For FYs 1991 through 2000, OBRA-90, as amended, required that the NRC recover approximately 100 percent of its budget authority, less the amount appropriated from the U.S. Department of Energy (DOE) administered NWF, by assessing fees. To address fairness and equity concerns raised by the NRC related to charging NRC license holders for agency budgeted costs that do not provide a direct benefit to the licensee, the FY 2001 Energy and Water Development Appropriations Act amended OBRA-90 to decrease the NRC's fee recovery amount by 2 percent per year beginning in FY 2001, until the fee recovery amount is 90 percent in FY 2005. As a result, the NRC is required to recover approximately 92 percent of its FY 2004 budget authority, less the amounts appropriated from the NWF, through fees. In the Energy and Water Development Appropriation Act, 2004 (Pub. L. 108-137), Congress appropriated $626.1 million to the NRC for FY 2004. This sum includes $33.1 million appropriated from the NWF. The total amount NRC is required to recover in fees for FY 2004 is approximately $545.6 million.

The NRC assesses two types of fees to meet the requirements of OBRA-90, as amended. First, license and inspection fees, established in 10 CFR Part 170 under the authority of the Independent Offices Appropriation Act of 1952 (IOAA), 31 U.S.C. 9701, recover the NRC's costs of providing special benefits to identifiable applicants and licensees. Examples of the services provided by the NRC for which these fees are assessed are the review of applications for new licenses, and for certain types of existing licenses, the review of renewal applications, the review of amendment requests, and inspections. Second, annual fees established in 10 CFR Part 171 under the authority of OBRA-90, recover generic and other regulatory costs not otherwise recovered through 10 CFR Part 170 fees.

The NRC is proposing to amend its licensing, inspection, and annual fees to recover approximately 92 percent of its FY 2004 budget authority less the appropriations received from the NWF. The NRC's total budget authority for FY 2004 is $626.1 million, of which approximately $33.1 million has been appropriated from the NWF. Based on the 92 percent fee recovery requirement, the NRC must recover approximately $545.6 million in FY 2004 through part 170 licensing and inspection fees, part 171 annual fees, and other offsetting receipts. The total amount to be recovered through fees and other offsetting receipts for FY 2004 is $19.3 million more than the amount estimated for recovery in FY 2003.

The FY 2004 fee recovery amount is reduced by a $3.5 million carryover from additional collections in FY 2003 that were unanticipated at the time the final FY 2003 fee rule was published. This leaves approximately $542.1 million to be recovered in FY 2004 through part 170 licensing and inspection fees, part 171 annual fees, and other offsetting receipts.

The NRC estimates that approximately $139.7 million will be recovered in FY 2004 from part 170 fees and other offsetting receipts. For FY 2004, the NRC also estimates a net adjustment of approximately $2.0 million for FY 2004 invoices that the NRC estimates will not be paid during the fiscal year, and for payments received in FY 2004 for FY 2003 invoices. The remaining $400.4 million would be recovered through the part 171 annual fees, compared to $396.8 million for FY 2003.

The primary reason for the increase in total fees for FY 2004 is that the amount to be recovered for FY 2004 includes $51.1 million for homeland security activities, compared to $35.4 million in FY 2003. Other reasons for the fee increases include the 2004 Federal pay raise and the increased resources for reactor license renewals and new reactor licensing.

Table I summarizes the budget and fee recovery amounts for FY 2004. Due to rounding, adding the individual numbers in the table may result in a total that is slightly different than the one shown.

The FY 2004 final fee rule will be a “major rule” as defined by the Small Business Regulatory Enforcement Fairness Act of 1996. Therefore, the NRC's fee schedules for FY 2004 would become effective 60 days after publication of the final rule in the Federal Register . The NRC will send an invoice for the amount of the annual fee to reactors and major fuel cycle facilities upon publication of the FY 2004 final rule. For these licensees, payment would be due on the effective date of the FY 2004 rule. Those materials licensees whose license anniversary date during FY 2004 falls before the effective date of the final FY 2004 rule would be billed for the annual fee during the anniversary month of the license at the FY 2003 annual fee rate. Those materials licensees whose license anniversary date falls on or after the effective date of the final FY 2004 rule would be billed for the annual fee at the FY 2004 annual fee rate during the anniversary month of the license, and payment would be due on the date of the invoice.

As a matter of courtesy, the NRC plans to continue mailing the proposed fee rule to all licensees, although, as a cost saving measure, in accordance with its FY 1998 announcement, the NRC has discontinued mailing the final fee rule to all licensees. Accordingly, the NRC does not plan to routinely mail the FY 2004 final fee rule or future final fee rules to licensees.

However, the NRC will send the final rule to any licensee or other person upon specific request. To request a copy, contact the License Fee Team, Division of Financial Management, Office of the Chief Financial Officer, at 301-415-7554, or e-mail fees@nrc.gov. The NRC plans to publish the final fee rule in May 2004. In addition to publication in the Federal Register , the final rule will be available on the Internet at http://ruleforum.llnl.gov for at least 90 days after the effective date of the final rule.

The NRC is proposing to make changes to 10 CFR Parts 170 and 171 as discussed in Sections A and B below.

The NRC is proposing to establish the hourly rates used to calculate fees and to adjust the part 170 fees based on the proposed hourly rates.

The proposed amendments are as follows:

The NRC is proposing to establish in § 170.20 two professional hourly rates for NRC staff time. These proposed rates would be based on the number of FY 2004 direct program full time equivalents (FTEs) and the FY 2004 NRC budget, excluding direct program support costs and NRC's appropriations from the NWF. These rates are used to determine the part 170 fees. The proposed rate for the reactor program is $157 per hour ($278,957 per direct FTE). This rate would be applicable to all activities for which fees are assessed under § 170.21 of the fee regulations. The proposed rate for the materials program (nuclear materials and nuclear waste programs) is $156 per hour ($276,598 per direct FTE). This rate would be applicable to all activities for which fees are assessed under § 170.31 of the fee regulations. In the FY 2003 final fee rule, the reactor and materials program rates were $156 and $158, respectively.

The primary reason for the increase to the reactor rate is the salary and benefits increase that results primarily from the Government-wide pay raise. While salary and benefits also increase for the materials program, the increase is offset by a reduction in overhead costs and allocated agency management and support costs under this program.

The method used to determine the two professional hourly rates is as follows:

a. Direct program FTE levels are identified for the reactor program and the materials program (nuclear materials and nuclear waste programs). All program costs, except contract support, are included in the hourly rate for each program by allocating them uniformly by the total number of direct FTEs for the program. Direct contract support, which is the use of contract or other services in support of the line organization's direct program, is excluded from the calculation of the hourly rates because the costs for direct contract support are recovered through part 170 fees.

b. All non-program direct costs for management and support and the Office of the Inspector General, are allocated to each program based on that program's costs.

This method results in the following costs which are included in the hourly rates. Due to rounding, adding the individual numbers in the table may result in a total that is slightly different than the one shown.

As shown in Table II, dividing the $335.7 million budgeted amount (rounded) included in the hourly rate for the reactor program by the reactor program direct FTEs (1203.4) results in a rate for the reactor program of $278,957 per FTE for FY 2004. The Direct FTE Hourly Rate for the reactor program would be $157 per hour (rounded to the nearest whole dollar). This rate is calculated by dividing the cost per direct FTE ($278,957) by the number of productive hours in one year (1,776 hours) as set forth in the revised OMB Circular A-76, “Performance of Commercial Activities.” Similarly, dividing the $81.1 million budgeted amount (rounded) included in the hourly rate for the materials program by the program direct FTEs (293.4) results in a rate of $276,598 per FTE for FY 2004. The Direct FTE Hourly Rate for the materials program would be $156 per hour (rounded to the nearest whole dollar). This rate is calculated by dividing the cost per direct FTE ($276,598) by the number of productive hours in one year (1,776 hours).

The NRC is proposing to adjust the current part 170 fees in §§ 170.21 and 170.31 to reflect the changes in the revised hourly rates. The full cost fees assessed under §§ 170.21 and 170.31 would be based on the proposed professional hourly rates and any direct program support (contractual services) costs expended by the NRC. Any professional hours expended on or after the effective date of the final rule would be assessed at the FY 2004 hourly rates.

The fees in §§ 170.21 and 170.31 that are based on the average time to review an application (“flat” fees) would be adjusted to reflect the change in the materials program professional hourly rate from FY 2003. The amounts of the materials licensing “flat” fees were rounded so that the amounts would be “ de minimis ” and the resulting flat fee would be convenient to the user. Fees under $1,000 are rounded to the nearest $10, fees that are greater than $1,000 but less than $100,000 are rounded to the nearest $100, and fees that are greater than $100,000 are rounded to the nearest $1,000.

The proposed licensing “flat” fees are applicable for fee categories K.1 through K.5 of § 170.21, and fee categories 1.C, 1.D, 2.B, 2.C, 3.A through 3.P, 4.B through 9.D, 10.B, 15.A through 15.E, and 16 of § 170.31. Applications filed on or after the effective date of the final rule would be subject to the revised fees in this proposed rule.

The NRC is also proposing to expand category 10 of § 170.31 to include category 10.C for evaluation of security plans, route approvals and surveys, and transportation security devices, including immobilization devices. There has been an increase in the number of transportation security activities that the NRC oversees and an increase in the number and types of licensees covered by the transportation security requirements. Therefore, the NRC believes that category 10 should be updated to clarify that licensees will be assessed full-cost fees for security-related activities as stated above.

Additionally, the NRC is proposing to modify § 170.21 category K. and § 170.31 category 15 to clarify the import and export license language. This clarification is being proposed to reflect the current work being performed under these categories and to ensure consistency with 10 CFR Part 110.

The NRC is proposing to modify category 13 of § 170.31, to include licensing and inspection fees under category 13.A and delete category 13.C. This change would be made so that § 170.31 corresponds with the categorization used in § 171.16(d).

Additionally, the NRC is proposing to modify § 170.12(f) to replace License Fee and Accounts Receivable Branch with Accounts Receivable Team. This change is being made so that the regulation reflects the current Office of the Chief Financial Officer organizational structure.

In summary, the NRC is proposing to amend 10 CFR Part 170 to—

1. Establish revised materials and reactor programs FTE hourly rates;

2. Revise the licensing fees to be assessed to reflect the reactor and materials program hourly rates;

3. Revise § 170.31 to add category 10.C to clarify transportation security activities;

4. Modify § 170.21 category K. and § 170.31 category 15 to ensure consistency with 10 CFR Part 110;

5. Make an administrative change to fee category 13 of § 170.31 to be consistent with category 13 of § 171.16(d).

6. Revise § 170.12(f) to replace License Fee and Accounts Receivable Branch with Accounts Receivable Team.

The NRC proposes to revise the annual fees for FY 2004 as follows.

