This administrative action is governed by the provisions of Sections 556 and 557 of Title 5 of the United States Code and, therefore, is excluded from the requirements of Executive Order 12866.

These amendments to the rules proposed herein have been reviewed under Executive Order 12988, Civil Justice Reform. They are not intended to have a retroactive effect. If adopted, the amendments would not preempt any state or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

The Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), 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 request modification or exemption from such order by filing 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 the law. A handler is afforded the opportunity for a hearing on the petition. After a hearing, the Department 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 its principal place of business, has jurisdiction in equity to review the Department's ruling on the petition, provided a bill in equity is filed not later than 20 days after the date of the entry of the ruling.

In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the Agricultural Marketing Service has considered the economic impact of this action on small entities and has certified that this proposed rule will not have a significant economic impact on a substantial number of small entities. For the purpose of the Regulatory Flexibility Act, a dairy farm is considered a “small business” if it has an annual gross revenue of less than $750,000, and a dairy products manufacturer is a “small business” if it has fewer than 500 employees.

For the purposes of determining which dairy farms are “small businesses,” the $750,000 per year criterion was used to establish a production guideline of 500,000 pounds per month. Although this guideline does not factor in additional monies that may be received by dairy producers, it should be an inclusive standard for most “small” dairy farmers. For purposes of determining a handler's size, if the plant is part of a larger company operating multiple plants that collectively exceed the 500-employee limit, the plant will be considered a large business even if the local plant has fewer than 500 employees.

In the Western Federal milk order, 551 of the 791 dairy producers (farmers), or almost 70 percent, whose milk was pooled under the order at the time of the hearing, April 2002, would meet the definition of small businesses. On the processing side, 5 of the 12 milk plants associated with the Western milk order during April 2002 would qualify as “small businesses,” constituting about 42 percent of the total.

In the Pacific Northwest Federal milk order, 805 of the 1,164 dairy producers (farmers), or about 69 percent, whose milk was pooled under the Pacific Northwest Federal milk order at the time of the hearing, April 2002, would meet the definition of small businesses. On the processing side, 9 of the 20 milk plants associated with the Pacific Northwest milk order during April 2002, would qualify as “small businesses,” constituting about 45 percent of the total.

Based on these criteria, more than 69 percent of the producers in both orders would be considered as small businesses. The adoption of the proposed pooling standards serves to revise established criteria that determine those producers, producer milk, and plants that have a reasonable association with, and are consistently serving the fluid needs of the Pacific Northwest and Western milk marketing area and are not associated with other marketwide pools concerning the same milk. Criteria for pooling are established on the basis of performance levels that are considered adequate to meet the Class I fluid needs and, by doing so, determine those that are eligible to share in the revenue that arises from the classified pricing of milk. Criteria for pooling are established without regard to the size of any dairy industry organization or entity. The established criteria are applied in an identical fashion to both large and small businesses and do not have any different economic impact on small entities as opposed to large entities. Therefore, the proposed amendments will not have a significant economic impact on a substantial number of small entities.

A review of reporting requirements was completed under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). It was determined that these proposed amendments would have no impact on reporting, recordkeeping, or other compliance requirements because they would remain identical to the current requirements. No new forms are proposed and no additional reporting requirements would be necessary.

This notice does not require additional information collection that requires clearance by the Office of Management and Budget (OMB) beyond currently approved information collection. The primary sources of data used to complete the forms are routinely used in most business transactions. Forms require only a minimal amount of information which can be supplied without data processing equipment or a trained statistical staff. Thus, the information collection and reporting burden is relatively small. Requiring the same reports for all handlers does not significantly disadvantage any handler that is smaller than the industry average.

Interested parties are invited to submit comments on the probable regulatory and informational impact of this proposed rule on small entities. Also, parties may suggest modifications of this proposal for the purpose of tailoring their applicability to small businesses.

Prior documents in this proceeding:

Notice of Hearing: Issued February 26, 2002; published March 4, 2002 (67 FR 9622).

Correction of Notice of Hearing: Issued March 14, 2002; published March 19, 2002 (67 FR 12488).

Notice is hereby given of the filing with the Hearing Clerk of this tentative final decision with respect to proposed amendments to the tentative marketing agreements and the orders regulating the handling of milk in the Pacific Northwest and Western marketing areas. This notice is issued pursuant to the provisions of the Agricultural Marketing Agreement Act and the applicable rules of practice and procedure governing the formulation of marketing agreements and marketing orders (7 CFR Part 900).

Interested parties may file written exceptions to this decision with the Hearing Clerk, U.S. Department of Agriculture, Room 1083-STOP 9200, 1400 Independence Avenue, SW, Washington, DC 20250-9200, by the October 17, 2003. Six (6) copies of the exceptions should be filed. All written submissions made pursuant to this notice will be made available for public inspection at the office of the Hearing Clerk during regular business hours (7 CFR 1.27(b)).

The hearing notice specifically invited interested persons to present evidence concerning the probable regulatory and informational impact of the proposals on small businesses. While no evidence was received that specifically addressed these issues, some of the evidence encompassed entities of various sizes.

The proposed amendments set forth below are based on the record of a public hearing held at Salt Lake City, Utah, on April 16-19, 2002, pursuant to a notice of hearing issued February 26, 2002, and published March 4, 2002, (67 FR 9622) and a correction of notice of hearing issued March 14, 2002, and published March 19, 2002 (67 FR 12488).

The material issues on the record of the hearing relate to:

1. Simultaneous pooling of milk on a Federal and a State-operated milk order.

2. Pooling Standards of the Western Order.

a. Supply plant performance standards.

b. Cooperative supply plant performance standards.

c. Standards for Producer milk.

d. Proprietary bulk tank handler provision.

e. Establishing pooling standards for “State-units.”

3. Marketwide Service Payments.

4. Pooling provision clarifications.

5. Determining whether emergency marketing conditions exist that would warrant the omission of a recommended decision and the opportunity to file written exceptions.

The following findings and conclusions on the material issues are based on evidence presented at the hearing and the record thereof:

Two proposals, published in the hearing notice as Proposals 1 and 10, seeking to exclude the same milk from being simultaneously pooled on the Pacific Northwest and Western orders and any State-operated order which provides for marketwide pooling, should be adopted immediately. The practice of pooling milk on a Federal order and simultaneously pooling the same milk on a State-operated order has come to be referred to as “double dipping”. The Pacific Northwest and Western orders do not currently prohibit milk to be simultaneously pooled on the order and a State-operated order that provides for marketwide pooling. Proposals 1 and 10 were offered by Northwest Dairy Association (NDA), a cooperative association that markets the milk of their dairy-farmer members in the Pacific Northwest and Western milk marketing areas.

A witness appearing on behalf of NDA, testified that double dipping not only creates disorderly conditions in California, it also results in competitive inequities in Federal milk order areas. The NDA witness explained that once minimal pool qualification standards are met, milk pooled via this manner rarely is delivered to a Federal order marketing area.

The NDA witness provided evidence indicating that in 2001, over $4.5 million was diverted from the Western Order pool and the producer blend price was reduced by an average of 10 cents per hundredweight (cwt) through double dipping. The witness was of the opinion that milk pooled through double dipping provided no service or delivery of milk from California yet the California milk receives the benefit of the Western order's blend price.

The NDA witness testified that there was no evidence of double dipping presently occurring on the Pacific Northwest order. However, the witness was of the opinion that the Pacific Northwest order would be targeted. The witness drew this conclusion on the premise that as soon as the double dipping loophole is closed in other orders, California milk will be pooled on orders that do not yet prohibit the practice.

Two witnesses, one representing Gossner Foods, Inc. (Gossner), an ultra high temperature (UHT) fluid milk processor located in Utah, and the second, Utah Dairymen's Association (UDA), a cooperative located in Utah, also provided testimony in support of Proposal 10. The witnesses concurred that by eliminating double dipping, producers pooled on the order would benefit financially and enhance their ability to stay in business.

A witness representing River Valley Milk Producers Inc. (River Valley), a dairy farmer cooperative located in Southwestern Idaho, testified in support of eliminating double dipping. The witness was of the opinion that producers from outside of the marketing area should meet pooling standards by demonstrating actual performance in supplying the Western marketing area as a condition for pooling their milk and receiving the blend price. However, the witness stressed that producer milk which already participates in a State marketwide pool should be prohibited from participating in a Federal order pool.

The Commissioner of the Utah Department of Agriculture and Food testified in support of eliminating double dipping on the Western milk order. The witness testified that increasing volumes of California milk are diluting the Class I utilization of the market and lowering the blend price paid to producers. The witness found this to be patently unfair and stressed that double dipping lowers the income of Utah dairy farmers.

Three dairy farmers from Utah testified in support of prohibiting double dipping. These witnesses stated that double dipping on the Western order has had a significant negative impact on their pay prices. They maintained that it is unfair and wrong for dairy farmers to have their milk price reduced as a result of California milk being pooled on the order. One dairy farmer witness also added that the loose pooling provisions of the Western Order have resulted in unwarranted financial gain to those who do not supply the Class I milk market of the Western marketing area. This witness indicated that this contributed to the financial ruin of a quarter of Western Order dairy farmers over the past four years.

There was no direct opposition to eliminating or preventing double dipping. However, a witness testifying on behalf of the Dairy Farmers of America (DFA), a dairy farmer cooperative that markets the milk of their members in both orders and in most other Federal milk orders offered their own proposals. These proposals were published in the hearing notice as Proposals 2, 3, 4, 5, 6, 7, 8, and 9, and are offered, said the witness, to address broader pooling standards and concerns rather than focusing on the single pooling issue of double dipping. These proposals are discussed later in this decision.

For nearly 70 years, the Federal government has operated the milk marketing order program. The law authorizing the use of milk marketing orders, the Agricultural Marketing Agreement Act of 1937 (AMAA), as amended, provides authority for milk marketing orders as an instrument which dairy farmers may voluntarily opt to use to achieve objectives consistent with the AMAA and that are in the public interest. An objective of the AMAA, as it relates to milk, was the stabilization of market conditions in the dairy industry. The declaration of the AMAA is specific: “the disruption of the orderly exchange of commodities in interstate commerce impairs the purchasing power of farmers and destroys the value of agricultural assets which support the national credit structure and that these conditions affect transactions in agricultural commodities with a national public interest, and burden and obstruct the normal channels of interstate commerce.”

The AMAA provides authority for employing several methods to achieve more stable marketing conditions. Among these is classified pricing which entails pricing milk according to its use by charging processors differing prices on the basis of form and use. In addition, the AMAA provides for specifying when and how processors are to account for and make payments to dairy farmers. Plus, the AMAA requires that milk prices established by an order be uniform to all processors and that the price charged can be adjusted by, among other things, the location at which milk is delivered by producers (Section 608c(5)).

As these features and constraints provided for in the AMAA were employed in establishing prices under Federal milk orders, some important market stabilization goals were achieved. The most often recognized goal was the near elimination of ruinous pricing practices of handlers competing with each other on the basis of the price they paid dairy farmers for milk and in price concessions made by dairy farmers. The need for processors to compete with each other on the price they paid for milk was significantly reduced because all processors are charged the same minimum amount for milk, and processors had assurance that their competitors were paying the same value-adjusted minimum price.

The AMAA also authorizes the establishment of uniform prices to producers as a method to achieve stable marketing conditions. Marketwide pooling has been adopted in all Federal orders because of its superior features of providing equity to both processors and producers, thereby helping to prevent disorderly marketing conditions. A marketwide pool, using the mechanism of a producer settlement fund to equalize on the use-value of milk pooled on an order, meets that objective of the AMAA of ensuring uniform prices to producers supplying a market.

The California State milk order program clearly has objectives similar to those of the AMAA. Exhibits presented at the hearing indicate that the California State order program has a long history in the development and evolution of a classified pricing plan and in providing equity in pricing to handlers and producers. Important as classified pricing has been in setting minimum prices, the issue of equitable returns to producers for milk could not be satisfied by only the use of a classified pricing plan. Some California plants had higher Class I fluid milk use than did others and some plants processed little or no fluid milk products. As with the Federal order system, producers who were fortunate enough to be located nearer Class I processors had been receiving a much larger return for their milk than producers shipping to plants with lower Class I use or to plants whose main business was the manufacturing of dairy products. Over time, disparate price differences grew between producers located in the same production area of the state which, in turn, led to disorderly marketing conditions and practices. These included producers who became increasingly willing to make price concessions with handlers by accepting lower prices and in paying higher charges for services such as hauling. Contracts between producers and handlers were the norm, but the contracts were not long-term (rarely more than a single month) and could not provide a stable marketing relationship from which the dairy farmers could plan their operations.

In 1967, the California State legislature passed and enacted the Gonsalves Milk Pooling Act. The law provided the authority for the California Agriculture Secretary to develop and implement a pooling plan, which was implemented in 1968. The California pooling plan provides for the operation of a State-wide pool for all milk that is produced in the State and delivered to California pool plants. It uses an equalization fund that equalizes prices among all handlers and sets minimum prices to be paid to all producers pooled on the State order. While the pooling plan details vary somewhat from pooling details under the Federal order program, the California pooling objectives are basically identical to those of the Federal program.

It is clear from this review of the Federal and California State programs that the orderly marketing of milk is intended in both systems. Both plans provide a stable marketing relationship between handlers and dairy farmers and both serve the public interest. It would be incorrect to conclude that the Federal and California milk order programs have differing purposes when the means, mechanisms, and goals are so nearly identical. In fact, the Federal order program has precedent in recognizing that the California State milk order program has marketwide pooling. Under milk order provisions in effect prior to milk order reform, and under § 1000.76(c), a provision currently applicable to all Federal milk marketing orders, the Department has consistently recognized California as a State government program with marketwide pooling.

Since the 1960's the Federal milk order program recognized the harm and disorder that resulted to both producers and handlers when the same milk of a producer was simultaneously pooled on more than one Federal order. When this occurs, producers do not receive uniform minimum prices, and handlers receive unfair competitive advantages. The need to prevent “double pooling” became critically important as distribution areas expanded and orders merged. The issue of California milk, already pooled under its State-operated program and able to simultaneously be pooled under a Federal order, has essentially the same undesirable outcomes that Federal orders once experienced and subsequently corrected. It is clear that the Pacific Northwest and Western orders should be amended to prevent the ability of milk to be pooled on more than one order when both orders employ marketwide pooling.

There are other State-operated milk order programs that provide for marketwide pooling. For example, New York operates a milk order program for the western region of that State. A key feature explaining why this State-operated program has operated for years alongside the Federal milk order program is the exclusion of milk from the State pool when the same milk is already pooled under a Federal order. Because of the impossibility of the same milk being pooled simultaneously, the Federal order program has had no reason to specifically address double dipping or double pooling issues, the disorderly marketing conditions that arise from such practice, or the primacy of one regulatory program over another. The other states with marketwide pooling similarly do not double-pool Federal order milk.

