA has developed a definition of small entities applicable to cellular licensees that consists of all such companies having 1,500 or fewer employees. According to the Trends in Telephone Service data, 858 carriers reported that they were engaged in the provision of wireless telephony. Of these 858 companies, 291 wireless telephony providers have 1,500 or fewer employees and 567 wireless telephony providers have more than 1,500 employees (alone or in combination with affiliates). Consequently, we estimate that no more than 291 small carriers providing wireless telephony services may be affected by the regulations.

36. Paging Service. The SBA has developed a definition of small entities applicable to providers of paging services that consists of all such companies having 1,500 or fewer employees. According to the Trends in Telephone Service data, 576 companies reported that they were engaged in the provision of paging service. Of these 1,434 companies, 557 paging companies have 1,500 or fewer employees and 19 paging companies have more than 1,500 employees (alone or in combination with affiliates). Consequently, we estimate that no more than 291 small carriers providing paging services may be affected by the regulations.

37. The requirements discussed herein should not require additional reporting, recordkeeping or compliance requirements for service providers. In this Report and Order, we are not mandating new recordkeeping and compliance requirements. Rather, we are affirming, clarifying or reducing requirements.

38. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.

39. In this Fourth Report and Order, we decline to extend local number portability requirements to carriers operating in the 100 largest MSAs that have not yet received a request to deploy local number portability from a competing carrier. By maintaining our current local number portability requirement, we will not impose new burdens on small carriers operating in the 100 largest MSAs. We believe that the costs associated with the alternative of requiring all carriers, including small entities, to deploy local number portability in the absence of a request would outweigh any number optimization benefit.

40. In addition, we exempt rural telephone companies and Tier III CMRS carriers from the pooling requirement until they are required to implement LNP. We also exempt from the pooling requirement carriers operating in rate centers where they are the only service provider receiving numbering resources. Once such a carrier receives a request to provide LNP, the carrier must then also participate in pooling in areas where it is deployed. If, however, a state believes that a carrier that qualifies for this exemption should participate in pooling to further our numbering resource optimization goals, the state commission may petition the Commission for authority to require such carriers to implement pooling.

41. Report to Congress: The Commission will send a copy of this Fourth Report and Order, including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act. In addition, the Commission will send a copy of this Fourth Report and Order, including this FRFA, to the Chief Counsel for Advocacy of the SBA. A copy of this Fourth Report and Order and FRFA (or summaries thereof) will also be published in the Federal Register .

42. Pursuant to the authority contained in sections 1, 3, 4, 201-205, 251 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 153, 154, 201-205, and 251, this Fourth Report and Order is hereby adopted and part 52 of the Commission's rules are amended and adopted as set forth in Appendix A of the Fourth Report and Order.

43. Pursuant to the authority contained in sections 1, 2, 3, 4, 251(e), 254(e), and 405 of the Communications Act of 1934, as amended, 47 U.S.C 151, 152, 153, 154, 251(e), 254(e), and 405, and § 1.429 of the Commission's rules, 47 CFR 1.429, the petition for reconsideration filed by AT&T on May 6, 2002 is denied.

44. Pursuant to the authority contained in Sections 1, 3, 4, 201-205, 251 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 153, 154, 201-205, and 251, this fourth further notice of proposed rulemaking is hereby adopted.

45. The amendments to §§ 52.20 through 52.31 of the Commission's rules as set forth in the rule changes are adopted, effective August 20, 2003. The action contained herein has been analyzed with respect to the Paperwork Reduction Act of 1995 and found to impose no new or modified reporting and/or recordkeeping requirements or burdens on the public.

46. The Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Fourth Report and Order in CC Docket No. 99-200 and CC Docket No. 95-116, and Fourth Further Notice of Proposed Rulemaking in CC Docket No. 99-200, including the Final Regulatory Flexibility Analysis and Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of Small Business Administration.

On March 11, 1997, the Commission released a First Memorandum Opinion and Order on Reconsideration in CC Docket No. 95-116; FCC 97-74 (Order). In that Order the Commission concludes, first, that Query on Release (QOR) is not an acceptable long-term number portability method. Second, the Commission extends the completion deadlines in the implementation schedule for wireline carriers by three months for Phase I and by 45 days for Phase II, clarifies the requirements imposed there under, concludes that LECs need only provide number portability within the 100 largest MSAs in switches for which another carrier has made a specific request for portability, and addresses issues raised by rural LECs and certain other parties. Finally, the Commission affirms and clarifies its implementation schedule for wireless carriers. A summary of the Order was published in the Federal Register. See 62 FR 18280, April 15, 1997. In that summary, the Commission stated that the modified rules would become effective May 15, 1997. Information collections, however, which are subject to approval by the Office of Management and Budget (OMB), shall become effective upon approval by OMB, but no sooner than September 12, 1997. A document announcing the information collections approval by OMB will be published in the Federal Register at a later date. On August 9, 1997, OMB approved the information collections. See OMB No. 3060-0742. The rule amendments adopted by the Commission in the Order took effect May 15, 1997. The OMB approval of the information collection requirements was announced in the Federal Register on August 28, 1997, however, the effected rules took effect on September 12, 1997.

On March 17, 2003, the Commission released the Third Order on Reconsideration and Second Further Notice of Proposed Rulemaking (Order). The Order revised and clarified certain rules to implement section 258 of the Communications Act. The rules and requirements implementing section 258 can be found primarily at 47 CFR Part 64. The modifications and additions adopted in the Order will improve the carrier change process for consumers and carriers, while making it more difficult for unscrupulous carriers to perpetrate slams. The Commission released the Order on March 17, 2003. In addition, a summary of the Order was published in the Federal Register at 68 FR 19152, April 18, 2003. On July 1, 2003, the Commission received approval for the information collection requirements, Implementation of Subscriber Carrier Selection Changes Provisions of the Telecommunications Act of 1996; Policies and Rules Concerning Unauthorized Changes of Consumers' Long Distance Carriers, OMB Control Number 3060-0787, contained in the Order pursuant to the “emergency processing” provisions of the Paperwork Reduction Act of 1995 (5 CFR 1320.13). Questions concerning OMB control numbers and expiration dates should be directed to Les Smith, Federal Communications Commission, (202) 418-0217 or via the Internet to leslie.smith@fcc.gov.

In 1916, the United States and Great Britain (on behalf of Canada) signed the Convention for the Protection of Migratory Birds in Canada and the United States (Canada Treaty). The treaty prohibited commercial hunting for, and specified a closed season on the taking of, migratory game birds between March 10 and September 1 of each year. In 1936, the United States and Mexico signed the Convention for the Protection of Migratory Birds and Game Mammals (Mexico Treaty). The Mexico treaty prohibited the taking of wild ducks between March 10 and September 1. Neither treaty allowed adequately for the traditional harvest of migratory birds by northern peoples during the spring and summer months. This harvest, which had occurred for centuries, was necessary to the subsistence way of life in the north and thus continued despite the closed season.

The Canada treaty and the Mexico treaty, as well as migratory bird treaties with Japan (1972) and Russia (1976), have been implemented in the United States through the Migratory Bird Treaty Act (MBTA). The courts have ruled that the MBTA prohibits the Federal Government from permitting any harvest of migratory birds that is inconsistent with the terms of any of the migratory bird treaties. The more restrictive terms of the Canada and Mexico treaties thus prevented the Federal Government from permitting the traditional subsistence harvest of migratory birds during spring and summer in Alaska. To remedy this situation, the United States negotiated Protocols amending both the Canada and Mexico treaties to allow for spring/summer subsistence harvest of migratory birds by indigenous inhabitants of identified subsistence harvest areas in Alaska. The U.S. Senate approved the amendments to both treaties in 1997.

The major goals of the amended treaty with Canada are to allow for traditional subsistence harvest and to improve conservation of migratory birds by allowing effective regulation of this harvest. The amended treaty with Canada allows permanent residents of villages within subsistence harvest areas, regardless of race, to continue harvesting migratory birds between March 10 and September 1 as they have done for thousands of years. The Letter of Submittal of May 20, 1996, from the Department of State to the White House that officially accompanied the treaty protocol explains that lands north and west of the Alaska Range and within the Alaska Peninsula, Kodiak Archipelago, and the Aleutian Islands generally qualify as subsistence harvest areas. Treaty language provides for further refinement of this determination by management bodies.

The Letter of Submittal places limitations on who is eligible to harvest and where they can harvest migratory birds. Anchorage, the Matanuska-Susitna and Fairbanks North Star Boroughs, the Kenai Peninsula roaded area, the Gulf of Alaska roaded area, and Southeast Alaska generally do not qualify as subsistence harvest areas. Limited exceptions may be made so that some individual communities within these excluded areas may qualify for designation as subsistence harvest areas for specific purposes. For example, future regulations could allow some villages in Southeast Alaska to collect gull eggs.

The amended treaty with Canada calls for creation of management bodies to ensure an effective and meaningful role for Alaska's indigenous inhabitants in the conservation of migratory birds. According to the Letter of Submittal, management bodies are to include Alaska Native, Federal, and State of Alaska representatives as equals. Together they will develop recommendations for, among other things: seasons and bag limits, methods and means of take, law enforcement policies, population and harvest monitoring, education programs, research and use of traditional knowledge, and habitat protection. The management bodies will involve village councils to the maximum extent possible in all aspects of management.

The management bodies will submit relevant recommendations to the Service and to the Flyway Councils. Restrictions in harvest levels for the purpose of conservation will be shared equitably by users in Alaska and users in other States, taking into account nutritional needs of subsistence users in Alaska. The treaty amendments are not intended to cause significant increases in the take of migratory birds relative to their continental population sizes. In addition, the amendments are not intended to create a preference in favor of any group of users in the United States or to modify any preference that may exist, nor do they create any private rights of action under U.S. law.

In 1998, we began a public involvement process to determine how to structure management bodies in order to provide the most effective and efficient involvement for subsistence users. We began by publishing a notice in the September 17, 1998, Federal Register (63 FR 49707) stating that we intended to establish management bodies to implement the spring and summer subsistence harvest. The Service, the Alaska Department of Fish and Game, and the Native Migratory Bird Working Group held public forums to provide information regarding the amended treaties and to listen to the needs of subsistence users. The Native Migratory Bird Working Group was a consortium of Alaska Natives formed by the Rural Alaska Community Action Program to represent Alaska Native subsistence hunters of migratory birds during the treaty negotiations. We held forums in Nome, Kotzebue, Fort Yukon, Allakaket, Naknek, Bethel, Dillingham, Barrow, and Copper Center. We led additional briefings and discussions at the annual meeting of the Association of Village Council Presidents in Hooper Bay and for the Central Council of Tlingit & Haida Indian Tribes in Juneau. Staff members from National Wildlife Refuges in Alaska also conducted public meetings in the villages within their refuge areas and discussed the amended treaties at those meetings.