The NRC is proposing to establish rebaselined annual fees for FY 2004. The Commission's policy commitment, made in the statement of considerations accompanying the FY 1995 fee rule (60 FR 32225; June 20, 1995), and further explained in the statement of considerations accompanying the FY 1999 fee rule (64 FR 31448; June 10, 1999), determined that base annual fees will be re-established (rebaselined) at least every third year, and more frequently if there is a substantial change in the total NRC budget or in the magnitude of the budget allocated to a specific class of licenses. The fees were last rebaselined in FY 2003. Based on the substantial change in the total budget from FY 2003 to FY 2004 and the magnitude of the budget allocated to certain classes of licensees, the Commission has determined that it is appropriate to rebaseline the annual fees again this year. Rebaselining fees would result in increased annual fees compared to FY 2003 for three classes of licenses (power reactors, rare earth mills, and transportation), and decreased annual fees for three classes (spent fuel storage/reactor decommissioning, non-power reactors, and fuel facilities). For the uranium recovery and small materials classes, some of the categories (sub-classes) of licenses would have decreased annual fees and others would have increased annual fees.

The annual fees in §§ 171.15 and 171.16 would be revised for FY 2004 to recover approximately 92 percent of the NRC's FY 2004 budget authority, less the estimated amount to be recovered through part 170 fees and the amounts appropriated from the NWF. The total amount to be recovered through annual fees for FY 2004 is $400.4 million, compared to $396.8 million for FY 2003.

Within the nine fee classes of licensees, the FY 2004 annual fees will decrease for many categories of licenses, increase for other categories, and for seven categories remain the same from the previous year. Of the seven categories that remain the same, two of the categories comprise the largest number of materials licensees (3P and 7C). The increases in annual fees range from approximately .9 percent for the category of other source material licenses to approximately 108 percent for the uranium recovery disposal incidental to operations category. The proposed decreases in annual fees range from approximately .4 percent for the category of commercial collection and laundry of items contaminated with byproduct material, source material, or special nuclear material ( i.e. , nuclear laundry category) to approximately 77 percent for conventional mills category.

Factors affecting the changes to the annual fee amounts include: adjustments in budgeted costs for the different classes of licenses; the reduction in the fee recovery rate from 94 percent for FY 2003 to 92 percent for FY 2004; the estimated part 170 collections for the various classes of licenses; the decrease in the number of licensees for certain categories of licenses; and the $3.5 million carryover from additional collections in FY 2003 that were unanticipated at the time the final FY 2003 final rule was published ( i.e. , there was no carryover from FY 2002 to reduce the FY 2003 fees).

Table III below shows the proposed rebaselined annual fees for FY 2004 for a representative list of categories of licenses.

The annual fees assessed to each class of licenses include a surcharge to recover those NRC budgeted costs that are not directly or solely attributable to the classes of licenses, but must be recovered from licensees to comply with the requirements of OBRA-90, as amended. Based on the FY 2001 Energy and Water Development Appropriations Act which amended OBRA-90 to decrease the NRC's fee recovery amount by 2 percent per year beginning in FY 2001, until the fee recovery amount is 90 percent in FY 2005, the total surcharge costs for FY 2004 will be reduced by approximately $47.4 million. The total FY 2004 budgeted costs for these activities and the reduction to the total surcharge amount for fee recovery purposes are shown in Table IV. Due to rounding, adding the individual numbers in the table may result in a total that is slightly different than the one shown.

As shown in Table IV, $21.2 million would be the total surcharge cost allocated to the various classes of licenses for FY 2004. The NRC would continue to allocate the surcharge costs, except LLW surcharge costs, to each class of licenses based on the percent of the budget for that fee class compared to the NRC's total budget. The NRC would continue to allocate the LLW surcharge costs based on the volume of LLW disposal of certain classes of licenses. The proposed surcharge costs allocated to each class would be included in the annual fee assessed to each licensee. The proposed FY 2004 surcharge costs allocated to each class of licenses are shown in Table V. Due to rounding, adding the individual numbers in the table may result in a total that is slightly different than the one shown.

The budgeted costs allocated to each class of licenses and the calculations of the rebaselined fees are described in a. through h. below. The workpapers which support this proposed rule show in detail the allocation of NRC's budgeted resources for each class of licenses and how the fees are calculated. The workpapers are available electronically at the NRC's Electronic Reading Room on the Internet at Web site address http://www.nrc.gov/reading-rm/adams.html. During the 30-day public comment period, the workpapers may also be examined at the NRC Public Document Room located at One White Flint North, Room O-1F22, 11555 Rockville Pike, Rockville, MD 20852-2738.

a. Fuel Facilities. The FY 2004 budgeted costs to be recovered in annual fees assessment to the fuel facility class of licenses is approximately $24.7 million compared to $27.0 million in FY 2003. The annual fee decrease is attributable to the increase in part 170 fees for the fuel facility class due to an increase in the mixed-oxide fuel effort. The annual fees are allocated to the individual fuel facility licensees based on the effort/fee determination matrix established in the FY 1999 final fee rule (64 FR 31448; June 10, 1999). In the matrix (which is included in the NRC workpapers that are publicly available), licensees are grouped into five categories according to their licensed activities ( i.e. , nuclear material enrichment, processing operations, and material form) and according to the level, scope, depth of coverage, and rigor of generic regulatory programmatic effort applicable to each category from a safety and safeguards perspective. This methodology can be applied to determine fees for new licensees, current licensees, licensees in unique license situations, and certificate holders.

The methodology is adaptable to changes in the number of licensees or certificate holders, licensed or certified material and/or activities, and total programmatic resources to be recovered through annual fees. When a license or certificate is modified, it may result in a change of category for a particular fuel facility licensee as a result of the methodology used in the fuel facility effort/fee matrix. Consequently, this change may also have an effect on the fees assessed to other fuel facility licensees and certificate holders. For example, if a fuel facility licensee amends its license/certificate in such a way ( e.g. , decommissioning or license termination) that results in it not being subject to part 171 costs applicable to the fee class, then the budgeted costs for the safety and/or safeguards components will be spread among the remaining fuel facility licensees/certificate holders, resulting in higher fees for those affected licensees.

The methodology is applied as follows. First, a fee category is assigned based on the nuclear material and activity authorized by license or certificate. Although a licensee/certificate holder may elect not to fully use a license/certificate, the license/certificate is still used as the source for determining authorized nuclear material possession and use/activity. Next, the category and license/certificate information are used to determine where the licensee/certificate holder fits into the matrix. The matrix depicts the categorization of licensees/certificate holders by authorized material types and use/activities, and the relative generic regulatory programmatic effort associated with each category. The programmatic effort (expressed as a value in the matrix) reflects the safety and safeguards risk significance associated with the nuclear material and use/activity, and the commensurate generic regulatory program ( i.e. , scope, depth and rigor) level of effort.

The effort factors for the various subclasses of fuel facility licenses are summarized in Table VI.

Applying these factors to the safety, safeguards, and surcharge components of the $24.9 million total annual fee amount for the fuel facility class results in annual fees for each licensee within the categories of this class summarized in Table VII.

b. Uranium Recovery Facilities. The proposed FY 2004 budgeted costs, including surcharge costs, to be recovered through annual fees assessed to the uranium recovery class is approximately $547,000. Approximately $453,000 of this amount would be assessed to DOE. The remaining $94,000 would be recovered through annual fees assessed to conventional mills, in-situ leach solution mining facilities, and 11e.(2) mill tailings disposal facilities.

Consistent with the change in methodology adopted in the FY 2002 final fee rule (67 FR 42612; June 24, 2002), the total annual fee amount, less the amounts specifically budgeted for Title I activities, is allocated equally between Title I and Title II licensees. This would result in an annual fee being assessed to DOE to recover the costs specifically budgeted for NRC's Title I activities plus 50 percent of the remaining annual fee amount, including the surcharge and generic/other costs, for the uranium recovery class. The remaining 50 percent of the surcharge and generic/other costs are assessed to the NRC Title II program licensees that are subject to annual fees. The costs to be recovered through annual fees assessed to the uranium recovery class are shown below. Due to rounding, adding the individual numbers in the table may result in a total that is slightly different than the one shown.

The Federal Credit Union Act permits FCUs and corporate credit unions to purchase mortgage related securities (MRS) subject to such regulations as the NCUA Board may prescribe. 12 U.S.C. 1757(15)(B). NCUA regulations generally permit the purchase of CMOs, a multi-class MRS, but not if the CMO is a stripped mortgage backed security (SMBS). 12 CFR 703.14(d) and 703.16(e); 704.5(c)(5) and (h)(4). SMBS, including interest-only CMOs (IOs) and principal-only CMOs (POs) are, when purchased individually, highly volatile and risky investments. For example, in a declining interest rate environment, such as that experienced over the last few years, the value of an IO can drop precipitously in a short time period. Accordingly, individual SMBS are generally not suitable investments for most credit unions.

Currently, many CMO issues contain one or more classes of exchangeable CMOs. An exchangeable CMO represents a beneficial ownership interest in a combination of two or more underlying CMOs, and the owner may pay a fee and take delivery of the underlying CMOs. In many cases, these underlying CMOs include IOs and POs.

Because NCUA regulations prohibit investment in SMBS, the regulations also prohibit investment in an exchangeable CMO that represents an interest in one or more IOs or POs. Certain exchangeable CMOs representing IOs or POs, however, do not carry the risk or raise the same safety and soundness concerns associated with direct investment in an SMBS. For example, an exchangeable CMO might represent ownership in two securities: (1) An interest-bearing CMO ( i.e. , a non-SMBS CMO) with a coupon of 5.0 percent and (2) a SMBS in the form of an IO representing 0.5 percent interest on the interest-bearing CMO. See RCR class PA from Federal National Mortgage Association (Fannie Mae) Prospectus Supplement 2001-73. As indicated in the Prospectus Supplement for this particular combination, the notional principal of the underlying IO is not large relative to the principal of the underlying interest-bearing CMO and will decline at the same rate as the principal on the interest-bearing CMO. As a result, the risks associated with this combination more closely resemble the risks associated with the underlying interest-bearing CMO than the risks associated with the IO or any other SMBS.

This proposed rule, if adopted, will authorize FCUs and corporate credit unions to invest in an exchangeable CMO representing interests in one or more IOs or POs if the exchangeable CMO meets certain conditions.

One condition concerns the rate of amortization of the underlying IOs and POs. Specifically, for an exchangeable CMO representing one or more IOs, the notional principal of each IO must decline at the same rate as the principal on one or more non-IO CMOs included in the combination. For an exchangeable CMO representing one or more POs, the principal of each PO must decline at the same rate as the notional principal of one or more IOs included in the combination or at the same rate as the principal on one or more interest-bearing CMOs included in the combination. This requirement helps mitigate the risk associated with the IO and PO SMBS.