The record testimony and evidence show milk pooled on the Western order originates from locations distant from the area. However, this decision acknowledges that with the advent of the economic incentives for California milk to be pooled on the Western order and, at the same time, enjoy the benefits of being pooled under California's State-operated milk order program, more milk has come to be pooled on the order that has no legitimate association with the integral milk supplies of Western order pool plants. The association at present has been made possible only through what some market participants describe as a regulatory loophole. The record also supports concluding that the Pacific Northwest order should be similarly amended to preclude the ability to simultaneously pool the same milk on the order if the same milk is already pooled on a State-operated order that provides for marketwide pooling.

California milk should only be eligible for pooling on the Pacific Northwest and Western orders when it is not pooled on the California State order and when it meets the Pacific Northwest and Western order pooling standards. It is the ability of milk from California to “double dip” that is a source of disorderly marketing conditions for the Western order and should be preempted in the case of the Pacific Northwest order.

Proposals 1 and 10 offer a reasonable solution for prohibiting the same milk to draw pool funds from Federal and State marketwide pools simultaneously. It is consistent with the current prohibition against the same milk pooling simultaneously in more than one Federal order pool. Adoption of Proposals 1 and 10 will not establish any barrier to the pooling of milk from any source that actually demonstrates performance in supplying the Pacific Northwest and Western market's Class I needs. In this regard, adoption of Proposals 1 and 10 specifically prohibit the practice of double dipping which two other proposals (Proposals 2 and 9), discussed below, do not.

The amendatory language provided below has been modified by the Department but nevertheless accomplishes the intent of Proposals 1 and 10. As published in the hearing notice, amendatory language was proposed for the Producer definition of the Pacific Northwest and Western milk orders. The amendments adopted in this tentative decision to prohibit double dipping has been made in each respective order's Producer milk definition. This change is made because milk marketing orders do not regulate producers in their capacity as producers. Additionally, the amendatory language adopted is consistent with that adopted in other milk orders where the practice of double dipping has been eliminated.

Testimony summaries regarding the pooling standards for the Western order are provided individually. The discussion of all pooling standards and the decision's findings and conclusions regarding pooling standards is presented immediately after testimony summary for d below.

An inadequacy of the supply plant pooling provision contributes to the inappropriate pooling of milk and the unwarranted erosion of the blend price received by those producers who are regularly and consistently serving the fluid demands of the Western marketing area. Proposal 3, offered by DFA, seeking adoption of a “net shipments” standard for supply plant deliveries to the order's distributing plants for the purpose of meeting the shipping standard, should be adopted immediately. A net shipments standard would exclude from a supply plant's qualifying shipments any transfer or diversion of bulk fluid milk products made by the distributing plant receiving the shipment.

The Western marketing order currently provides automatic pool plant status during the 6-month period of March through August for supply plants provided they were pool plants during each of the immediately preceding months of September through February. The current order does not provide for a net shipments method in determining if the supply plant performance standard has been met.

A witness appearing on behalf of DFA testified that a net shipments provision for pooling purposes would better ensure that milk physically received and retained at a distributing plant for Class I use would be a superior method of determining if the supply plant performance standard is being met. According to the witness, this feature would deter a supply plant from physically shipping milk into the facilities of a distributing plant only to have the milk reloaded and moved to another plant for uses other than Class I. The witness added that a net shipments provision also would ensure that milk being pooled was demonstrating a service in meeting the Class I needs of the market.

A witness appearing on behalf of NDA testified in opposition to adopting Proposal 3. The witness was of the opinion that the net shipments provision for supply plants was designed and intended to reduce the amount of milk that could be pooled on the Western order. The witness explained that no other Federal milk order contained a net shipments provision because pool supply plants and other reserve plants provide a benefit by balancing the needs of the fluid market and pooling milk in a way that prevent disorderly marketing conditions from arising.

A witness representing Gossner opposed the establishment of a net shipment provision for the Western order. Additionally a witness representing Glanbia Foods, Inc. (Glanbia), and another witness representing Davisco Foods International (Davisco), offered testimony in opposition to the adoption of a net shipments provision for the Western order. Glanbia is a handler that operates two cheese plants located in the Western marketing area, and Davisco is a handler that operates proprietary cheese plants located in Idaho and in Minnesota. The Glanbia witness testified that a net shipments provision would preclude many producers located in Idaho from being pooled on the Western order when their milk is not needed for fluid use even though it is available and stands ready and able to supply the Class I needs of the marketing area. The Gossner witness indicated that market alternatives for pooling milk within the Western region were already very limited and the adoption of this proposal could entirely eliminate them. The Davisco witness testified that a net shipments provision would limit their ability to pool their producers and viewed this as essentially erecting barriers to market entry on the Western order.

A witness representing KDK, Inc. (KDK), a fluid processing plant located in Draper, Utah, also presented testimony in opposition to adopting a net shipments provision. The witness indicated that their plant transfers milk to exempt plants and, on occasion, to producer-handlers. The witness was of the opinion that adoption of a net shipments provision would result in milk currently associated with their plant no longer being able to be pooled because their supplier would be unable to meet the shipping standard.

A proposal, published in the hearing notice as Proposal 4, seeking to increase the cooperative supply plant pooling standard should not be adopted. Proposal 4, offered by DFA, seeks to increase the cooperative supply plant performance standard that specifies the percentage of cooperative producer milk that needs to be physically received by a distributing plant of the Western order to 50 percent in order for the cooperative supply plant to qualify as a pool plant of the order.

The Western order currently provides for a cooperative association that operates a plant as a unique type of supply plant. The cooperative association's plant must be located within the marketing area and at least 35 percent of the milk which the cooperative association handles is physically received at a Western order distributing plant during the month or the immediately preceding 12-month period.

In offering Proposal 4, the DFA witness testified that while no plants currently utilize the cooperative supply plant provision, some cooperatively-owned manufacturing plants may seek such status if DFA's other proposal to decrease the diversion limit standard, (discussed later in this decision) is adopted. The witness maintained that increasing the cooperative supply plant shipping standard is intended to ensure that plants opting for this type of pool plant status would be demonstrating adequate performance in supplying the Class I needs of the Western marketing area.

Opposition to Proposal 4 was offered by witnesses representing Glanbia, Gossner, and Davisco. The Glanbia witness was of the opinion that the proposal was designed to prevent market entry and participation by dairy farmers who may be attracted to the Western market. The Gossner witness stated that producers should have as many options as possible in marketing their milk because it brings about increased competition and may also bring better milk prices. The Davisco witness asserted that Proposal 4 would only decrease opportunities for Idaho milk from becoming pooled on the Western order. This would, the witness said, pressure Idaho producers to find other means by which to pool their milk on the Western order.

The NDA witness also testified in opposition to Proposal 4. The witness was of the opinion that increasing the cooperative supply plant performance standard would create competitive inequities and may even create new disorderly marketing conditions. The witness indicated that to be able to utilize the cooperative supply plant provision, Class I sales would need to be increased and to accomplish this, a cooperative would likely need to engage in price cutting tactics to win sales from competitors. The witness predicted that an outcome such as this would be disorderly.

A proposal, published in the hearing notice as Proposal 6, seeking to lower the diversion limit standard for producer milk should not be adopted. This proposal was offered by DFA. Specifically, Proposal 6 seeks to reduce the diversion limit for producer milk to nonpool plants to 70 percent of total receipts. The Western order currently provides a diversion limit standard for producer milk of 90 percent of total milk receipts. The DFA witness was of the opinion that the pooling of milk which does not demonstrate a service in supplying the needs of the Class I market is inconsistent with Federal order policy. Returns to producers who regularly supply the Class I market are unnecessarily reduced when milk is pooled that cannot demonstrate such service, the witness asserted.

The DFA witness also testified that milk which does not actually supply the Class I needs of the market, but shares in the revenue generated from fluid milk sales, is an indicator of faulty pooling provisions. The witness asserted that if the current pooling standards are not amended, local dairy farmers who are actually supplying the local Class I market will continue to receive lower returns.

The DFA witness testified that the Western order's current diversion limit standard of 90 percent is inadequate because it allows milk to be pooled on the order than can not demonstrate a regular and consistent service in meeting the needs of the fluid market. According to the witness, it is appropriate to lower the limit on the amount of producer milk that pool plants can divert to nonpool plants.

The Commissioner of the Utah Department of Agriculture and Food testified in support of Proposal 6. The witness reasoned that by lowering the diversion limit standard, prices paid to Utah dairy farmers would increase. Lowering the diversion limit standard would increase the relative Class I use of milk pooled on the order, explained the witness. It would also allow Utah family dairy farms to compete fairly, and be compensated more equitably for the service they provide, the witness said. If the diversion limit standard is not lowered, cautioned the witness, dairy farms in Utah will continue to be endangered and result in harming Utah's rural communities.

A witness representing UDA, testified in support of Proposal 6. This witness stated that reducing the diversion limit standard from 90 to 70 percent would result in similar diversion limit standards in effect in other Federal milk orders such as the Arizona-Las Vegas, Mideast, Appalachian, Central and Southwest orders. The UDA witness added that lowering the diversion limit standard also would remedy some of the financial damage borne by Utah and Idaho milk producers resulting from the reform of Federal milk marketing orders in 2000.

A witness representing River Valley also testified in support of lowering the Western order's diversion limit standard. The witness, however, supported lowering the standard to 80 percent, not the 70 percent proposed by DFA. The witness expressed concern about the consequences of easily pooling large volumes of milk on the Western order. The witness provided evidence showing that the amount of milk pooled on a daily basis increased by more than 5.5 million pounds between October and November 2001—a 58 percent increase. The witness hypothesized that an 80 percent diversion limit would continue to allow handlers the ability to efficiently divert milk to nonpool plants while also providing a smoother regulatory transition for regulated handlers.

Seven Utah dairy farmers provided testimony supporting the lowering of the diversion limit standard. The witnesses were of the opinion that the pooling standards adopted as part of Federal milk order reform created loopholes that have caused some handlers and producers to be financially rewarded without the need to demonstrate actual shipments of milk for the Class I market. As a result, the witnesses said, dairy farmers have observed that their blend price is lower than it otherwise would be. These witness asserted that dairy farmers should not be permitted to collect money from their fellow dairy farmers if they do not demonstrate performance in supplying the fluid needs of the market.

The witness representing Gossner testified in opposition to Proposal 6. The witness was of the opinion that great disruption would occur to their business operation if the diversion limit standard is lowered. The witness explained that a large portion of their Class I sales are contracts with governmental agencies. The contracts they hold are bid annually, the witness said, and the loss of a contract would make it very difficult for them to meet the proposed pooling standards.

The Gossner witness also asserted that DFA holds a virtual monopoly in supplying the Class I market in Utah and Southern Idaho. In this regard, the witness advocated the view that dairy farmers are best served when they have more than one buyer for their milk and that Gossner is trying to provide producers an alternative Class I market for their milk. The witness stated that producers would benefit by maintaining a 90 percent diversion limit standard because it leaves Gossner with the flexibility to add producers for pooling as needed and maintain the flexibility to react to changing marketing conditions.

A witness representing Glanbia also testified against lowering the diversion limit standard. The witness was of the opinion that the proposed change was an unwarranted attempt to disassociate much of Idaho's historically pooled milk supply because it is not needed for fluid use. If diversion limits are decreased, the witness said, a large portion of their producer milk would not be pooled. If a producer wished to remain pooled, the witness explained, they would be forced to join a cooperative whose supply is large enough to meet the proposed standards. If adopted, the witness concluded, the new diversion limit standard would inhibit a producer's ability to choose how to market their milk and remain pooled on the order.

The witness representing Magic Valley Milk Producer Association, Inc. (Magic Valley), testified in opposition to Proposal 6. Magic Valley is a milk marketing cooperative located in Idaho that has producer members in both Idaho and Utah. The witness was of the opinion that adoption of Proposal 6 would severely hinder Magic Valley's ability to pool the milk of their producers thereby placing them at a competitive disadvantage in their ability to market the milk of their members at competitive prices. For example, the witness explained, with the 90 percent diversion limit standard in effect from January 2001 to March 2002, the monthly volume of milk pooled on the order averaged 396,900,356 pounds. If a 70 percent standard had been in effect over that same time period, the witness contrasted, the monthly average volume of milk that could have been pooled would have been 285,410,615 pounds. The witness concluded from this example that on average, about 111,489,741 pounds would no longer have been able to be pooled.

The witness representing Davisco, also testified in opposition to lowering the diversion limit standard. The witness was of the opinion that disorderly marketing in the Western market already exists and attributed the disorder to the pooling standards adopted as part of Federal milk order reform. Since January 1, 2000, the witness emphasized, Davisco had been unable to pool two-thirds of their producers. The witness concluded that their inability to pool all of their producers would be remedied by raising the diversion limit standard to 95 percent or by suspending the diversion limit standard altogether.

The witness representing NDA also testified in opposition to lowering the diversion standard. Not only would there be less milk that could be pooled, the witness noted, but the current Western order already pools far less than the total milk production that occurs within the marketing area. The witness concluded from this observation that lowering the diversion limit standard would only make it more difficult for producers to pool their milk on the order. The witness was of the opinion this would give rise to disorderly marketing conditions in a number of forms including the use of “price incentives” serving to undercut the published Class I price, the potential expansion or creation of new bottling operations which could be used to “raid” the retail market, the “paper-pooling” of milk on other Federal milk orders, and being charged a fee for the benefit of being pooled on the order.

The NDA witness estimated that if Proposal 6 is adopted, approximately 150 million pounds, or about 38 percent of the monthly average volume of milk pooled in 2001 would no longer be pooled. This occurrence, according to the witness, would bring an immediate shift in the balance of economic power within the Western order. This result, together with the forms of disorderly conditions previously described cited above, the witness asserted, also would result in political reaction, Congressional review, and waning political support for the Federal milk order program.

The NDA witness asserted that the practice of buying and selling pooling rights is an important indicator and cause of disorderly marketing conditions. The witness explained that this is because a person selling pooling rights can gain competitive advantages not available to others thus compounding disorderly marketing conditions. Finally, the witness concluded, no justification exists for lowering the diversion limit standard of the Western order, adding that perhaps the standard should be raised.

A proposal, published in the hearing notice as Proposal 7, seeking to establish a “netting” provision for diverted milk from a pool distributing plant by the amount of any transfers out of that plant, should be adopted immediately. This proposal was offered by DFA. The Western order does not currently contain this provision as a feature of how the order defines producer milk.

The DFA witness testified that by adopting a “netting” provision, a distributing plant's ability to divert milk would be based on the actual amount of milk retained by the distributing plant. According to the witness, this feature would deter a plant from physically receiving milk into the facility only to have milk reloaded and moved to another plant for uses other than Class I. The witness added that the provision would ensure that milk being pooled was demonstrating a service in meeting the Class I needs of the market.

Many witnesses testified in opposition to Proposal 7. A witness representing NDA was of the opinion that if adopted, the provision would reduce the ability to pool milk by limiting the ability of a plant to maximize the use of its pooling base. Witnesses representing Davisco, Glanbia, Gossner and Magic Valley all concurred that adoption of DFA's proposal would have a dramatic negative impact on their ability to pool the milk of their producers. The witnesses were all of the opinion that Proposal 7's only real purpose was to prevent many Idaho producers from having their milk pooled on the Western order.