On July 1, 1999, we published in the Federal Register (64 FR 35674) a notice of availability of an options document, entitled “Forming management bodies to implement legal spring and summer migratory bird subsistence hunting in Alaska.” This document described four possible models for establishing management bodies and was released to the public for review and comment. We mailed copies of the document to approximately 1,350 individuals and organizations, including all tribal councils and municipal governments in Alaska, Native regional corporations and their associated nonprofit organizations, the Alaska Department of Fish and Game, Federal land management agencies, representatives of the four Flyway Councils, conservation and other affected organizations, and interested businesses and individuals. We distributed an additional 600 copies at public meetings held in Alaska to discuss the four models. We also made the document available on the Service web page.

During the public comment period, we received 60 written comments addressing the formation of management bodies. Of those 60 comments, 26 were from tribal governments, 20 from individuals, 10 from nongovernmental organizations, 2 from the Federal Government, 1 from the State of Alaska, and 1 from the Native Migratory Bird Working Group. In addition to the 60 written comments, 9 of the 10 Federal Subsistence Regional Advisory Councils passed resolutions regarding the four models presented.

On March 28, 2000, we published in the Federal Register (65 FR 16405) the Notice of Decision, “Establishment of Management Bodies in Alaska To Develop Recommendations Related to the Spring/Summer Subsistence Harvest of Migratory Birds.” This notice described the establishment and organization of management bodies.

Based on the wide range of views expressed on the options document, the decision incorporated key aspects of two of the models. The decision established one statewide management body consisting of 1 Federal member, 1 State member, and 7-12 Alaska Native members, with each component serving as equals. Decisions and recommendations of this management body will be by consensus wherever possible; however, if a vote becomes necessary, each component, Federal, State, and Native, will have one vote. This body will set a framework for annual regulations for spring and summer subsistence harvest of migratory birds.

The Alaska Regional Director of the Service divided Alaska into 12 geographic regions based on common subsistence resource use patterns and the 12 Alaska Native Regional Corporation boundaries under the Alaska Native Claims Settlement Act. Despite using the Alaska Native Regional Corporation boundaries, we are not working directly with the Regional Corporations in this program, and are instead working with the Alaska Native nonprofit groups and local governments in those corresponding regions. Eleven regional bodies have elected to participate in the statewide management body at this time. Out of all of the regions represented in the statewide management body, only eight regions actually represent included areas (50 CFR 92.5). These eight eligible regions submitted proposals to open harvest in 2003.

In April 2000, we met with the Alaska Department of Fish and Game and the Native Migratory Bird Working Group to discuss bylaws for the statewide management body. At that meeting, participants decided to name the statewide management body the “Alaska Migratory Bird Co-management Council.” On October 30, 2000, the Co-management Council convened for the first time to establish organizational guidelines and to begin development of recommendations for regulations. On December 17, 2001, the Co-management Council met to refine organizational procedures and to discuss Alaska Frameworks/Guidelines for development of regulations for the first harvest season.

Over the winter of 2001-02, the regional management bodies submitted recommendations for regulating the harvest within their regions. Recommendations were received only from the eight regions with communities included in the 2003 proposed harvest. The other four regions did not send in recommendations. On May 14, 2002, the Co-management Council met to make final recommendations on harvest dates and methods and means of harvest for the 2003 season as necessary to protect the migratory bird resource. The Co-management Council sent recommendations to the four Flyway Councils for comments, and presentations were made at July 2002 meetings of the Pacific and Central Flyway Councils. The Co-management Council's harvest recommendations were initially presented to the Service Regulations Committee (SRC) on August 31, 2002, with final SRC action on October 24, 2002.

On April 8, 2002, we published in the Federal Register (67 FR 16709) a proposed rule to establish procedures for implementing a spring/summer migratory bird subsistence harvest in Alaska. The proposed rule provided for a public comment period of 46 days. We mailed copies of the proposed rule to more than 1,200 individuals and organizations that were on the project mailing list. We conducted two public meetings in Anchorage where people could ask questions or provide formal comment.

By the close of the public comment period on May 24, 2002, we had received written responses from 11 entities. Four of the responses were from individuals, five from organizations, one from the Alaska Legislature, and one from the Alaska Department of Fish and Game. On August 16, 2002, we published in the Federal Register (67 FR 53511) a final rule at 50 CFR part 92, which established procedures for incorporating subsistence management into the continental migratory bird management program. These procedural regulations establish an annual procedure to develop harvest guidelines for implementation of a spring/summer migratory bird subsistence harvest.

On February 10, 2003, we published a proposed rule in the Federal Register (68 FR 6697) to establish annual spring/summer subsistence migratory bird harvest regulations for Alaska, starting with the 2003 season. By the close of the public comment period on March 12, 2003, we had received written responses from 30 entities. Seven of the responses were from individuals, 20 from organizations, 2 from regional Flyway Councils and 1 from the Alaska Department of Fish and Game.

This is the first year that we are prescribing annual frameworks, or outer limits, for dates when subsistence harvest of birds may occur, the list of species that may be taken, methods and means excluded from use, etc. These frameworks are not intended to be a complete, all-inclusive set of regulations, but are intended to provide an initial framework to legalize customary and traditional subsistence uses of migratory birds in Alaska during the spring and summer. This rulemaking is necessary because the regulations governing the subsistence harvest of migratory birds in Alaska are subject to annual establishment and public review and because the season is closed unless opened. This rule establishes regulations for reorganization of the regional areas, harvest seasons, a list of subsistence species, emergency closure authority, and methods and means related to taking of migratory birds for subsistence uses in Alaska during the spring/summer of 2003. We have also made nonsubstantive changes to 50 CFR parts 20 and 21 that were necessitated by the creation of 50 CFR part 92.

The Service's authority arises from the four international treaties implemented by the Migratory Bird Treaty Act. Formerly, the 1916 Convention between the United States and Great Britain on behalf of Canada and the 1936 treaty with the United Mexican States contained language that precluded most spring/summer subsistence harvest of migratory birds in Alaska. Both of these treaties have now been amended to allow the U.S. government to implement subsistence harvests during the closed season by indigenous inhabitants of identified subsistence harvest areas in Alaska. Specifically, the Protocol with Canada, Article II of the Treaty was revised to allow migratory birds and their eggs to be harvested by the indigenous inhabitants of the State of Alaska, regardless of the closed season provisions in Article II.

Although the Protocol with the United Mexican States was amended to allow for the taking of wild ducks by indigenous inhabitants of Alaska, the hunting season limitation specified in Article II Part C was not altered. Therefore, the length of the Alaskan spring/summer subsistence harvest of migratory birds cannot exceed the period specified within the Mexican convention, which is 4 months. Historically, we have interpreted this restriction as 124 days. Therefore, to be consistent with the Mexican Treaty, subsistence harvest between March 11 and September 1 must be limited to 124 days. The above interpretation of season length came late in this initial regulatory process. The Co-management Council had developed season recommendations without being aware of a 124-day season limitation; therefore, the Service has elected to open the season as soon as this rule is published and allow the “Closed Season Policy” (53 FR 16877, May 12, 1988) to remain in effect until this rule takes effect. Under the “Closed Season Policy,” the emphasis is to protect those species for which there is greatest conservation concern. Following publication of this rule, the “Closed Season Policy” will no longer be in effect. Certain provisions in this final rule will govern the spring/summer subsistence harvest from the effective date of this rule through August 31, 2003. The regulations in 50 CFR part 20 will apply to all migratory bird harvests by all people in Alaska from September 1, 2003, to March 11, 2004.

The 1974 Migratory Bird Treaty with Japan provides for “taking of migratory birds by Eskimos, Indians, and Indigenous peoples of the Trust Territory of the Pacific Islands for their own food and clothing.” The Japan Treaty further stipulates that “Open seasons for harvesting migratory birds may be decided by each Contracting Party respectively. Such harvesting seasons shall be set so as to avoid their principal nesting seasons and to maintain their populations in optimum numbers.” In conformance with this provision, the Service developed a provision that would allow the traditional subsistence harvesting of eggs while also providing protection during the most critical part of the production period. Using ducks and geese as the initial model (with applications later considered for seabirds), a 30-day closed period targets the last 2 weeks of the incubation period and the first 2 weeks of the brood-rearing period. This concept still permits an opportunity for traditional egg harvesting during the early period after egg laying, but protects the later developing eggs and newly hatched young. To determine the best protective closure periods for their harvest regions based on mean nest initiation and egg laying dates, regional management bodies within the Co-management Council worked with the Service's Division of Migratory Bird Management in Anchorage, Alaska. Closures in some regions were geographically subdivided to provide the best protection, while other regions were provided separate closures for waterfowl and seabirds (primarily murres).

In this rule, the Yukon-Kuskokwim Delta region requested flexibility to set and announce the annual mid-season principal nesting closure period, based on local information, such as timing of snow melt and initiation of nesting. Thus, the closure period in the Yukon-Kuskokwim Delta region will be announced by the Alaska Regional Director or his or her designee, after consultation with biologists in the field, local subsistence users, and the region's Waterfowl Conservation Committee. A press release announcing the actual closure dates will be forwarded to regional newspapers and radio and television stations and posted in village post offices and stores.

The Preamble of the Protocol amending the Canada Treaty states one of its goals is to allow a traditional subsistence hunt while also improving conservation of migratory birds through effective regulation of this hunt. In addition, the Preamble notes that, by sanctioning a traditional subsistence hunt, the Parties do not intend to cause significant increases in the take of migratory birds, relative to their continental population sizes, compared to the take that is presently occurring. Any such increase in take as a result of the types of hunting provided for in the Protocol would be inconsistent with the Convention. If the new subsistence harvest regulations result in increased harvest, management strategies will be implemented to ensure maintenance of continental populations.

Eligibility to harvest under these new regulations is limited to permanent residents, regardless of race, in villages located within the Alaska Peninsula, Kodiak Archipelago, the Aleutian Islands, and in areas north and west of the Alaska Range (50 CFR 92.5). These geographical restrictions open the initial spring/summer subsistence migratory bird harvest to only about 13% of Alaska residents. High-population areas such as Anchorage, the Matanuska-Susitna and Fairbanks North Star boroughs; the Kenai Peninsula roaded area; the Gulf of Alaska roaded area; and Southeast Alaska are currently excluded from the eligible subsistence harvest areas. The eligible subsistence harvest areas were determined by a history of customary and traditional use of migratory birds during the spring and summer as provided in the Protocol amending the Canada Treaty. Adoption of annual harvest regulations will legalize the spring/summer subsistence harvest, but is not intended to initiate or somehow increase it, since subsistence harvest has a long history of prior use in these regions. In addition, some regions, such as Bristol Bay and the Northwest Arctic, indicated that local interest in harvesting birds is declining due to increased commercial availability of alternative foods.

Alaska Natives have longstanding conservation ethics and traditions that are passed from generation to generation through the teachings of elders. These customary and traditional teachings have provided for the perpetuation of migratory birds prior to the ratification of the Canada and Mexico treaty amendments and will continue to do so following the opening of the legal subsistence season. Ultimately it is these components of Native Alaskan culture, rather than regulations, that will provide the more restrictive limits on the harvest of migratory birds.

We have long recognized that a legal and equitable harvest opportunity should be provided during traditional harvesting periods within a regulated framework that ensures conservation of the resource. Without regulating this ongoing activity, populations of the most heavily harvested species, principally waterfowl, could experience declines, and the recovery of depressed populations would be more difficult. Legalizing the subsistence harvest could make any documentation of the take easier and any reporting more accurate. In addition, the regulations will become part of the comprehensive, continental system of migratory bird management, thus integrating subsistence uses with other uses for the first time. Further, the Alaska subsistence migratory bird harvest is presently thought to constitute only approximately 2-3% of the aggregate national migratory bird harvest.

Under the prior “Closed Season Policy” (53 FR 16877, May 12, 1988), it was the position of the Service to emphasize enforcement of restrictions on species of greatest conservation concern. Since its implementation, information on the “Closed Season Policy” has been broadly distributed in Alaska. We believe it is reasonable to assume that most subsistence users were aware of the policy and continued their traditional harvest of non-protected migratory bird species, so few new subsistence users should be attracted by legalizing their customary and traditional harvests. Indications are that subsistence harvests of migratory birds have, in the past, been generally underreported because of fear of prosecution. Legalization of the harvest could make people more comfortable about reporting take. This could lead to more accurate reporting and ultimately help in regulation setting and bird conservation.

Subsistence harvest has been monitored for the past 14 years through the use of annual household surveys in the most heavily used subsistence harvest areas ( e.g., Yukon-Kuskokwim Delta).

Continuation of this monitoring would enable tracking of any significant changes or trends in levels of harvest and user participation after legalization of the harvest. The harvest survey forms that we used to collect information previously were not approved by the Office of Management and Budget (OMB). In the March 3, 2003, Federal Register (68 FR 10024), we published a notice of intent to submit the Alaska Subsistence Household Survey information collection forms to OMB for approval under the Paperwork Reduction Act, with a subsequent 60-day public comment period. We will not conduct or sponsor these surveys until we obtain OMB approval of this information collection. If OMB approves the forms, we intend to begin a Statewide program to gather information that would provide a more comprehensive view of the overall subsistence harvest and more species-specific harvest data, especially on shorebirds.

The Co-Management Council in general adopted the existing methods and means prohibitions that occur in the Federal (50 CFR part 20) and Alaska (5AAC92.100) migratory bird hunting regulations. Some exceptions were made to allow the continuation of customary and traditional spring harvest methods. For example, an exception was made to allow use of live birds as decoys for the harvest of auklets on Diomede Island.

The concept of harvest or bag limits is difficult to apply to the traditional subsistence harvest. A subsistence harvest involves opportunistic use of resources when they are available or abundant, usually for short periods such as bird migration stopovers. Also, subsistence hunting traditionally is often not for individual purposes, meaning hunters are taking birds to be shared within the community, among several families. Historically, local survival depended on sharing, which is a cultural value broadly taught and practiced both within and between communities. Often these designated village hunters are proficient in the techniques necessary to take specific species, for example, hunting murres from breeding areas along seacliff ledges. A restrictive daily limit for individual subsistence hunters would significantly constrain customary and traditional practices and limit opportunistic seasonal harvest opportunities within the Alaska subsistence communities.

The Co-management Council does recognize that setting harvest limits may become necessary, especially within local areas and individual species. However, we did not design these initial 2003 harvest regulations to be a complete, all-inclusive set of regulations, but intended for them to provide an initial framework to formally recognize and provide opportunities for the customary and traditional subsistence uses of migratory birds in Alaska. Within these initial frameworks, the first step in limiting the overall subsistence harvest was to establish a closed species list that included regional restrictions. Establishing a 30-day closed period during the breeding season also limited the harvest impacts. The eventual need to further adjust levels of harvest take, either regionally or overall, is recognized and will be dealt with by the Co-management Council on the basis of recommendations by the Council's Technical Committee on a species-by-species basis. These decisions will likely be based on bird population status and past subsistence harvest data. Concepts such as community harvest limits and/or designated hunters may be considered to accommodate customary and traditional subsistence harvest methods.

The Service believed that it was necessary to develop a list of bird species that would be open to subsistence harvest during the spring/summer season. The original list was compiled from subsistence harvest data, with several species added based on their presence in Alaska without written records of subsistence take. The original intent was for the list to be reviewed by the regional management bodies as a check list. The list was adopted by the Co-management Council as part of the guidelines for the 2003 season. Most of the regions adopted the list as written; however, two regions created their own lists. One regional representative explained that it would take much more time than was available for his region to reduce the list and that, once a bird was removed, returning it to the list would be more difficult later. Going with the original list was viewed as protecting hunters from prosecution for the rare take of an unlisted bird. To understand this rationale, one must be aware that subsistence hunting is generally opportunistic and does not usually target individual species. Native language names for birds often group closely related species, with no separate names for species within these groups. Also, preferences for individual species differ greatly between villages and individual hunters. As a result, regions are hesitant to remove birds from the list until they are certain the species are not taken for subsistence use. The list therefore contains some species that are taken infrequently and opportunistically, but this is still part of the subsistence tradition. The Co-Management Council initially decided to call this list “potentially harvested birds” versus “traditionally harvested birds” because a detailed written documentation of the customary and traditional use patterns for the species listed had not yet been conducted. However, this terminology was leading to some confusion, so the Service renamed the list “subsistence birds” to cover the birds open to harvest in 2003.

The “customary and traditional use” of a wildlife species has been defined in Federal regulations (50 CFR 100.4) as a long-established, consistent pattern of use, incorporating beliefs and customs that have been transmitted from generation to generation. Much of the customary and traditional use information has not been documented in written form, but exists in the form of oral histories from elders, traditional stories, harvest methods taught to children, and traditional knowledge of the birds' natural history shared within a village or region. The only available empirical evidence of customary and traditional use of the harvested bird species comes from Alaska subsistence migratory bird harvest surveys, conducted by Service personnel and contractors and transferred to a computerized database. Because of difficulties in bird species identification, shorebird harvest information has been lumped into “large shorebird” and “small shorebird” categories. In reality, Alaska subsistence harvests are also conducted in this manner, generally with no targeting or even recognition of individual shorebird species in most cases. In addition, red-faced cormorants, trumpeter swans, Aleutian terns, whiskered auklets, short-eared owls, and others have not been targeted in subsistence harvest questionnaires, so little or no numerical harvest data exists. Available summaries of subsistence harvest data include Page and Wolf 1997; Trost and Drut 2001, 2002; Wentworth 1998; Wentworth and Wong 2001; and Wong and Wentworth 2001.

Birds of Conservation Concern (BCC) 2002 (FWS 2002) is the latest document in a continuing effort by the Service to assess and prioritize bird species for conservation purposes (FWS 1982, 1987, 1995; and U.S. Department of the Interior 1990) and was published in the February 6, 2003, Federal Register (68 FR 6179). It identifies bird species at risk because of inherently small populations or restricted ranges, severe population declines, or imminent threats, and thus in need of increased conservation attention to maintain or stabilize populations. The legal authority for this effort is the Fish and Wildlife Conservation Act (FWCA) of 1980, as amended. The 1988 amendment (Public Law 100-653, Title VIII) to the FWCA requires the Secretary of the Interior (16 U.S.C. 2901—2912), through the Service, to “identify species, subspecies, and populations of all migratory nongame birds that, without additional conservation actions, are likely to become candidates for listing under the Endangered Species Act (ESA) of 1973, as amended (16 U.S.C. 1531—1543).”

In actuality, and fortunately, few of the species on the BCC lists are in such a precarious state that they will have to be considered for listing as endangered or threatened in the near future. Our goal is to implement preventive management measures that will serve to keep these species off the endangered species list. Proactive conservation clearly is more cost-effective than the extensive recovery efforts required once a species is federally listed under the ESA. The BCC lists are intended to stimulate coordinated and collaborative proactive conservation actions (including research, monitoring, and management) among Federal, State, and private partners. By focusing attention on these highest priority species, the Service hopes to promote greater study and protection of the habitats and ecological communities upon which these species depend, thereby ensuring the future of healthy avian populations and communities (for more detailed information on the exact criteria used to select species for consideration and inclusion on the BCC lists, see FWS 2002).

Of the 108 species for which the Service proposes to establish regulations allowing subsistence hunting in Alaska, 22 are on BCC lists at one or more scales ( e.g. , National, FWS Regions, or Bird Conservation Regions-Alaska). The Service considers one additional species (Trumpeter Swan) to be “sensitive” because of its small population size and limited breeding distribution in Alaska. Of the 22 species on BCC lists, 14 are technically considered “gamebirds” (as defined by bilateral migratory bird conventions with Canada and Mexico), although frameworks allowing sport hunting seasons have never been established for any of them in the 85-year history of the Migratory Bird Treaty Act.

The following 23 species are birds of conservation concern or are considered sensitive for other reasons.

Red-throated Loon ( Gavia stellata ).

Yellow-billed Loon ( Gavia adamsii ).

Red-faced Cormorant ( Phalacrocorax urile ).

Trumpeter Swan ( Cygnus buccinator ).

American Golden-Plover ( Pluvialis dominicus ).

Pacific Golden-Plover ( Pluvialis fulva ).

Black Oystercatcher ( Haematopus bachmani ).

Solitary Sandpiper ( Tringa solitaria ).

Upland Sandpiper ( Bartramia longicauda ).

Whimbrel ( Numenius phaeopus ).

Bristle-thighed Curlew ( Numenius tahitiensis ).

Hudsonian Godwit ( Limosa haemastica ).

Bar-tailed Godwit ( Limosa lapponica ).

Marbled Godwit ( Limosa fedoa ).

Black Turnstone ( Arenaria melanocephala ).

Red Knot ( Calidris canutus ).

Dunlin ( Calidris alpina ).

Buff-breasted Sandpiper ( Tryngites subruficollis ).

Red-legged Kittiwake ( Rissa brevirostris ).

Arctic Tern ( Sterna paradisaea ).

Aleutian Tern ( Sterna aleutica ).

Whiskered Auklet ( Aethia pygmaea ).

Short-eared Owl ( Asio flammeus ).

On February 10, 2003, we published in the Federal Register (68 FR 6697) a proposed rule to establish spring/summer migratory bird subsistence harvest regulations in Alaska for the 2003 subsistence season. The proposed rule provided for a public comment period of 30 days. We mailed copies of the proposed rule to more than 60 individuals and organizations that were determined to be direct stakeholders in this process. We established an internet homepage posting the proposed rule and related historical documents. We issued a press release and radio public service announcement expressing the request for public comments and the pertinent deadlines for such comments, which was faxed to 26 members of the statewide media. We presented the proposed rule and related materials at public meetings conducted by Federal Subsistence Regional Advisory Councils in Kotzebue, Barrow, Kodiak, Dillingham, Unalakleet, Chevak, and Nenana, Alaska, requesting further written public comments. By the close of the public comment period on March 12, 2003, we had received written responses from 30 entities. Seven of the responses were from individuals, 20 from organizations, 2 from regional Flyway Councils, and 1 from the Alaska Department of Fish and Game.

Most sections of the proposed rule were addressed by commenters. This discussion addresses comments section by section beginning with those of a general nature.

Two respondents requested that groups other than government agencies and Native groups be represented on the Co-management Council, specifically mentioning Audubon and Ducks Unlimited.

Service Response: An extensive public process took place July 1999 through March 2000, during which the composition of the statewide management body, the Co-management Council, was decided. The Co-management Council's composition has been established by regulation (67 FR 53511) and is not being reconsidered in this rule. All Co-management Council meetings are public, and any interested parties can participate and testify.

Two respondents requested that the regulations in the proposed rule be cross-referenced with Title VIII of the Alaska National Interest Lands Conservation Act (ANILCA) subsistence regulations, such as by adding the guidance “* * * consistent with sound management principles, and the conservation of healthy populations of fish and wildlife * * *,” adding emergency closure authority, and adding the words “non-wasteful subsistence.”

Service Response: Development of the spring/summer subsistence migratory bird harvest regulations is guided solely by amendments to the international migratory bird treaties, and not by ANILCA legislation. Cross-referencing guiding principles and management objectives would only serve to further confuse the two very separate programs. However, in the final rule, we have added an emergency closure authority to ensure prompt corrective actions on conservation concerns, similar to that used in both part 20 and part 100.

One individual referenced the Administrative Procedure Act and how it is stated within the proposed rule “The Department of the Interior's policy is, whenever practicable, to afford the public opportunity to participate in the rulemaking process” and how this sounds like the Department is doing the public some kind of favor, when by law it is required. The individual further cites mandates within the Administrative Procedure Act and how it spells out public notice procedures.

Service Response: This language does not appear in the final rule, but we will take this into consideration when drafting other Federal Register documents. See the Public Involvement Section under Supplementary Information for a summary of the Service's efforts to seek public involvement under the Administrative Procedure Act.

One respondent stated that more funds are needed to adequately monitor spring and summer subsistence harvest of migratory birds as well as to promote the effective and meaningful role for Alaska's indigenous inhabitants in the conservation of migratory birds through the participation in the Co-management Council and its related meetings.

Service Response: Funding levels to support the efforts of the Co-management Council, which include harvest monitoring and Native participation, are provided by Congress annually and are not dictated by Federal regulations.

One respondent brought up the issue of the Migratory Bird Hunting and Conservation Stamp Act and how it would require subsistence hunters to purchase a Federal Migratory Bird Hunting and Conservation Stamp. One of the major goals of the amended migratory bird treaty with Canada was to allow for traditional subsistence harvests, and acquiring a hunting license or duck stamp is not customary and traditional. This respondent expressed the need to modify the Duck Stamp Act to exempt subsistence hunters from the requirement.

Service Response: The only way to change the requirement to possess a Federal Migratory Bird Hunting and Conservation Stamp is if the Migratory Bird Hunting and Conservation Stamp Act is modified by Congress.

One individual requested that the introductory information be corrected to reflect that there is evidence that the needs of northern peoples to harvest migratory birds in the spring and summer were considered at the time of the original treaty with Canada. The individual noted the participation of E.W. Nelson, who helped establish the original Yukon Delta Reservation in 1909 and was the principal negotiator for the 1916 treaty.

Service Response: We have changed the introductory language to read: “Neither treaty allowed adequately for the traditional harvest of migratory birds by northern peoples. . .”

Two commenters suggested that subsistence area migratory bird management plans should be required for each subsistence harvest region, complete with sustainable population and habitat protection goals, and a reporting requirement. The person further suggested using the Yukon-Kuskokwim Delta Goose Management Plan as a model.

Service Response: The Co-Management Council is tasked to develop management plans as needed and requested. No immediate plans exist to write management plans for each region. The Co-management Council has directed a working group to review and update, if necessary, the Emperor Goose Management Plan.

Two commenters suggested that the cooperation of Native subsistence hunting groups should be sought in establishing sanctuaries for migrating or nesting birds when concentrated or particularly vulnerable to disturbance or over-harvest.

Service Response: These subsistence harvest regulations do not dictate Federal or State land management practices such as designating sanctuaries; however, any concerning individual or party can petition to close a specific area to the spring/summer subsistence migratory bird harvest.

One individual stated that the proposed regulations are a ridiculous extension of the initial concept of legalizing a small traditional harvest for sustenance, primarily by Native people.

Service Response: The Federal Government is obligated to implement the amendments to the international migratory bird treaties. The executive branch does not have the authority to change the treaties; that responsibility lies with Congress and the treaty participants.

Two commenters suggested that the Service should be required to publish jointly with the Co-management Council an annual harvest report complete with details of what is working and not working and what corrective actions need to be taken.

Service Response: Subsistence harvest survey data is collected with reports published annually summarizing the data on a regional basis. This Alaska subsistence harvest data is also available in the annual Service's Pacific Flyway Data Book.

One individual complained that the statement “Alaska Natives have longstanding conservation ethics” is not substantiated or explained in the rule document. The individual stated that the complete elimination of the rich deltas' goose populations surrounding Kotzebue and Norton sounds and the historical lack of interest in restoration of nesting geese there does not suggest any form of good management either now or in the past.

Service Response: Although there have been declines in the populations of nesting geese in the deltas surrounding Kotzebue and Norton Sounds and subsistence is one source of goose mortality in these regions, it has not been identified as a major cause of the population declines. The Native communities of these regions are now actively participating in the Co-Management Council and recovery efforts. Development of this new subsistence harvest program has involved active participation by 11 regional Native organizations.

One individual commented that the statement of subsistence take constituting 2-3% of the national migratory bird take is misleading, and for some species groups such as seabirds and shorebirds, the subsistence take may equal 90-100% of the national harvest.

Service Response: We believe the 2-3% quoted is valid when the entire migratory bird harvest is considered, and did not see the need to break this down per species group, since it is well documented that harvests for some species groups do not exist outside Alaska.

Two commenters specifically supported the 30-day harvest closure for breeding birds.

Service Response: None needed.

Two commenters suggested that the Co-management Council should organize “Migratory Bird Conservation Committees” in each subsistence area that would include subsistence harvesters, government representatives, and the local conservation organizations. One of the functions of these committees would be to organize subsistence hunters in migratory bird population surveys and censuses in close cooperation with the Service.

Service Response: We would like to clarify that local migratory bird conservation committees already exist in the form of regional management bodies or partners, with 11 actively contributing to the Co-management Council.

Two commenters requested increased public education efforts and enforcement of harvest regulations, especially in communities shared by nonconsumptive users such as birdwatchers. One commenter cited a June 2002 incident in Barrow, in which a group that was watching pectoral sandpipers saw a truck with two individuals pull up and begin shooting at a bird with a high-powered rifle. The individuals from the truck had no means to retrieve the bird (no boots for wading). The group also watched the same individuals shooting at birds between the shore and pack ice.

Service Response: Once this initial phase of regulation development is completed, we plan to launch an extensive education and outreach campaign targeting the communities within the subsistence harvest areas. Outreach efforts will focus on educating all residents of the new regulations and emphasize regulatory protection of those migratory bird species of the greatest conservation concern.

Three respondents supported the proposed regulations for subsistence harvest in Alaska as permitted under the revised Migratory Bird Treaty. They commended the Service's efforts to improve frameworks for regulation of these harvests and for improving information on subsistence use of these resources.

Service Response: None needed.

One commenter complained that the 30-day public comment period was not sufficient time to collect harvest information for the 23 bird species on the Birds of Conservation Concern list. The commenter argued that rushing the process will further erode the existing credibility of the meaningful role indigenous inhabitants have in development of these regulations. The commenter requested that the Secretary of the Interior grant a 90-day extension on the public comment period for the proposed rule.

Service Response: We were not able to grant this requested extension, because we need to publish final regulations as close as possible to the requested April 2 start date of the 2003 harvest season. The future plan is to merge into the “late season” waterfowl regulatory cycle for Service Regulation Committee meetings and subsequent publication in the Federal Register . Under this cycle, we would publish the next Proposed Rule late this coming fall, which should allow for a 60-day comment period.

Three commenters questioned the assumption that no increase in subsistence harvest is anticipated following adoption of the spring-summer season regulations, since all rural residents, not just Alaska Natives, will be included in the harvests. The cumulative effect of adding these hunters who did not traditionally participate in the subsistence harvest has been underestimated. While another individual was concerned that, since harvest reporting will not be conducted this first year, no scientific evaluation of whether the harvest has increased or is having a detrimental effect, is possible. Also, the harvest reporting done on the Yukon-Kuskokwim Delta missed many other rural communities in interior Alaska.

Service Response: Upon OMB approval of the survey forms, we are planning to expand the harvest monitoring to a Statewide effort with a statistical model for stratifying the survey area. We hope that this effort will provide a means to monitor and report any significant increases in harvest activity. The regulations were intended to be a foundation for the spring/summer subsistence harvest of migratory birds in Alaska. If conservation concerns arise such that future harvest restrictions have to be imposed, the Co-management Council will act accordingly.

Four respondents expressed concern about the lack of harvest limits presented in these regulations. One individual recognized the difficulty in applying bag or harvest limits to traditional subsistence harvests, but stated that limits will be necessary to ensure that Statewide cumulative harvests of species are not excessive. The respondents also recognized that if bag limits are not incorporated in the 2003 regulations, the Co-management Council will need to move in this direction in the future. In addition, if species on the Birds of Conservation Concern list and/or Audubon Watchlist are included in the 2003 harvest, then small bag limits should be set immediately. Two commenters specifically mentioned sea ducks as an area of special concern with regard to lack of bag limits. Another commenter suggested using proxy hunting as administered by the State of Alaska as an example of formatting harvest limits to allow for sharing among communities.

Service Response: These initial 2003 harvest regulations are designed to provide an initial framework and the first steps taken to limit the subsistence harvest. These steps will include establishing a closed species list and a 30-day closed period during the breeding season. In the future, concepts such as community harvest limits, proxy hunting, and/or designated hunters will likely be considered to accommodate customary and traditional subsistence harvest methods, if further species-specific harvest limits are needed.

One commenter was supportive of there being no harvest limits, because they do not fit with customary and traditional practices. Frequently a person goes hunting and returns with food for extended families, so harvest or bag limits would not be suitable or appropriate for the North Slope region.

Service Response: The Co-management Council agrees with this assessment of the situation and is not recommending harvest limits to be set for this initial 2003 season, but may consider them when specifically requested or needed for a localized area or species of conservation concern.

One respondent suggested that some Native language names for birds, group closely related species, and there may or may not be separate names for species within these groups. In a 1958 UAF paper titled “On the Naming of Birds by Eskimos,” Lawrence Irving documents different Inupiaq names for all the locally-occurring species of loons, scoters, shorebirds, and even the two species of scaup. Thus, in this region, this degree of differentiation was reflected in the language.

Service Response: In developing the subsistence harvest survey collection forms, we have found that some confusion does exist concerning local Native names for specific bird species, just as it does when common names are used for international species. In some cases, neighboring local regions use different Native names for the same species. When at all possible, we have given all known extant Native names for a species in our education materials.

One commenter suggested that the existing wording referencing availability of empirical evidence is inaccurate. As stated, “the only available empirical evidence of customary and traditional use of the harvested bird species comes from Alaska subsistence migratory bird surveys, conducted by Service personnel and contractors and transferred to a computerized database.” The commenter noted that, to the contrary, there is ample information in the ethnographic literature documenting bird harvest and use practices from most regions of the State. There is a considerable amount of archaeological literature describing pre-contact harvest patterns, including species of birds harvested as well as implements used for bird harvest. Also, a large body of contemporary and traditional knowledge exists among subsistence users themselves.

Service Response: We agree that additional information is available from both contemporary and archaeological sources, yet we disagree that this available information is able to provide numerical summaries of bird harvest down to the species level.

One commenter expressed concern over the apparent absence of any internal review process by the Service's migratory bird specialists and urged that an intra-agency review process be involved in developing the Final Rule.

Service Response: The Co-management Council can only make recommendations to the Service as far as regulations development, with all final decisions made by the Service Regulations Committee. Prior to the Service Regulations Committee finalizing any new regulations, there is an extensive, two-part internal review process in which the Service's migratory bird management division and its biologists are extensively involved.

One commenter stated that this amendment implies that subsistence hunting under part 92 occurs during closed seasons, when, in fact, part 92 establishes open seasons. The commenter suggested that the section should read: “* * * during the closed season established in this part except as provided in * * * ”

Service Response: We concur and have made the recommended wording change.

One respondent recommended revising text to read: “The Co-management Council will review and, as necessary, recommend modifications to these regulations * * * working within the schedule of the Federal late season migratory game bird hunting regulations.”

Service Response: We concur and have made the recommended wording change.

One commenter suggested that removal of this section eliminates authorized fall and winter harvests of snowy owls and cormorants for food or clothing that have been in place for many years. The commenter did not believe there had been adequate public notice of this proposed action; it has not been substantively considered by the Co-management Council and was not part of the widely distributed package of recommended subsistence regulations. The commenter recommended that the Service retain § 20.132(b) until such time as fall and winter subsistence needs can be assessed and there is adequate involvement of the Alaska public and Co-management Council.

Service Response: The commenter has identified an oversight potentially restricting the winter subsistence harvest of snowy owls and cormorants in Alaska with this action. We modified the section to retain subsection (b) while making it effective only from September 1 through April 1 in the final rule.

Five respondents, all representing separate Kodiak area organizations, expressed an urgent need to close the Kodiak road system starting in the 2003 season. The primary and most common concern expressed was the likelihood of overharvesting, primarily by user groups that do not demonstrate customary and traditional uses of migratory birds and will have easy access to this resource. Other concerns brought up were the potential conflicts between consumptive and nonconsumptive users that could negatively affect the local tourism industry, and subsistence harvesting posing a public safety concern in regard to hunting within a populated area.

Service Response: On the basis of public testimony and written comments received, we are closing to harvest a buffer zone around the Kodiak Island road system under § 92.33(e). The conservation concern is the nontraditional access posed by the road system in a region where the migratory bird hunting is traditionally done by boat in marine waters. Acts of civil disobedience with respect to other hunting regulations and road access have been documented. Closing the road system to the spring and summer subsistence migratory bird harvest will help ensure no local increases in harvest occur in implementation of the new regulations. Offshore islands and waters will remain open to harvest.

One commenter requested that all road systems, such as Kodiak and Nome, should be closed to subsistence harvests, with the primary concern being the conflicts between consumptive and nonconsumptive users along roads frequented by tourists, birdwatchers, and others. The issue of the Nome road system was only brought up by one commenter, and has not been supported by the regional management body, nor mentioned in any other public comments.

Service Response: We are taking no action on restricting harvest along the Nome road system for the 2003 regulations; however, the issue may be revisited by petition for a rule change in the future, should the need arise.

One respondent requested exclusion of the community of Tok, most of whose residents have no customary and traditional history of bird harvesting in the spring/summer. The respondent explained that legalizing the harvest will significantly increase the level of take of waterfowl and owls in the Upper Tanana Valley, especially if no harvest limits are imposed.

Service Response: There is a petition process to exclude a community from subsistence bird harvesting. Petitions are accepted annually and acted upon by the Co-management Council and subsequently by the Service Regulations Committee for the upcoming season. In addition, we added an emergency closure provision in § 92.21, so that if a significant increase is documented for waterfowl and owls in this or any other region, an emergency closure can be requested and implemented.

Five respondents questioned the definition of “indigenous inhabitant” used in the regulations. One of the commenters stated that the current definition is erroneous, immoral, and unjust and could result in an increased harvest of birds during the spring and summer. The second commenter stated that the regulations should only apply to residents of the proposed area whose families have a tradition of harvesting migratory birds in the area. The third commenter charged that this loophole, which includes populations of recent rural immigrants and their invited relatives, will cast suspicion on the whole program, and that the Native community should define the term “indigenous.” The commenter added that the Service should consider the impact of immigrants into the included villages when stating that it is not the intent of these regulations to increase the harvest. Also, the Native community itself is increasing, adding many new hunters to increase the take. Another individual commented that the phrase “permanent inhabitants” is not defined, thus allowing participation by anyone with a rural ZIP Code, regardless of cultural heritage, local tenure, annual income, or subsistence need. Still another commenter added that if hunting pressure needs to be limited, the harvest should be returned to its original intent.

Service Response: The term “indigenous inhabitant” was defined in Congress' ratification of the Treaty amendments, which are binding on the Service. Defining the term as the commenters requests would misconstrue Congress' explicit intent in ratifying the Treaty amendments.

One respondent expressed strong concern that the Secretary of the Interior lacks the legal authority to open the spring/summer hunt to non-Native village residents, despite Alaska's former U.S. Senator's desire for this to be accomplished through amendments to the Canada and Mexico Migratory Bird Treaties.

Service Response: Same as above.

Two commenters requested that subsistence hunters age 16 and younger should be required to be accompanied by an adult both in the interest of safety and to avoid abuse of the subsistence privilege. In addition, they suggested that young hunters should be encouraged to obtain a firearms safety certificate before being allowed to hunt.

Service Response: We intend to encourage participation in the State's hunter safety program by subsistence hunters of all ages through our program's long-term education and outreach efforts.

Two individuals expressed concern because rifles, especially .22 caliber, are not a currently prohibited method. One of the commenters explained that allowing these types of weapons creates a situation in which male youths with .22 caliber rifles can have an open season on all birds with little regard for salvage of edible meat. The commenter added that people lacking identification skills will likely shoot anything that flies, and that lack of identification and marksman skills could cause wounding losses from rifle use to be substantial.

Service Response: The issue of use of small caliber rifles was discussed by the Co-management Council, and it was recommended that we do not prohibit their use. It was also stated that small caliber rifles are traditional tools for subsistence use and that they are most commonly used to dispatch wounded or crippled birds. Outreach and educational efforts of the Co-management Council will be focusing on improving the hunter identification of individual bird species at both long and short distances.

One respondent requested that we prohibit the use of air boats and personal watercraft ( e.g. jet skis) for spring/summer migratory bird hunting on the Tetlin Refuge, at least in the Scotty/Desper drainage and other sensitive areas in the region. The respondent explained that use of air boats and jet skis is already established in the area, and that use during the fall sport season on lakes accessible from the Alaska Highway has been an increasing issue. The use of air boats or personal watercraft is extremely disturbing to nesting and brood rearing waterfowl and other species, and has the potential to alter and damage critical habitat. Abuses will occur and law enforcement will be extremely difficult. In addition, use of air boat or personal water craft is not customary and traditional for harvesting migratory birds in the spring and summer.

Service Response: We concur and have added a regional prohibition on the use of air boats and jet skis under § 92.20.

One commenter brought up the concern that it has not been made clear what licenses or permits are going to be required, and that education and outreach have not been allocated to inform the subsistence users about the new regulations. The commenter requested that the Secretary of the Interior initiate a discretionary enforcement policy to continue for 2 years after the Final Rule is published and provide adequate funding to the regions to coordinate outreach and education efforts.

Service Response: We concur that we did not make general hunter requirements explicit and have clarified that by modifying the Final Rule to make § 20.2 (a), (b), (c), and (d) applicable to persons hunting under part 92. Under separate Federal regulations (16 U.S.C. 718a), Federal migratory bird stamps are required for hunters 16 years of age and older for taking migratory bird waterfowl. We also concur that additional education and outreach are needed.

One commenter from the Yukon-Kuskokwim Delta explained that village residents should be allowed to take waterfowl from a boat under power, especially for waterfowl frequenting the river. Village residents should also be allowed to use a boat under power to hunt bay ducks like scaup and scoters, which are easier to take from a moving boat. The same commenter added that they assumed if something was not listed specifically as prohibited under this section, then it is allowed, such as traditional methods like use of bird nets or bolos.

Service Response: The current regulations do not prohibit hunting from a boat under power, but do prohibit using a boat to drive or concentrate birds. In addition, the use of bird nets or bolos are not prohibited harvest methods at this time.

One respondent requested that regulations be added to prohibit subsistence hunters from commercially guiding other subsistence hunters, especially in regard to sea ducks.

Service Response: Commercial guiding is governed by State regulations, so no action is being taken under these Federal regulations.

One commenter requested that it be made clear that the sale or trade of migratory birds and their parts taken under this Part is prohibited.

Service Response: We concur. This is already addressed under § 92.6 of the Procedural Regulations.

Because of the wide-ranging views and comments we received on this subject, we have responded to the concerns of the public at the end of this summary of public comments (§ 92.32).

Two commenters requested that any species appearing on the BCC list be removed from those open to subsistence harvest in 2003, because they may be threatened. One of these commenters further suggested that the harvest should be limited to bird species for which population levels and harvest levels are known and can be monitored, and that birds with little population information should be protected from harvest. The other commenter suggested allowing an incidental/accidental harvest (less than 1% of the population) of birds taken resulting from hunter misidentification. They also stated that if these BCC birds are allowed to be harvested, then a massive educational campaign should be launched to promote conservation of these species by redirecting harvest efforts to the more viable species.

Two commenters deferred to the expertise of the Service and the Co-management Council on evaluating the effects of the subsistence harvest on the 23 species in question.

One individual was alarmed and concerned over the number of nongame species included in this hunt, especially without written records of past subsistence harvest. They recommended that the following taxonomic families be removed from the harvest list: Gaviidae (loons), Podicipedidae (grebes), Charadriidae (plovers), Haematopodidae (oystercatchers), and Scolopacidae (sandpipers), as well as the following species: all terns, red-legged kittiwakes, ivory gulls, whiskered auklets, and all owls except snowy owls. The commenter further questioned why the Service would bother identifying species of conservation concern only to foster the hunting of the same species.

One commenter requested that 13 of the 23 species be deleted from the subsistence harvest list because of their presence on the Alaska Audubon Watchlist. These species include: red-throated and yellow-billed loons, red-faced cormorants, Pacific golden plovers, black oystercatchers, bristle-thighed curlews, Hudsonian and marbled godwits, black turnstones, buff-breasted sandpipers, red-legged kittiwakes, Aleutian terns, and whiskered auklets. The recommendation was for the Service to take a precautionary approach and protect these species from harvest until it can be demonstrated that a subsistence harvest would not jeopardize existing population levels.

Two individuals requested that all 23 species of conservation concern should be removed from harvest because all races of residents are allowed to hunt. One commenter added that allowing these species to be taken would be a breach of faith with generations of conservationists that have struggled to make a place for large edible birds in our world. The second commenter explained that any additional harvest for some populations that have undergone a decline over recent years, such as mid-continental white-fronted geese in northwest Alaska, should not be taken lightly. And that with virtually no constraints in place under the proposed regulations, both Natives and non-Natives will take full advantage of birds that congregate at open water during spring migration, regardless of actual need for sustenance.

One respondent expressed concern that a long list of migratory birds is being institutionalized into regulations in the absence of past population or harvest information. They also stated that no species of conservation concern should be allowed for harvest except under strict controls in special cases. Also, the Service should be required to publish such a list annually and seek Native involvement in recovery efforts.

One commenter from the Yukon-Kuskokwim Delta was against removing birds from the harvest list because the idea of limiting species hunted to what is considered game birds is contrary to the treaty that says the hunt will be customary and traditional. There have been times that all hunters in a village died from influenza, diphtheria, small pox, and tuberculosis. During these times, it was necessary for women and children to take nongame birds. This led to a continued use as a way to remember the past. There is no large take of these birds. Only a few elders may take them these days and this will likely not expand to any level of concern. In most cases the birds listed are taken more often by gulls than by humans. The Native people of western Alaska have always hunted birds in the spring. “When the ice is rotten and you can't go after sea mammals or fish, God has provided birds that fly to us.”

One respondent from the Seward Peninsula/Norton Sound area stated that they traditionally harvest 16 of the 23 species of concern; and that, they would not support removing any of these species from the harvest list until ample time is given to document evidence of traditional and current harvest.

Two commenters requested that all 22 species on the BCC list, as well as an additional 5 species (Aleutian Canada geese, common and king eiders, long-tailed ducks, and black scoters) should be removed from the subsistence harvest. These additional five species are on the Alaska Audubon Watchlist.

Two commenters requested that the lists of birds open to harvest should be smaller and more area specific, with a clear distinction between those species that can be hunted and those whose eggs may be gathered. The commenter recognized the importance of subsistence harvest traditions, and felt that those who have traditionally harvested are in the best position to identify the most important species and incorporate this information on a regional or local basis into the harvest species list.

One commenter mentioned that legalizing the take of birds on the BCC and overlapping Audubon Alaska Watchlist sets back years of conservation efforts. At least 19 of the BCC birds overlap with the Watchlist because they are undergoing population declines, have small breeding populations, and/or have a very limited breeding distribution. Special consideration should be given to these species, especially since subsistence-caused declines may lead to costly management actions, litigation, or other undesirable results.

One commenter from the Kotzebue region supports removal of the seabird species listed as birds of conservation concern. People don't hunt seabirds in this area, and the other species in question are only taken when there is no other food source, or if an elder asks for it. The BCC seabird species are not considered everyday food, but from time to time an elder craves certain foods, often associated with a particular season. The commenter expressed that the declines noted in these particular birds are more caused by natural predators such as jaegers (“wolves of the sky”), bears, and foxes. The commenter suggests that predator control would allow these species to increase.

One respondent was frustrated because the Service has belatedly introduced concerns for 23 of the species proposed for spring and summer hunting. Despite repeated requests over the past 2 years, the Service is only now explicitly identifying which species are of concern in this regulatory process. The Co-management Council was not accorded an opportunity to thoughtfully review these species and reasons for concern because the full list was not declared and no substantive briefing material was provided for most species. This precluded effective dialogue with subsistence users and regional co-management committees, and recommendations from the Co-management Council. An even more important problem, considering the current national review of these regulations, is the incomplete and inadequate information in the Federal Register or other documents on the basis for concerns about these 23 species. The Service especially solicits public opinions on whether they should be hunted. Presumably, the most valuable comments will come from agencies, public interest groups, and individuals that evaluate the status of bird populations in relation to current and future harvests. However, readers do not have access to available source documents that will provide information necessary to form sound opinions, raising concern that commenters will simply “vote” yes or no based on subjective assumptions or their dispositions on subsistence or hunting in general.

The same commenter further adds that in the Supplemental Information, it states that 22 of these species are on regional or national lists of Birds of Conservation Concern (BCC). The Service published the long-awaited “Birds of Conservation Concern 2002” in December. Essentially, this document only contains BCC lists by national and regional categories, a description of criteria that were used for listing, and references to some of the source documents on which listings were based. In some cases, there are no formal source documents—the listings were based on consultations with experts and regional staff. In other cases, the reader has to find and consult a wide array of documents, ranging from field survey reports and regional summaries to continental conservation plans by the major bird initiatives (Partners in Flight, U.S. Shorebird Conservation Plan, North American Waterbird Conservation Plan) and regional step-down plans. This referencing approach does not provide reasonable public access to salient information on the status of populations from which the public can assess potential effects of subsistence hunting. Given the disparate level of available information, data, and details associated with these species of concern, together with the insufficient compilation and synthesis of materials, the commenter strongly recommended that the Service develop a summary that includes an objective analysis of these species, along with the strengths and weaknesses of available supporting data. In the development of these comments, the respondent not only encountered difficulty finding status information on the 23 highlighted species, but also found that the quality of information was often poor and subjective. The Supplemental Information says that the 22 BCC species proposed for hunting were listed because they are “at risk due to inherently small populations or restricted ranges, severe population declines, or imminent threats,” yet the respondent found no estimates of population size or speculations on orders of magnitude; little or no reliable information on population trends; and poor information on size and changes in seasonal ranges. The descriptions of perceived threats to populations were particularly vague, subjective, and in some cases prejudicial ( e.g. , degradation of winter habitat, exposure to contaminants, and seasonal occurrence in foreign countries). In most cases, there was little evidence that threats were imminent or substantial for the species. The respondent rarely found specific information from which to determine whether the population, range, or threat criteria for BCC species were met. While the respondent recognized that inadequate information could be reason enough for pursuing conservation actions, they preferred to have more definitive information with which to make this assessment. To this end, the respondent recommended that the Service develop strategies and timelines for obtaining information with which to make responsible decisions concerning subsistence harvests of species of concern.

Loons —Two commenters requested that all loon species be removed from the subsistence harvest because of identification problems between red-throated and yellow-billed loons and common, Pacific, and arctic loons.

One commenter requested that all loons be removed from the harvest list because, even if there may not be a biological reason to do so now, in 20 years there will be, and by then the users will say “we have done this for a long time” so it is better for us to stop it now. The commenter added that most places are trying to save loons while the Service is allowing a certain few to harvest them.

Red-throated Loons —One commenter stated that a few people in the Aleutian/Pribilof Islands gather these eggs, but likely have little or no effect on the population of these species, and recommended that an accurate account of the harvest be made to support the stance that it is minor relative to the overall population.

One commenter supported red-throated loons' being left on the harvest list, citing that subsistence harvests on the North Slope are never large and loons figure prominently in several of their dances and legends. Aerial breeding pair surveys on the North Slope show that the red-throated loon population is increasing.

One commenter requested that red-throated loons be removed from harvest until their population is stabilized, citing a more than 50% decline in the last 20 years, according to the Audubon Alaska Watchlist.

Yellow-billed Loons —One commenter stated that a few people in the Aleutian/Pribilof Islands gather these eggs, but likely have little or no effect on the population of these species, and recommended that an accurate account of the harvest be made to support the stance that it is minor relative to the overall population.

One commenter supported yellow-billed loons' being left on the harvest list, citing that subsistence harvests on the North Slope are never large and loons figure prominently in several Native dances and legends. Aerial breeding pair surveys on the North Slope show that the yellow-billed loon population is currently stable.

Trumpeter Swans —One commenter provided a detailed statement justifying why Trumpeter Swans should be removed from the list of birds open to harvest in 2003. Cited was the ongoing 70-year effort to restore the population in North America and how the population had only grown to 18,000 by the end of the 20th century. Concern was expressed that trumpeters could be subject to population reductions if taken or regularly disturbed during the nesting and brood rearing period, because of certain breeding behavior characteristics, such as the way they pair, select, and defend nesting territories, and their inability to renest successfully at high latitudes. Trumpeters have shown their best population growth in Alaska, but the people in this area are increasing rapidly and do not have a long-established, consistent pattern of use of these birds. In addition, threats on the wintering grounds in the lower 48 states such as urban sprawl, agricultural development, and lead poisoning threaten the overall security of the population, warranting protection of these birds from subsistence harvest in Alaska.

One respondent recognized trumpeter swans as a subsistence resource, but did not support a spring and summer open season at this time. The principal concerns expressed were: (1) Insufficient information on the extent of recent subsistence harvest; (2) the current lack of regulations limiting harvest quantity by qualified hunters; and (3) the potential for overharvest of this small population with low productivity.

One individual requested that trumpeter swans be protected from harvest with the justification that it has already been proved that it is not the grace of God but the grace of man that has allowed a tiny population to increase and repopulate the nesting territories where spring hunting will be allowed.

Aleutian Canada Geese —One respondent expressed that if the prohibition on taking Aleutian Canada Geese is ever extended to the Yukon-Kuskokwim Delta, it would be very difficult for hunters to distinguish this species from other subspecies.

King eiders —One individual requested that king eiders be restricted in the harvest, stating that North American numbers have been in a steady decline for the past several years. There is so much concern that Senator Ted Stevens just appropriated $100,000 to study the decline of king eiders on the North Slope. To help protect the remaining numbers, there needs to be a restricted take on the North Slope, particularly in the Barrow region.

Canvasbacks —One individual requested that a one bird or no bird limit be placed on canvasbacks in the subsistence hunt, stating that all people should share in the conservation of this great bird.

Shorebirds —One respondent from the Yukon-Kuskokwim Delta explained that young boys have traditionally hunted many of the smaller birds on the subsistence harvest list, especially shorebirds such as sandpipers, plovers, curlews, and godwits. It is known that these boys bring their catch to their grandmothers to cook and eat, which has been done for generations. Elders in the villages in the past harvested many of these shorebird species for subsistence foods, especially when these birds are migrating along the shoreline in flocks.

Black Oystercatchers —One commenter stated that a few people in the Aleutian/Pribilof Islands gather these eggs, but likely have little or no effect on the population of this species, and recommended that an accurate account of the harvest be made to support the stance that it is minor relative to the overall population. In addition, 10 subsistence hunter testimonials were received from the Aleutian/Pribilof region stating that some people do gather black oystercatcher eggs, but that the limited take likely has little to no effect on the population. On the other hand, one commenter expressed special local concern for this species because of its small population (2,500), limited range, and vulnerability to disturbance at coastal breeding sites and from oil spills. The Kodiak Archipelago is home to the largest concentration of black oystercatchers and should be afforded special protection from both hunting and egg gathering. Further cited was the oystercatcher's low reproductive rate, inability to re-nest, and vulnerability to egg gathering.

Red-legged Kittiwakes —Sixteen hunter testimonials were received stating that this species is customarily and traditionally harvested in the Pribilof Islands (primarily St. George Island), with minimum impacts to the population. This harvest is done with no waste and there is no reason to close or restrict the harvest. These hunters recommended an accurate count of the birds and eggs taken be maintained to support the stance that the take is very minor in relation to the overall species population. One St. George hunter specified that he takes less than 60 kittiwakes per season, consisting of a mix of black-legged and red-legged kittiwakes, and shares these birds with another household. Interviews of 11 kittiwakes hunters indicated that they take an average of 37 red-legged kittiwakes each per season. To demonstrate the customary and traditional nature of these hunts, one commenter from St. George explained, “I've been involved with red-legged kittiwake hunts since I was 6 years old. I was a gatherer for my grandfather; he shot the birds on the wing and I gathered them up from where they had fallen. I did this for him until I was 10 years old and the following year I started hunting by myself and have done so ever since. I hunt the same areas as my grandfather did and spend no more time in the hunts than we did 44 years ago, which indicates to me that the abundance has not changed very much or not at all.”

Arctic and Aleutian Terns —One commenter requested that both species be protected from the subsistence harvest and that they be treated together since they nest commonly in mixed colonies, and eggs from the two species are not readily distinquishable. Decreases in the arctic tern population are widely reported but poorly documented in arctic regions; however, large declines have occurred in Greenland where a traditional harvest is unregulated. In Alaska, recent declines have been reported from the Gulf of Alaska and coastal sites along the Beaufort Sea, while waterfowl surveys of the North Slope and Yukon-Kuskokwim Delta have shown increases. Perennial harvesting of adults could have serious impacts on local populations. The 30-day closures may provide some protection for the eggs, but they are probably set too late to provide adequate protection in the Aleutians and Kodiak.

Owls —One commenter expressed concern that the residents of Tok may dramatically affect local owl populations with the subsistence harvest. The commenter sites a Service management plan for Alaska's raptors that states, “with few exceptions, we are woefully ignorant and lack sufficient information to make management decisions or assess population status of raptors based on scientific data.” The commenter requested that all owl species be removed from harvest except in areas where their customary and traditional use has been documented and shown not to impact Statewide population levels.

One commenter requested that all owls be removed from the harvest list because, even if there may not be a biological reason to do so now, in 20 years there will be, and by then the users will say “we have done this for a long time,” so it is best to stop it now. The commenter added that most places are trying to save owls while the Service is allowing a certain few to harvest them.

Two respondents answered that for any species with very small populations, any harvest added to normal mortality could be significant. The Service would be ill-advised to authorize harvest of species with populations this small, particularly given that birds harvested in the spring/summer have survived the prior winter and in many cases are likely breeders. Specifically in regard to shorebirds, the commenter responded that biology has not been studied with respect to the ability of populations to sustain harvests.

One individual responded that the Service lacks the ability to determine the impact of hunting on these species.

In regard to arctic terns, one commenter responded that the killing of adults could have serious impacts on local populations.

One commenter claimed not to have found evidence that harvesting arctic terns has particular cultural significance, nor did the commenter find evidence that harvesting occurs in ways that minimize impacts.

One individual stated that these birds are not important species in the hunt for food, but if hunting them were legal, that would encourage a try at taking them.

Two respondents answered that there is the potential for adverse public reaction if it becomes widely known that species that are rare, vulnerable, or declining are being harvested, particularly if such hunts are sanctioned by management authorities. In addition, some of these species are charismatic such as puffins, loons, terns, and owls, which only increases the sensitivity of such decisions. Populations of species that are open for harvest must be sufficiently large to justify any harvest.

One individual responded that these are all species trying to find a place in a world dominated by man and whose population levels are substantially lower than when they were first described.

One commenter expressed that this would be like putting the cart before the horse, because as subsistence hunters, nothing is wasted and there is no overhunting even if an abundance of birds present themselves during the hunt.

One individual responded that with the exception of Trumpeter swans, the Service lacks the ability to determine if the population of any of these birds is being maintained or improved.

One respondent suggested that subsistence users should participate in a registration system to provide a means to follow up with harvest surveys and more accurately determine the composition and levels of subsistence harvests.

One respondent suggested that harvest quotas and bag limits should be required in each subsistence harvest area to avoid overharvests.

Service Response: Subsistence hunting of migratory birds was authorized by recent amendments to the migratory bird treaties with Canada and Mexico. A proposed rule was developed after extensive consultation with the interested parties in Alaska through the newly formed Co-management Council and other interested constituencies. Comments have been received and reviewed regarding this proposal. The main issue to emerge during development was the number and species of migratory birds to be included in the list of birds open to subsistence harvest for the coming year. The Service highlighted 23 species of birds in the proposed rule for public comment, including 22 species that also occur on the Service's list of Birds of Conservation Concern (BCC), and the Trumpeter Swan.

Based on the comments received and internal Service analysis, we have decided to remove the following species from the list of species open to subsistence take for the reasons stated:

Yellow-billed Loon: Yellow-billed Loons have a limited distribution in Alaska and are found primarily along the Arctic Coastal Plain. The highest density of breeding Yellow-billed Loons are found within the National Petroleum Reserve. Yellow-billed Loons have a low relative abundance, and the Alaska population is estimated to be about 2,500 birds. Threats to Yellow-billed Loons include oil and gas development, oil pollution, contaminants, gill-net fisheries, and overharvest. The Service is in the process of completing a Status Assessment for this species.

Trumpeter Swan: This species was significantly reduced and extirpated from much of its range during the 19th Century. The current world population is between 20,000 and 25,000, approximately 90% of which summer and nest in Alaska. The population is increasing and active efforts are underway to restore breeding populations to parts of the former range. However, in recent years, significant losses caused by lead poisoning have been documented in that portion of the winter range associated with Alaskan breeding Trumpeter Swans.

Pacific Golden-plover: The Pacific Golden-plover is of primary importance within the Alaska Region because of its small population size, 16,000 birds, and because its North American breeding range is restricted to Alaska (Johnson and Connors 1996). This species occurs only in western Alaska. Like the American Golden-plover, the species is especially susceptible to hunting because of its high visibility and tendency to remain near humans when they enter its territory.

American Golden-plover: The American Golden-plover is listed as a species of moderate concern in the Alaska Shorebird Plan (ASWG 2000) and of high concern within the U.S. Shorebird Conservation Plan (Brown et al. 2001). This ranking reflects a population decline and high threats to the species on nonbreeding areas. We believe its removal from the list is appropriate due to possible misidentification problems with the Pacific Golden-plover mentioned above.

Bristle-thighed Curlew: This species is of interest because it nests only in Alaska in 2 relatively small, disjunct regions, the Andreafsky Wilderness near the north Yukon Delta and the central Seward Peninsula. The total breeding population is among the smallest of all shorebirds and estimated at 3,200 pairs (Handel et al. 1990). Numerous lines of evidence suggest the population is being affected by anthropogenic factors on areas outside the nesting grounds (Marks and Redmond 1994, Gill 1998). The Bristle-thighed Curlew is listed as a species of high concern within the U.S. and Alaska Shorebird Conservation Plans. This ranking reflects a very low population size and restricted breeding range.

Hudsonian Godwit: Alaska is important to this species because as much as 30% of the population may breed in the region (McCaffery 1996; McCaffery and Harwood in press). Recent findings suggest Alaska birds may warrant subspecies status (Haig et al. 1997). The Hudsonian Godwit is listed as a species of high concern within the U.S. and Alaska Shorebird Conservation Plans. This ranking reflects a low population size, threats on nonbreeding areas, and restricted breeding and non-breeding distributions.

Marbled Godwit: Alaska hosts a small (probably <3,000 birds), highly disjunct breeding population of sufficiently different morphology to warrant subspecies ( Limosa fedoa beringiae ) designation (Gibson and Kessel 1989). The Marbled Godwit is listed as a species of high concern within the U.S. and Alaska Shorebird Conservation Plans. This ranking reflects a declining population and threats on breeding and nonbreeding areas.

Buff-breasted Sandpiper: The regional importance of this species is based on the high proportion of breeding birds in the State and the marked decline in the population, which is now thought to number less than 15,000 birds (Lanctot and Laredo 1994, R. Lanctot, pers. comm.). The Buff-breasted Sandpiper is listed as a species of high concern within the U.S. and Alaska Shorebird Conservation Plans. This ranking reflects a declining and extremely low population size, threats on nonbreeding areas, and a restricted nonbreeding range.

Whimbrel: The Whimbrel is of primary importance in the Alaska Region because the majority of a subspecies ( Numenius phaeopus rufiventris ) breeds in Alaska (Gibson and Kessel 1997; Engelmoer and Roselaar 1998). The species population is estimated at about 60,000 birds, of which as many as 40,000 occur in Alaska. The Whimbrel is listed as a species of high concern within the U.S. and Alaska Shorebird Conservation Plans. This ranking reflects a declining and low population size. The Service's determination is based primarily on the fact that this species overlaps the distribution of the Bristle-thighed Curlew and we believe it will be difficult, if not impossible, for subsistence hunters to distinguish between the 2 species.

Harvest of these 9 species will not be authorized in 2003. Harvest will be allowed on the other 15 species of birds listed in the proposed rule as being of conservation concern, as well as 2 species recommended by the State of Alaska, the Northern Hawk-owl and Wandering Tattler. However, these species will be given additional consideration by Co-management Council for over the coming year. We intend the Co-management Council to focus its attention on determining the importance of the harvest of these species for subsistence purposes, as well as any information on status that would be useful in future deliberations. In the case of the Bar-tailed Godwit, which we understand is an important species in the subsistence harvest, we are concerned about incidental take of 2 similar species-Hudsonian and Marbled Godwits-for which no harvest will be authorized. The Co-management Council should address actions that have, or can be, taken to minimize incidental take of the Hudsonian and Marbled godwits in the event that the Bar-tailed Godwit remains on the list submitted to the Service for consideration of subsistence harvest in future years.

One commenter from the North Slope requested that the season for the Northern Unit should be amended to include a specific season for king and common eiders: open April 2-June 6, and July 7—August 31, and closed June 7—July 6. This change will allow for customary and traditional eider harvest practices.

Service Response: We concur with this request and have added this season under § 92.33 (g)(2) in the Final Rule.

One respondent recommended the following changes in the regulations: Aleutian/Pribilofs Region, Section (2): clarify that Unalaska is included in the Central Unit ( e.g. , “* * * to and including Unalaska”). Section (3): clarify that Attu is in the Western Unit.

Service Response: We have not made the requested changes regarding geographical boundaries. These regulations do not have distinct geographic boundaries for harvest areas, but instead define included community subsistence harvest areas. For example, the village of Nuiqsut could hunt on both sides of the Colville River; however if its members hunt as far east as the Arctic National Wildlife Refuge, it would have to follow the Eastern Unit season dates.

One commenter representing a Yukon-Kuskokwim village suggested that the nesting closure period for the Yukon-Kuskokwim region be simplified to parallel the Bristol Bay region: June 15-July 15.

Service Response: The Co-management Council struggled to set up a flexible system to adjust the dates of the 30-day harvest closure around annual seasonal variations, to be determined by the Alaska Regional Director or his designee, after consultation with local subsistence users and the region's Waterfowl Conservation Committee. Simplifying the closure dates to those requested would eliminate the flexibility and local consultation benefits of the current regulations.

We derive our authority to issue these regulations from the four migratory bird treaties with Canada, Mexico, Japan, and Russia, and from the Migratory Bird Treaty Act of 1918 (16 U.S.C. 703 et seq. ), which implements these treaties. Specifically, these regulations are issued pursuant to 16 U.S.C. 712 (1), which authorizes the Secretary of the Interior, in accordance with these four treaties, to “issue such regulations as may be necessary to assure that the taking of migratory birds and the collection of their eggs, by the indigenous inhabitants of the State of Alaska, shall be permitted for their own nutritional and other essential needs, as determined by the Secretary of the Interior, during seasons established so as to provide for the preservation and maintenance of stocks of migratory birds.”

Under the Administrative Procedure Act, our normal practice is to publish rules with a 30-day delay in effective date. But in this case, we are using the “good cause” exemption under 5 U.S.C. 553 (d)(3) to make this rule effective immediately upon publication in order to ensure conservation of the resource for the upcoming spring/summer subsistence harvest. The rule needs to be made effective immediately for the following reason. The Service Regulations Committee approved the April 2, 2003, harvest start date at a phone conference on March 31, 2003, and publication of this rule well after April 2 has delayed the actual commencement of the legal harvest season. We need to open the harvest as close as possible to the original agreed-upon date. The expediency of the publication of this first set of annual regulations will ensure prompt follow-through on the process to start the first legally recognized spring/summer subsistence migratory bird harvest season in Alaska.

The Office of Management and Budget (OMB) has determined that this document is not a significant rule subject to OMB review under Executive Order 12866.

a. This rule will not have an annual economic effect of $100 million or adversely affect an economic sector, productivity, jobs, the environment, or other units of government. A cost-benefit and economic analysis is not required. This rule is administrative, technical, and procedural in nature, establishing the procedures for implementing spring and summer subsistence harvest of migratory birds as provided for in the amended Canada and Mexican Treaties. The rule does not provide for new or additional hunting opportunities and therefore will have minimal economic or environmental impact.

This rule benefits those participants who engage in the subsistence harvest of migratory birds in Alaska in two identifiable ways: First, participants receive the consumptive value of the birds harvested, and second, participants get the cultural benefit associated with the maintenance of a subsistence economy and way of life. The Service can estimate the consumptive value for birds harvested under this rule but does not have a dollar value for the cultural benefit of maintaining a subsistence economy and way of life.

The economic value derived from the consumption of the harvested migratory birds has been estimated using the results of a paper by Robert J. Wolfe titled “Subsistence Food Harvests in Rural Alaska, and Food Safety Issues” (August 13, 1996). Using data from Wolfe's paper and applying it to the areas that will be included in this process, a maximum economic value of $6 million is determined. This is the estimated economic benefit of the consumptive part of this rule for participants in subsistence hunting. The cultural benefits of maintaining a subsistence economy and way of life can be of considerable value to the participants, and these benefits are not included in this figure.

b. This rule will not create inconsistencies with other agencies' actions. We are the Federal agency responsible for the management of migratory birds, coordinating with the State of Alaska's Department of Fish and Game on management programs within Alaska. The State of Alaska is a member of the Alaska Migratory Bird Co-management Council.

c. This rule will not materially affect entitlements, grants, user fees, loan programs, or the rights and obligations of their recipients. The rule does not affect entitlement programs.

d. This rule will not raise novel legal or policy issues. The subsistence harvest regulations will go through the same National regulatory process as the existing migratory bird hunting regulations in 50 CFR part 20.

The Department of the Interior certifies that this rule will not have a significant economic effect on a substantial number of small entities as defined under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). A regulatory flexibility analysis is not required. Accordingly, a Small Entity Compliance Guide is not required. The rule legalizes a pre-existing subsistence activity, and the resources harvested will be consumed by the harvesters or persons within their local community.

This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act, as discussed in the Executive Order 12866 section above.

a. This rule does not have an annual effect on the economy of $100 million or more. It will legalize and regulate a traditional subsistence activity. It will not result in a substantial increase in subsistence harvest or a significant change in harvesting patterns.

The commodities being regulated under this rule are migratory birds. This rule deals with legalizing the subsistence harvest of migratory birds and, as such, does not involve commodities traded in the marketplace. A small economic benefit from this rule derives from the sale of equipment and ammunition to carry out subsistence hunting. Most, if not all, businesses that sell hunting equipment in rural Alaska would qualify as small businesses. The Service has no reason to believe that this rule will lead to a disproportionate distribution of benefits.

b. This rule will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions. This rule does not deal with traded commodities and, therefore, does not have an impact on prices for consumers.

c. This rule does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. This rule deals with the harvesting of wildlife for personal consumption. It does not regulate the marketplace in any way to generate effects on the economy or the ability of businesses to compete.

We have determined and certify pursuant to the Unfunded Mandates Reform Act (2 U.S.C. 1501 et seq. ) that this rule will not impose a cost of $100 million or more in any given year on local, State, or tribal governments or private entities. A statement containing the information required by this Act is therefore not necessary.

Participation on regional management bodies and the Co-management Council will require travel expenses for some Alaska Native organizations and local governments. In addition they will assume some expenses related to coordinating involvement of village councils in the regulatory process. Total coordination and travel expenses for all Alaska Native organizations are estimated to be less than $300,000 per year. In the Notice of Decision, 65 FR 16405, March 28, 2000, we identified 12 partner organizations to be responsible for administering the regional programs. When possible, we will make annual grant agreements available to the partner organizations to help offset their expenses. The Alaska Department of Fish and Game will incur expenses for travel to the Co-management Council meetings and to meetings of the regional management bodies. In addition, the State of Alaska will be required to provide technical staff support to each of the regional management bodies and to the Co-management Council. Expenses for the State's involvement may exceed $100,000 per year, but should not exceed $150,000 per year.

This rule has been examined under the Paperwork Reduction Act of 1995 and has been found to contain no information collection requirements. We are, however, beginning the process to request OMB approval of associated voluntary annual household surveys used to determine levels of subsistence take. In the March 3, 2003, Federal Register , we published a notice of intent to submit the Alaska Subsistence Harvest Survey Information Collection Forms to OMB for approval (68 FR 10024) under the Paperwork Reduction Act, with a 60-day public comment period. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.

As discussed in the Executive Order 12866 and Unfunded Mandates Reform Act sections above, this rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment under Executive Order 13132. We worked with the State of Alaska on development of these regulations.

In accordance with Executive Order 12988, the Office of the Solicitor has determined that the rule does not unduly burden the judicial system and that it meets the requirements of section 3 of the Order.

This rule is not specific to particular land ownership, but applies to the harvesting of migratory bird resources throughout Alaska. Therefore, in accordance with Executive Order 12630, this rule does not have significant takings implications.

In accordance with the President's memorandum of April 29, 1994, “Government-to-Government Relations With Native American Tribal Governments” (59 FR 22951), and Executive Order 13175, 65 FR 67249 (November 6, 2000), concerning consultation and coordination with Indian Tribal Governments, we have consulted with Alaska tribes, evaluated the rule for possible effects on tribes or trust resources and have determined that there are no significant effects. This rule establishes procedures by which the individual tribes in Alaska will be able to become significantly involved in the annual regulatory process for spring and summer subsistence harvesting of migratory birds and their eggs. The rule will legalize the subsistence harvest for tribal members, as well as for other indigenous inhabitants.

Section 7 of the Endangered Species Act, as amended (16 U.S.C. 1531-1543; 87 Stat. 884), provides that, “The Secretary shall review other programs administered by him and utilize such programs in furtherance of the purposes of the Act” (and) shall “insure that any action authorized, funded, or carried out * * * is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of [critical] habitat * * *” Consequently, we conducted formal consultations to ensure that actions resulting from these regulations would not likely jeopardize the continued existence of endangered or threatened species or result in the destruction or adverse modification of their critical habitat. Findings from these consultations are included in a biological opinion that concluded that the regulations are not likely to adversely affect any endangered or threatened species. Additionally, these findings may have caused modification of some regulatory measures previously proposed, and the final rule reflects such modifications. Our biological opinions resulting from the section 7 consultation are public documents available for public inspection at the address indicated under the caption ADDRESSES.

The annual regulations and options were considered in the Environmental Assessment, “Managing Migratory Bird Subsistence Hunting in Alaska: Hunting Regulations for the First Legal Spring/Summer Harvest in 2003” issued August 7, 2002, modified, with a Finding of No Significant Impact issued May 7, 2003. Copies are available from the address indicated under the caption ADDRESSES.

On May 18, 2001, the President issued Executive Order 13211 on 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 rule only allows for traditional subsistence harvest and improves conservation of migratory birds by allowing effective regulation of this harvest, it is not a significant regulatory action under Executive Order 12866. Consequently it is not expected to significantly affect energy supplies, distribution, and use. Therefore, this action is a not significant energy action under Executive Order 13211 and no Statement of Energy Effects is required.

NMFS manages the groundfish fishery in the BSAI exclusive economic zone according to the Fishery Management Plan for the Groundfish Fishery of the Bering Sea and Aleutian Islands Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

The 2003 TAC of Pacific ocean perch for the Western Aleutian District was established as 5,411 metric tons (mt) by the final 2003 harvest specifications for groundfish in the BSAI (68 FR 9907, March 3, 2003).

In accordance with § 679.20(d)(1)(i), the Administrator, Alaska Region, NMFS (Regional Administrator), has determined that the 2003 TAC for Pacific ocean perch in the Western Aleutian District will be reached. Therefore, the Regional Administrator is establishing a directed fishing allowance of 5,111 mt, and is setting aside the remaining 300 mt as bycatch to support other anticipated groundfish fisheries. In accordance with § 679.20(d)(1)(iii), the Regional Administrator finds that this directed fishing allowance will soon be reached. Consequently, NMFS is prohibiting directed fishing for Pacific ocean perch in the Western Aleutian District of the BSAI.

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is contrary to the public interest. This requirement is contrary to the public interest as it would delay the closure of the fishery, lead to exceeding the 2003 TAC for Pacific ocean perch in the Western Aleutian District, and therefore reduce the public's ability to use and enjoy the fishery resource.

The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.

This action is required by § 679.20 and is exempt from review under Executive Order 12866.