Each exchangeable CMO has an offering circular, which includes the final prospectus and all supplements to that prospectus, that contains performance characteristics for the exchangeable CMO and its various underlying CMOs. One set of tables, labeled as “decrement” or “declining balance” tables, displays the remaining principal (or, for IOs, the notional principal) balance on each CMO at periodic intervals following issuance, assuming certain principal repayment speeds for the mortgage pool as a whole. The Board believes that the principal, or notional principal, of two underlying CMOs will decline at the same rate only if the two CMOs share the same decrement or declining balance table. The rule text also requires this condition be satisfied throughout the life of the investment, so that a credit union may not exercise a call option, or other embedded option, that causes the exchangeable CMO to fail this condition after purchase.

The amortization condition discussed above helps mitigate risk, but by itself will not ensure that an exchangeable CMO representing interests in underlying SMBS does not perform like a stand-alone SMBS. For example, an issuer might fashion an exchangeable CMO that represents ownership in two securities: (1) An interest-bearing CMO and (2) an IO, but with the notional principal of the IO much larger than the principal of the interest-bearing CMO. Even assuming the notional principal on the IO declines at the same rate as the principal on the interest-bearing CMO, the exchangeable CMO representing these two interests will still have the substantive risk characteristics of the underlying IO.

Accordingly, the Board finds it necessary to add another condition: that, at the time of purchase, the ratio of the market price to the remaining principal balance is between .8 and 1.2, meaning that the discount or premium of the market price to par must be less than 20 points. In the Board's view, if an exchangeable CMO is priced at a premium of 20% or more to the remaining principal balance due on the CMO at the time of purchase, or its “par,” the CMO has substantially the same risk characteristics as an IO. Similarly, if an exchangeable CMO is priced at a discount of 20% or more to par, it has substantially the same risk characteristics as a PO. “Remaining principal balance” refers to the actual principal remaining to be paid, not notional principal.

The proposed rule also states that credit unions may not exercise the right to exchange an exchangeable CMO if it represents an interest in one or more impermissible SMBS. Corporate credit unions with part I or part II Expanded Authorities may exercise the exchange function if the resulting SMBS are all permissible under those authorities.

This proposed rule also adds a definition of collateralized mortgage obligation to part 703 of NCUA's rules and regulations. This definition parallels the definition found in NCUA's corporate rule. 12 CFR 704.2.

The Board also proposes to make several technical corrections and other minor changes to parts 703 and 704.

The Board proposes to modify the definitions of put and call in § 703.2. Puts and calls are parallel devices, with a put giving the holder the option to sell, and a call giving the holder an option to buy, a security under certain conditions. The proposed definitions reflect this relationship more closely. The Board also proposes to modify the definition of put to clarify that the exercise of a put need only be during a fixed time period rather than, as currently stated, “at any time until the stated expiration date.”

Section 703.2 defines “custodial agreement” and limits such agreements to those where one party agrees to exercise ordinary care in the safekeeping of securities. The term “custodial agreement” only appears in § 703.9(a), and that section references a “written custodial agreement that requires the safekeeper to exercise, at least, ordinary care.” Accordingly, the use of “ordinary care” in the definition of custodial agreement is redundant and the Board proposes to eliminate it.

The Board wishes to amend the current definition of derivative in part 703. The Board intends that the term derivative mean any derivative instrument that, under generally accepted accounting principles (GAAP), must be recognized as an asset or liability in the statement of financial condition and be valued at fair market value. Currently, FASB Statement No. 133 (FAS 133), as amended and interpreted, discusses the accounting treatment of derivative instruments, which include certain financial contracts and other contracts that meet conditions specified in FAS 133. Stand-alone interest rate swaps, options, swaptions, and futures, for example, are derivative instruments under FAS 133 that must be recognized as assets or liabilities and valued at fair market value and so are considered to be derivatives for purposes of parts 703 and 704. In contrast, embedded options that are not required under GAAP to be accounted for separately from the host contract are not derivatives for purposes of parts 703 and 704.

Sections 703.8(b)(3) and 703.9(d) employ the term “nationally-recognized statistical rating agencies.” The Board proposes to replace this term with the more commonly used “nationally-recognized statistical rating organizations.”

Section 703.14(g) allows for the purchase, subject to certain conditions, of European financial options contracts to fund the payment of dividends on member share certificates. One condition in paragraph (g)(4) requires that “[t]he options' expiration dates coincide with the maturity date of the share certificate.” The Board proposes a change to allow these options to expire “no later than the maturity date of the share certificate.” This change will provide more flexibility in the use of options.

In § 703.14(g)(13), the Board proposes to replace the word “it” with “its.”

In § 704.2, the Board proposes to amend the definitions of “small business related security” and “weighted average life” to make them identical to the definitions of those terms in § 703.2. Also, the Board proposes to revise § 704.8(a)(4) by changing the phrase “interest rate risk simulation tests” to “interest rate sensitivity analysis requirements.” Section 704.8(a)(4) cross-references § 704.8(d) which uses the phrase “interest rate sensitivity analysis requirements.” The Board also proposes to add a definition of “derivatives” to part 704. The proposed part 704 definition is identical to the amended definition proposed for part 703 and discussed above.

The Regulatory Flexibility Act requires NCUA to prepare an analysis to describe any significant economic impact a proposed rule may have on a substantial number of small credit unions (those under $10 million in assets). This proposed rule expands the investment authority granted to FCUs and corporate credit unions. The proposed amendments will not have a significant economic impact on a substantial number of small credit unions and, therefore, a regulatory flexibility analysis is not required.

NCUA has determined that the final rule would not increase paperwork requirements under the Paperwork Reduction Act of 1995 and regulations of the Office of Management and Budget.

Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. In adherence to fundamental federalism principles, NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order. The proposed rule would not have substantial direct effects on the states, on the connection between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. NCUA has determined that this proposed rule does not constitute a policy that has federalism implications for purposes of the executive order.

The NCUA has determined that this proposed rule would not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681 (1998).

The Small Business Regulatory Enforcement Act of 1996 (Pub. L. 104-121) provides generally for congressional review of agency rules. A reporting requirement is triggered in instances where NCUA issues a final rule as defined by section 551 of the Administrative Procedure Act. 5 U.S.C. 551. The Office of Management and Budget has determined that this rule is not a major rule for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.

For the reasons stated in the preamble, NCUA proposes to amend 12 CFR part 703 and 12 CFR part 704 as follows:

In accordance with Department of Defense, Washington Headquarters Services, Administrative Instruction Number 102, “A DoD issuance or document shall be published in the Federal Register for public comment if it * * * has a direct or substantial impact on the public or any significant portion of the public.” The Office of Management and Budget (OMB) has provided all government agencies guidelines for ensuring and maximizing the quality, objectivity, utility, and integrity of information disseminated to the public. OMB has directed the agencies to publish a notice in the Federal Register , by May 1, 2002, that their draft policies complying with the OMB requirement are available for public view and comment on their public Web sites. The draft Department of Defense Instruction is available on the Deputy General Counsel (Personnel and Health Policy), Office of the General Counsel public Web site located at http://www.defenselink.mil/dodgc/php .

It has been determined that 32 CFR part 153 is not a significant regulatory action. This rule does not: (1) Have an annual effect to the economy of $100 million or more or adversely affect in a material way the economy; a section of the economy; productivity; competition; jobs, the environment; public health or safety; or State, local, or tribal governments or communities; (2) create serious inconsistency or otherwise interfere with an action taken or planned by another Agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs, or the rights and obligation or recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in Executive Order 12866.

It has been certified that this part is not subject to the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) because it would not, if promulgated, have a significant economic impact on a substantial number of small entities. This part presents no economic impact and solely involves the rules and procedures governing the procedures for the Department of Defense to comply with and implement the Military Extraterritorial Jurisdiction Act of 2000 (18 U.S.C. 3261 et seq. )

It has been certified that this part does not impose any reporting or record keeping requirements under the Paperwork Reduction Act of 1995.

It has been determined that this part does not involve a Federal Mandate that may result in the expenditure by State, local and tribal governments, in the aggregate, or by the private sector, of $100 million or more and that such rulemaking will not significantly or uniquely affect small governments.

Accordingly, 32 CFR part 153 is proposed to be revised to read as follows:

The public hearings will provide interested parties the opportunity to present data, views, or arguments concerning the proposed rules. The EPA may ask clarifying questions during the oral presentations, but will not respond to the presentations at that time. Written statements and supporting information submitted during the comment period will be considered with the same weight as any oral comments and supporting information presented at the public hearings. Written comments must be postmarked by the last day of the comment period, as specified in the proposals.

If you would like to present oral testimony at the hearings, please notify JoAnn Allman, U.S. EPA, Office of Air Quality Planning and Standards, Air Quality Strategies and Standards Division, C539-02, Research Triangle Park, NC 27711, telephone (919) 541-1815, e-mail allman.joann@epa.gov no later than February 20, 2004. She will provide you with a specific time and date to speak. Oral testimony will be limited to 10 minutes for each commenter to address either or both proposals. We will not be providing equipment for commenters to show overhead slides or make computerized slide presentations unless we receive special requests in advance. Commenters should notify JoAnn Allman if they will need specific equipment. The hearing schedules, including lists of speakers, will be posted on EPA's Web pages for the proposals at http://www.epa.gov/interstateairquality and http://www.epa.gov/mercury prior to the hearing. Verbatim transcripts of the hearings and written statements will be included in the rulemaking dockets.

The EPA has established the official public docket for the Interstate Air Quality Rule under Docket ID No. OAR-2003-0053. The EPA has established the official public docket for the Utility Mercury Reductions Rule under Docket ID No. OAR-2002-0056. The EPA has also developed web sites for the proposals at the addresses given above. Please refer to the proposals, which were published in the Federal Register on January 30, 2004, for detailed information on accessing information related to the proposals.

For additional information see the direct final rule which is published in the rules section of this Federal Register .

1. The Regional Office has established an official public rulemaking file available for inspection at the Regional Office. EPA has established an official public rulemaking file for this action under Regional Material EDocket Number R01-OAR-2004-NH-0001. The official public file consists of the documents specifically referenced in this action, any public comments received, and other information related to this action. Although a part of the official docket, the public rulemaking file does not include Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. The official public rulemaking file is the collection of materials that is available for public viewing at the Office of Ecosystem Protection, U.S. Environmental Protection Agency, EPA New England Regional Office, One Congress Street, Suite 1100, Boston, MA. EPA requests that if at all possible, you contact the contact listed in the For Further Information Contact section to schedule your inspection. The Regional Office's official hours of business are Monday through Friday, 8:30 to 4:30 excluding federal Holidays.