A proposal, published in the hearing notice as Proposal 5, seeking to eliminate the Proprietary bulk tank handler (PBTH) provision of the Western order, should be adopted immediately. The proposal was offered by DFA. The PBTH provision is a pooling provision and feature of only the Western order. It provides for a person who operates a plant that produces Class II, III, and IV milk products, and who operates a truck that picks up the milk of a producer, to be a regulated handler of the order.

According to the DFA witness, PBTH's are able to pool large volumes of milk that do not actually service the Class I market. The witness testified that PBTH milk is received into a plant to qualify it for pooling and is subsequently pumped back out of the plant to be delivered to a manufacturing plant. The witness emphasized that milk pooled through a PBTH in this manner never services the Class I market.

The DFA witness testified, however, that their major concern with the PBTH provision was that some entities are purchasing milk below the order's minimum prices from PBTH's. The witness asserted that this results in inequity among handlers in the minimum prices they pay for milk and undermines the key pricing principle of the Federal milk order system of uniform prices to handlers. The witness testified that in removing the PBTH provision handlers currently using the provision could be able to pool their milk by utilizing other provisions that are contained in the order.

In brief, DFA asserted that the record evidence clearly demonstrated that large volumes of milk are pooled on the order through the PBTH provision, but demonstrates only minimal service to the Class I market. DFA noted that under the current diversion limit standard, a PBTH can pool 20 loads of milk for every one load used in actual Class I production. More importantly, DFA stressed that this one load of milk is sold at less than minimum class prices.

The DFA brief maintained that pooling milk is not an entitlement. Instead, milk must demonstrate actual performance to the Class I market. DFA concluded that because the order contains other provisions that are more performance based through which a PBTH could qualify for pooling, the PBTH provision should be removed.

A witness representing River Valley testified in support of eliminating the PBTH provision. The witness viewed the provision as a loophole in the Western order's pooling provisions that allows manufacturing plants to qualify milk for pooling on the order that does not demonstrate any reasonable service in supplying the Class I needs of the market. The witness asserted that PBTH's have used financial incentives to solicit producers located near distributing plants to become patrons and then use those nearby producers to qualify all the milk of a PBTH. Because the producers were already delivering milk to the distributing plant, the witness emphasized, no actual new milk is being made available to service fluid demand, but the amount of milk that can be pooled is significantly increased. The witness noted that this milk is being used in Class II, III, and IV uses. The witness characterized pooling milk in this way as fostering disorderly marketing conditions which justifies removing the PBTH provision from the Western order.

A witness representing NDA testified in opposition to Proposal 5. The NDA witness said that the PBTH provision is provided as a more efficient way for some handlers to operate their plants. The witness is of the opinion that the goal of Proposal 5 is to make it more difficult for some producers to be pooled. According to the witness, accomplishing this end should not be a reason for its removal from the order. If there are problems with the PBTH provision it should be modified, not eliminated, the witness stressed.

A brief filed by NDA also expressed opposition to removing the PBTH provision. NDA agreed that all pool plants should be accountable to the pool at minimum class prices and that different wholesale prices for milk between handlers can create disorderly marketing conditions. Nevertheless, NDA also held there would be no guarantee that uniformity of pricing between handlers would actually be achieved by eliminating the provision. NDA stressed that it is a handler's need to pool milk that is the catalyst for selling milk below class prices.

Eliminating the PBTH provision would, maintained NDA, agitate the problem and cause handlers to seek other ways to pool milk. Rather than its elimination, the NDA witness advocated modification of the provision to address its shortcomings.

Two witnesses representing Glanbia and Davisco also testified in opposition to Proposal 5. These witnesses stated that if adopted, the proposal would create market disorder and discontent for some Idaho producers who would no longer be able to pool their milk on the Western order. The Davisco witness asserted that Federal order reform adopted performance standards that could not accommodate pooling the milk supply of the consolidated Western order, even though this milk supply stood willing and available to serve the Class I needs of the market. Under the current standards, Davisco is able to pool less than half of the producers they did prior to milk order reform, the witness said. The Davisco witness estimated that if the PBTH provision is removed, they would be able to pool less than 5 percent of their milk supply.

The Davisco witness emphasized that their milk stands ready to supply the Class I market, but is has never been needed for the fluid market. In this regard, the witness was of the opinion that producers should not be penalized by not having the ability to pool their milk simply because it is not needed for Class I use.

The Glanbia witness was of the opinion that eliminating the PBTH provision would inhibit the ability and freedom of dairy farmer to choose how to market their milk. The witness thought this may also force producers to join a cooperative to assure that their milk would be pooled on the order, an outcome consistent with lowering the diversion limit standard. A brief submitted by Glanbia and Davisco continued stressing their opposition to Proposal 5. Their brief maintained, among other things, that elimination of the PBTH provision would prevent many producers, who stand willing to service the Class I market, from being able to pool their milk on the Western order.

A witness representing Stoker Wholesale, Inc., a pool distributing plant located in Idaho, testified against eliminating the PBTH provision. The witness indicated that if adopted, the proposal would jeopardize their ability to remain competitive with other processors in the marketing area. The Stoker witness indicated that their main concern was that the removal of the PBTH provision would allow a dominant cooperative to gain too much market power. In this regard, the witness foreshadowed that Stoker might be forced to purchase milk from a dominant cooperative and along with paying the order's minimum class prices, would also be forced to pay other charges dictated by the cooperative. Such an outcome would be devastating to Stoker and hinder their ability to compete in the Western marketing area, concluded the witness.

Two Idaho dairy farmers testified in opposition to Proposal 5. The farmers were of the opinion that if the PBTH provision was eliminated, farmers would have to pool their milk through a cooperative. One witness testified that this would eliminate the number of outlets available to farmer's to market their milk and put the market's milk supply in the hands of fewer entities. The witness also noted that while the fewer entities controlling the milk supply could raise their prices, it would also result in higher retail costs to consumers. The witnesses were also of the opinion that the low milk prices they are facing arise from complicated economic and political factors and are not caused by dairy farmers having the opportunity to pool their own milk.

A proposal, published in the hearing notice as Proposal 11, seeking to reach a balance of assuring handler equity while retaining the PBTH provision should not be adopted. Proposal 11 was offered by Meadow Gold Dairies (Meadow Gold). Meadow Gold is a dairy processor regulated in the Western order. Because this decision eliminates the PBTH provision from the Western order, amending the provision is rendered moot.

Two companion proposals to Proposal 11, also offered by Meadow Gold, published in the hearing notice as Proposals 12 and 13, should not be adopted. Proposals 12 and 13 offer language for the Western order to address payment obligation changes which would arise from modifying the PBTH provision. Because the PBTH provision is eliminated from the order, the need for these proposals are also rendered moot.

Similarly, another proposal, published in the hearing notice as Proposal 14, offered by the Market Administrator to provide additional clarity to the PBTH definition, is not adopted. The need to provide additional clarity to a provision that is being eliminated is also rendered moot.

A witness representing Meadow Gold viewed Proposals 11 and 13 as a remedy to the alternative to removing the PBTH provision and Proposal 12 as ensuring that pool plants must pay PBTH's at least the order's minimum class prices. According to the Meadow Gold witness, their major concern with the PBTH provision is that plants buying from a PBTH are not required to pay minimum class prices. Proposals 11 and 13 would ensure that milk is considered producer milk at the pool plant and that the pool plant is responsible for accounting to the pool and paying producers, the witness said. This would give the MA authority to verify payment to the Producer-Settlement Fund and to the producers supplying the PBTH, the witness said.

The witness maintained that the AMAA provides authority for the Secretary to ensure that handlers are paying minimum class prices for their milk purchases. The witness indicated that Meadow Gold would not object to removing the PBTH provision if the Department determined that the problems arising from the provision would be more appropriately remedied by its removal from the order.

A witness representing NDA, testified that while NDA understood the current problems regarding the PBTH provision, they had yet to determine their position on Proposals 11 through 13. However, in their post-hearing brief, NDA expressed support of Proposals 11, 12 and 13. They acknowledged that Proposals 11 and 13 are presented as a “package” and viewed Proposal 12 as an alternative. NDA asserted that they had no preference as to which approach should be adopted and expressed confidence in the Department for rendering its decision on how best to address the PBTH issue.

A witness representing DFA testified that while they support evidence presented in support of Proposals 11 through 13, DFA believed that removal of the PBTH provision was a more appropriate course of action.

Witnesses representing Glanbia, Davisco, and Stoker testified in opposition to Proposal 11. The witnesses stated that they could not support this proposal because it would essentially regulate transactions between one type of handler to another while leaving other similar transactions such as bulk transfers, packaged milk transfers, custom bottling, tolling arrangements, and pooling fees untouched. The Davisco witness was also of the opinion that the AMAA does not grant the Secretary authority to regulate handler-to-handler transactions. The Stoker witness opposed Proposals 11 through 13 for the same reasons given in opposing the removal of the PBTH provision.

The witness representing NDA supported Proposal 14, stating that they were of the opinion that the Market Administrator's proposal would assist in the interpretation and administration of the order.

The pooling standards of all milk marketing orders are intended to ensure that an adequate supply of milk is supplied to meet the Class I needs of the market and to provide the criteria for identifying the milk of those producers who are reasonably associated with the market as a condition for receiving the order's blend price. The pooling standards of the Western order are represented in the Pool Plant, Producer, Proprietary bulk tank handler, and the Producer milk provisions of the order. Taken as a whole, these provisions are intended to ensure that an adequate supply of milk is available to meet the Class I needs of the market. In addition, these provisions provide the criteria for identifying those producers whose milk is reasonably associated with the market and thereby share in the marketwide distribution of proceeds arising primarily from Class I sales. Pooling standards of the Western order are based on performance, specifying standards that, if met, qualify a producer, the milk of a producer, or a plant to share in the benefits arising from the classified pricing of milk.

Pooling standards that are performance-based provide the only viable method for determining those eligible to share in the marketwide pool. This is because it is the added value from the Class I use of milk that adds additional income, and it is reasonable to expect that only those producers who consistently bear the costs of supplying the market's fluid needs should be the ones to share in the distribution of pool proceeds. Pooling standards are also needed to identify the milk of those producers who are providing service in meeting the Class I needs of the market. If the pooling provisions do not reasonably accomplish these aims, the proceeds that accrue to the marketwide pool from fluid milk sales are not properly shared with the appropriate producers. The result is the unwarranted lowering of returns to those producers who actually incur the costs of servicing and supplying the fluid needs of the market.

Similarly, pooling standards should provide for those features and accommodations that reflect the needs of proprietary handlers and cooperatives in providing the market with milk and dairy products. When the use of a pooling feature provision deviates from its intended purpose and gives rise to conditions that are contrary to the objectives of classified pricing and marketwide pooling as articulated in the AMAA, it is appropriate to re-examine the need for continuing to provide that feature as a necessary component of the pooling standards of the order. Because one of the objectives of classified pricing is assuring that all similarly situated handlers regulated under the terms of an order pay the same classified use-value, a pooling feature which can be used to circumvent this objective should be considered as inappropriate for inclusion in the order.

The Final Decision of Federal milk order reform examined and discussed the various pooling standards and features of the pre-reform orders for their applicability in new and larger consolidated milk orders. The pooling standards and features adopted for the consolidated Western Order were designed to reflect and retain those standards and features of the pre-reform orders so as not to cause a significant change and indeed to provide for the continued pooling of milk that had been pooled by those market participants.

The record provides evidence to conclude that a performance standard feature for supply plants is needed. Additionally, a pooling feature in defining producer milk is also needed to provide an appropriate limit on diversions by distributing plants. The lack of adequately defining how much milk a distributing plant can divert contributes to the inappropriate pooling of milk through the diversion process. Some milk being pooled under the Western order by diversion is not an integral reserve supply of the distributing plant diverting milk. These inadequacies inappropriately pool milk classified at lower-valued uses which results in an unwarranted lowering of the blend price to those producers whose milk actually and consistently demonstrates service to the Class I needs of the market.

The record evidence also provides strong evidence that the Proprietary bulk tank handler provision gives rise to disorderly marketing conditions because the order is unable to establish minimum prices that are uniform among regulated handlers, a requirement of Section 608c(5) of the AMAA. The record clearly reveals that this pooling feature of the Western order is being used as a means to pool milk that could not otherwise be pooled and allows for the sale of milk for Class I use below the order's minimum Class I price. While this provision served its purpose in the pre-reform Southwest Idaho-Eastern Oregon order, its purpose and usefulness for the larger consolidated Western order can no longer be justified.

This decision finds that some milk is being pooled and is receiving the benefit of the Western order blend price without demonstrating actual and consistent service in supplying the Class I needs of the Western milk marketing area. This finding is attributed to inadequate pooling standard features needed to accomplish the intent of the order's pooling standards. The pooling provisions provided in the Final Decision of milk order reform established pooling standards and pooling features that envisioned the needs of the market participants resulting from the consolidation of two pre-reform milk marketing areas to form the current Western milk marketing area. The milk order reform Final Decision did not intend or envision that the pooling standards and pooling features adopted would result in the sharing of Class I revenues with those persons, or the milk of those persons, who would not be demonstrating a measure of service in fulfilling the Class I needs of the Western marketing area. The reform Final Decision also did not envision that the PBTH provision, carried into the consolidated Western order from the pre-reform Southwestern Idaho-Eastern Oregon order, would enable entities to sell milk for fluid use below the order's minimum Class I price.

The Final Decision of milk order reform examined and discussed various pooling standards and features of the pre-reform orders for applicability in a new, larger consolidated milk order. The pooling standards and features adopted for the Western order were intended to reflect and retain those standards and features of the pre-reform orders so as to not cause a significant change, and indeed to provide for the continued pooling of milk that had been pooled by market participants. The 35 percent shipping standard for supply plants adopted as part of milk order reform was slightly higher than that of the Southwestern Idaho-Eastern Oregon order and was slightly lower than that provided for in the Great Basin order. Nevertheless, the adopted 35 percent standard was intended to result in no milk losing its association in the larger consolidated order due to a change in a regulatory provision.

With regard to producer milk, the Final Decision of milk order reform established a limit for producer milk diversions to nonpool plants at 90 percent. This standard is identical to the diversion limit then applicable in the Southwestern Idaho-Eastern Oregon order, but is higher than the applicable standards of 75 percent for cooperatives and 70 percent for proprietary handlers in the Great Basin order. The 90 percent standard was determined to be appropriate for the consolidated Western order because it would permit all milk then associated with the market that was not needed at pool plants to continue to be pooled and priced under the order. The 90 percent standard was also adopted because it was envisioned that it would provide handlers more flexibility to efficiently move milk and not preclude most producers associated with either the Great Basin or Southwestern Idaho-Eastern Oregon orders from having their milk pooled in the new consolidated order.

This decision agrees with DFA and those who expressed support for adopting Proposals 3 and 7. The record reveals that because the Western order does not account for milk deliveries from supply plants to distributing plants on a net basis, more milk is being pooled on the order through the diversion process than can be considered a integral reserve supply of distributing plants. The act of physically receiving milk certainly demonstrates performance in supplying the fluid needs of the market. However, by pumping the same amount, or some portion of the milk physically received out of a distributing plant for other than Class I use, undermines the intent and importance of the performance standard. In practice, the unloading and reloading of milk creates an artificial base for pooling additional milk that cannot otherwise meet the specified performance standards.

Similarly, a netting provision on producer milk diverted from distributing plants is also needed to properly identify the milk of those producers that actually supply the marketing area's fluid needs. A “net diversions” provision is warranted for inclusion as part of the Producer milk definition of the order because the current diversion limit standard of the order does not properly limit the amount of milk that can be pooled by distributing plants. The diversion limit standard as it relates to supply plants is based on receipts. For supply plants, diverted milk is a component of the total receipts of the plant. For distributing plants, however, the pooling basis is determined by the amount of milk physically received. If a supply plant delivery no longer becomes a pool-qualifying shipment because shipments are determined on a net basis, then that milk should not be considered as physically received by the distributing plant and should therefore not be included as part of the basis for calculating the amount of milk that can be diverted from the distributing plant.

This decision finds that the adoption of Proposals 3 and 7 is warranted. Milk deliveries to distributing plants will be limited to milk transferred or diverted and physically received by distributing pool plants, less any transfers or diversions of bulk fluid milk products from the distributing plant. Relying on net shipments and net diversions for determining pool qualifying deliveries to distributing plants strengthens the principle of performance in supplying the Class I needs of the market as a condition for pooling diverted milk. Determining shipments and diversions on a net basis should also more appropriately identify the milk of those producers that should share in the distribution of Class I revenue by receipt of the order's blend price.

The record evidence does not support increasing the cooperative supply plant performance standard above the current 35 percent of receipts as sought in Proposal 4. The proposal is presented on the assumption that this decision would lower the diversion limit standard to 70 percent, and that in doing so, may cause entities to seek this special pool plant status. This proposal is rejected on the basis that the record does not reveal why this standard should be different from the “regular” supply plant standard. Additionally, speculation of how entities may choose to pool milk on the order is not, in the context of proposing a change in this performance standard, an appropriate basis upon which to make a change.

Providing for the diversion of milk is a desirable and needed feature of an order because it facilitates the orderly and efficient disposition of milk not needed for fluid use. When producer milk is not needed by the market for Class I use, some provision should be made for milk to be diverted to nonpool plants for use in manufactured products and still be pooled and priced under the order. Additionally, it is also necessary to safeguard against excessive milk supplies becoming associated with the market through the diversion process.

In the context of this proceeding, milk diverted by distributing plants is milk not physically received at the plants. While diverted milk is not physically received, it is nevertheless an integral part of the milk supply of the diverting distributing plant. If such milk is not part of the integral supply of the diverting plant, then that milk should not be associated with the diverting plant and should not be pooled. Associating more milk than is actually part of the legitimate reserve supply of the diverting plant unnecessarily reduces the potential blend price paid to dairy farmers who service the market's Class I needs.

Diversion limit standards that are too high can open the door for pooling more milk on the market. The record does not support lowering the diversion limit below the current 90 percent standard. As explained above, the lack of a netting provision for diversions by distributing plants has resulted in the inappropriate pooling of milk on the Western order. In this regard, the record evidence cannot attribute more milk being pooled on the order because the diversion limit standard is too high.

These findings, together with the original intents of the order's pooling provisions, may be altered if marketing conditions warrant their adjustments. In this regard, the Western order provides the Market Administrator with the authority to make needed adjustments to the shipping and diversion limit standards of the order.

Two Proposals, published in the hearing notice as Proposals 2 and 9, seeking to establish pooling units organized and reported as “State-units” in the Pacific Northwest and Western milk orders respectively, should not be adopted. These proposals were offered by DFA. Specifically, the proposals would specify that milk from those States located outside of the States and counties that comprise the Western and Pacific Northwest marketing areas would be reported separately in units, organized by the State from which the milk originates. Each State-unit would need to meet the performance standards applicable for supply plants as a condition for being pooled on the orders. Neither order currently provides separate pooling standards for milk located outside of each respective marketing area.

The DFA witness explained that Proposals 2 and 9 address broader pooling issues by establishing reasonable performance standards for milk located outside of market areas and do not just simply prohibit the practice of double dipping as discussed earlier in this decision. In this regard, the witness indicated that Proposals 2 and 9 are offered to address the pooling of large volumes of milk from locations distant from the Pacific Northwest and Western marketing areas. According to the witness, large volumes of milk are being pooled without meeting any reasonable measures of performance in serving the Class I needs of the market.

The DFA witness testified that since the implementation of milk order reform, organizations like DFA have made purposeful pooling decisions to maximize returns and have engaged in the practice of double dipping to accomplish this end. Nevertheless, the witness acknowledged that the practice of double dipping is unfair and should be corrected. The witness continued to explain that the impact of double dipping on an order's blend price paled in comparison to the blend price impact caused by inadequate pooling provisions that do not properly stress the importance of demonstrating performance in regularly and consistently supplying the Class I needs of a marketing area. Additionally, the witness expressed the opinion that the relationship between the Class I pricing surface and the pooling provisions was fundamentally changed as part of milk order reform. Specifically, the witness noted, the movement to a nationally coordinated Class I pricing structure that makes adjustments to the Class I differential level by county accounts for the changed relationship.

The DFA witness stressed that while the new Class I price structure has a relationship to the blend price paid to producers, the connection between milk value and the distance of milk from the market are not adequately linked. The disconnect is further aggravated by the adoption of faulty pooling standards that run counter to three key criteria used during milk order reform in establishing the Class I price structure, the witness asserted. The three key criteria include, the witness said, sending appropriate marketing signals, recognizing the value of milk at location, and recognizing handler equity with regard to raw product costs. The witness expressed the opinion that these outcomes were not anticipated by the Department.

The DFA witness drew from the Final Decision on milk order reform which detailed how milk marketing orders should pool milk and for identifying those producers whose milk should be eligible for pooling in the consolidated orders. In this regard, the witness particularly noted the Department's rejection of “open pooling” and that pooling provisions be performance oriented. According to the witness, the lack of pooling provisions that are sufficiently performance oriented result in volumes of “distant” milk pooled on orders that do not and would not ever perform any reasonable and consistent servicing of the Class I needs of a market in a manner similar to “local” milk. The witness asserted that inadequate performance standards have lowered producer blend prices and have caused the type of disorderly marketing conditions intended to be avoided by the Class I price structure criteria cited above.

The DFA witness concluded Proposals 2 and 9 are justified because their adoption would more appropriately link milk value and where milk is located relative to a market. According to the witness, these proposals are also superior to the adoption of other proposals (Proposals 1 and 10) because those proposals are aimed solely at eliminating or preventing double dipping. DFA asserted that Proposals 2 and 9 provide: (1) appropriate recognition to the concept of a marketing area where handlers compete for the majority of their Class I sales and the importance of performance as a condition for having milk eligible for pooling, (2) a measurable economic outcome consistent with Federal milk marketing order principles which do not prohibit pooling milk if the economics for doing so are positive, and (3) an adequate and reasonable safeguard for low Class I utilization markets in which lower diversion limits or higher performance standards for supply plants might otherwise cause hardship.

A NDA witness indicated an initial lack of understanding on the ramifications of Proposals 2 and 9 and expected to articulate a position in post-hearing briefs. The witness did express dissatisfaction on how milk order reform addressed the location value of milk and its relationship to pooling provisions in general. In their post-hearing brief, NDA indicated that they can support adoption of Proposal 9. However, NDA viewed Proposal 9 as having limited usefulness. With regard to Proposal 2, NDA's brief concluded that a State-unit pooling approach for out-of-area milk was not appropriate for the Pacific Northwest order because it does not adequately address the issue of double dipping. The brief was of the opinion that other proposals under consideration in another rulemaking proceeding for the Pacific Northwest order were more appropriate for that marketing order.

A witness representing River Valley testified in support of Proposal 9. The witness was of the opinion that local producer milk should not be used as a basis for qualifying distant milk for pooling on the order. The witness testified that the milk of producers from outside the market should be expected to meet the pooling standards of the order in the way local milk does as a condition for receiving the order's blend price.

Opposition to Proposal 9 was presented by Glanbia and Davisco. The Glanbia witness viewed the proposal as being designed to build barriers to market entry by dairy farmers located in and out of the Western order milkshed who otherwise may be attracted to pool their milk on the Western order.

The record does not support the adoption of performance standards for pooling milk on the Pacific Northwest or Western orders on the basis of its location or as the proponent and supporters of Proposal 2 and 9 describe as State-units. The marketing conditions of the Pacific Northwest and Western orders do not exhibit the need to require additional performance standards for milk located outside of the marketing area beyond those adopted in this decision. Accordingly, all plants, regardless of location, may become eligible to have the milk of producers pooled on the Pacific Northwest and Western orders by meeting the performance standards specified for the various types of pool plants.

It is not important who provides the milk for Class I use or from where this milk originates. The order boundaries of the Pacific Northwest and Western orders were not intended to limit or define which producers, which milk of those producers, or which handlers could enjoy the benefits of being pooled on those orders. What is important and fundamental to all Federal orders, including the Pacific Northwest and Western orders, is assuring an adequate supply of milk to meet the market's fluid needs, the proper identification of those producers who supply the market, and an equitable means of compensating those producers from the market's pool proceeds.

A significant portion of the testimony received at the hearing implicated the current Class I price structure as an important factor that has caused the inappropriate pooling of milk across the Federal order system including the Pacific Northwest and Western orders. The current price structure was faulted specifically as not providing appropriate location adjustments for milk as had been the case prior to the implementation of milk order reform.

Testimony indicated that the lack of location adjustments effectively undermines the pooling standards of the order. The decision to pool milk was once based on the economics of transporting milk—comparing the costs of transporting milk to the benefit of receiving the order's blend price. Testimony indicates this factor is as important as the pooling standards of the order. Critics of the Class I pricing structure were of the opinion that placing a relative value on milk based on its distance from the market provides appropriate pooling discipline and fosters orderly marketing conditions.

The reform of milk orders, contained in the Recommended Decision (63 FR 4802) and Final Decision (64 FR 16026), made purposeful changes to the Class I pricing structure. In this regard, a fixed adjustment for Class I milk prices was provided for every county location in the 48 contiguous states to create a national Class I pricing surface for the system of milk marketing orders. Changing this characteristic of the pricing structure ensured handlers that regardless of the marketing order by which regulated, the applicable prices they are charged would be the same.

Such changes made a more clear distinction between the value milk has at location and the pooling standards of any individual marketing order. Location adjustments were never a part of the pooling standards of the Pacific Northwest and Western orders or any other milk marketing order. Instead, location adjustments were an integral part of the pricing provisions of the order. However, it is acknowledged that how location adjustments were applied tended to strengthen the effectiveness of the order's pooling standards. Pooling standards have always established the criteria for pooling milk on the order and continue to do so in the consolidated milk marketing orders. With the Class I price surface adopted by order reform, more direct reliance is placed on pooling standards to identify the milk that should be pooled on the order.

Pooling provisions of all orders are intended to define appropriate standards for the prevailing marketing conditions in assuring that the marketing area would be supplied with a sufficient supply of milk for fluid use and to identify those producers—and the milk of those producers—that actually service the Class I needs of the market. The issue before the Department regarding pooling is the consideration of amendments that will provide standards for determining reasonable performance measures and to more properly identify the milk that regularly and consistently supplies the market's Class I needs.

As discussed earlier, the pooling standards of the consolidated Federal milk orders, including the Pacific Northwest and Western orders, were not intended to exclude any milk from being pooled on any order, provided the fluid needs of a marketing area are served. The reform of Federal milk orders rejected the concept of open pooling, and provided that each market would pool the milk that actually demonstrates a reasonable level of serving the fluid needs of the market as reflected in those order's pooling standards. The determination of the boundaries of the Pacific Northwest and Western marketing areas was guided by identifying the common characteristics of the predecessor orders that could be consolidated and to promulgate a marketing order containing provisions to provide for orderly marketing conditions. The consolidation of the pre-reform orders into the current Pacific Northwest and Western orders was not intended to determine those areas from which milk should, or should not, be obtained to serve the market.

The adoption of revised pooling standards, specifically adoption of netting provisions for supply plant performance standards and diversions from distribution plants and the removal of the PBTH provision in this decision, should assure milk will be available for the market's fluid needs and properly identify the milk of those producers that actually demonstrates consistent service to the market's Class I needs. Therefore the proposal for establishing State units is unnecessary for the Pacific Northwest and Western orders. Additionally, the State-unit proposal does not adequately or specifically prohibit the practice of double dipping in either the Pacific Northwest or Western orders. Accordingly, Proposals 2 and 9 are not adopted.

A proposal, published in the hearing notice as Proposal 8, seeking to establish a marketwide service payment provision in the form of a transportation and assembly credit for the Western order, should not be adopted. Currently, the Western order does not provide for transportation and assembly credits or any other form of a marketwide service payment.

Proposal 8, offered by DFA, specifically seeks to modify the Western order by establishing a transportation credit and an assembly credit. The transportation credit would provide $0.0032 per mile for each hundredweight(cwt) of milk delivered to a pool distributing plant when the farm supplying the plant is located over 80 miles away. The credit would only apply to milk picked up directly from a farm located within the marketing area, processed at a Class I pool plant located in the order, with payment being made to the milk supplying producer or cooperative. The assembly credit of ten cents per cwt would apply to milk delivered to pool distributing plants. The proposal also recognizes that the reporting requirements of the order would also need amending to properly administer the transportation and assembly credit provision.

A witness appearing on behalf DFA testified that establishing a transportation and assembly credit is necessary to recoup costs associated with supplying the Western marketing area's Class I market. The witness argued that some producers are providing services which benefit the entire marketplace, but are unable to recoup the cost of these services from the marketplace. The DFA witness was of the opinion that the Federal milk marketing order system is structured to allow producers servicing the Class I needs of the marketing area to equitably share in the revenues generated in that marketing area. However, the DFA witness was also of the opinion that in the Western order, the costs of supplying the Class I market is noticeably higher for some, explaining that not all producers equitably share the cost of servicing the Class I market.

The DFA witness stated that large supplies of milk produced in the Western order are, in general, located far from distributing plants. As such, the witness continued, the costs of transporting milk to pool distributing plants are higher than in other Federal orders. The witness explained that a transportation credit would provide producers a means to recoup some of the cost of transporting milk to a pool distributing plant when it must be shipped long distances.

The DFA witness testified that because of weekly and monthly fluctuations in demand for Class I milk, supplying extra milk for Class I use or processing excess milk not needed for Class I use imposes extra costs for manufacturing plants that have the capacity to process this milk. The witness presented an example that detailed a DFA manufacturing plant's 2001 average daily processing capacity, referred to as “throughput.” The example illustrated that plant throughput was noticeably lower in the fall months of 2001, ranging from a low of 795,951 pounds per day to a high of 1,269,379 pounds per day in the spring months. Given such significant variation, the witness said, it is necessary that the market have the available balancing capacity to accommodate such fluctuations in demand.