2. Electronic Access. An electronic version of the public docket is available through EPA's Regional Material EDocket (RME) system, a part of EPA's electronic docket and comment system. You may access RME at http://docket.epa.gov/rmepub/index.jsp to review associated documents and submit comments. Once in the system, select “quick search,” then key in the appropriate RME Docket identification number.

You may also access this Federal Register document electronically through the Regulations.gov web site located at http://www.regulations.gov where you can find, review, and submit comments on Federal rules that have been published in the Federal Register, the Government's legal newspaper, and are open for comment.

For public commenters, it is important to note that EPA's policy is that public comments, whether submitted electronically or in paper, will be made available for public viewing at the EPA Regional Office, as EPA receives them and without change, unless the comment contains copyrighted material, CBI, or other information whose disclosure is restricted by statute. When EPA identifies a comment containing copyrighted material, EPA will provide a reference to that material in the version of the comment that is placed in the official public rulemaking file. The entire printed comment, including the copyrighted material, will be available at the Regional Office for public inspection.

3. Copies of the State submittal and EPA's technical support document are also available for public inspection during normal business hours, by appointment at the State Air Agency. Air Resources Division, Department of Environmental Services, 6 Hazen Drive, P.O. Box 95, Concord, NH 03302-0095.

You may submit comments electronically, by mail, or through hand delivery/courier. To ensure proper receipt by EPA, identify the appropriate rulemaking identification number by including the text “Public comment on proposed rulemaking R01-OAR-2004-NH-0001” in the subject line on the first page of your comment. Please ensure that your comments are submitted within the specified comment period. Comments received after the close of the comment period will be marked “late.” EPA is not required to consider these late comments.

1. Electronically. If you submit an electronic comment as prescribed below, EPA recommends that you include your name, mailing address, and an e-mail address or other contact information in the body of your comment. Also include this contact information on the outside of any disk or CD ROM you submit, and in any cover letter accompanying the disk or CD ROM. This ensures that you can be identified as the submitter of the comment and allows EPA to contact you in case EPA cannot read your comment due to technical difficulties or needs further information on the substance of your comment. EPA's policy is that EPA will not edit your comment, and any identifying or contact information provided in the body of a comment will be included as part of the comment that is placed in the official public docket, and made available in Regional Material EDocket. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment.

i. Regional Material EDocket (RME). Your use of EPA's Regional Material EDocket to submit comments to EPA electronically is EPA's preferred method for receiving comments. Go directly to RME at http://docket.epa.gov/rmepub/index.jsp, and follow the online instructions for submitting comments. Once in the RME system, select “quick search,” and then key in RME Docket ID Number R01-OAR-2004-NH-0001. The system is an “anonymous access” system, which means EPA will not know your identity, e-mail address, or other contact information unless you provide it in the body of your comment.

ii. E-mail. Comments may be sent by electronic mail (e-mail) to conroy.dave@epa.gov, please include the text “Public comment on proposed rulemaking R01-OAR-2004-NH-0001” in the subject line. EPA's e-mail system is not an “anonymous access” system. If you send an e-mail comment directly without going through Regulations.gov, EPA's e-mail system automatically captures your e-mail address. E-mail addresses that are automatically captured by EPA's e-mail system are included as part of the comment that is placed in the official public docket.

iii. Regulations.gov. Your use of Regulations.gov is an alternative method of submitting electronic comments to EPA. Go directly to Regulations.gov at http://www.regulations.gov, then click on the button “TO SEARCH FOR REGULATIONS CLICK HERE”, and select Environmental Protection Agency as Agency name to search on. The list of current EPA actions available for comment will be listed. Please follow the online instructions for submitting comments. The system is an “anonymous access” system, which means EPA will not know your identity, e-mail address, or other contact information unless you provide it in the body of your comment.

iv. Disk or CD ROM. You may submit comments on a disk or CD ROM that you mail to the mailing address identified in Section 2, directly below. These electronic submissions will be accepted in WordPerfect, Word or ASCII file format. Avoid the use of special characters and any form of encryption.

2. By Mail. Send your comments to: David Conroy, Unit Manager, Air Quality Planning, Office of Ecosystem Protection (mail code CAQ), U.S. Environmental Protection Agency, EPA New England Regional Office, One Congress Street, Suite 1100, Boston, MA 02114-2023. Please include the text “Public comment on proposed rulemaking R01-OAR-2004-NH-0001” in the subject line on the first page of your comment

3. By Hand Delivery or Courier. Deliver your comments to: David Conroy, Unit Manager, Air Quality Planning, Office of EcosystemProtection, U.S. Environmental Protection Agency, EPA New England Regional Office, One Congress Street, 11th floor, (CAQ), Boston, MA 02114-2023. Such deliveries are only accepted during the Regional Office's normal hours of operation. The Regional Office's official hours of business are Monday through Friday, 8:30 to 4:30 excluding federal Holidays..

Do not submit information that you consider to be CBI electronically to EPA. You may claim information that you submit to EPA as CBI by marking any part or all of that information as CBI (if you submit CBI on disk or CD ROM, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is CBI). Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2.

In addition to one complete version of the comment that includes any information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the official public regional rulemaking file. If you submit the copy that does not contain CBI on disk or CD ROM, mark the outside of the disk or CD ROM clearly that it does not contain CBI. Information not marked as CBI will be included in the public file and available for public inspection without prior notice. If you have any questions about CBI or the procedures for claiming CBI, please consult the person identified in the FOR FURTHER INFORMATION CONTACT section.

You may find the following suggestions helpful for preparing your comments:

1. Explain your views as clearly as possible.

2. Describe any assumptions that you used.

3. Provide any technical information and/or data you used that support your views.

4. If you estimate potential burden or costs, explain how you arrived at your estimate.

5. Provide specific examples to illustrate your concerns.

6. Offer alternatives.

7. Make sure to submit your comments by the comment period deadline identified.

8. To ensure proper receipt by EPA, identify the appropriate regional file/rulemaking identification number in the subject line on the first page of your response. It would also be helpful if you provided the name, date, and Federal Register citation related to your comments.

Organization of this document. The following outline is provided to aid in locating information in this preamble.

The information in this section is organized as follows:

Under the Clean Air Act Amendments of 1990, southern New Hampshire was divided into three separate ozone nonattainment areas: the New Hampshire portion of the Boston area which is comprised of portions of Hillsborough and Rockingham counties; the Portsmouth-Dover-Rochester area which includes portions of Rockingham and all of Strafford county; and the Manchester area, which includes all of Merrimack and the remaining portions of Hillsborough and Rockingham counties. Each of these areas was designated nonattainment for ozone.

To bring these areas into attainment, the State adopted and implemented a broad range of ozone control measures including stage II vapor recovery on gasoline retail facilities, numerous stationary and area source VOC controls, NO X controls on stationary sources, and a vehicle inspection and maintenance (I/M) program. In addition, the State participated in the federal RFG program in the four southern counties in New Hampshire since January 1, 1995. This strategy and other measures resulted in significant air quality improvements in southern New Hampshire. Nevertheless, in light of ongoing concerns regarding the oxygenate requirement in RFG, specifically the use of methyl tertiary butyl ether (MTBE), the Governor instructed the Department of Environmental Services (DES) to opt-out of the federal RFG program.

New Hampshire had voluntarily chosen to participate in the reformulated gasoline program. Ultimately, EPA approved RFG as one of the control strategies that New Hampshire needs to attain the national ambient air quality standard (NAAQS) for ozone. As such, RFG is now approved as part of the State Implementation Plan (SIP). New Hampshire is now seeking to amend the SIP to replace RFG with oxygen flexible reformulated gasoline (OFRFG).

By this rule, the OFRFG rule, New Hampshire is ensuring that it replaces the VOC and NO X benefits that RFG is required to achieve. These emission reductions are critical to New Hampshire's attainment of the 1-hour ozone standard, and are critical strategies that are part of the State's approved rate of progress plans.

New Hampshire has adopted a rule PART Env-A 1611 entitled “Oxygen Flexible Reformulated Gasoline” effective May 2, 2002. That rule was established to mimic the requirements of the federal RFG. It sets forth performance standards for NO X (3.0% reduction) and VOC (23.4% reduction) that each gallon of fuel sold in New Hampshire will be required to meet in the summertime. The rule also establishes other performance standards for wintertime NO X , air toxics, benzene and heavy metals but those portions of the rule were not submitted to EPA for approval. Importantly, this rule does not establish a minimum oxygen requirement for gasoline to contain in New Hampshire. New Hampshire has not set an oxygen minimum in order to encourage fuel with less oxygenates, most notably MTBE, to be sold in the State. Compliance with the requirements of this rule will be determined based on the phase II complex model in 40 CFR 80.45, just as is done with federal RFG. Gasoline certified as Phase II federal RFG will be considered a compliant fuel. Because NO X and VOC are necessary components in the production of ground level ozone in hot summer months, reduction of these pollutants will help areas achieve the NAAQS for ozone and thereby produce benefits for human health and the environment.

In determining the approvability of a SIP revision, EPA must evaluate the proposed revision for consistency with the requirements of the CAA and EPA regulations, as found in section 110 and part D of the CAA and 40 CFR part 51 (Requirements for Preparation, Adoption, and Submittal of Implementation Plans).

For SIP revisions approving certain state fuel measures, an additional statutory requirement applies. CAA section 211(c)(4)(A) prohibits state regulations respecting a fuel characteristic or component for which EPA has adopted a control or prohibition under section 211(c)(1), unless the state control is identical to the federal control. Section 211(c)(4)(C) provides an exception to this preemption if EPA approves the state requirements in a SIP. Section 211(c)(4)(C) states that the Administrator may approve an otherwise preempted state fuel standards in a SIP:

Only if [s]he finds that the State control or prohibition is necessary to achieve the national primary or secondary ambient air quality standard which the plan implements. The Administrator may find that a State control or prohibition is necessary to achieve that standard if no other measures that would bring about timely attainment exist, or if other measures exist and are technically possible to implement, but are unreasonable or impracticable.

EPA interprets the reference to “other measures” that must be evaluated as generally not encompassing other state fuel measures. The Agency believes that the Act does not call for a comparison between state fuels measures to determine which measures are unreasonable or impracticable, but rather section 211(c)(4) is intended to ensure that a state resorts to a fuel measure only if there are no available practicable and reasonable nonfuels measures. Thus, in demonstrating that other measures are unreasonable or impracticable, a state need not address the reasonableness or practicability of other state fuel measures.

EPA's August, 1997 “Guidance on Use of Opt-in to RFG and Low RVP Requirements in Ozone SIPS” gives further guidance on what EPA is likely to consider in making a finding of necessity. Specifically, the guidance recommends breaking down the necessity demonstration into four steps: identify the quantity of reductions needed to reach attainment; identify other possible control measures and the quantity of reductions each measure would achieve; explain in detail which of those identified control measures are considered unreasonable or impracticable; and show that even with the implementation of all reasonable and practicable measures, that the state would need additional emission reductions for timely attainment, and that the state fuel measure would supply some or all of such additional reductions.

EPA has evaluated the submitted SIP revision and has determined that it is consistent with the requirements of the CAA, EPA regulations, and conforms to EPA's completeness criteria in 40 CFR part 51, Appendix V. Further, EPA has looked at New Hampshire's demonstration that this fuel control program is necessary in accordance with 211(c)(4)(C) and agrees with the State's conclusion that a fuel measure is needed to achieve the ozone NAAQS.

The SIP submittal contains: (1) New Hampshire rule, PART Env-A 1611 entitled “Oxygen Flexible Reformulated Gasoline” effective May 2, 2002; (2) documentation of the public notice dated January 14, 2002, and evidence of the public hearing regarding the OFRFG which occurred on February 20, 2002; (3) evidence of State legal authority; and (4) an application for waiver of federal preemption initially dated December 7, 2001 and updated October 3, 2003. Information regarding prohibitions on the sale of non-conforming gasoline, test procedures and sampling for the SIP revision can be found in PART Env-A 1611 of the New Hampshire Department of Environmental Services regulations, and New Hampshire statutes on enforcement and penalties can be found at New Hampshire Revised Statutes Annotated (R.S.A.) Chapter 125-C:6 and Chapter 125-C:15. Based on this and a detailed enforcement strategy in the October 31, 2002 submittal, EPA has concluded that these provisions confer on the State the requisite authority to enforce compliance with the NO X and VOC control requirements in their OFRFG rule.

CAA section 211(c)(4)(A) preempts certain state fuel regulations by prohibiting a state from prescribing or attempting to enforce any control or prohibition respecting any characteristic or component of a fuel or fuel additive for the purposes of motor vehicle emission control if the Administrator has prescribed under section 211(c)(1) a control or prohibition applicable to such characteristic or component of the fuel or fuel additive, unless the state prohibition is identical to the prohibition or control prescribed by the Administrator.

EPA has adopted federal controls for RFG under section 211(k). These regulations are found in 40 CFR 80.40-80.130. The specific standards being approved here, summertime VOC and NO X controls, are identified in 40 CFR 80.41. Four counties in New Hampshire are presently required under the federal rule to use federal RFG. See 40 CFR 80.70(j)(8).

A state may prescribe and enforce an otherwise preempted fuel control requirement only if the EPA approves the control into the state's SIP. In order to approve a preempted state fuel control into a SIP, EPA must find that the state control is necessary to achieve a NAAQS because no other reasonable or practicable measures exist to bring about timely attainment. Thus, to determine whether New Hampshire's OFRFG rule is necessary to meet the ozone NAAQS, EPA must consider whether there are other reasonable and practicable measures available to produce the emission reductions needed to achieve the 1-hour ozone NAAQS. In addition, while EPA has not yet acted on the recommendation, in July 2003, the Governor of New Hampshire did make a recommendation that much of this area should be designated nonattainment of EPA's 8-hour ozone standard.

With the State's decision to opt-out of the federal RFG program, the VOC and NO X reductions achieved by this program need to be replaced to ensure that the southern New Hampshire areas meet the 1-hour ozone standard. New Hampshire nonattainment areas have measured air quality in recent years exceeding the 1-hour and 8-hour ozone standard. Given this situation, it is clear that the reductions provided by participation of the four counties of southern New Hampshire in the federal RFG program are critical to achievement of the ozone NAAQS.

For purposes of demonstrating necessity, New Hampshire has determined the level of reductions achieved from the phase 2 RFG VOC and NO X reductions required in the various SIP submittals made by New Hampshire for its 15 percent rate of progress plan, its subsequent 9 percent rate of progress plan and its attainment demonstration as estimates of the emission reductions that are necessary for southern New Hampshire to achieve the ozone NAAQS. Based on MOBILE6, EPA's mobile sources emission estimation tool, New Hampshire believes that RFG is responsible for 5.5 tons per summer day of VOC reductions for the summer of 2004. New Hampshire's OFRFG rule, because it requires the same “performance standards” to be met, will achieve the same level of emission reductions of both VOC and NO X .

With this estimate of the reductions necessary to achieve the ozone NAAQS, the State evaluated an extensive list of non-fuel alternative controls to determine if reasonable and practicable controls could be implemented to provide sufficient reductions in a timely manner. The State analyzed potential control measures by reviewing previously prepared emission inventories to determine if other non-fuel control measures could be adopted and used to replace the VOC reductions that RFG had achieved. The State reviewed all the source categories that comprised the emission inventory, and evaluated control measures on each source category. For a variety of reasons, most control measures were either already implemented, or were found to be unreasonable or impracticable for achieving reductions in a timely manner. ( See October 3, 2003 submittal from the State of New Hampshire.) In addition, New Hampshire recognized that OFRFG would yield some additional NO X emission reductions which would replace the emission reductions that federal RFG was required to achieve.

As one example, the State evaluated the possibility of further controlling gasoline refueling, or stage II, emissions. The State does have a stage II vapor recovery program for facilities with an annual throughput greater than 420,000 gallons per year, but requiring even smaller facilities ( i.e. , gas stations) to comply would yield 0.038 tons per summer weekday (tpswd). The State concluded that a regulatory change would be necessary to further control emissions from this source category. In addition, such controls could not be adopted and implemented as quickly as the fuel control. Further, the actual installation of these controls would take additional time, which would not be reasonable or practicable because the State needed to replace the reductions as soon as possible. For these reasons and the small amount of available reductions, the State concluded that further stage II controls were not a practical measure for achieving VOC emission reductions. The State also considered the effect of further improving its vehicle inspection and maintenance program through the implementation of OBD2. This would yield an additional 0.64 tpswd. While this program may indeed be implemented by the summer of 2004, it will not replace the need for further controls. Other control measures were similarly evaluated, and determined to be either technically impossible or unreasonable and impracticable, or in a longer time frame from when the State needed to secure the replacement emission reductions. The State's analysis did not identify any non-fuel alternative controls that could conceivably be implemented by the summer of 2004—the earliest time frame for EPA approval of OFRFG. ( See October 3, 2003 State submittal.) Because they found no reasonable or practicable non-fuel control measures, additional reductions are necessary.

New Hampshire's OFRFG rule will achieve approximately 5.5 tpd of VOC reductions and some NO X reductions beginning the first summer it is implemented, and is designed to replace the emission reductions required to be achieved by federal RFG. EPA believes these emission reductions are necessary to achieve the applicable ozone NAAQS in southern New Hampshire. EPA is basing today's action on the information available to the Agency at this time, which indicates that adequate reasonable and practicable non-fuel measures are not available to the State that would achieve these needed emission reductions, and protect New Hampshire's air quality in a timely manner. Hence, EPA is finding that these fuel standards are necessary for attainment of the applicable ozone NAAQS, and EPA is proposing to approve them as a revision to the New Hampshire SIP.

As discussed earlier, New Hampshire has adopted OFRFG to replace the emission reductions from federal RFG-from which the State has petitioned to withdraw. EPA's decision to grant or deny an opt-out request, based on whether or not a state has satisfied the substantive opt-out requirements under 40 CFR 80.72, need not be made through notice and comment rulemaking. See 61 FR 35673 at 35675 (July 8, 1996). EPA established a petition process to allow case-by-case consideration of individual state requests to opt-out of the federal RFG program. 1 The Opt-out Rule establishes specific requirements regarding what information a State must submit in connection with an opt-out petition. These regulatory provisions also address when a state's petition is complete and the appropriate transition time for opting out. EPA has applied these criteria. If EPA approves this SIP revision as a final action, EPA intends to also approve New Hampshire's petition for withdrawal from the RFG program. Consistent with EPA's Opt-out Rule ( see 40 CFR 80.72(c)(5)), the opt-out would become effective 90 days from the effective date of the final rulemaking for this SIP revision. The Opt-out Rule also directs EPA to publish a notice in the Federal Register announcing the approval of any opt-out petition and the effective date for removal of the state from the RFG program.

New Hampshire had participated voluntarily in the federal RFG program since it began in January 1995. By letter dated April 16, 2001, the Governor of New Hampshire announced the state's intent to opt-out, and indicated that the addition information and material necessary by EPA's rule would be forthcoming in future submittals from the State. The final information needed by EPA in order to proceed with this rulemaking was submitted by New Hampshire DES on October 3, 2003.

EPA is proposing to approve a SIP revision at the request of the New Hampshire DES. This rule was adopted by the State effective May 2, 2002. To ensure that it secures the needed approval under section 211(c)(4)(C) of the Clean Air Act, New Hampshire submitted this action for EPA approval, to make it part of the SIP, and to complete the submission of material needed for opt-out of the RFG program.

EPA is proposing to approve a SIP revision submitted by the State of New Hampshire on October 31, 2002 and October 3, 2003, establishing fuel emission control requirements for gasoline distributed in southern New Hampshire which includes Hillsborough, Merrimack, Rockingham and Strafford Counties. New Hampshire has a adopted a rule PART Env-A 1611 entitled “Oxygen Flexible Reformulated Gasoline” effective May 2, 2002. That rule was established to mimic the requirements of the federal RFG. It sets forth performance standards for NO X (3.0% reduction) and VOC (23.4% reduction) that each gallon of fuel sold in New Hampshire will be required to meet in the summertime. The rule also establishes other performance standards for wintertime NO X , air toxics, benzene and heavy metals but those portions of the rule were not submitted to EPA for approval. EPA is proposing to approve New Hampshire's fuel requirements into the SIP because EPA has found that the requirements are necessary for southern New Hampshire to achieve the national ambient air quality standard for ozone.

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

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

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

For additional information, see the direct final rule published in the rules section of this Federal Register .

This is a summary of the Commission's Notice of Proposed Rule Making, ET Docket No. 03-254, FCC 03-318, adopted December 15, 2003 and released December 23, 2003. The full text of this document is available for inspection and copying during normal business hours in the FCC Reference Center (Room CY-A257), 445 12th Street, SW., Washington, DC 20554. The complete text of this document also may be purchased from the Commission's copy contractor, Qualex International, 445 12th Street SW., Room, CY-B402, Washington, DC 20554. The full text may also be downloaded at: http://www.fcc.gov. Alternate formats are available to persons with disabilities by contacting Brian Millin at (202) 418-7426 or TTY (202) 418-7365.

Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments on or before March 3, 2004, and reply comments on or before March 18, 2004. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS) or by filing paper copies. See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121, May 1, 1998. Comments filed through the ECFS can be sent as an electronic file via the Internet to http://www.fcc.gov/e-file/ecfs.html. Generally, only one copy of an electronic submission must be filed. If multiple docket or rulemaking numbers appear in the caption of this proceeding, however, commenters must transmit one electronic copy of the comments to each docket or rulemaking number referenced in the caption. In completing the transmittal screen, commenters should include their full name, U.S. Postal Service mailing address, and the applicable docket or rulemaking number. Parties may also submit an electronic comment by Internet e-mail. To get filing instructions for e-mail comments, commenters should send an e-mail to ecfs@fcc.gov, and should include the following words in the body of the message, “get form <your e-mail address>.” A sample form and directions will be sent in reply. Parties who choose to file by paper must file an original and four copies of each filing. If more than one docket or rulemaking number appears in the caption of this proceeding, commenters must submit two additional copies for each additional docket or rulemaking number.

All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission. Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail (although we continue to experience delays in receiving U.S. Postal Service mail). The Commission's contractor, Natek, Inc., will receive hand-delivered or messenger-delivered paper filings for the Commission's Secretary at 236 Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes must be disposed of before entering the building. Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743. U.S. Postal Service first-class mail, Express mail, and Priority Mail should be addressed to 445 12th Street, SW., Washington, D.C. 20554.

1. The Notice of Proposed Rulemaking (NPRM) proposes to modify the Commission's frequency coordination rules to promote sharing between non-geostationary satellite orbit (NGSO) and geostationary satellite orbit (GSO) fixed-satellite service (FSS) operations and various terrestrial services operating in several frequency bands. Specifically, we consider a joint proposal by SkyBridge L.L.C. and the Fixed Wireless Communications Coalition (Skybridge/FWCC Growth Zone Proposal) to supplement our existing coordination procedures to promote sharing between new NGSO FSS space-to-Earth (downlink) operations and existing Fixed Service (FS) operations in the 10.7-11.7 GHz (10 GHz) band. We also set forth proposals for amending our frequency coordination rules to address situations where NGSO FSS and GSO FSS operations share spectrum with terrestrial operations in the FS, Broadcast Auxiliary Service (BAS) and Cable Television Relay Service (CARS) in various bands. Specifically, we:

• Propose to apply the principles of the Skybridge/FWCC Growth Zone Proposal to our coordination rules for NGSO FSS downlink operations sharing with FS operations in the 10 GHz band;

• Propose to apply the existing parts 25 and 101 coordination rules for coordination of new FSS (both NGSO and GSO) earth stations with mobile BAS/CARS operations in the 6875-7075 MHz (7 GHz) and 12750-13250 MHz (13 GHz) bands, and consider whether any additions or modifications to the rules are needed to address the operating characteristics of mobile services;

• Propose to allow either the parts 74 and 78 informal ad hoc coordination rules or the part 101 coordination rules to be used for the coordination of mobile BAS/CARS operations with FSS (both NGSO and GSO) earth stations, in the 7 GHz and 13 GHz bands, and consider whether any additions or modifications of these rules are needed; and,

2. Proposal. We tentatively conclude that our frequency coordination procedures should be modified to include the terms as we propose to modify them, below, of the Skybridge/FWCC Growth Zone Proposal for NGSO FSS gateway earth stations coordinating with the FS in the 10 GHz band. We believe that modifying our coordination requirements in this way will ensure that the use of the 10 GHz band by FS is not significantly hindered by the introduction of NGSO FSS gateway operations and that NGSO FSS operators will have more flexibility in deciding where to locate gateway earth stations. We note that the 10 GHz band has been targeted as an important alternative spectrum for FS operations being relocated from other bands. FS use in this band has seen continued growth. We do not think that the proposed coordination approach will significantly hinder NGSO FSS operations. The areas qualifying for Growth Zone treatment would be limited and, by their design and purpose, the number of NGSO FSS gateway earth stations should be small and have sufficient deployment flexibility. Finally, we believe that the coordination obligations put forth by Skybridge/FWCC are reasonable, and note that they would only apply if an NGSO FSS gateway earth station licensee determines that deployment within a Growth Zone is necessary. We request comment on our tentative conclusions regarding the effectiveness and benefits of the Skybridge/FWCC Growth Zone Proposal and whether FS expansion can be accommodated under this approach.

3. We note that the Skybridge/FWCC Growth Zone Proposal reflects a compromise reached by two significant parties in this proceeding, but it is prudent to address all of the various interests in the band. Therefore, we intend to explore alternatives to some of the procedures in the SkyBridge/FWCC Growth Zone Proposal and seek comment on them. First, we propose to adopt the qualification criteria in the SkyBridge/FWCC Growth Zone definition of any county in which at least 30 FS frequencies are licensed to transmit in the 10.7-11.7 GHz band. We acknowledge the advantages of using counties as Growth Zone boundaries in that they are well defined. The use of counties would also be administratively convenient, since this information is readily available in our license and other coordination databases. Further, a minimum fixed number of FS operations (30 FS transmit frequencies per county) would provide an easy and definitive method of determining when a county would qualify as a Growth Zone. Nevertheless, this approach does not account for varying county size and the fact that 30 licensed FS transmit frequencies could be on a single FS path or 30 different FS paths. This could be a problem in that large counties with low FS path densities would qualify as Growth Zones and smaller counties with higher FS path densities, but not 30 frequencies, would not qualify as Growth Zones. Therefore, we seek comment on this proposal and on any alternatives that might normalize the qualification factors for Growth Zones or otherwise account for varying county sizes and deployment scenarios.

4. Rather than propose the Skybridge/FWCC suggestion that the Commission publish a public notice every 6 months with a list of counties that qualify as Growth Zones, we propose to make the determination of whether an area qualifies as a Growth Zone a case-by-case function of the frequency coordination process. We find that making and publishing Growth Zone determinations every six months is unnecessary because this information can easily be handled as part of the coordination process for a new NGSO FSS gateway earth station. This approach would also provide “near real-time” currency to the process. We seek comment on this proposal and any alternatives.

5. We also propose to adopt the conditions ( see (a) through (e) in paragraph 9 in the NPRM, on NGSO FSS deployment set forth in the SkyBridge/FWCC Growth Zone Proposal. These conditions would ensure: (1) That the coordination process protects the potential for FS growth throughout the allocated band, even though FS licensees would continue to be authorized for specific frequencies on an as needed basis; (2) that NGSO FSS licensees accepting a certain level of interference along a given azimuth from incumbent FS licensees will accept the same level of impact from future FS applicants; and (3) that coordination only considers the particular technical characteristics of the NGSO FSS gateway earth station being deployed without considering “look angles” to the satellites that will not be used. We seek comment on whether these conditions should apply only to NGSO FSS gateway earth stations located within a Growth Zone, or whether they should also apply to those in proximity to, or within a certain distance of, a Growth Zone, and, if so, what the proximity criteria or distance should be. We also seek comment on whether these conditions should apply only to the protection of FS stations located within the Growth Zone in which the NGSO FSS earth station is located, or whether they should also apply to the protection of other FS stations located outside that Growth Zone but within the coordination contour of the earth station. Further, we seek comment on whether the level of impact from future FS applicants, expressed in the proposal as an aggregate level of interference from any FS stations ( see (c) in paragraph 9 of the NPRM, should apply case-by-case to individual transmit frequencies, to the aggregate of transmit frequencies operating on a single transmit path from a station, or to all frequencies on all transmit paths from a station. We seek comment on whether these conditions are appropriate to ensure equitable sharing. We also seek comment on whether other conditions or changes to our coordination procedures would be appropriate to address sharing between these services.

6. Proposal. We acknowledge that frequency coordination and spectrum sharing between FSS and BAS/CARS fixed and mobile operations will be challenging. Nevertheless, we believe that spectrum sharing between FSS earth stations (both GSO and NGSO) and BAS/CARS fixed and mobile operations is feasible because the number of new FSS earth stations should be relatively small. We find that there are several factors that affect how fixed, mobile, and fixed-satellite services will share the 7 GHz and 13 GHz bands. For example, mobile BAS/CARS operations, which may include aeronautical operations, require a great deal of deployment flexibility to cover news or events when and where they happen, whereas fixed BAS/CARS and FSS operations are stationary and often have high requirements for reliability. Further, the interference protection expectations of mobile BAS/CARS operations, which may rely upon informal ad hoc coordination, would likely be different than those of fixed BAS/CARS and FSS operations, which coordinate their use prior to authorization to ensure reliable communications. Therefore, we address separately mobile and fixed BAS and CARS coordination with FSS for the 7 GHz and 13 GHz bands.

7. Coordination of FSS with Mobile BAS and CARS operations. We propose to maintain the existing coordination requirements for both FSS and mobile BAS and CARS operations in the 7 GHz and 13 GHz bands, rather than propose to require that all operations in the bands follow the same coordination procedures. Thus, NGSO and GSO FSS operators seeking to deploy new earth stations in these bands would continue to initiate coordination with mobile BAS and CARS operations using the coordination procedures in §§ 25.203, 25.251 and 101.103(d). Similarly, new mobile BAS and CARS operations initiating coordination in the 7 GHz and 13 GHz bands would continue to have the flexibility to use either the informal ad hoc local coordination procedures in §§ 74.638 and 78.36 or the coordination procedures in § 101.103(d) to coordinate with FSS earth stations.

8. We first address the coordination procedures that an FSS entity would use when it initiates coordination for a new earth station. At the outset, pursuant to §§ 25.203(b) and 25.251, the FSS entity needs to identify the coordination distance contour for the earth station based on the technical criteria contained in ITU Appendix 7 and certain ITU Recommendations. These technical criteria address protection of mobile as well as terrestrial fixed facilities, and thus, we believe, contain sufficient technical rigor to enable identification and protection of mobile TVPU stations. In this context, however, we note that the maximum coordination distances and coordination contours calculated using ITU Appendix 7 are conservatively large, particularly for sharing between an NGSO FSS earth station and aeronautical TVPU stations. Considering the relative brevity of TVPU operations, particularly for worst-case pointing by either an earth station or a mobile antenna, we seek comment on whether these distances should be changed with a view toward reducing the overall coordination burden where the potential for interference is minimal. Parties favoring reducing the coordination distances should support alternative distances with appropriate engineering analysis.