The DFA witness also noted that a plant's manufacturing costs have a direct correlation to the plant's capacity that is idled during certain times of the year. During months of low Class I demand, explained the witness, manufacturing plants operate at full capacity resulting in lower per unit costs. However, during months of high fluid demand, the witness continued, manufacturing plants operate at less than full capacity but incur costs similar to when plants are operated at capacity. It is the costs arising from idled or unused capacity that is borne by a few pool manufacturing plants of the order while their service in balancing the Class I demand of the marketplace benefits the entire market, explained the witness. Therefore, concluded the witness, an assembly credit would help producers who are providing a service of marketwide benefit the means to recoup some of the costs they are unable to generate from the marketplace. The DFA witness estimated that the blend price would be reduced by approximately 2.2 cents per cwt if the assembly credit was adopted.

Two Utah dairy farmers testified in support of Proposal 8. The farmers stated that since Federal order reform, the Class I utilization in Utah has dramatically decreased which in turn has had a direct negative impact on the blend price Utah farmers receive. The dairy farmers were of the opinion that the adoption of an assembly and transportation credit would help restore some of the lost revenue represented by a lower blend price.

A witness appearing on behalf of Stoker testified in support of Proposal 8. Another witness appearing on behalf of the Utah Farmers Union, also testified in support of Proposal 8.

A witness appearing on behalf of NDA, testified in opposition to Proposal 8. The witness stated that currently only one Federal order, the Upper Midwest order, has an assembly credit provision, stressing that the marketing conditions of that order are quite different from the Western order. In the Upper Midwest, the witness explained, farms tend to be significantly smaller and it is necessary to assemble milk from numerous farms in order to “assemble” a full tanker load of milk. The witness contrasted this by explaining that most farms in the Western order are large enough that a single farm is capable of shipping a full tanker load of milk. The witness concluded that it was therefore not appropriate to provide credit for the assembly of milk that does not need “assembling.”

The NDA witness also asserted that the justification given for an assembly credit—the need to recover some of the balancing costs of the market—is itself inconsistent. Typically, the witness said, balancing functions are provided by manufacturing plants for processing milk when it is not needed at Class I plants. However, explained the witness, the proposed assembly credit would apply to those who deliver milk to Class I facilities and would not be limited to manufacturing plants that actually perform the balancing function. In this regard, the witness indicated, a credit for balancing should instead be paid to those pool plants that actually provide a balancing function and not to those who supply milk to Class I facilities.

The witness concluded that NDA was not aware of any difficulty of Western order distributing plants obtaining necessary milk supplies where milk must be assembled into a full tanker load before delivery to a pool distributing plant. Money should not be drawn from the Western order producer-settlement fund as an assembly credit because no “assembly” actually takes place, emphasized the witness.

The NDA witness also opposed the transportation credit feature of Proposal 8. While there are transportation credits in three other Federal orders, the witness said, they function in a different manner than that proposed for the Western order. In the Upper Midwest order transportation credits only apply to transfers of milk between plants, stated the witness, and not to direct shipments from farms to distributing plants. The witness also noted that in two southern orders where Class I use is high, transportation credits were established to fund bringing milk into the marketing area to fulfill all Class I needs. However, the witness contrasted, Western order Class I utilization is relatively low and does not exhibit the need for a transportation credit to encourage shipments of milk to satisfy Class I demands.

The NDA witness also asserted that the Western order already has a $0.30 difference in the level of applicable Class I differentials to encourage milk shipments towards population centers where most distributing plants are located. Accordingly, the witness maintained, there is no need to provide an additional incentive for moving milk to pool distributing plants.

The witness also predicted that adopting a transportation credit would give rise to disorderly marketing conditions because it would provide an incentive for milk located farther away to be delivered to distributing plants while milk located nearer would then need to be shipped to manufacturing plants located farther away. The NDA witness concluded that there are no cost disadvantages that would be corrected by providing the Western order with transportation and assembly credit provisions.

Two witnesses appearing on behalf of KDK and Gossner testified in opposition to Proposal 8. The witnesses were of the opinion that Western order producers should not be paying for assembly credit for a few pool plants that are unable to recoup their costs of balancing. They also stressed that it was inappropriate to establish a transportation credit to encourage the movement of distant milk when producers located nearer to pool distributing plants are willing and able to supply the market without a credit.

A witness appearing on behalf of River Valley also testified in opposition to Proposal 8. The witness stated that the order's blend price should not be reduced to pay for transportation and assembly credits. Instead, the witness said, Class I plants should pay their milk suppliers a direct delivery differential in lieu of a transportation credit and that the level of the Class I differential should be increased. In that way, the witness explained, the blend price paid to producers would be unaffected.

Objections by several parties were raised regarding evidence presented in support of some features of Proposal 8. The objecting parties argued that the testimony given equating balancing costs with assembly costs was beyond the scope of the hearing notice. The objectors moved that such testimony be stricken from the record. Objectors maintained that assembly costs and balancing costs are two entirely different concepts. Because the concept of balancing was not noticed in the hearing notice, the objectors stressed, interested parties were not prepared to discuss the concept of balancing. The objectors also maintained that in previous Federal order hearings where assembly credits were proposed, balancing functions and associated costs were never presented in a context for explaining the need for an assembly credit.

The presiding Administrative Law Judge (ALJ) overruled the objection to strike evidence regarding balancing costs from the record. However, the presiding ALJ found that balancing is fundamentally different from assembly. Accordingly, the ALJ ruled the assembly credit feature of Proposal 8 as being beyond the scope of the proposal presented in the hearing notice.

The record lacks sufficient evidence for the adoption of the transportation and assembly credit proposal. The relative low Class I utilization of the Western marketing area characterizes the order as a market in which manufacturing predominates. In this regard, the record makes clear that the Class I needs of the market are sufficiently supplied, even though certain pooling provisions lack needed features. In fact, the record evidence which supports the adoption of a net diversions feature for diverted milk by distributing plants effectively undercuts the argument that somehow additional compensation or incentive should be provided to attract milk to distributing plants beyond that provided by the level of the Class I differential. If distributing plants engage in the behavior of physically receiving milk and then pumping the milk out of the plant and diverting it for uses other than Class I, it is abundantly clear that distributing plants are certainly adequately supplied with milk.

This decision finds that the evidence and testimony for the adoption of Proposal 8 has more to do with proponents responding to the Western order's improper and inadequate features of pooling provisions than in explaining how the “services” of a few are providing benefit for the entire market. Improper or inadequate features of pooling provisions do not provide justification for adopting this sort of mechanism by which to compensate for lower producer revenue resulting from improper or inadequate features of pooling provisions.

Additionally, this decision agrees with the ALJ's determination that the assembly credit portion of Proposal 8 is beyond the scope of the hearing notice. For this reason alone the proposal warrants denial. As indicated by NDA, the concept of “assembly” is far different from the concept of “balancing.” This is especially so given the context of testimony explaining balancing and balancing costs as a reflection of unused manufacturing plant capacity while diminimus testimony on milk assembly and assembly costs was offered.

Proposals 15 and 16, seeking to clarify order language in the Producer and Producer milk provisions of the Western order, should be adopted immediately. Currently the Producer provision does not list Class II milk at nonpool plants as a type of utilization that a handler can opt to not pool without causing a producer to lose producer status. The current Producer milk definition does not allow a dairy farmer who lost producer status to again qualify milk for diversion until delivery of one days' milk production has been received at a pool plant.

Proposal 15, offered by the Western order Market Administrator (MA), seeks to modify the Producer provision by adding Class II utilization of milk at a non-pool plant as a type of milk utilization a handler may elect to not pool without jeopardizing the producer status of that producer. Proposal 16, also offered by the MA, seeks to modify the Producer milk provision by allowing a dairy farmer to re-qualify for producer status in the same manner that a dairy farmer who has never qualified can have their milk pooled on the order.

Witnesses appearing on behalf of DFA and NDA testified in support of Proposals 15 and 16. The witnesses stated that both proposals make necessary changes to the order that reflect current market needs. Furthermore, said the witnesses, the changes will assist in the interpretation and administration of the order. Neither proposal received opposition testimony.

Evidence presented at the hearing establishes that the pooling standards of the Western order are inadequate and have resulted in the unwarranted erosion of the blend price received by producers who are serving the Class I needs of the market and should be changed on an emergency basis. The unwarranted erosion of such producers' blend prices stems, in part, from improper performance standard features as they relate to pool supply plants, from inadequate features as they relate to producer milk diversions by distributing plants, and the PBTH provision. These shortcomings of the pooling provisions have allowed milk that does not provide consistent and reasonable service in meeting the needs of the Class I market to be pooled on the Western order. Additionally, the PBTH provision gives rise to disorderly marketing conditions and renders the order unable to establish prices to handlers that are uniform. Consequently, it is determined that emergency marketing conditions exist and the issuance of a recommended decision is therefore being omitted. The record clearly establishes a basis as noted above for amending the order on an interim basis and the opportunity to file written exceptions to the proposed amended order remains.

Evidence presented at the hearing also establishes that California milk pooled simultaneously on the California State-operated order and a Federal order, a practice commonly referred to as double dipping, would render the Pacific Northwest milk order and does render the Western milk order unable to establish prices that are uniform to producers and to handlers and contributes to the unwarranted erosion of milk prices to Western producers and the erosion of milk prices that could result to producers supplying milk for the Pacific Northwest marketing area should double dipping occur in the Pacific Northwest marketing area.

In view of this situation, an interim final rule amending the orders should be issued as soon as the procedures are completed to determine the approval of producers whose milk is pooled in both the Pacific Northwest and Western orders.

Briefs, proposed findings and conclusions were filed on behalf of certain interested parties. These briefs, proposed findings and conclusions, and the evidence in the record were considered in making the findings and conclusions set forth above. To the extent that the suggested findings and conclusions filed by interested parties are inconsistent with the findings and conclusions set forth herein, the requests to make such findings or reach such conclusions are denied for the reasons previously stated in this decision.

The findings and determinations hereinafter set forth supplement those that were made when the Pacific Northwest and Western orders were first issued and when they were amended. The previous findings and determinations are hereby ratified and confirmed, except where they may conflict with those set forth herein.

The following findings are hereby made with respect to the aforesaid marketing agreements and orders:

(a) The interim marketing agreements and the orders, as hereby proposed to be amended, and all of the terms and conditions thereof, will tend to effectuate the declared policy of the Act;

(b) The parity prices of milk as determined pursuant to Section 2 of the Act are not reasonable in view of the price of feeds, available supplies of feeds, and other economic conditions which affect market supply and demand for milk in the marketing areas, and the minimum prices specified in the interim marketing agreements and the orders, as hereby proposed to be amended, are such prices as will reflect the aforesaid factors, insure a sufficient quantity of pure and wholesome milk, and be in the public interest; and

(c) The interim marketing agreements and the orders, as hereby proposed to be amended, will regulate the handling of milk in the same manner as, and will be applicable only to persons in the respective classes of industrial and commercial activity specified in, the marketing agreements upon which a hearing has been held.

Annexed hereto and made a part hereof are two documents, an Interim Marketing Agreement regulating the handling of milk, and an Interim Order amending the orders regulating the handling of milk in the Pacific Northwest and Western marketing areas, which have been decided upon as the detailed and appropriate means of effectuating the foregoing conclusions.

It is hereby ordered that this entire tentative decision and the interim order and the interim marketing agreement annexed hereto be published in the Federal Register.

The month of April 2002 is hereby determined to be the representative period for the purpose of ascertaining whether the issuance of the order, as amended and as hereby proposed to be amended, regulating the handling of milk in the Pacific Northwest and Western marketing areas is approved or favored by producers, as defined under the terms of the orders as hereby proposed to be amended, who during such representative period were engaged in the production of milk for sale within the aforesaid marketing areas.

This interim order shall not become effective unless and until the requirements of § 900.14 of the rules of practice and procedure governing proceedings to formulate marketing agreements and marketing orders have been met.

The findings and determinations hereinafter set forth supplement those that were made when the orders were first issued and when amended. The previous findings and determinations are hereby ratified and confirmed, except where they may conflict with those set forth herein.

(a) Findings. A public hearing was held upon certain proposed amendments to the tentative marketing agreements and to the orders regulating the handling of milk in the Pacific Northwest and Western marketing areas. The hearing was held pursuant to the provisions of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), and the applicable rules of practice and procedure (7 CFR part 900).

Upon the basis of the evidence introduced at such hearing and the record thereof, it is found that:

(1) The said orders as hereby amended, and all of the terms and conditions thereof, will tend to effectuate the declared policy of the Act;

(2) The parity prices of milk, as determined pursuant to Section 2 of the Act, are not reasonable in view of the price of feeds, available supplies of feeds, and other economic conditions which affect market supply and demand for milk in the aforesaid marketing area. The minimum prices specified in the order as hereby amended are such prices as will reflect the aforesaid factors, insure a sufficient quantity of pure and wholesome milk, and be in the public interest; and

(3) The said orders as hereby amended regulate the handling of milk in the same manner as, and is applicable only to persons in the respective classes of industrial or commercial activity specified in, the marketing agreements upon which a hearing has been held.

It is therefore ordered, that on and after the effective date hereof, the handling of milk in the Pacific Northwest and Western marketing areas shall be in conformity to and in compliance with the terms and conditions of the orders, as amended, and as hereby amended, as follows:

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

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

How can I be sure FAA receives my comment? If you want FAA to acknowledge the receipt of your mailed comments, you must include a self-addressed, stamped postcard. On the postcard, write “Comments to Docket No. 2003-CE-21-AD.” We will date stamp and mail the postcard back to you.

What events have caused this proposed AD? The Civil Aviation Safety Authority (CASA), which is the airworthiness authority for Australia, recently notified FAA that an unsafe condition may exist on all ASTA Models N22B and N24A airplanes. The CASA reports several incidents of ailerons incurring damage during flight. Extensive tests and analysis revealed that the cause of the damage to the ailerons is a result of operation outside approved limits and undetected pre-existing damage. This condition causes the aileron to flutter as well as damage and failure.

The CASA lowered the operational limits of the affected airplanes in order to prevent damage from occurring. Additional reports of aileron flutter have been received even when operating within these lower approved limits.

As a precautionary measure, the CASA is further restricting flight operations.

What are the consequences if the condition is not corrected? If this condition is not corrected, it could result in aileron failure. Such failure could lead to reduced or loss of control of the airplane.

Is there service information that applies to this subject? ASTA has issued Nomad Alert Service Bulletin ANMD-57-18, dated December 19, 2002.

What are the provisions of this service information? The service bulletin includes procedures for:

What action did the CASA take? The CASA classified this service bulletin as mandatory and issued Australian AD/GAF-N22/69, Amendment 4, dated February 27, 2003, in order to ensure the continued airworthiness of these airplanes in Australia.

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

Pursuant to this bilateral airworthiness agreement, the CASA has kept FAA informed of the situation described above.

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

What would this proposed AD require? This proposed AD would require you to visually inspect the ailerons for damage and replace if necessary, and incorporate the actions in the previously-referenced service bulletin.

How does the revision to 14 CFR part 39 affect this proposed 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 would this proposed AD impact? We estimate that this proposed AD affects 10 airplanes in the U.S. registry.

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

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

We estimate the following costs to accomplish the proposed modifications:

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

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

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

We encourage you to participate in this rulemaking by submitting comments and related material. If you do so, please include your name and address, identify the docket number for this rulemaking [CGD08-03-030], indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related material in an unbound format, no larger than 81/2 by 11 inches, suitable for copying. If you would like to know they reached us, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this proposed rule in view of them.

We do not now plan to hold a public meeting. You may submit a request for a meeting by writing to Commander, Eighth Coast Guard District, Bridge Administration Branch at the address under ADDRESSES explaining why one would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the Federal Register.

The U.S. Coast Guard, at the request of a state representative and the owner of two of the three bridges crossing the Inner Harbor Navigation Canal in New Orleans, Orleans Parish, Louisiana, proposes to change the times of the existing drawbridge operation regulation. Currently, all three bridges remain closed to navigation and open to vehicular traffic during the morning and afternoon commuter rush hours. The SR 46 (St. Claude Avenue) bascule span highway bridge at mile 0.5, the SR 39 (Judge Seeber/Claiborne Avenue) vertical lift span highway bridge at mile 0.9, and the Florida Avenue bascule span highway and railroad bridge at mile 1.7 are governed by 33 CFR 117.458, which states that the draw of these three bridges shall open on signal; except that, from 6:45 a.m. to 8:30 a.m. and from 4:45 p.m. to 6:45 p.m., Monday through Friday, except Federal holidays, the draws need not open for the passage of vessels. The draws shall open at any time for a vessel in distress.

In an effort to reassess and accurately determine the needs of the commuters who cross these three bridges in the morning and afternoon en route to and from work in the Lower Ninth Ward area of New Orleans and in St. Bernard Parish, the Port of New Orleans hired Urban Systems to perform a new traffic study. The March 2003 traffic study revealed the average peak periods for vehicular traffic crossing the SR 46 (St. Claude Avenue) and the Florida Avenue bridges are from 6:30 a.m. to 8:30 a.m. and from 3:30 p.m. to 5:45 p.m. This marks a shift from the peak traffic times currently reflected in the regulation that was based on a traffic study completed in October 1999.

Traffic counts for the SR 39 (Judge Seeber/Claiborne Avenue) bridge were not conducted. However, the Claiborne Avenue bridge is located in close proximity to the other two bridges and is expected to exhibit similar traffic patterns. The Claiborne Avenue bridge provides a vertical clearance of 40 feet above Mean High Water in the closed to navigation position and is therefore expected to have less impact on vessel traffic than the other two bridges.

A review of the bridge tender logs revealed that adjusting the marine traffic closures to coordinate with vehicular rush hour traffic should not significantly impact the flow of marine traffic.

Allowing the bridges to remain closed to marine traffic during times that coincide with the heaviest vehicular traffic counts would help to relieve the morning and afternoon rush hour commuter traffic congestion across the bridges while having minimal impact on vessel traffic.

The proposed rule change to 33 CFR 117.458 would allow the bridges across the Inner Harbor Navigation Canal in New Orleans, Louisiana, at mile 0.5, 0.9, and 1.7 to remain closed to navigation beginning at 6:30 a.m. instead of 6:45 a.m. and remain closed until 8:30 a.m. In the afternoon, the closure time would begin earlier at 3:30 p.m. and end at 5:45 p.m. instead of 6:45 p.m. These changes would more closely coincide with peak rush hour traffic.

This proposed rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Homeland Security.

We expect the economic impact of this proposed rule to be so minimal that a full Regulatory Evaluation under the regulatory policies and procedures of DHS is unnecessary.

This proposed rule adds 15 minutes to the existing drawbridge operating regulation and shifts the afternoon closure time up by one hour and 15 minutes. A review of the bridge logs for these three bridges indicates that minimal requests to open the bridges during these periods have been made in the past, and there is no indication that there will be a future increase.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this proposed rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. This proposed rule would affect a limited number of small entities. These entities include the owners or operators of vessels needing to transit the Inner Harbor Navigation Canal between mile 0.5 and mile 1.7 from 6:30 a.m. to 8:30 a.m. and from 3:30 p.m. to 5:45 p.m. on weekdays.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see ADDRESSES) explaining why you think it qualifies and how and to what degree this rule would economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the Eighth Coast Guard District Bridge Administration Branch at the address above.

This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520.).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this proposed rule under that Order and have determined that it does not have implications for federalism.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this proposed rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This proposed rule would not affect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This proposed rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this proposed rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children.

This proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would 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.

We have analyzed this proposed rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. It has not been designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

We have analyzed this rule under Commandant Instruction M16475.1D, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (32)(e), of the Instruction, from further environmental documentation. Paragraph (32)(e) excludes the promulgation of operating regulations or procedures for drawbridges from the environmental documentation requirements of NEPA. Since this rule will alter the normal operating conditions of the drawbridges, it falls within this exclusion. A final “Environmental Analysis Check List” and a final “Categorical Exclusion Determination” are available in the docket where indicated under ADDRESSES.

For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 117 as follows:

In recent years, numerous automated advances in mail processing developed by the Postal Service have led to faster, more efficient methods of sorting individual letter-size and flat-size pieces. A new system, to be designated as the Automated Package Processing System (APPS), would extend similar benefits of automated processing to small, lightweight parcels and to letter-size pieces and flat-size pieces such as magazine and catalogs prepared in packages (several mailpieces presorted and secured together into a single unit). The APPS equipment represents the next generation of the Small Parcel and Bundle Sorter (SPBS) currently used by the Postal Service.

Barcoded pressure-sensitive package labels would be one method to support the use of the APPS, which the Postal Service plans to deploy beginning in 2004 in major processing and distribution centers to improve operational efficiency and increase workhour productivity. The use of these new labels would have no significant effect, however, on mail preparation standards and processes or on current mailer operations, especially mailer operations using optional endorsement lines (OELs) for designating the presort level of packages containing letter-size pieces or flat-size pieces. This proposed change would not replace OELs. In fact, mailers currently using OELs should continue using these cost-efficient information lines rather than converting to the use of pressure-sensitive package labels.

With its large processing capacity, the APPS will replace current labor-intensive methods with more efficient automated methods that improve the sortation of parcels, Priority Mail envelopes, and presort destination packages of letter-size and flat-size mailpieces. The APPS contains several advanced features, including an integrated optical character/barcode reader with four-sided image capture. With this feature, the APPS can read and interpret information from properly prepared parcels and presort destination packages and automatically direct the parcels and presort packages to the appropriate bins.

Applying a pressure-sensitive package label to the top mailpiece in a presort package of banded mailpieces is one method that mailers use to indicate the sortation level for certain letter-size mail, flat-size mail, and small parcels that are required to be packaged before being placed into a tray or sack or placed onto a pallet. The proposed design changes to these presort labels would ensure that presort packages could be scanned and sorted automatically on the APPS.

The proposed changes affect the five pressure-sensitive package labels that mailers currently use. The size of the proposed rectangular labels would measure 3/4 inch wide by 1/2 inch high. Current scalloped-shaped pressure-sensitive package labels measure 7/8 inch wide and 1/2 inch high. A width-modulated barcode would appear on the right side of each label as a unique indicator of the sortation level. The bars of the barcode are 0.02 inch wide and 0.50 inch high. The rightmost bar ends 0.04 inch from the right edge of the label. Each new label would also contain a human-readable single alpha or numeric character to the left of the barcode, corresponding to the sortation level of the package as shown in the following table.

The new label design would allow the APPS equipment to find and read the necessary information much more quickly, and the redundant information appearing on the redesigned labels would ensure a higher read rate and lower false positive rate as well as accommodate incidental label damage. The label could be placed anywhere on the address side of the package or the parcel for proper recognition, provided that opaque banding or strapping is not placed over the labels.

The proposed pressure-sensitive package labels would be the same color as the current labels. Besides the label shape, slightly smaller label size, and barcode, the only other changes would be the following:

• The alpha character “D” that appears on the current red labels for the 5-digit sortation level would be replaced with the numeric “5.”

• The alpha characters “MXD” that appear on the current tan labels for the mixed ADC sortation level would be replaced with the single alpha character “X.”

The scheduled availability of the new pressure-sensitive package labels from the Postal Service (through existing procurement and supply sources) would be in late September 2003. Mailers would be permitted to begin using the new package labels as soon as they become available from their local post office. Effective January 1, 2004, however, mailers not using OELs would be required to use only the barcoded pressure-sensitive package labels rather than the nonbarcoded labels.

This proposed rule also includes minor editorial revisions that clarify and standardize the text of mailing standards related to package preparation as follows:

• Unit M031. Clarification of label format used for the destination line (Line 1) for overseas military mail is made to the section on tray and sack labels and the section on pallet labels. Other sections throughout module M in the DMM for nonautomation mail now reference this section on overseas military mail.

• Unit M032. Clarification of label format used for the destination line (Line 1) for overseas military mail is made to the section on barcoded tray and sack labels. Other sections throughout module M in the DMM for automation rate mail now reference this section on overseas military mail. For the content identifier for presorted Standard Mail machinable and irregular parcels (content identifier number 603), the human-readable content line “STD MACH & IRREG 5D” is changed to “STD MACH-IRREG 5D.”

• Section M073.1.6. Presentation of sacking and labeling requirements for combined mailings of Standard Mail and Package Services parcels is standardized for simplicity and editorial consistency. Line 2 (content line) label information is now incorporated with requirements for preparation sequence, minimum sack size, and Line 1 labeling.

• Unit M130. Presentation of packaging, traying, sacking, and labeling requirements for Presorted First-Class Mail is standardized for simplicity and editorial consistency. Packaging requirements and exceptions to those requirements are also clarified.

• Part M210.2.0. Presentation of packaging and labeling requirements for presorted Periodicals mail is standardized for editorial consistency.

• Unit M610. Packaging requirements for presorted Standard Mail are clarified, and the mailing standards for flat-size pieces and irregular parcels are separated. Additional organizational changes are made for editorial consistency.

• Unit M722. Presentation of packaging, sacking, and labeling requirements for Bound Printed Matter is standardized throughout this unit.

• Unit M730. Presentation of packaging and labeling requirements for Media Mail is standardized for editorial consistency.

• Unit MM740. Presentation of packaging and labeling requirements for Library Mail is standardized for editorial consistency.

Although exempt from the notice and comment requirements of the Administrative Procedure Act [5 U.S.C. of 553(b), (c)] regarding proposed rulemaking by 39 U.S.C. 410(a), the Postal Service invites public comment on the following proposed revisions to the Domestic Mail Manual, incorporated in the Code of Federal Regulations. See 39 CFR 111.1.

This proposal addresses Clean Air Act section 111(d)/129 negative declarations submitted by various local air pollution control agencies in Arizona and Nevada, certifying that commercial/industrial solid waste incinerator units do not exist within their air pollution control jurisdictions. For further information, please see the information provided in the direct final action, with the same title, that is located in the “Rules and Regulations” section of this Federal Register publication. If no adverse comments are received in response to this action, no further activity will be contemplated. If EPA receives adverse comments, the direct final rule will be withdrawn and all public comments received will be addressed in a subsequent final rule based on this proposed rule. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment.

The U.S. EPA Region IX is publishing this Notice of Intent to Delete the Celtor Chemical Works Superfund Site from the NPL and requests public comment on this proposed action. The NPL constitutes appendix B of 40 CFR part 300, which is the National Oil and Hazardous Substances Pollution Contingency Plan, which EPA promulgated pursuant to Section 105 of CERCLA, as amended. The EPA identifies sites that appear to present a significant risk to public health, welfare, or the environment, and maintains the NPL as the list of those sites. As described in § 300.425(e)(3) of the NCP, sites deleted from the NPL remain eligible for remedial action in the unlikely event that conditions at the site warrant such action.

EPA will accept comments on the proposal to delete this Site for thirty (30) days after publication of this document in the Federal Register.

Section II of this document explains the criteria for deleting sites from the NPL. Section III discusses procedures that EPA is following specifically for this Site. Section IV discusses the Celtor Chemical Works Superfund Site and demonstrates how it meets the deletion criteria.

Deletion of a site from the NPL does not itself create, alter, or revoke any individual's rights or obligations.

Section 300.425(e) of the NCP provides that sites may be deleted from the NPL where no further response is appropriate. In making a determination to delete a site from the NPL, EPA, in consultation with the State and the Tribe, shall consider whether any of the following criteria have been met:

i. Responsible parties or other persons have implemented all appropriate response actions required; or

ii. All appropriate Fund-financed (Hazardous Substance Superfund Response Trust Fund) response under CERCLA has been implemented, and no further response action by responsible parties is appropriate; or

iii. The remedial investigation has shown that the release poses no significant threat to public health or the environment and, therefore, the taking of remedial measures is not appropriate.

If new information becomes available which indicates a need for further action, EPA may initiate remedial actions. Whenever there is a significant release from a site deleted from the NPL, the deleted site may be restored to the NPL without application of the Hazard Ranking System (40 CFR 300.425(e)(3)).

The following procedures apply to deletion of this Site:

(1) All remedial action has been implemented as is documented in the Final Close Out Report (FCOR), dated September 29, 1989.

(2) The EPA consulted with the State of California and the Hoopa Valley Indian Tribe on the deletion of the Site from the NPL prior to developing this Notice of Intent to Delete.

(3) The Hoopa Valley Indian Tribe concurred with deletion of the Site from the NPL.

(4) The State of California concurred with deletion of the Site from the NPL.

(5) A notice has been published in the local newspaper and has been distributed to appropriate federal, state, and local officials and other interested parties announcing the commencement of a 30-day public comment period on EPA's Notice of Intent to Delete.

(6) The EPA placed copies of documents supporting the deletion in the Site information repositories identified above.

For deletion of this Site, EPA's Regional Office will accept and evaluate public comments before making a final decision to delete. If comments are received, EPA will prepare a Responsiveness Summary to address those comments. The Responsiveness Summary will be available for review in the Deletion Docket. The Deletion Docket is a compilation of documents containing all pertinent information supporting the deletion recommendation.

A deletion occurs when the Regional Administrator places a final notice in the Federal Register. Generally, the NPL will reflect deletions in the final update following the notice. Public notices and copies of the Responsiveness Summary will be made available to local residents by the Regional Office in the local information repository and in the Region IX Superfund Records Center.

The following information provides EPA's rationale for deleting the Site from the NPL:

The Celtor Chemical Works Superfund Site is a 2.5 acre parcel of mountainous terrain located at the northern end of the Hoopa Valley Indian Reservation in Humboldt County California, about 2 miles north of the town of Hoopa. The property on which the Site is located is owned by the Hoopa Valley Indian Tribe. The Tribe's land is held in trust by the U.S. Bureau of Indian Affairs (BIA). The land use for the area surrounding the Site is rural residential. A cattle grazing pasture is located to the west of the former plant site. A gravel bar on the Trinity River at the northern end of the Site provides access to a popular recreational fishing site.

In 1958, BIA leased the land to the Celtor Chemical Corporation on behalf of the Tribe. The Celtor Chemical Corporation processed sulfide ore taken from the Copper Bluff Mine. The plant, known as the Celtor Chemical Works Mill, is believed to have used dissolved air flotation to extract copper, zinc, and precious metals from the ore. The ore concentrates were trucked off-site for further processing. Some mine tailings were stockpiled in the area of the plant site; however, most of the tailings were presumably sluiced down a drainage ditch to the Trinity River. The tailings may have been the cause of the numerous fish kills for which the California Department of Fish and Game have cited the Celtor Chemical Corporation.

In 1960 the Celtor Chemical Corporation became delinquent in its royalty payments to the Hoopa Valley Indian Tribe. By 1962, Celtor ceased operations and in March 1993, the BIA, as trustee for the Tribe, canceled the leases of both the Copper Bluff Mine and the Celtor Chemical Works Mill.

After milling operations ceased, a very large pile of tailings was reported to have been left standing on a sand and gravel bar between the drainage ditch and the Trinity River, along with the tailings that were known to have been left at the plant site. Flooding in 1964 reportedly washed all traces of tailings that had been left on the sand and gravel bar into the Trinity River.

Acid runoff from the Site continued to leach the remaining tailings in the plant area. Elevated levels of metals in Site soils were identified in samples collected by the California Department of Health Services in July 1981. In August of the same year, EPA received a Notification of a Hazardous Waste Site under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) from the State. The Site was placed on the California State Priority List in April 1982, then included on the National Priorities List (NPL) in September 1983.

In December, 1983, EPA completed a Removal Action (also called the initial remedial measure) in which all visibly contaminated material (tailings, non-concrete structures, and a portion of the adjacent pasture) were removed. Approximately 1,400 cubic yards of contaminated material were taken to the IT Corporation Class I hazardous landfill in Benicia, California.

The Remedial Investigation/Feasibility Study was completed on June 28, 1985, and a Record of Decision (ROD) was signed by the Regional Administrator on September 30, 1985, which selected excavation and off-site disposal of the remaining contaminated soils.

The ROD for the Celtor Chemical Works Site was signed on September 30, 1985. The primary human health threats posed at the Site were (1) direct contact with soils contaminated with arsenic, copper, cadmium and lead, and (2) consumption of surface water runoff from the Site or in the drainage ditch, which sometimes exceeded Maximum Contaminant Levels for copper, iron, lead and zinc. The remedial action objective was to prevent human exposure to soil and water contaminated with arsenic, copper, cadmium, zinc, mercury, selenium, cyanide and lead at concentrations that may pose a public health or environmental threat.

The remedial actions of the 1985 ROD were: demolition and removal of structures, excavation of soils contaminated above action levels from all Site areas, import clean fill as necessary, regrade and vegetate the Site, and install security fencing to protect new vegetation. No groundwater treatment was necessary because the aquifer was not contaminated.

Following signature, the ROD was amended twice. The first amendment corrected an error in the copper action level and the second amendment added additional standards for mercury, selenium, and cyanide in soils. The additional cleanup standards were added as precautionary measures; subsequent sampling showed all three metals to be below action levels.

In August 1986, EPA entered into an interagency agreement (IAG) with the U.S. Army Corps of Engineers for the remedial design. The Corps retained Aqua Resources, Inc. of Berkeley to plan the remedial action.

The remedial design was completed by Aqua Resources, and approved by EPA on June 9, 1987. The design plan was divided into six areas designated A-F to be excavated to various depths. After excavation, soil samples were to be taken at designated grid points for all the contaminants of concern. It was estimated that 3,220 yards of soil and 890 tons of concrete were to be removed and transported to the Envirosafe Services RCRA approved Class I Landfill in Grandview, Idaho. Environmental Health Research and Testing, Inc. (EHRT) was contracted to carry out the remedial action work. Shortly into the remediation, EHRT submitted a Value Engineering Change Proposal (VECP) to perform deeper and more thorough sampling to reduce the volume of soils excavated. This change was accepted and decreased the actual volume of soil excavated and transported to the Idaho Class I landfill to 1,163 cubic yards. Another post-design change was in the sampling depth of the concrete.

On December 9, 1987 the Site was closed down for the winter season, and activities resumed again on May 11, 1988. All backfilling and revegetation was completed on October 14, 1988, marking the beginning of a one year post-remedial maintenance period.

At any location where contaminants were detected above action levels, additional soil was excavated and removed to the approved off-site landfill. The removal of contaminated material and subsequent confirmatory sampling of remaining on-site soils ensured that all contamination was removed from the Site according to the guidelines set forth in the Quality Assurance Project Plan (QAPP). On February 20, 1989, the Corps sent the Final Technical Report to EPA describing all of the construction activities and the sampling data.

The operation and maintenance (O&M) was performed for a one-year period by the U.S. Army Corps of Engineers. O&M efforts included monthly site visits to inspect for evidence of erosion and problems with revegetation, and maintenance of the perimeter fence.

The initial Five Year Review conducted in 1993 found the Site to be in good condition, with a healthy cover of vegetation and no evidence of erosion. A wood-staked wire fence had been constructed around the pasture which had been remediated during the remedial action. The 1993 review concluded that the Site required little or no maintenance. However, the Hoopa Valley Indian Tribe subsequently raised concerns about residual contamination remaining at the Site. On September 20, 1995, EPA collected 14 biased samples from the Site at the request of the Hoopa Tribe. Samples were collected from three distinct areas of the Site, including the former facility hillside, the access road leading down to the river, and the gravel bar between the drainage ditch and the Trinity River where it was reported a large pile of mine tailings had once stood before they were washed away by the 1964 flood. Of the 14 samples, 4 samples had levels of contaminants above the ROD clean-up goals.

On April 22, 1996, EPA's Emergency Response Team performed additional, more extensive sampling at the Site to verify that the cleanup was complete. A total of 26 soil and sediment samples were collected and analyzed by screening with the x-ray fluorescence (XRF) spectrometer, and six soil samples were sent to a lab for confirmatory analysis. Soils were also analyzed for pH. Hillside soil samples from the former plant site contained minimal levels of copper, and traces of copper were also found in the river access road cut area and the drainage ditch but samples at both sites were well below action levels for the Site. No detectable contamination was found in samples collected from the borrow pit. However, analysis of samples collected from stained areas on the gravel bar indicated these sediments may have levels of copper, lead and arsenic in excess of the cleanup level.

Since 1996 no stained sediments have been observed on the gravel bar by EPA or the Tribe. The gravel bar, hillside, and gully that connects the Site to the Trinity River were sampled in 2002. No Contaminants of Concern (COCs) were found in concentrations above ROD cleanup goals.

A Second Five-Year Review was conducted in August of 2001. The review concluded that the Site was not currently a threat to human health and the environment, but that additional data was needed to determine if the Site posed a future risk. The Review concluded that all items of concern would be resolved before delisting could occur.

EPA, with support from the Tribal Environmental Protection Agency (TEPA), conducted a comprehensive unbiased sampling event on May 28, 2003. EPA sampled the hillside, drainage ditch adjacent to the hillside, and gully that connects the Site to the Trinity River. A total of 38 soil samples were taken and 4 surface water samples were taken. The laboratory results from the sampling indicated that all sampled constituents are below the levels established in the ROD.

These results have been reviewed by the Region IX EPA toxicologist who concurs that the Site has met soil action levels established in the ROD, and that the Site does not pose an unacceptable risk to human health or the environment from the COCs based upon EPA's current guidance.

EPA has determined that all appropriate response actions for the COCs have been implemented, and the Site is available for unrestricted use. Therefore, no more Five-Year Reviews need to be conducted at the Site.

During the week of August 4, 2003, a fact sheet was mailed out to tribal members notifying them of EPAs intent to delete the site from the NPL. In addition to the fact sheet, an announcement for a community meeting was published in a local paper on August 5, 2003. The community meeting is scheduled for August 13, 2003. Members of the community will be invited to ask questions and make formal comments. The Deletion Docket which contains the documents EPA relied on for its recommendation to delete the Site from the NPL is available to the public in the information repositories.

All the completion requirements for this Site have been met as described in the FCOR dated September 28, 1989. The NPL provides that a site is eligible for deletion where “all appropriate Fund-financed (Hazardous Substance Superfund Response Trust Fund) response under CERCLA has been implemented, and no further response action by responsible parties is appropriate,” and where “responsible parties or other parties have implemented all appropriate response actions required.”

EPA, with the concurrence of the Hoopa Valley Indian Tribe through the Tribal EPA on November 26, 2003 and the State of California through its Department of Toxic Substances Control on July 25, 2003, and finds that these criteria for deletion of the Site have been met. Consequently, EPA is proposing deletion of the Celtor Chemical Works Superfund Site from the NPL.

1. On February 5, 2003, the Federal Communications Commission released an order and notice of proposed rulemaking (Notice) among other things seeking comment on the possibility of revising the spectrum sharing plan among non-geostationary satellite orbit mobile satellite service systems operating in the 1.6/2.4 GHz bands. (See 68 FR 33666, June 5, 2003). On June 30, 2003, Globalstar L.P. (GLP or Globalstar) filed a request for extension of time (GLP Request) requesting the Commission to extend the comment and reply comment filing deadlines in this proceeding for two months to September 8, 2003, and September 29, 2003, respectively. ICO Global Communications (Holdings) Limited (ICO) and The Official Creditors' Committee of Globalstar, L.P. (the Creditors) each filed documents in support of GLP's request. Iridium Satellite LLC (Iridium) filed in opposition to GLP's request.

2. GLP asserts that two events have occurred since release of the Notice in this proceeding that warrant grant of an extension of time. First, GLP states that it has filed an emergency application for review and request for stay of an International Bureau order canceling GLP's 2 GHz MSS license. According to GLP, a Commission decision regarding whether to revise the Big LEO band plan and to assign more or less spectrum to Globalstar and Iridium or to reallocate some Big LEO spectrum to another service must necessarily be affected by the amount of second generation spectrum, if any, that is available to GLP in the 2 GHz MSS band. Second, GLP states that the U.S. Bankruptcy Court for the District of Delaware has approved an investment transaction pursuant to which GLP's assets will be transferred to a company controlled by ICO. According to GLP, ICO's interests as the proposed new owner of the Globalstar system cannot be taken into account in this proceeding until the applications for the assignment of the Globalstar assets have been approved by the Commission.

3. We find that the public interest does not weigh in favor of a grant here. Rather, we find that extending the comment deadline would contravene the Commission's express intention to proceed expeditiously in this rulemaking proceeding. First, we do not agree that a Commission decision regarding whether to revise the Big LEO band plan must necessarily be affected by the amount of second generation spectrum available to GLP in the 2 GHz MSS band. We expect any decision the Commission may make regarding whether to revise the Big LEO band plan will be made based on the operations and use of systems in the Big LEO band. We do not believe that resolution of 2 GHz MSS licensing matters will have any bearing on whether or how the Commission may decide to alter the Big LEO band plan. In any event, it is not necessary for the Commission to reach a decision on GLP's appeal for parties to provide comments in this proceeding concerning how favorable or unfavorable Commission action with respect to GLP's appeal might affect GLP's spectrum needs in the Big LEO band.

4. Second, we do not agree that a Commission decision regarding the proposed ICO/GLP transaction is necessary for parties to comment meaningfully in this proceeding. Whether or not the Commission ultimately approves the transaction has no bearing on current operations, use, or capacity of the Globalstar Big LEO MSS system. Moreover, nothing prohibits ICO, as proposed new owners of the Globalstar Big LEO MSS system, from filing comments in this proceeding. We are not convinced that ICO requires resolution of its pending transfer and assignment applications to understand its interests and comment meaningfully in this proceeding.

5. Nevertheless, because of the operation of § 1.46 of the Commissions rules, which automatically extends the time for filing comments until two business days after the Commission denies a timely-filed motion for extension of time, we adjusted the comment date to July 11, 2003. Also, to provide parties a full two weeks to respond to comments filed in this proceeding, we adjusted the reply comment date to July 25, 2003.

6. Accordingly, pursuant to § 1.46 of the Commission's rules, 47 CFR 1.46, the new comment due date was July 11, 2003 and the new reply comment due date was July 25, 2003. Instructions for filing pleadings in this proceeding are set forth in the NPRM, available on the Commission's Web site at http://www.fcc.gov. All comments and reply comments will be available for public inspection during regular business hours in the FCC Reference Information Center, Room CY-A257, 445 Twelfth Street SW., Washington, DC 20554.

This is a summary of the Commission's Notice of Proposed Rule Making, MB Docket No. 03-182, adopted July 30, 2003, and released August 1, 2003. The full text of this Commission decision is available for inspection and copying during normal business hours in the Commission's Reference Center 445 Twelfth Street, SW., Washington, DC 20554. The complete text of this decision 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.

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

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

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

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

TSA invites interested persons to participate in this rulemaking by submitting written comments, data, or views. We also invite comments relating to the economic, environmental, energy, or federalism impacts that might result from adopting the proposals in this document. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. See ADDRESSES above for information on how to submit comments.

We will file in the docket all comments we receive, as well as a report summarizing each substantive public contact with TSA personnel concerning this rulemaking. The docket is available for public inspection before and after the comment closing date.

We will consider all comments we receive on or before the closing date for comments. We will consider comments filed late if it is possible to do so without incurring expense or delay. We may change this rulemaking in light of the comments we receive.

If you want TSA to acknowledge receipt of your comments on this rulemaking, include with your comments a self-addressed, stamped postcard on which the docket number appears. We will stamp the date on the postcard and mail it to you.

You can get an electronic copy using the Internet by—

(1) Searching the Department of Transportation's electronic Docket Management System (DMS) web page (http://dms.dot.gov/search);

(2) Accessing the Government Printing Office's web page at http://www.access.gpo.gov/su_docs/aces/aces140.html; or

(3) Visiting the TSA's Law and Policy web page at http://www.tsa.dot.gov/public/index.jsp.

In addition, copies are available by writing or calling the individual in the FOR FURTHER INFORMATION CONTACT section. Make sure to identify the docket number of this rulemaking.

Prior to March 1, 2003, TSA was an operating administration within the Department of Transportation (DOT). While part of DOT, TSA established several Privacy Act systems of records. Under DOT practice, DOT identified those TSA systems of records that are exempt from one or more provisions of the Privacy Act (pursuant to 5 U.S.C. 552a(j) or (k) both) in a system notice published in the Federal Register and in an appendix to DOT's Privacy Act regulations (49 CFR part 10, Appendix). On December 24, 2002, DOT published a proposed rule exempting three TSA systems of records from several provisions of the Privacy Act. See 67 FR 78403, Dec. 24, 2002.

As of March 1, 2003, TSA transferred to the Department of Homeland Security (DHS) and is now republishing the exemptions proposed on December 24, 2002, for its three systems of records now designated as DHS/TSA 001, 002, and 004. TSA also is proposing to exempt DHS/TSA 001 from an additional provision of the Privacy Act. In addition, TSA proposes to exempt five new systems of records from one or more provisions of the Privacy Act.

The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires that TSA consider the impact of paperwork and other information collection burdens imposed on the public. We have determined that there are no current or new information collection requirements associated with this proposed rule.

This proposal is not a “significant regulatory action” within the meaning of Executive Order 12886. Because the economic impact should be minimal, further regulatory evaluation is not necessary. Moreover, I certify that this proposal would not have a significant economic impact on a substantial number of small entities, because the reporting requirements themselves are not changed and because it applies only to information on individuals.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), (Pub. L. 104-4, 109 Stat. 48), requires Federal agencies to assess the effects of certain regulatory actions on State, local, and tribal governments, and the private sector. UMRA requires a written statement of economic and regulatory alternatives for proposed and final rules that contain Federal mandates. A “Federal mandate” is a new or additional enforceable duty, imposed on any State, local, or tribal government, or the private sector. If any Federal mandate causes those entities to spend, in aggregate, $100 million or more in any one year the UMRA analysis is required. This proposal would not impose Federal mandates on any State, local, or tribal government or the private sector.

TSA has analyzed this proposed rule under the principles and criteria of Executive Order 13132, Federalism. We determined that this action 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, and therefore would not have federalism implications.

TSA has reviewed this action for purposes of the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4347) and has determined that this action will not have a significant effect on the human environment.

The energy impact of this document has been assessed in accordance with the Energy Policy and Conservation Act (EPCA) Public Law 94-163, as amended (42 U.S.C. 6362). We have determined that this rulemaking is not a major regulatory action under the provisions of the EPCA.

In consideration of the foregoing, the Transportation Security Administration proposes to amend Chapter XII of Title 49, Code of Federal Regulations, as follows:

1. Add a part 1507 to read as follows:

This Federal Register document is also accessible via the internet at the website of the Office of the Federal Register's website at: http://www/access/gpo.gov/su_docs/aces140.html.

The Magnuson-Stevens Act requires each regional fishery management council to submit fishery management plans or plan amendments to NMFS for review and approval, disapproval, or partial approval. The Magnuson-Stevens Act also requires NMFS, immediately upon receiving a fishery management plan or plan amendment, to publish notification in the Federal Register that the fishery management plan or plan amendment is available for public review and comment. At the end of the comment period, NMFS considers the public comments received during the comment period described above in determining whether to approve, partially approve, or disapprove the fishery management plan or plan amendment.

Amendment 16-1 would set a process and standards by which the Council will specify rebuilding plans for groundfish stocks declared overfished by the Secretary of Commerce. Amendment 16-1 is intended to ensure that Pacific Coast groundfish overfished species rebuilding plans meet the requirements of the Magnuson-Stevens Act in particular National Standard 1 on overfishing and § 304(e), which addresses rebuilding overfished fisheries. Amendment 16-1 is also intended to partially respond to a Court order in Natural Resources Defense Council, Inc. v. Evans, 168 F. Supp. 2d 1149 (N.D. Cal 2001,) in which NMFS was ordered to provide Pacific Coast groundfish rebuilding plans as FMPs, FMP amendments, or regulations, per the Magnuson-Stevens Act. Amendment 16-1 will be followed by Amendment 16-2, which was adopted by the Council at its June 2003 meeting. If approved, Amendment 16-2 would implement rebuilding plans for canary rockfish, darkblotched rockfish, lingcod, and Pacific ocean perch.

Under Amendment 16-1, initial rebuilding plans for overfished species would be incorporated into the FMP via FMP amendments and implemented through Federal regulations. The two rebuilding parameters that control the establishment of the annual or biennial optimum yield of each overfished species would be codified in the Code of Federal Regulations. If, after a new stock assessment, the Council and NMFS conclude that these should be revised, the revision will be done through a notice and comment rulemaking, and the updated values codified in the Code of Federal Regulations. Amendment 16-1 would also set standards for the frequency of Council review of rebuilding plans such that whenever the species in question has a new stock assessment, the plan will be reviewed for whether it is expected to achieve the population size and structure to support maximum sustainable yield within the plan's rebuilding period. Rebuilding plans would be reviewed at least every 2 years for their effects on fishing communities, for their distribution of conservation burdens, for the need to protect habitat, and for public awareness of rebuilding programs. Individual species rebuilding plans would also identify plan-specific standards for determining whether and when the progress of rebuilding for that particular species has been adequate. Finally, Amendment 16-1 requires that, if a species managed under a rebuilding plan is listed under the Endangered Species Act (ESA), jeopardy standards or a recovery plan under the ESA would take precedence over the rebuilding plan if they were to establish higher rebuilding and/or recovery standards than those in the rebuilding plans. Beyond these substantive revisions to the FMP, Amendment 16-1 also includes a series of lesser, primarily editorial, changes to the FMP. These minor technical additions, corrections, and changes update FMP definitions, update references to management parameters, re-arrange portions of different FMP chapters so that they read more logically, and update different sections of the FMP to require in the FMP, rather than just in Federal regulations, the existing federal observer program for groundfish fisheries.

Public comments on Amendment 16-1 must be received by October 17, 2003, to be considered by NMFS in the decision whether to approve, disapprove, or partially approve Amendment 16-1. A proposed rule to implement Amendment 16-1 has been submitted for Secretarial review and approval. NMFS expects to publish and request public comments on proposed regulations to implement Amendment 16-1 in the near future.

The groundfish fisheries in the exclusive economic zone (EEZ) of the BSAI are managed under the FMP. The North Pacific Fishery Management Council (Council) prepared the FMP under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act), 16 U.S.C. 1801, et seq. Regulations implementing the FMP appear at 50 CFR part 679. General regulations governing U.S. fisheries also appear at 50 CFR part 600.

The Council submitted Amendment 77 for Secretary of Commerce review, and it published a Notice of Availability of the FMP amendment in the Federal Register on July 22, 2003 (68 FR 43342), with comments on the FMP amendment invited through September 22, 2003.

Comments may address the FMP amendment, the proposed rule, or both, but must be received by September 22, 2003 to be considered in the approval/disapproval decision on the FMP amendment. All comments received by that time, whether specifically directed to the FMP amendment or to the proposed rule, will be considered in the approval/disapproval decision on the FMP amendment.

Amendment 77 is intended to respond to concerns that the stability of the fully utilized Pacific cod fishery is threatened by increased competition. This competition has been fueled in part by recent increases in the market value of Pacific cod products and in part by decreases in opilio crab guideline harvest level (GHL). Participants in the BSAI fixed gear Pacific cod fishery include hook-and-line and pot gear fishermen with extensive catch histories. Absent the current gear allocations under Amendment 64, which are set to sunset on December 31, 2003, no regulatory mechanism is in place that would prevent one sector from increasing its effort in the fishery and from eroding another sector's relative historical share. The proposed split between the two sectors of the Pacific cod pot gear fishery is similarly intended to prevent one sector from eroding the other's market share.

Formal allocation of the BSAI Pacific cod TAC among gear types began in 1994 with the passage of Amendment 24 to the FMP. Amendment 24 and subsequently Amendment 46 allocated the Pacific cod TAC among vessels using jig gear, trawl gear, and fixed gear (hook-and-line and pot). Under Amendment 46, which was implemented in 1997, 2 percent of the TAC was reserved for jig gear, 51 percent for fixed gear, and 47 percent for trawl gear. The amendment further split the trawl apportionment equally between catcher vessels and catcher/processors, but did not split the fixed gear allocation between hook-and-line and pot gear vessels.

At its April 1999 meeting, the Council initiated an analysis to examine the probable effects of further splitting the fixed gear allocation of Pacific cod. In October of that year, the Council approved Amendment 64, which allocated the fixed gear portion of the BSAI TAC among its four sectors as follows:

•80 percent - hook-and-line catcher/processors;

•0.3 percent - hook-and-line catcher vessels;

•18.3 percent - pot vessels;

•1.4 percent - catcher vessels less than 60 ft (18.3 m) length overall (LOA), using pot or hook-and-line gear.

The percentages were roughly based on the historical harvest shares of each gear sector from 1995 through 1998, with the exception of the allocation to catcher vessels less than 60 ft (18.3 m) LOA, which received more than their actual historical share.

Amendment 64 was approved by the U.S. Secretary of Commerce in July 2000 and became effective on September 1, 2000 (65 FR 51553, August 24, 2000). Amendment 64 and its implementing rule include a sunset date of December 31, 2003; the allocations established for the fixed gear sectors will expire at that time.

Amendment 77 and its implementing rule would supersede Amendment 64. It would remove the sunset provision for the fixed gear sector allocations established by Amendment 64. It would further allocate the pot sector's share between pot catcher vessels and pot catcher/processors. It would also change the rollover provisions for unused quota from the jig gear sector, in effect reallocating some quota that is typically allocated to the catcher/processor sector to the less than 60 ft (18.3 m) LOA catcher vessel sector. Each of these provisions is discussed below.

Hook-and-line and pot gear fishermen have expressed concern with the pending expiration of the fixed gear allocations for BSAI Pacific cod under Amendment 64, and the potential for serious disruption to the fishery if no gear allocations are in place for the 2004 fishing year. Increased prices for Pacific cod, reduced crab GHLs, and shortened or canceled crab seasons due to low resource abundance have resulted in increased harvests of Pacific cod by vessels using pot gear. Fishermen that are displaced from the crab fisheries have expressed interest in fishing for Pacific cod, spurring concerns by long-term Pacific cod fishermen about erosion of their gear harvest shares in the fishery in favor of vessels using pot gear with limited historical participation in the fishery. Approval of Amendment 77 would maintain the status quo allocations of Pacific cod for the fixed gear sector with some modifications, including a change in the rollover provisions for jig gear and a split in the allocation between the two sectors of the Pacific cod pot gear fishery.

Amendment 77 would split the pot gear sector share of the TAC between pot catcher/processors and pot catcher vessels. In October 1999, when the Council approved Amendment 64, the pot catcher/processor sector requested a direct gear allocation, similar to the separate allocations the hook-and-line sectors received under Amendment 64. The Council acknowledged that a similar split between catcher/processors and catcher vessels using pot gear might be desirable. However, because the public had not been given an opportunity to comment on the idea, the Council, delaying the action, decided to include the proposal in a follow-up amendment (proposed BSAI Amendment 68 to the FMP).

In June 2000, the Council considered Amendment 68 to create separate allocations for the pot catcher/processor and pot catcher vessel sectors, but decided to again delay action until the allocation to pot gear sectors could be included in one FMP amendment that would also address the issues associated with the expiration of Amendment 64.

Under Amendment 77 as adopted by the Council, the pot share of the BSAI Pacific cod fixed gear TAC would be allocated between pot catcher/processors and pot catcher vessels based on catch histories by the two sectors from 1998 through 2001. In effect, this action would split the pot gear vessel quota, providing 82 percent to catcher vessels and 18 percent to catcher/processors. Catcher vessels, which have been catching an increasing proportion of the harvest over recent years, would receive about 6 percent more than they would if the split were based on 1995-1999 catch histories, the earliest option analyzed in the EA/RIR/IRFA.

With the pot catcher vessel and pot catcher/processor split taken into account, the fixed gear sectors under Amendment 77 would receive the following shares of the BSAI Pacific cod fixed gear TAC:

• 80.0 percent to hook-and-line catcher/processors;

• 0.3 percent to hook-and-line catcher vessels;

• 3.3 percent to pot catcher/processors;

• 15.0 percent to pot catcher vessels; and

• 1.4 percent to catcher vessels less than 60 ft (18.3 m) LOA, using pot or hook-and-line gear.

The proposed rule implementing Amendment 77 would also include new rollover requirements for unharvested portions of the jig sector allocation. Currently, regulatory provisions authorized under Amendment 64 require that unused portions of the overall BSAI Pacific cod allocations to trawl and jig gear be reallocated 95 percent to the hook-and-line catcher/processor sector and 5-percent to vessels using pot gear. Furthermore, reallocation of the unused portion of the jig gear TAC is not authorized until September 15 of each fishing year.

Under Amendment 77, unused trawl quota would be reallocated in nearly the same manner, except that the 5 percent pot gear reallocation would be split further between the two sectors of the pot vessel fleet, using the same percentages as would apply to the overall pot vessel quota, as explained above. The reallocated trawl gear would, therefore, amount to 95 percent to the hook-and-line catcher/processor sector, 0.9 percent to pot catcher/processors, and 4.1 percent to pot catcher vessels.

Unused jig gear quota, however, would be handled differently than under current regulations. The quota would be apportioned to the jig gear sector through the annual harvest specification process on a trimester basis. The three seasonal apportionments for the jig gear allocation would be 40 percent, 20 percent, and 40 percent respectively for January April, May August, and September December. Projected amounts of unharvested jig gear seasonal apportionments would be initially reallocated each jig season to catcher vessels less than 60 ft (18.3 m) using hook-and-line or pot gear. Only if the Regional Administrator determines that the small vessel fleet would not be able to harvest the additional amounts of Pacific cod would these jig gear rollover amounts be made available to the hook-and-line catcher/processor sector.

In effect, the new rollover provisions in Amendment 77 would primarily represent a reallocation from the hook-and-line catcher/processor fleet to smaller vessels. The jig sector harvested an average of 6 percent of its BSAI Pacific cod allocation from 1995 to 2001. Since the implementation of Amendment 64 in 2000, quota reallocated from the jig sector has accounted for about 3.3 percent of the hook-and-line catcher/processor sector's total catch and 0.5 percent of the pot sector's total catch. Under the proposed action, 40 percent of the jig quota, less whatever catch the jig gear sector is projected to take, could be potentially reallocated to the less than 60 ft (18.3 m) LOA catcher fleet by April, more than doubling the total Pacific cod quota available to that fleet (based on the 2003 TAC). This seasonal front-loading would benefit the small vessel fleet not only by increasing its quota at a time when the fleet has just started fishing for Pacific cod, but also by reducing the risk of having to close the less than 60 ft (18.3 m) LOA fishery intermittently while the fleet waits for quota reallocated from the jig sector.

Members of the public testifying in favor of retaining the status quo for jig gear rollovers argued that such a reallocation should be considered only as part of an overall gear allocation discussion of all allocations affecting all sectors. Speakers stressed that when the Council approved Amendment 64 in 1999, giving the jig gear sector a two percent allocation, the parties involved understood that most of the jig gear sector's unused quota would continue to be reallocated to the catcher/processor fleet. Apportioning some of the unharvested jig allocation instead to the under 60 ft (18.3 m) LOA vessels was portrayed as reneging on a bargain, and speakers stressed that the amount of catch under discussion is not trivial.

Speakers who favored changing the way jig rollovers would be apportioned expressed their belief that the original intent of the two percent jig allocation was to develop the small boat fleet in support of coastal communities, that pot and hook-and-line vessels less than 60 ft (18.3 m) LOA play a similar role to jig vessels in community development, emphasized the extremely low bycatch rate of the small pot vessels, and said that the proportion of TAC affected was relatively minor.