9. Regarding the administrative aspects of coordination for FSS earth stations, our parts 25 and 101 rules require notification to all potentially affected licensees and applicants within the ITU Appendix 7 coordination distance contour for the earth station. We note that the rules give applicants the flexibility to determine how best to identify facilities that may affect or be affected by the proposed facilities, and licensees who must be notified. Thus, in addition to thoroughly checking relevant Commission and any other licensing databases to assess both local and nationwide licensees that may have operations in the affected area, the FSS earth station applicant should also find it useful to contact local broadcast frequency coordinators, where they exist, to help identify the licensees with operations within the coordination contour of the FSS earth station, that need to be notified. Once notification is initiated, any responses from affected parties indicating potential interference must specify the technical details in writing, and all parties must make every reasonable effort to eliminate all technical problems and conflicts. Further, if no response is received within the 30 day period, the applicant will be deemed to have made reasonable efforts to coordinate and may file its application. We believe that this process will meet the needs of both the new FSS applicants and the BAS/CARS incumbents, who can identify and provide full technical details of the facilities that may interfere with the proposed earth station; facilities requiring protection, including fixed receiver sites; aeronautical TVPU operations; and mobile patterns of use. Because BAS/CARS stations and FSS earth stations have co-primary allocations in these bands, new FSS entrants must protect all incumbent BAS/CARS operations. Therefore, new FSS entrants in the 7 GHz and 13 GHz bands must consider typical deployments of TVPU operations within their authorized area to ensure that existing TVPU uses and operations are not adversely affected.

10. In addition, we note that § 25.203(c)(3) requires coordination procedures to be completed within 30 days, but allows FSS applicants to extend the maximum coordination period to 45 days by mutual consent of the parties. To accommodate the notification and response process for incumbent TVPU operations, which may involve additional consideration of fixed receiver sites, aeronautical operations, and mobile patterns of use identified by notified parties as described above, we seek comment on whether the maximum coordination period should be increased beyond 45 days and, if so, for how long. We also seek comment on whether any modifications to the coordination process proposed above should be made to account for the technical and operational differences between NGSO FSS and GSO FSS earth stations.

11. We also believe the existing coordination procedures provide sufficient flexibility for the parties to agree to reduce the likelihood of interference by shielding the earth station, particularly in satellite downlink bands, or constraining operations by various means. We note that these coordination procedures have been used successfully in coordinating the three FSS downlink earth stations grandfathered by the MSS Feeder Link R&O with mobile BAS/CARS TVPU stations in the 7025-7075 MHz band. They have also been successfully used to coordinate FSS uplink earth stations with mobile BAS/CARS TVPU stations in the 13 GHz band. While we believe existing parts 25 and 101 coordination procedures are adequate to ensure that new FSS earth stations are deployed without interference with mobile BAS and CARS operations, we seek comment on the conclusions and proposals, and whether any additional steps or rule modifications are necessary to address the sharing scenarios in the 7 GHz and 13 GHz bands as the number of earth stations and BAS/CARS deployments increase.

12. We propose to allow BAS and CARS entities flexibility to use either the informal ad hoc coordination process in §§ 74.638 and 78.36 or the coordination procedures in § 101.103(d) when they initiate coordination for a new mobile BAS/CARS station with FSS earth stations in the 7 GHz and 13 GHz bands. These coordination procedures have been adequate to address sharing with BAS/CARS fixed operations and should offer sufficient protection between BAS/CARS mobile and FSS operations without unnecessary burdens and regulatory oversight. Since the number of earth stations in these bands should be few and readily identifiable through the Commission's files, BAS and CARS entities should have little difficulty in notifying the appropriate FSS entity for coordination purposes. We observe that our rules give BAS and CARS applicants the flexibility to determine how best to contact the parties they identify for coordination and thus we believe that these rules do not need to be modified in this regard. Because FSS has a co-primary allocation in these bands, new BAS and CARS entrants must protect all authorized FSS operations.

13. We recognize the ad hoc coordination process relies on mutual interest, cooperation, and informal negotiations among licensees. It is less burdensome to the parties and affords mobile services maximum flexibility with regard to deployment. We believe this an important factor for TVPU operations where it is not possible to predict where breaking news may happen. On the other hand, we also recognize that the more formal frequency coordination procedures in parts 25 and 101 would likely provide FSS operations with additional certainty of protection from TVPU operations. We seek comment on our proposal to allow BAS and CARS entities the flexibility to use either the ad hoc coordination process in §§ 74.638 and 78.36 or the coordination procedures in § 101.103(d). Commenters should address whether this approach is the best means to maintain flexibility for mobile TVPU operations and to provide adequate protection to NGSO FSS earth stations. We also seek comment on any other alternatives to our existing coordination rules for FSS and BAS/CARS mobile operations. Finally, we seek comment from small businesses or other small entities concerning the alternatives proposed.

14. In the BAS/CARS R&O , the Commission recently declined to expand the BAS short-term frequency coordination procedure to include a two-way notification/response coordination requirement for short-term use with respect to FSS earth stations operations. The Commission stated that all short-term operation is secondary, and that the existing Section 74.24(g) requirement to notify the local coordinating committee or co-channel licensees is sufficient to ensure short-term deployments have a minimal chance of causing harmful interference while providing broadcasters the ability to cover newsworthy events without delay. We thus propose to maintain the secondary, non-interference status of BAS short-term itinerant TVPU operations vis-a-vis primary FSS operations in the 7 GHz and 13 GHz bands. In this connection, we remind BAS short-term operants that they are responsible for ensuring notification to any co-channel FSS earth station within whose coordination contour a prospective short-term deployment is contemplated, whether notification is effected through a local frequency coordinator or directly with the FSS earth station. We also propose to require CARS short-term operators to notify either the local frequency coordinator or co-channel licensees, including licensees of FSS earth stations, and provide the name and telephone number of a person who may be contacted in the event of interference, except where it is impractical, similar to the BAS notification requirements. We believe this action will provide more certainty to licensed fixed, mobile, and particularly earth station operations without burdening CARS short-term itinerant operations. In this connection, we seek comment on whether the status of CARS short-term operations should be on a secondary, non-interference basis, similar to BAS short-term operations. Because short-term itinerant TVPU operations would be susceptible to interference if they deploy near FSS uplink earth stations, they would benefit by coordinating their use to avoid such deployment. Moreover, we encourage all parties to a coordination to cooperate in resolving any potential interference concerns regarding a prospective short-term operation. We believe that the short-term operation procedures, could be used by the short-term TVPU operants to address potential interference scenarios. Under these procedures, the short-term itinerant TVPU operants will likely contact either the local frequency coordinators or co-channel BAS/CARS licensees, who likely have been involved in FSS earth station coordinations and are aware of any existing FSS earth station in an area. Further, we do not believe there will be large areas where short-term itinerant operations would be precluded by FSS earth stations because the number of these earth stations should be limited. We seek comment on these proposals and whether other coordination steps would be necessary to address FSS sharing with short-term itinerant operations. For example, should FSS licensees maintain a point of contact to facilitate frequency engineering for short-term itinerant deployments to cover unplanned events? This point of contact could afford an avenue for rapid information exchange and thereby facilitate both the continued viability of short-term itinerant deployments and the protection of FSS operations. Alternatively, absent any coordination, FSS entities could take precautions to protect downlink earth stations from interference from short-term itinerant TVPU operations.

15. In connection with the use of parts 25 and 101 coordination procedures for the coordination of FSS earth stations with mobile stations in the 7 GHz and 13 GHz bands, we note that the interference protection criteria in § 101.105(a), (b), and (c) for FS, and referenced by § 74.638 and 78.36, respectively, for BAS and CARS, specifically address the protection of fixed stations, but not mobile stations. We seek comment on whether those rules should be amended to apply specifically to mobile as well as fixed stations, whether they should be supplemented to include criteria unique to the protection on mobile and fixed receivers used in conjunction with mobile stations, and what the additional criteria should be. Commenters recommending additional criteria, such as the baseline interference and threshold degradation figures in §§ 101.105(a) and (b) or the conservative default criteria in § 101.105(c)(2), should support their proposals with engineering showings.

16. We believe that the approaches described for coordinating FSS (both NGSO and GSO) and BAS/CARS mobile operations achieve a viable balance between the needs of FSS licensees for certainty and reliability and the needs of BAS/CARS for flexibility. We seek comment on these findings and proposals, as well as any modifications to the above procedures that would enhance the good faith and speed of participants or otherwise improve or streamline the process without compromising our goals.

17. Coordination of FSS and Fixed BAS and CARS Operations: In both ET Docket No. 98-142 and ET Docket No. 98-206, the Commission stated its belief that parts 25 and 101 coordination procedures could protect both NGSO FSS earth stations and fixed BAS/CARS stations, but deferred adoption of those procedures to this proceeding. We propose to maintain the coordination procedures in §§ 25.203 and 25.251 for coordination of new FSS earth stations with fixed BAS/CARS stations in the 7 GHz and 13 GHz bands, and to adopt the coordination procedures set forth in §§ 101.21(f) and 101.103(d) for coordination of new fixed BAS and CARS stations with FSS earth stations, whether NGSO or GSO. These procedures and the ITU Appendix 7 technical criteria referenced by them have proven successful in coordinating FS facilities governed by part 101 with FSS earth stations. Fixed BAS and CARS facilities under part 74 and part 78 are similar, if not identical, to the part 101 FS facilities in frequency, technical characteristics, limitations, and use, and thus should be able to follow the same technical criteria for coordination purposes. We believe that the same coordination procedures should be used for coordinating fixed BAS and CARS with FSS in the 7 GHz and 13 GHz bands, as currently used for coordinating fixed FS with FSS in the nearby 6525-6875 MHz and 10 GHz bands. We favor using uniform coordination procedures for similar services to simplify our rules and the frequency coordination process. Therefore, we propose to amend §§ 74.638 and 78.36 to reference §§ 101.21(f) and 101.103(d) procedures for coordinating fixed BAS/CARS facilities with FSS earth stations where the prospective fixed facilities are within the coordination contour of the FSS earth station, as defined in the ITU Appendix 7. We seek comment on this proposal. We also seek comment on whether any additional measures are needed, or any additional information should be exchanged, to ensure the efficacy of these coordination procedures for fixed BAS and CARS facilities.

18. We also propose that the FS interference protection criteria in § 101.105(a), (b), and (c) apply to the protection of fixed BAS and CARS receivers and that new FSS earth stations use this criteria when coordinating with incumbent fixed BAS and CARS operations. We believe use of these criteria will be as successful for protecting fixed BAS and CARS receivers as they have proven to be for FS receivers. We seek comment on these conclusions and proposals.

19. As required by the Regulatory Flexibility Act (“RFA”), 1 the Commission has prepared this Initial Regulatory Flexibility Analysis (“IRFA”) of the possible significant economic impact on small entities by the policies and rules proposed in this NPRM of Proposed Rulemaking (“NPRM”). Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the NPRM. The Commission will send a copy of the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration. See 5 U.S.C. 603(a). In addition, the NPRM and IRFA (or summaries thereof) will be published in the Federal Register .

20. By this action (NPRM), we propose to modify our frequency coordination rules to promote sharing between non-geostationary satellite orbit (NGSO) and geostationary satellite orbit (GSO) fixed-satellite service (FSS) operations and various terrestrial services operating in several frequency bands. Specifically, we consider a joint proposal by SkyBridge L.L.C. and the Fixed Wireless Communications Coalition (Skybridge/FWCC Growth Zone Proposal) to supplement our existing coordination procedures to promote sharing between new NGSO FSS space-to-Earth (downlink) operations and existing Fixed Service (FS) operations in the 10.7-11.7 GHz (10 GHz) band. 2 We also set forth proposals for amending our frequency coordination rules to address situations where NGSO FSS and GSO FSS operations share spectrum with terrestrial operations in the FS, Broadcast Auxiliary Service (BAS) and Cable Television Relay Service (CARS) in various bands. Specifically, we:

• Propose to apply the principles of the Skybridge/FWCC Growth Zone Proposal to our coordination rules for NGSO FSS downlink operations sharing with FS operations in the 10 GHz band;

• Propose to apply the existing parts 25 and 101 coordination rules for coordination of new FSS (both NGSO and GSO) earth stations with mobile BAS/CARS operations in the 6875-7075 MHz (7 GHz) and 12750-13250 MHz (13 GHz) bands, and consider whether any additions or modifications to the rules are needed to address the operating characteristics of mobile services;

• Propose to allow either the parts 74 and 78 informal ad hoc coordination rules or the part 101 coordination rules to be used for the coordination of mobile BAS/CARS operations with FSS (both NGSO and GSO) earth stations, in the 7 GHz and 13 GHz bands, and consider whether any additions or modifications of these rules are needed; and,

• Propose to apply the existing parts 25 and 101 coordination rules for sharing between new NGSO FSS earth stations and fixed BAS/CARS operations in the 7 GHz and 13 GHz bands.

21. The proposed action is authorized under sections 4(i), 7(a), 303(c), 303(f), 303(g), and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 157(a), 303(c), 303(f), 303(g), and 303(r).

22. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.”  3 In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. 4 A small business concern is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (“SBA”). 5 A small organization is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.”  6 Nationwide, as of 1992, there were approximately 275,801 small organizations. 7 The term “small governmental jurisdiction” is defined as “governments of cities, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.”  8 As of 1997, there were about 87,453 governmental jurisdictions in the United States. 9 This number includes 39,044 county governments, municipalities, and townships, of which 37,546 (approximately 96.2%) have populations of fewer than 50,000, and of which 1,498 have populations of 50,000 or more. Thus we estimate the number of small governmental jurisdictions overall to be 84,098 or fewer.

23. Regarding incumbent cable television operations in the affected bands, the SBA has developed a small business size standard for Cable and Other Program Distribution, which consists of all such firms having $12.5 million or less in annual receipts. 10 This category includes cable systems operators, closed circuit television services, direct broadcast satellite services, multipoint distribution systems, satellite master antenna systems, and subscription television services. According to Census Bureau data for 1997, there were a total of 1,311 firms in this category, total, that had operated for the entire year. 11 Of this total, 1,180 firms had annual receipts of under $10 million and an additional 52 firms had receipts of $10 million or more but less than $25 million. Consequently, the Commission estimates that the majority of providers in this service category are small businesses that may be affected by the rules and policies adopted herein.

24. In addition, the Commission has developed its own small business size standard for cable system operators, for purposes of rate regulation. Under the Commission's rules, a “small cable company” is one serving fewer than 400,000 subscribers nationwide. 12 Estimates indicate that there were 1,439 cable operators who qualified as small cable system operators at the end of 1995. 13 Since then, some of those companies may have grown to serve over 400,000 subscribers, and others may have been involved in transactions that caused them to be combined with other cable operators. Consequently, the Commission estimates that there are now fewer than 1,439 small entity cable system operators that may be affected by the rules and policies adopted in the NPRM.

25. Further, the Communications Act of 1934, as amended, also contains a size standard for small cable system operators, which is “a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000.”  14 The Commission has determined that there are 67,700,000 subscribers in the United States. 15 Therefore, an operator serving fewer than 677,000 subscribers shall be deemed a small operator, if its annual revenues, when combined with the total annual revenues of all its affiliates, do not exceed $250 million in the aggregate. 16 Based on available data, the Commission estimates that the number of cable operators serving 677,000 subscribers or fewer, totals 1,450. 17 The Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million, 18 and therefore are unable, at this time, to estimate more accurately the number of cable system operators that would qualify as small cable operators under the size standard contained in the Communications Act of 1934.

26. Regarding incumbent GSO FSS satellite use and the proposed NGSO FSS use in these requested bands, the Commission has not developed a definition of small entities specifically directed toward geostationary or non-geostationary orbit fixed-satellite service applicants or licensees. The SBA has developed a size standard for a small business within the category of Satellite Telecommunications. Under that SBA size standard, such a business is small if it has $12.5 million or less in average annual receipts. 19 According to Census Bureau data for 1997, in this category there was a total of 324 firms that operated for the entire year. 20 Of this total, 273 firms had annual receipts of under $10 million, and an additional twenty-four firms had receipts of $10 million to $24,999,999. 21 Thus, under this size standard, the majority of firms can be considered small. Generally, these NGSO and GSO FSS systems cost several millions of dollars to construct and operate. Therefore the NGSO and GSO FSS companies, or their parent companies, rarely qualify under this definition as a small entity.

27. Auxiliary, Special Broadcast and other program distribution services involve a variety of transmitters, generally used to relay broadcast programming to the public (through translator and booster stations) or within the program distribution chain (from a remote news-gathering unit back to the station). The Commission has not developed a definition of small entities specific to broadcast auxiliary licensees. The U.S. Small Business Administration (SBA) has developed small business size standards, as follows: (1) For TV BAS, we will use the size standard for Television Broadcasting, infra ;  22 (2) For Aural BAS, we will use the size standard for Radio Stations, infra ;  23 (3) For Remote Pickup BAS we will use the small business size standard for Television Broadcasting when used by a TV station and that for Radio Stations when used by such a station.

28. The SBA has developed a small business sized standard for television broadcasting, which consists of all such firms having $12 million or less in annual receipts. 24 Business concerns included in this industry are those “primarily engaged in broadcasting images together with sound.”  25 According to Commission staff review of BIA Publications, Inc. Master Access Television Analyzer Database as of May 16, 2003, about 814 of the 1,220 commercial television stations in the United States had revenues of $12 million or less. We note, however, that, in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations  26 must be included. 27 Our estimate, therefore, likely overstates the number of small entities that might be affected by our action, because the revenue figure on which it is based does not include or aggregate revenues from affiliated companies. There are also 2,127 low power television stations (LPTV). 28 Given the nature of this service, we will presume that all LPTV licensees qualify as small entities under the SBA size standard.

29. The SBA has developed a small business size standard for Radio Stations, which consists of all such firms having $6 million or less in annual receipts. 29 Business concerns included in this industry are those “primarily engaged in broadcasting aural programs by radio to the public.”  30 According to Commission staff review of BIA Publications, Inc., Master Access Radio Analyzer Database, as of May 16, 2003, about 10,427 of the 10,945 commercial radio stations in the United States had revenue of $6 million or less. We note, however, that many radio stations are affiliated with much larger corporations with much higher revenue, and, that in assessing whether a business concern qualifies as small under the above definition, such business (control) affiliations  31 are included. 32 Our estimate, therefore, likely overstates the number of small businesses that might be affected by our action.

30. We believe, however, that most, if not all, of the auxiliary facilities could be classified as small businesses by themselves. We also recognize that most translators and boosters are owned by a parent station which, in some cases, would be covered by the revenue definition of small business entity discussed above.

31. Incumbent microwave services in the 7 GHz, 10 GHz, and 13 GHz bands include common carrier, private operational fixed, and BAS services. Presently there may be up to 22,015 common carrier fixed licensees and 61,670 private operational-fixed licensees and broadcast auxiliary radio licensees in the microwave services. The SBA has developed a small business size standard for Cellular and other Wireless Telecommunications, which consists of all such companies having 1,500 or fewer employees. 33 According to Census Bureau data for 1997, there were 977 firms in this category, total, that operated for the entire year. 34 Of this total, 965 firms had employment of 999 or fewer employees, and an additional 12 had employment of 1,000 employees or more. 35 Thus, under this standard, the majority of firms can be considered small. We estimate, for this purpose, that all of the Fixed Microwave licensees (excluding broadcast auxiliary licensees) would qualify as small entities under the SBA definition for radiotelephone companies.

32. We propose changes to the part 74, 78, and 101 rules governing coordination between NGSO FSS and other terrestrial services. Specifically, certain obligations will be imposed on NGSO FSS licensees in order to protect potential growth opportunities for terrestrial services in the 10 GHz band, and proposed coordination rules will govern the use of shared frequencies between FSS and BAS/CARS terrestrial services in the 7 and 13 GHz bands. 36 As noted in the section entitled “Need for, and Objectives of, the Proposed Rules”, supra , in the 7 and 13 GHz bands, we are applying existing parts 25 and 101 coordination rules for coordination of new FSS earth stations with mobile BAS/CARS operations; allowing either existing part 74/78 ad hoc coordination rules or part 101 coordination rules for coordination of new BAS/CARS mobile operations with FSS earth stations; and applying existing parts 25 and 101 coordination rules for coordination of new FSS earth stations and new fixed BAS/CARS operations. 37

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

34. We propose to adopt or seek comment on adequate spectrum sharing criteria to minimize the potential for interference of these new NGSO FSS operations on incumbent operations, many of which qualify as small entities. Further, to promote system growth for the fixed microwave service, we are proposing to establish obligations on NGSO FSS licensees to ensure flexible growth potential. This proposal should permit FS small entities some level of assurance that future terrestrial links can be established without hindrance from NGSO FSS earth stations. Further, our coordination rules will ensure that BAS, CARS, and NGSO FSS services can operate sharing these bands without impacting other services' operations. We also note that, in the Discussion Section of the Notice, we have requested comment from small businesses and other small entities concerning the alternatives proposed for our coordination rules. 39 We request comment on our conclusions and any alternatives to our proposals that could minimize the impact of this action on small entities.

35. None.

36. Pursuant to sections 4(i), 4(j), 7(a), 303(c), 303(f), 303(g), and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 157(a), 303(c), 303(f), 303(g), and 303(r), this Notice of Proposed Rule Making is hereby adopted .

37. The Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of the Notice of Proposed Rule Making, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

For the reasons discussed in the preamble, the Federal Communications Commission proposes to amends 47 CFR parts 25, 74, and 78 as follows: