A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain Bombardier Model DHC-8-102, ^103, ^106, ^201, ^202, ^301, ^311, and ^315 series airplanes was published in the Federal Register on November 28, 2003 (68 FR 66765). That action proposed to require repetitive inspections for discrepancies of certain rear spar fittings between the flex shaft of the flap secondary drive and the wing-to-fuselage structure, and corrective action if necessary. That action also provides for an optional modification of the flex shaft installation, which would terminate the repetitive inspections.

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

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

The FAA estimates that 218 airplanes of U.S. registry will be affected by this AD.

It will take about 16 work hours per rear spar fitting (two fittings per airplane) to accomplish the inspection, at an average labor rate of $65 per work hour. Based on these figures, the cost impact of the inspection required by this AD on U.S. operators is estimated to be $453,440, or $2,080 per airplane, per inspection cycle.

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

The optional terminating modification, if done, will take about 16 work hours, at an average labor rate of $65 per work hour. Required parts will cost about $365 per airplane. Based on these figures, we estimate the cost of the optional terminating modification to be $1,405 per airplane.

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

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

Commission Rule 1.25 (17 CFR 1.25) sets forth the types of instruments in which FCMs and DCOs are permitted to invest customer segregated funds. Rule 1.25 was substantially amended in December 2000 to expand the list of permitted investments. 1 In connection with that expansion, the Commission added several provisions intended to minimize the credit, liquidity, and volatility risks associated with the additional investments.

On June 30, 2003, the Commission published for public comment proposed amendments to some of those provisions and further requested comment on several other provisions of the rule. 2 The Commission received comment letters from the Futures Industry Association (“FIA”), National Futures Association (“NFA”), Chicago Mercantile Exchange (“CME”), Federal Home Loan Mortgage Corporation (“Freddie Mac”), and Lehman Brothers. In light of the comments received, the Commission has determined to adopt amendments to Rule 1.25 substantially as proposed and to further clarify certain provisions of the rule. 3

CFTC Staff Letter 84-24 (“Letter 84-24”)  4 permits FCMs to enter into repos with collateral deposited by customers (“customer collateral”), subject to certain terms and conditions. When the Commission adopted the amendments to Rule 1.25 in December 2000, it included provisions governing repos and reverse repos involving investments purchased with customer funds (“permitted investments”), subject to terms and conditions that differ in a number of ways from those in Letter 84-24. 5 The Commission did not, however, specifically address Letter 84-24 at that time.

The Commission proposed to amend Rule 1.25(a)(2) to permit FCMs and DCOs to engage in repos of customer-deposited securities subject to certain terms and conditions. The proposed amendments did not include a requirement that the FCM provide written disclosure of the mechanics of the repo transaction and obtain prior written authorization from the customer. In contrast, Letter 84-24 does include such a requirement. The Commission requested public comment on whether it is appropriate to permit repos of customer collateral without prior written consent, and, if so, whether the limitations set forth in the proposal are appropriate. The Commission further requested comment on whether one-way notice disclosure to the customer should be required, or whether an “opt-out” mechanism should be provided.

The Commission received three comments on the disclosure issue. The FIA pointed out that the securities used in the repos would have to be highly liquid and any loss incurred as a result of a counterparty default would be borne by the FCM. The FIA therefore concluded that the Commission should not require an FCM to provide one-way disclosure or obtain a customer's written consent prior to engaging in a repo transaction with the customer's securities. It further stated its view that all customers are presumed to be aware of the rules and regulations governing their accounts. 6

The NFA observed that because the Commission's proposed amendments exclude specifically identifiable property from repo transactions, it is not necessary to provide an opt-out mechanism whereby a customer could instruct an FCM not to subject collateral to a repo. The NFA expressed its belief that an opt-out provision would be costly and burdensome for FCMs that would have to revise their existing customer agreements without a corresponding regulatory benefit.

Freddie Mac expressed the contrary view that the written disclosure and customer consent requirements of Letter 84-24 are appropriate, and should be retained. It pointed out that, in posting margin to its clearing firms, Freddie Mac may transfer securities, which may include mortgage-related securities that are not fungible. In certain cases, it may be necessary to have the same security returned in order to achieve the company's asset/liability management goals or for other risk management purposes. Freddie Mac stated that, at a minimum, customers and FCMs should be permitted to provide contractually for disclosure and notice.

The Commission has determined to amend Rule 1.25(a)(2) as proposed, without a requirement for written disclosure and customer consent. The Commission believes that in light of the stringent safeguards discussed below, it is appropriate to provide FCMs and DCOs this additional flexibility in performing collateral management. The Commission wishes to emphasize, however, that the absence of disclosure and consent requirements does not preclude any customer of an FCM from requiring on its own initiative, by written agreement ( e.g. , the customer agreement), that the FCM obtain the customer's prior consent in order to engage in repo transactions with securities deposited by the customer. As in other instances where disclosure and customer authorization are not expressly required by regulation, a customer and its FCM are always free to negotiate terms and conditions of disclosure and consent, and to enter into a binding agreement accordingly. 7

With respect to the criteria for engaging in repos with customer collateral under proposed paragraphs (a)(2)(ii)(A)-(D), the FIA expressed the view that those requirements, in combination with the requirements of paragraph (d), “will be more than sufficient to safeguard both the customer-owned securities specifically as well as the customer segregated account generally.” Similarly, the NFA observed that the safeguards included in the proposal provide “ample protection” for customer-deposited securities.

Proposed paragraph (a)(2)(ii)(A) would provide that, to be eligible for repurchase, securities would have to meet the marketability requirements of Rule 1.25(b)(1). 8 Application of this standard is intended to ensure that, if a repo counterparty should default, the FCM or DCO could use the cash proceeds from the repo to buy the securities elsewhere. Both the NFA and FIA supported the marketability requirement. The Commission has determined to adopt paragraph (a)(2)(ii)(A) as proposed.

Proposed paragraph (a)(2)(ii)(B) would provide that securities subject to repos must not be “specifically identifiable property” as defined in Rule 190.01(kk) (17 CFR 190.01(kk)). Such property is generally not eligible for repurchase. The NFA expressed the opinion that the exclusion of specifically identifiable property eliminates the need to require the FCM to replace the securities in the event of a counterparty default. The NFA further stated its belief that, in the event of a default, it would be acceptable for an FCM to make the customer whole by giving the customer the cash equivalent of the securities plus any transaction costs that might be incurred in replacing the securities. This topic is discussed in connection with paragraph (a)(2)(ii)(D), below. The Commission has determined to adopt paragraph (a)(2)(ii)(B) as proposed.

Proposed paragraph (a)(2)(ii)(C) would provide that the terms and conditions of a repo involving customer-deposited securities must be in accordance with the requirements of Rule 1.25(d). 9 As noted above, the FIA commented that application of the requirements of paragraph (d), combined with the additional requirements of proposed paragraph (a)(2)(ii), will more than sufficiently safeguard both the customer-owned securities and the customer segregated account. The Commission believes that these safeguards, currently applicable to repos for permitted investments, are appropriate to apply to customer-deposited securities as well. The Commission, therefore, has determined to adopt paragraph (a)(2)(ii)(C) as proposed.

Proposed paragraph (a)(2)(ii)(D) would provide that, in the unlikely event of a default by a counterparty to a repo, the FCM or DCO “must take steps to ensure” that the default does not result in “any cost or expense” to the customer. The Commission requested comment on how an FCM might fulfill its obligations to its customer in the event a repo counterparty fails to perform. In this regard, the Commission asked commenters to consider whether it is sufficient for the FCM to give the customer the cash equivalent of the securities, plus any transaction costs that might be incurred in replacing the securities, or whether the FCM should be required to replace the securities. The Commission recognized the possibility that cash compensation might be insufficient if a customer needed the particular securities to maintain the risk profile of its portfolio.

The FIA observed that, among other things, because the customer-owned securities used for repos must be highly liquid, an FCM should have little difficulty using the cash proceeds of the repo held in the customer segregated account to buy the same securities elsewhere. The FIA stated its belief that if a counterparty fails to perform, an FCM should make every reasonable effort to replace the customer-owned securities that are the subject of the repo. The FIA added that “[o]f course, any loss incurred as a result of such difficulty would be borne by the FCM.” In response to the Commission's specific request for comments on whether there are tax implications that should be considered in connection with the proposal, the FIA stated its understanding that the failure of a counterparty to return the customer-owned securities could, in certain circumstances, have tax implications. Given the remoteness of counterparty default, the FIA said it does not believe the Commission should consider potential tax implications in adopting final rules. The Commission received no other comments on tax implications.

As noted above, the NFA stated its view that in the event of a counterparty default, it would be acceptable for an FCM to make the customer whole by giving the customer the cash equivalent of the securities plus any transaction costs that might be incurred in replacing the securities. It noted, however, that replacing the securities may be the preferable course of action.

Freddie Mac, in pointing out that it posts margin in the form of securities that are not fungible, explained that in certain cases, it may be necessary to have the same security returned in order to achieve the company's asset/liability management goals or for other risk management purposes. Based on this concern, Freddie Mac requested that the Commission make more explicit, and specifically state, that an FCM is responsible for losses arising from a customer's inability to maintain the risk profile of a portfolio or otherwise replicate necessary positions ( e.g. , “breakage”), transactional costs, and similar consequential losses resulting from the repo transaction.

The Commission has determined that in the unlikely event of a counterparty default involving customer-deposited securities, the FCM or DCO must make the customer economically whole and must do so in a timely manner. The FCM or DCO will not be required to replace the securities; rather, it may exercise its discretion in determining the means for making the customer whole in light of the relevant facts and circumstances. Making the customer “whole” includes, but is not limited to replacing the securities that were the subject of the repo, paying the customer the cash equivalent of the securities, reimbursing the customer for any commissions or other transactional costs incurred by the customer in replacing the securities, compensating the customer for any adverse tax consequences accruing to the customer, 10 or covering any other losses that arise from the counterparty's failure to return the securities deposited by the customer.

Accordingly, the proposed language of 1.25(a)(2)(ii)(D), which would have obligated the FCM or DCO “to take steps to ensure” that the default by a repo counterparty does not result in “any cost or expense to the customer,” has been revised to read “[u]pon the default by a counterparty to a repurchase agreement, the futures commission merchant or derivatives clearing organization shall act promptly to ensure that the default does not result in any direct or indirect cost or expense to the customer.” This modified language is intended to clarify: (1) The FCM or DCO has an unconditional responsibility to make the customer whole; (2) the FCM or DCO must act promptly; and (3) making the customer whole includes compensation for a wide range of costs and expenses, both direct and indirect, as discussed above.

In its proposal, the Commission requested comment on whether the terms and conditions applicable to DCOs engaging in repos should differ in any way from those applicable to FCMs. The Commission received no comments on this topic. The Commission has determined to apply the same rules to both FCMs and DCOs engaging in repo transactions with customer-deposited securities because the same economic risks apply to both situations.

The Commission also requested comment on whether customer collateral that is subject to repo should be treated for concentration purposes like permitted investments under paragraph (b)(4)(ii) (repurchase agreements) or continue to be treated under paragraph (b)(4)(v) (treatment of customer-owned securities). Only the FIA touched on this. In footnote 3 of its letter, the FIA recommends that the concentration limit requirements in paragraph (b)(4)(i) (permitted investments) apply to all transactions. The Commission notes that under current paragraph (b)(4)(v), there is no concentration requirement for customer-deposited securities because changes in the value of such securities accrue to the customer, not the FCM. 11 The final rules in no way limit or alter the fact that changes in the value of such securities accrue to the customer and not the FCM. As discussed above, however, if an FCM engaged in a repo with a customer-deposited security and the counterparty defaulted, the FCM would bear the cost. Thus, the FCM would incur price risk. Accordingly, consistent with the FIA comment, the concentration requirements of direct investments apply.

In light of the Commission's adoption of amendments to Rule 1.25(a)(2), as discussed above, Rule 1.25, as amended, supersedes Letter 84-24.

Rule 1.25(b)(5) establishes a time-to-maturity requirement for the portfolio of permitted investments. In order to encourage development of innovative collateral management programs, and thereby facilitate the efficient use of capital, the Commission proposed to amend Rule 1.25(b)(5) to permit certain instruments to be treated as if they had a time-to-maturity of one day, if certain terms and conditions were satisfied. 12

The Commission proposed the following criteria for such treatment: first, under proposed paragraph (b)(5)(ii)(A), the instrument must be deposited with a DCO solely on an overnight basis, pursuant to the terms and conditions of a collateral management program. Second, under proposed paragraph (b)(5)(ii)(B), the instrument must be one that the FCM owns or has the unqualified right to pledge, is free of any lien, and is deposited by the FCM into a segregated account at a DCO. 13 Third, under proposed paragraph (b)(5)(ii)(C), the instrument must be used only for the purpose of meeting concentration margin or other similar charges that are in addition to the basic margin requirement established by the DCO. Fourth, under proposed paragraph (b)(5)(ii)(D), the DCO must price the instrument each day based on the current mark-to-market value. Fifth, under proposed paragraph (b)(5)(ii)(E), the DCO must haircut the instrument by at least two percent.

The Commission requested comment on the appropriateness of the proposed terms and conditions. In particular, the Commission requested comment on whether the relief should be limited to instruments deposited to meet concentration and similar margin requirements, as proposed, or whether the modified treatment should be extended to apply to initial margin generally. If the latter, the Commission requested comment on whether alternative safeguards should be developed. The Commission also requested comment on whether the proposed haircut is appropriate.

The Commission received two comment letters on the proposed amendments to Rule 1.25(b)(5). With respect to the permitted categories of margin (proposed paragraph (b)(5)(ii)(C)), the CME requested clarification that the proposed language would not restrict it from applying assets in the IEF 3 program to reserve and/or core performance bond requirements. The CME stated that it performs its own conservative risk management and stress testing functions on a daily basis, establishing a prudent and flexible program that benefits market participants. It asserted that by expanding the list of permitted margin categories, industry participants and DCOs would realize greater benefits. The CME stated its belief that it is important to have the flexibility to expand the IEF 3 program to satisfy other classes of performance bond requirements.

Similarly, the FIA expressed the view that certain of the proposed terms and conditions would unnecessarily restrict the scope of the relief. In particular, the FIA stated its belief that the benefits of the amendment should not be limited to those circumstances in which the securities are used only for the purpose of meeting concentration margin or other similar charges. Referring to the IEF 3 program, the FIA noted that although it is limited to the deposit of concentration margin, “we see no reason why, if a clearing organization desired, a comparable program could not be designed for initial margin deposits generally.”

With respect to the proposed minimum haircut of two percent (proposed paragraph (b)(5)(ii)(E)), the CME expressed the view that the rule should allow either a DCO or a qualified custodian to perform the pricing and haircutting functions. It indicated that it plans to use third party custodians to price and haircut securities that qualify for the one-day time-to-maturity benefit, but would like the ability to perform these functions if it obtains the necessary expertise. The CME did not object to the two percent minimum haircut.

The FIA opposed the minimum haircut, expressing the view that the DCO core principles support the authority of DCOs to exercise discretion in managing risks in setting haircuts on deposited securities. The FIA requested that the Commission defer to the DCO's judgment in establishing such haircuts, until the Commission has reason to believe that the DCO is not complying with a core principle.

The Commission has carefully considered the views expressed by the CME and FIA. The Commission has determined to adopt the amendments to Rule 1.25(b)(5), as proposed, with two exceptions. First, the Commission has decided not to adopt proposed paragraph (b)(5)(ii)(C), which would have limited the one-day time-to-maturity treatment to instruments deposited to meet concentration margin or similar charges. The Commission believes that the other provisions of the rule constitute prudent safeguards and that it is appropriate to give DCOs the flexibility to apply the rule to other classes of performance bond.

Second, in the final rules, the Commission has added language to proposed paragraph (b)(5)(ii)(A) to make clear that the DCO's collateral management program must have become effective in accordance with the notice procedures of Rule 39.4. 14 The notice procedures, which apply generally to DCO rules, 15 provide the Commission with a mechanism for maintaining an appropriate level of oversight to ensure that the relief granted in paragraph (b)(5) is applied consistent with core principles and the Commission's regulations. The Commission notes that rather than adopt prescriptive rules for collateral management programs that incorporate the one-day time-to-maturity treatment, the Commission has taken a more flexible approach in permitting DCOs to exercise discretion in developing such programs.

With regard to the CME's comment on performance of the pricing and haircutting function, the Commission confirms that a DCO could outsource the daily execution of these functions to a third party custodian. Under the rule, however, the DCO would remain ultimately responsible for compliance.

With regard to the FIA's comment on the haircut, the Commission has decided to impose a minimum two percent haircut, as proposed. The effect of new paragraph (b)(5)(ii) will be to give relief from the time-to-maturity requirement of paragraph (b)(5)(i) that would otherwise apply. The Commission believes that in light of this relief, the two percent haircut is a prudent substitute safeguard. The Commission understands that two percent is the standard haircut generally used in the repo market.

Finally, the FIA concluded its comments on (b)(5) with a request for the Commission to confirm that, to the extent the concentration limits in Rule 1.25 apply to deposits of securities with DCOs under 1.25(b)(2), the applicable limits will be the limits for direct investments. The Commission hereby confirms this.

The final rules allowing FCMs and DCOs to engage in repos with securities deposited by customers are promulgated under section 4d(a)(2) of the Commodity Exchange Act (“Act”), 16 which governs investment of customer funds, and Section 4(c) of the Act, 17 which grants the Commission broad exemptive authority. Section 4d(a)(2) provides that customer funds may be invested in obligations of the United States, in general obligations of any State or of any political subdivision thereof, and in obligations fully guaranteed as to principal and interest by the United States. It further provides that such investments must be made in accordance with such rules and regulations and subject to such conditions as the Commission may prescribe.

Section 4(c) of the Act provides that, in order to promote responsible economic or financial innovation and fair competition, the Commission, by rule, regulation or order, may exempt any class of agreements, contracts or transactions, including any person or class of persons offering, entering into, rendering advice or rendering other services with respect to, the agreement, contract, or transaction, from the contract market designation requirement of section 4(a) of the Act, or any other provision of the Act other than section 2(a)(1)(C)(ii) or (D), if the Commission determines that the exemption would be consistent with the public interest. For the reasons stated below, the Commission believes that issuing the exemptive relief as set forth in these final rules is consistent with the public interest.

The Commission is expanding the range of instruments in which FCMs may invest customer funds beyond those listed in section 4d(a)(2) of the Act, to enhance the yield available to FCMs, DCOs, and their customers without compromising the safety of customer funds. These final rules should enable FCMs and DCOs to remain competitive globally and domestically, while maintaining safeguards against systemic risk. In light of the foregoing, the Commission has determined that the adoption of the final rules regarding the expansion of permitted instruments for the investment of customer funds will be consistent with the “public interest,” as that term is used in section 4(c) of the Act. When that provision was enacted, the Conference Report accompanying the Futures Trading Practices Act of 1992  18 stated that the “public interest” in this context would “include the national public interests noted in the Act, the prevention of fraud and the preservation of the financial integrity of the markets, as well as the promotion of responsible economic or financial innovation and fair competition.”  19

The Regulatory Flexibility Act (“RFA”) 20 requires federal agencies, in promulgating rules, to consider the impact of those rules on small businesses. The rule amendments adopted herein will affect FCMs and DCOs. The Commission has previously established certain definitions of “small entities” to be used by the Commission in evaluating the impact of its rules on small entities in accordance with the RFA. 21 The Commission has previously determined that registered FCMs  22 and DCOs  23 are not small entities for the purpose of the RFA. Pursuant to 5 U.S.C. 605(b), the Chairman, on behalf of the Commission, certifies that the final rules will not have a significant economic impact on a substantial number of small entities.

The Paperwork Reduction Act of 1995 (“PRA”)  24 imposes certain requirements on federal agencies (including the Commission) in connection with their conducting or sponsoring any collection of information as defined by the PRA. The final rule amendments that have been adopted do not require a new collection of information on the part of any entities subject to these rules.

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

Section 15(a) further specifies that costs and benefits shall be evaluated in light of the following considerations: (1) Protection of market participants and the public; (2) efficiency, competitiveness, and financial integrity of futures markets; (3) price discovery; (4) sound risk management practices; and (5) other public interest considerations. Accordingly, the Commission could, in its discretion, give greater weight to any one of the five considerations and could, in its discretion, determine that, notwithstanding its costs, a particular rule was necessary or appropriate to protect the public interest or to effectuate any of the provisions or to accomplish any of the purposes of the Act.

The Commission has evaluated the costs and benefits of the final rules in light of the specific considerations identified in section 15(a) of the Act, as follows:

1. Protection of market participants and the public. The final rules facilitate greater capital efficiency on the part of FCMs and DCOs, while protecting customers by establishing prudent standards for repos with customer-deposited collateral and requirements for adjustment to time-to-maturity calculations for certain collateral management programs.

2. Efficiency and competition. The final rules provide FCMs and DCOs with greater flexibility in using repos to maximize returns on direct investment of customer funds. They also facilitate the implementation of collateral management programs, which can also serve to maximize capital efficiency. The rules should enable FCMs and DCOs to remain competitive globally and domestically, while maintaining safeguards against systemic risk.

3. Financial integrity of futures markets and price discovery. The final rules will not affect the financial integrity of futures markets and price discovery.

4. Sound risk management practices. The final rules impose sound risk management practices for FCMs and DCOs that elect to invest customer funds under the rules. The rules regarding repos with customer-deposited securities make clear that FCMs and DCOs, not customers, will bear the costs of any default by a repo counterparty. DCOs acting pursuant to the one-day time-to-maturity relief must satisfy the requirements set forth in the final rules, which include a requirement that the governing collateral management program must have been filed with the Commission.

5. Other public considerations. The final rules are expected to enhance the ability of FCMs and DCOs to earn revenue from the investment of customer funds, while protecting the safety of such funds and preserving the rights of customers. FCMs and DCOs are not obligated to enter into repos with customer-deposited collateral under Rule 1.25(a)(2), and, similarly, DCOs are not obligated to implement collateral management programs applying the relief granted in Rule 1.25(b)(5). Therefore, any costs to FCMs and DCOs in connection with the implementation of these rules are voluntarily incurred. With respect to customer costs, the rules clarify that, in the case of a default by a repo counterparty, the customer must be made whole, promptly. The requirements that must be satisfied in order for collateral to be used for a repo (including ready marketability) will make prompt replacement of the securities or payment of replacement costs readily feasible solutions.

On September 26, 2003, we published a notice of proposed rulemaking (NPRM) entitled “Safety Zone for Outer Continental Shelf Facility in the Gulf of Mexico for Green Canyon 645” in the Federal Register (68 FR 55557). We received no comments on the proposed rule. No public hearing was requested, and none was held.

The Coast Guard is establishing a safety zone around a petroleum and gas production facility in the Gulf of Mexico: Holstein, Green Canyon Block 645 (GC 645), located at position 27°19′17″ N, 90°32′08″ W. The safety zone will be in effect while the facility is being constructed and after the construction is completed.

This safety zone is in the deepwater area of the Gulf of Mexico. For the purposes of this regulation it is considered to be in waters of 304.8 meters (1,000 feet) or greater depth extending to the limits of the Exclusive Economic Zone (EEZ) contiguous to the territorial sea of the United States and extending to a distance up to 200 nautical miles from the baseline from which the breadth of the sea is measured. Navigation in the area of the safety zone consists of large commercial shipping vessels, fishing vessels, cruise ships, tugs with tows and the occasional recreational vessel. The deepwater area of the Gulf of Mexico also includes an extensive system of fairways. The fairways nearest the safety zone include the East-West Gulf of Mexico Safety Fairway and Louisiana Offshore Oil Port (LOOP) Shipping Safety Fairway. Significant amounts of vessel traffic occur in or near the various fairways in the deepwater area.

BP Exploration & Production Inc., hereafter referred to as “BP” requested that the Coast Guard establish a safety zone in the Gulf of Mexico around the Holstein construction site and for the zone to remain in effect after construction is completed.

The request for the safety zone was made due to the high level of shipping activity around the site of the facility and the safety concerns for construction personnel, the personnel on board the facility after it is completed, and the environment. BP indicated that the location, production level, and personnel levels on board the facility make it highly likely that any allision with the facility during and after construction would result in a catastrophic event.

The Coast Guard has evaluated BP's information and concerns against Eighth Coast Guard District criteria developed to determine if an Outer Continental Shelf facility qualifies for a safety zone. We concluded that the risk of allision to the facility and the potential for loss of life and damage to the environment resulting from such an accident during and following the construction of Holstein warrants the establishment of this safety zone. The regulation will significantly reduce the threat of allisions, oil spills and natural gas releases and increase the safety of life, property, and the environment in the Gulf of Mexico. This regulation is issued pursuant to 14 U.S.C. 85 and 43 U.S.C. 1333 as set out in the authority citation for 33 CFR part 147.

We received no comments on the proposed rule. Therefore, we have not made any change in the final rule.

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

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

The impacts on routine navigation are expected to be minimal because the safety zone will not overlap any of the safety fairways within the Gulf of Mexico.

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

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. Since the construction site for the Holstein is located far offshore, few privately owned fishing vessels and recreational boats/yachts operate in the area. This rule will not impact an attending vessel or vessels less than 100 feet in length overall not engaged in towing. Alternate routes are available for all other vessels impacted by this rule. Use of an alternate route may cause a vessel to incur a delay of four to ten minutes in arriving at their destinations depending on how fast the vessel is traveling. Therefore, the Coast Guard expects the impact of this regulation on small entities to be minimal.

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

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-121), we offered to assist small entities in understanding this rule so that they can better evaluate its effects on them and participate in the rulemaking.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

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

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

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

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

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

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

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal government and Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes.

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

We have analyzed this rule under Commandant Instruction M16475.1D, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1 paragraph (34)(g), of the instruction, from further environmental documentation because this rule is not expected to result in any significant environmental impact as described in NEPA.

A final “Environmental Analysis Check List” and a final “Categorical Exclusion Determination” are available in the docket where indicated under ADDRESSES.

We did not publish a notice of proposed rulemaking (NPRM) for this rule. The Coast Guard is promulgating this security zone regulation to protect NCSPA Wilmington and the surrounding vicinity from threats to national security. Accordingly, based on the military function exception set forth in the Administrative Procedure Act, 5 U.S.C. 553(a)(1), notice and comment rule-making and advance publication are not required for this regulation.

Vessels frequenting the North Carolina State Port Authority (NCSPA) Wilmington facility serve as a vital link in the transportation of military munitions, explosives, equipment, and personnel in support of Department of Defense missions at home and abroad. This vital transportation link is potentially at risk to acts of terrorism, sabotage and other criminal acts. Munitions and explosives laden vessels also pose a unique threat to the safety and security of the NCSPA Wilmington, vessel crews, and others in the maritime community and the surrounding community should the vessels be subject to acts of terrorism or sabotage, or other criminal acts. The ability to control waterside access to vessels laden with munitions and explosives, as well as those used to transport military equipment and personnel, moored at the NCSPA Wilmington is critical to national defense and security, as well as to the safety and security of the NCSPA Wilmington, vessel crews, and others in the maritime community and the surrounding community. Therefore, the Coast Guard is establishing this security zone to safeguard human life, vessels and facilities from sabotage, terrorist acts or other criminal acts.

The security zone is necessary to provide security for, and prevent acts of terrorism against, vessels loading or offloading and the NCSPA Wilmington facility during a military operation. It will include an area from 800 yards south of the Cape Fear River Bridge encompassing the southern end of Eagle Island, the Cape Fear River, and the grounds of the State Port Authority Terminal south to South Wilmington Terminal. The security zone will prevent access to unauthorized persons who may attempt to enter the secure area via the Cape Fear River, the North Carolina State Port Authority terminal, or use Eagle Island as vantage point for surveillance of the secure area. The security zone will protect vessels moored at the facility, their crews, others in the maritime community and the surrounding communities from subversive or terrorist attack that could cause serious negative impact to vessels, the port, or the environment, and result in numerous casualties.

No person or vessel may enter or remain in the security zone at any time without the permission of the Captain of the Port, Wilmington. Each person or vessel operating within the security zone will obey any direction or order of the Captain of the Port. The Captain of the Port may take possession and control of any vessel in a security zone and/or remove any person, vessel, article or thing from this security zone.

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

Although this regulation restricts access to the security zone, the effect of this regulation will not be significant because: (i) The COTP or his or her representative may authorize access to the security zone; (ii) the security zone will be enforced for limited duration; and (iii) the Coast Guard will make notifications via maritime advisories so mariners can adjust their plans accordingly.

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

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule will affect the following entities, some of which may be small entities: the owners or operators of vessels intending to transit or anchor in a portion of the Cape Fear River that is within the security zone.

This security zone will not have a significant economic impact on a substantial number of small entities for the following reasons. Although the security zone will apply to the entire width of the river, traffic will be allowed to pass through the zone with the permission of the COTP or his or her designated representative. Before the effective period, we will issue maritime advisories widely available to users of the river.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-121), we offer to assist small entities in understanding the rule so that they can better evaluate its effects on them and participate in the rulemaking process. If the rule will affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the address listed under ADDRESSES .

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

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

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

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

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

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

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

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal government and Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes.

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

We have analyzed this rule under Commandant Instruction M16475.lD, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction, from further environmental documentation. A final “Environmental Analysis Check List” and a final “Categorical Exclusion Determination” are available in the docket where indicated under ADDRESSES .

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a NPRM. Publishing a NPRM and delaying the rule's effective date would be contrary to the public interest since immediate action is needed to protect the public, ports and waterways of the United States.

For the same reasons, under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register .

Similar regulations were established on December 19, 2001, and published in the Federal Register (67 FR 2332, January 17, 2002); and again on September 13, 2002 (67 FR 57952, September 13, 2002), on March 18, 2003 (67 FR 22296, April 28, 2003); and on June 30, 2003 (67 FR 41081, July 10, 2003). However, these regulations have expired—on June 15, 2002; December 15, 2002; June 15, 2003; and December 15, 2003, respectively. We did not receive any comments on these regulations.

The Captain of the Port San Juan has determined that due to the continued security risks, the nature of the HOVENSA facility, recent increases in the Homeland Security Advisory System level and maritime security level, this rule is needed to ensure the safety and security of this facility. The Coast Guard intends to publish a notice of proposed rulemaking to propose making this temporary rule a final rule.

Although the Coast Guard has good cause to implement this regulation without a notice of proposed rulemaking, we want to afford the public the opportunity to participate in this rulemaking by submitting comments and related material regarding the size and boundaries of these security zones in order to minimize unnecessary burdens. If you submit a comment, please include your name and address, identify the docket number for this rulemaking (COTP San Juan 03-176), indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related material in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying to the address indicated in ADDRESSES. If you would like to know they reached us, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this temporary final rule in view of them.

Based on the September 11, 2001, terrorist attacks and recent increases in maritime security levels, there is an increased risk that subversive activity could be launched by vessels or persons in close proximity to the HOVENSA refinery on St. Croix, USVI against tank vessels and the waterfront facility. Given the highly volatile nature of the substances stored at the HOVENSA facility, this security zone is necessary to decrease the risk that subversive activity could be launched against the HOVENSA facility. The Captain of the Port San Juan is reducing this risk by prohibiting all vessels without a scheduled arrival from coming within 3 miles of the HOVENSA facility unless specifically permitted by the Captain of the Port San Juan, his designated representative, or the HOVENSA Facility Port Captain. The Captain of the Port San Juan can be reached through the Coast Guard Greater Antilles Section Command Center via VHF Marine Band Radio, Channel 16 (156.8 Mhz) or by calling (787) 289-2040, 24 hours a day, 7 days a week. The HOVENSA Facility Port Captain can be reached on VHF Marine Band Radio channel 11 (156.6 Mhz) or by calling (340) 692-3488, 24 hours a day, 7 days a week.

The temporary security zone around the HOVENSA facility is outlined by the following coordinates: 64°45′09″ West, 17°41′32″ North, 64°43′36″ West, 17°38′30″ North, 64°43′36″ West, 17°38′30″ North and 64°43′06″ West, 17°38′42″ North.

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that order. It is not significant under the regulatory policies and procedures of the Department of Homeland Security (DHS) because this zone covers an area that is not typically used by commercial vessel traffic, including fishermen, and vessels may be allowed to enter the zone on a case by case basis with the permission of the Captain of the Port San Juan or the HOVENSA Port Captain.

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

This rule may affect the following entities, some of which may be small entities: owners of small charter fishing or diving operations that operate near the HOVENSA facility. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities because this zone covers an area that is not typically used by commercial fishermen and vessels may be allowed to enter the zone on a case by case basis with the permission of the Captain of the Port San Juan or the HOVENSA Port Captain.

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

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we offer to assist small entities in understanding this rule so that they can better evaluate its effects on them and participate in the rulemaking process. If the rule will affect your small business, organization, or government jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed under FOR FURTHER INFORMATION CONTACT for assistance in understanding this rule.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

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

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

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

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

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

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

This proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. We invite your comments on how this proposed rule might impact tribal governments, even if that impact may not constitute a “tribal implication” under the Order.

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

We have analyzed this proposed rule under Commandant Instruction M16475.lD, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction, from further environmental documentation. A draft “Environmental Analysis Check List” and a draft “Categorical Exclusion Determination” (CED) are available in the docket where indicated under ADDRESSES . Comments on this section will be considered before we make the final decision on whether the rule should be categorically excluded from further environmental review.

We did not publish a notice of proposed rulemaking (NPRM) for this rule. Under 5 U.S.C. 553(b)(B) and (d)(3), the Coast Guard finds that good cause exists for not publishing a NPRM and for making this rule effective less than 30 days after publication in the Federal Register . Based upon the warnings from national security and intelligence personnel, this rule is urgently required to protect the plant from subversive activity, sabotage or possible terrorist attacks initiated from the waters surrounding the plants.

Delaying the effective date of the rule would be contrary to the public interest, since immediate action is needed to continue to protect the persons at the facilities, the public and surrounding communities from the release of nuclear radiation. This security zone should have minimal impact on vessel transits because the security zone does not block the channel.

On September 16, 2003, we published a notice of proposed rulemaking (68 FR 53928) to create a permanent security zone in the same area this temporary final rule covers. It is taking longer to resolve issues related to the final rule than originally expected at the time the first temporary final rule was issued (68 FR 33386, June 4, 2003). Our extension of the effective period of the temporary security zone is intended to provide the Coast Guard with enough time to complete the rulemaking for a permanent zone without an interruption in the protection provided at the site by the temporary security zone.

Due to the continued warnings from national security and intelligence officials that future terrorist attacks are possible, such as those launched against New York and Washington, DC, on September 11, 2001, heightened security measures are necessary for the area surrounding the Limerick Generating Station. This rule will provide the Captain of the Port Philadelphia with enforcement options to deal with potential threats to the security of the generating station. As noted, the Coast Guard has proposed to establish a permanent security zone that would control waterside access to the station.

This temporary rule will extend the effective period of the security zone from 5 p.m. (EST) on January 24, 2004 to 11:59 p.m. (EST) on February 29, 2004. No person or vessel may enter or remain in the prescribed security zone at any time without the permission of the Captain of the Port, Philadelphia, Pennsylvania or designated representative. Federal, state, and local agencies may assist the Coast Guard in the enforcement of this rule.

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

The primary impact of this rule will be on vessels wishing to transit the affected waterway. Although this rule restricts traffic from freely transiting portions of the Schuylkill River, that restriction affects only a limited area and will be well publicized to allow mariners to make alternative plans.

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

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule may affect the following entities, some of which may be small entities: owners or operators of fishing vessels and recreational vessels wishing to transit the portions of the Schuylkill River.

The rule will not have a significant impact on a substantial number of small entities for the following reasons: the restrictions affect only a limited area and traffic will be allowed to transit through the zone with permission of the Coast Guard or designated representative. The opportunity to engage in recreational and charter fishing outside the geographical limits of the security zone will not be disrupted. Therefore, this regulation should have a negligible impact on recreational and charter fishing activity.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking process.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

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

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

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

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

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

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Security Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to security that may disproportionately affect children.

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

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

We have analyzed this rule under Commandant Instruction M16475.1D, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of Commandant Instruction M16475.lD, from further environmental documentation.

A final “Environmental Analysis Checklist” and a final “Categorical Exclusion Determination” will be available in the docket where indicated under ADDRESSES.

We did not publish a notice of proposed rulemaking (NPRM) for this rule. Under 5 U.S.C. 553(b)(B) and (d)(3), the Coast Guard finds that good cause exists for not publishing a NPRM and for making this rule effective less than 30 days after publication in the Federal Register . Based upon the warnings from national security and intelligence personnel, this rule is urgently required to protect the plant from subversive activity, sabotage or possible terrorist attacks initiated from the waters surrounding the plants.

Delaying the effective date of the rule would be contrary to the public interest, since immediate action is needed to continue to protect the persons at the facilities, the public and surrounding communities from the release of nuclear radiation. This security zone should have minimal impact on vessel transits due to the fact that the security zone does not block the channel.

On September 15, 2003, we published a notice of proposed rulemaking (68 FR 53932) to create a permanent security zone in the same area this temporary final rule covers. It is taking longer to resolve issues related to the final rule than originally expected at the time the first temporary final rule was issued (68 FR 33388, June 4, 2003). Our extension of the effective period of the temporary security zone is intended to provide the Coast Guard with enough time to complete the rulemaking for a permanent zone without an interruption in the protection provided at the site by the temporary security zone.

Due to the continued warnings from national security and intelligence officials that future terrorist attacks are possible, such as those launched against New York and Washington DC on September 11, 2001, heightened security measures are necessary for the area surrounding the Peach Bottom Atomic Power Station. This rule will provide the Captain of the Port Philadelphia with enforcement options to deal with potential threats to the security of the plants. As noted, the Coast Guard has proposed to establish a permanent security zone that would control waterside access to the power station.

This will allow the Coast Guard time to publish a notice of proposed rulemaking (NPRM) and a final rule in the Federal Register without an interruption in the protection provided by the security zone.

This temporary final rule will extend the effective period of the security zone from 5 p.m. (EST) January 24, 2004, to 11:59 p.m. (EST) on February 29, 2004. No person or vessel may enter or remain in the prescribed security zone at any time without the permission of the Captain of the Port, Philadelphia, Pennsylvania or designated representative. Federal, state, and local agencies may assist the Coast Guard in the enforcement of this rule.

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

The primary impact of this rule will be on vessels wishing to transit the affected waterway. Although this rule restricts traffic from freely transiting portions of the Susquehanna River, that restriction affects only a limited area and will be well publicized to allow mariners to make alternative plans.

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

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule may affect the following entities, some of which may be small entities: owners or operators of fishing vessels and recreational vessels wishing to transit the portions of the Susquehanna River.

The rule will not have a significant impact on a substantial number of small entities for the following reasons: The restrictions affect only a limited area and traffic will be allowed to transit through the zone with permission of the Coast Guard or designated representative. The opportunity to engage in recreational and charter fishing outside the geographical limits of the security zone will not be disrupted. Therefore, this regulation should have a negligible impact on recreational and charter fishing activity.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking process.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

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

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

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

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

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

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Security Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to security that may disproportionately affect children.

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

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

We have analyzed this rule under Commandant Instruction M16475.1D, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of Commandant Instruction M16475.lD, from further environmental documentation.

A final “Environmental Analysis Checklist” and a final “Categorical Exclusion Determination” will be available in the docket where indicated under ADDRESSES.

We did not publish a notice of proposed rulemaking (NPRM) for this rule. Under 5 U.S.C. 553(b)(B) and (d)(3), the Coast Guard finds that good cause exists for not publishing a NPRM and for making this rule effective less than 30 days after publication in the Federal Register . Based upon the warnings from national security and intelligence personnel, this rule is urgently required to protect the plant from subversive activity, sabotage or possible terrorist attacks initiated from the waters surrounding the plants.

Delaying the effective date of the rule would be contrary to the public interest, since immediate action is needed to continue to protect the persons at the facilities, the public and surrounding communities from the release of nuclear radiation. This security zone should have minimal impact on vessel transits because the security zone does not block the channel.

On September 16, 2003, we published a notice of proposed rulemaking (68 FR 54177) to create a permanent security zone in the same area this temporary final rule covers. It is taking longer to resolve issues related to the final rule than originally expected at the time the first temporary final rule was issued (68 FR 33399, June 4, 2003). Our extension of the effective period of the temporary security zone is intended to provide the Coast Guard with enough time to complete the rulemaking for a permanent zone without an interruption in the protection provided at the site by the temporary security zone.

Due to the continued warnings from national security and intelligence officials that future terrorist attacks are possible, such as those launched against New York and Washington, DC, on September 11, 2001, heightened security measures are necessary for the area surrounding the Three Mile Island Generating Station. This rule will provide the Captain of the Port Philadelphia with enforcement options to deal with potential threats to the security of the plants. As noted, the Coast Guard has proposed to implement a permanent security zone surrounding the plants.

This temporary rule will extend the effective period of the security zone from 5 p.m. (e.s.t.) on January 24, 2004, to 11:59 p.m. (e.s.t.) on February 29, 2004. No person or vessel may enter or remain in the prescribed security zone at any time without the permission of the Captain of the Port, Philadelphia, Pennsylvania or designated representative. Federal, State, and local agencies may assist the Coast Guard in the enforcement of this rule.

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

The primary impact of this rule will be on vessels wishing to transit the affected waterway. Although this rule restricts traffic from freely transiting portions of the Susquehanna River, that restriction affects only a limited area and will be well publicized to allow mariners to make alternative plans.

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

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule may affect the following entities, some of which may be small entities: owners or operators of fishing vessels and recreational vessels wishing to transit the portions of the Susquehanna River.

The rule will not have a significant impact on a substantial number of small entities for the following reasons: the restrictions affect only a limited area and traffic will be allowed to transit through the zone with permission of the Coast Guard or designated representative. The opportunity to engage in recreational and charter fishing outside the geographical limits of the security zone will not be disrupted. Therefore, this regulation should have a negligible impact on recreational and charter fishing activity.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking process.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

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

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

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

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

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

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Security Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to security that may disproportionately affect children.

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

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

We have analyzed this rule under Commandant Instruction M16475.1D, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of Commandant Instruction M16475.lD, from further environmental documentation.

A final “Environmental Analysis Checklist” and a final “Categorical Exclusion Determination” will be available in the docket where indicated under ADDRESSES.

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing an NPRM. The Holland America cruise line only recently finalized arrangements with Federal and local agencies to allow the P/V MAASDAM to conduct regular passenger cruises from Norfolk. As a result, the Coast Guard received the final schedule for the MAASDAM in January 2004. Coast Guard policy dictates that the Captain of the Port will provide for the security of high-capacity passenger vessels, and this security zone is necessary for that purpose.

Publishing an NPRM, which would incorporate a comment period before a final rule was issued, would be contrary to the public interest since immediate action is needed to protect this vessel from potential security threats. For similar reasons, under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register .

Following terrorist attacks on the United States in September 2001, there is a heightened awareness that vessels or persons could launch subversive activity against passenger ships. These regulations are necessary to protect the vessel, its passengers, and its crew from these potential threats. The Coast Guard is establishing a temporary security zone to ensure the vessel's safe inbound and outbound transits, and to protect the vessel while moored at Nauticus International Terminal.

The Coast Guard is establishing temporary security zones to ensure safe transits and port calls for the P/V MAASDAM. The security zones will be activated while the P/V MAASDAM transits in the Port of Hampton Roads, and while it is berthed at Nauticus International Terminal. This rule is effective from January 20, 2004, to April 24, 2004. The security zone will extend in a 500-yard radius around P/V MAASDAM. All vessels within 500 yards must operate only at the minimum speed necessary to maintain course. No vessels are allowed within 100 yards of P/V MAASDAM without authorization by the Captain of the Port, Hampton Roads, or his designated representative. This rule will provide for increased security of the vessel and other vessels transiting in the area, and will allow the uninterrupted flow of commerce in the Port of Hampton Roads. Public notifications will be made prior to the transit via marine information broadcasts.

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

Although this rule restricts access to the regulated area, the effect of this rule will not be significant because: (i) The COTP may authorize access to the security zone; (ii) the security zones will be in effect for a limited duration; and (iii) the Coast Guard will make notifications via maritime advisories so mariners can adjust their plans accordingly.

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

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule will affect the following entities, some of which may be small entities: The owners and operators of vessels intending to transit or anchor within a 500-yard radius of P/V MAASDAM as she transits the Port of Hampton Roads, and while she is berthed at the Nauticus International Terminal.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we offer to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking process. If the rule will affect your small business, organization, or government jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed under FOR FURTHER INFORMATION CONTACT for assistance in understanding this rule.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

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

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

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

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

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

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

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

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

We have analyzed this rule under Commandant Instruction M16475.1D, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction, from further environmental documentation because it creates temporary security zones. A final “Environmental Analysis Check List” and a final “Categorical Exclusion Determination” are available in the docket where indicated under ADDRESSES.

I. Background

On August 4, 1995 (60 FR 39911), September 6, 1994 (59 FR 45985), December 21, 1994 (59 FR 65719) and September 6, 1994 (59 FR 45978), respectively, EPA redesignated Greenbrier County and the Charleston, Huntington and Parkersburg areas of West Virginia to attainment for the 1-hour ozone NAAQS. For each of those areas, the redesignations included approvals of 1-hour ozone maintenance plans, which identify on-road MVEBs for VOCs and NO X , which are ozone precursors. The MVEBs contained in those maintenance plans were based upon MOBILE5, which was the latest EPA on-road motor vehicle emission factor model available at the time.

The MOBILE model is an EPA emission factor model for estimating pollutant emissions from on-road motor vehicles. The MOBILE model calculates emissions of VOCs and NO X from passenger cars, motorcycles, buses, and light-duty and heavy-duty trucks. The model accounts for the emission impacts of factors such as changes in vehicle emission standards, changes in vehicle populations and activity, and various local conditions such as temperature, humidity, fuel quality, and air quality programs. The MOBILE model is used to calculate current and future inventories of motor vehicle emissions at the national and local level. These inventories are used to make decisions about air pollution policies and programs at the local, State and national level. MOBILE-based inventories are also used in demonstrating how the Clean Air Act's (the Act's) requirements for SIPs and transportation conformity are met.

The MOBILE model was first developed in 1978. It has been updated several times to reflect changes in the vehicle fleet and fuels, to incorporate EPA's growing understanding of vehicle emissions, and to address new emission regulations and modeling needs. EPA released MOBILE6, the latest version of the MOBILE model, on January 29, 2002 (67 FR 4254). Although some minor updates were made in 1996 with the release of MOBILE5b, MOBILE6 is the first major revision to MOBILE since MOBILE5a was released in 1993. Beginning in January of 2004, all conformity determinations for new transportation improvement programs and long range transportation plans will be required to use MOBILE6 to demonstrate conformity.

For the year 2005, the maintenance plans identified and established MVEBs for VOC and NO X for each area, to which each respective area's transportation improvement program and long range transportation plan must conform. Conformity to MVEBs in a SIP means that transportation activities will not produce new air quality violations, worsen existing violations, or delay timely attainment of the NAAQS.

On October 15, 2003, the State of West Virginia submitted to EPA a formal revision to its State Implementation Plan (SIP). The SIP revision contains recalculations of the MVEBs to reflect the use of the MOBILE6 emission factor model for Greenbrier County and the Charleston, Huntington and Parkersburg maintenance areas. The revisions also reallocate a portion of the differences (safety margins) between the total base year and total projected 2005 emissions for each area which produces an increase in the MVEBs. The base year is 1990 for the Charleston and Parkersburg areas, and 1993 for Greenbrier County and the Huntington area. By increasing the MVEBs, the West Virginia Department of Environmental Protection (WVDEP) is ensuring that conformity can be demonstrated in each area. The October 15, 2003 submittal, while increasing the MVEBs still ensures maintenance of the NAAQS for ozone in each area.

Tables 1-4 and the discussion that follows describe how the new MOBILE6-based MVEBs were determined for each maintenance area.

All emissions presented in the tables are recalculated based upon MOBILE6. The 2005 MVEB VOC AND NO X emissions (upper portion of last column) serve as the new MVEBs for transportation conformity planning.

As indicated in Tables 1-4 (see explanation that follows), ninety percent of the difference between the total base year emissions and the total projected 2005 emissions has been allocated to the respective on-road MVEBs. The remaining ten percent has been reserved as residual safety margins in the total maintenance budgets to ensure continued maintenance of the 1-hour ozone NAAQS.

To explain how the safety margins are determined and allocated, the VOC emissions for the Parkersburg area (in Table 4) may be used as an example. The total 1990 base year VOC emissions are 55.1 tons/day (tpd), which is the maximum amount of VOC emissions consistent with maintenance of the 1-hour ozone NAAQS. Since the total projected 2005 emissions are 44.6 tpd, there is a 10.5 tpd VOC safety margin ( i.e. , the ozone NAAQS would continue to be maintained if total VOC emissions increased as much as 10.5 tpd above the projected 2005 emissions of 44.6 tpd.) Ninety percent of the 10.5 tpd safety margin ( i.e. , 9.5 tpd) has been allocated to the 2005 projected highway VOC emissions (4.0 tpd) yielding a MVEB of 13.4 tpd of VOC for year 2005. (Note regarding the 13.4 number: 13.4, as opposed to 13.5, results from mathematical rounding of the VOC and safety margin numbers).

In the same Parkersburg example (again refer to Table 4), the remaining 1.0 tpd of the VOC safety margin has been reserved as a residual safety margin in the total (point, area and mobile source) maintenance VOC budget. The 1.0 tpd residual VOC safety margin is subtracted from the 1990 total allowable base year emissions (55.1 tpd) to yield 54.1 as the new total VOC maintenance budget for the Parkersburg area.

For all of the West Virginia 1-hour ozone maintenance areas addressed herein, the WVDEP recalculated the 2005 MVEBs using the latest available planning assumption data. However, the most up-to-date West Virginia vehicle registration data do not differentiate between passenger cars and light duty trucks, rendering those data inadequate for use in estimating emissions. Therefore, the WVDEP used the latest available West Virginia Highway Performance Monitoring System (HPMS) data on vehicle miles traveled (VMT) by vehicle type and roadway class obtained from the West Virginia Department of Transportation. The WVDEP used the HPMS data to adjust the national MOBILE6 default VMT data to generate a more accurate VMT mix by vehicle type and roadway class. That adjusted VMT mix was used in conjunction with MOBILE6 in calculating the base year and projected 2005 VOC and NO X emissions.

EPA is approving West Virginia's October 15, 2003 SIP revision submittal which amends the 1-hour ozone maintenance plans for the Greenbrier County and the Charleston, Huntington and Parkersburg areas. These revisions amend the maintenance plans' base year and 2005 highway mobile VOC and NO X emission inventories and the 2005 MVEBs to reflect the use of MOBILE6. These revisions also reallocate a portion of each plans' safety margins which results in an increase in the MVEBs. EPA is approving these SIP revisions to the maintenance plans for Greenbrier County and the Charleston, Huntington and Parkersburg areas because the October 15, 2003 submittal continues to demonstrate maintenance of the 1-hour ozone NAAQS. EPA is publishing this rule without prior proposal because the Agency views this as a noncontroversial amendment and anticipates no adverse comment, since no significant adverse comments were received on the SIP revision at the State level. However, in the “Proposed Rules” section of today's Federal Register , EPA is publishing a separate document that will serve as the proposal to approve the SIP revision if adverse comments are filed. This rule will be effective on April 12, 2004 without further notice unless EPA receives adverse comment by March 11, 2004.

If EPA receives adverse comment, EPA will publish a timely withdrawal in the Federal Register informing the public that the rule will not take effect. EPA will address all public comments in a subsequent final rule based on the proposed rule. EPA will not institute a second comment period on this action. Any parties interested in commenting must do so at this time. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment.

You may submit comments either electronically or by mail. To ensure proper receipt by EPA, identify the appropriate rulemaking identification number WV063-6032 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. 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. E-mail. Comments may be sent by electronic mail (e-mail) to budney.larry@epa.gov attention WV063-6032. 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.

ii. Regulations.gov. Your use of Regulations.gov is an alternative method of submitting electronic comments to EPA. Go directly to http://www.regulations.gov, then select “Environmental Protection Agency” at the top of the page and use the “go” button. 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.

iii. Disk or CD ROM. You may submit comments on a disk or CD ROM that you mail to the mailing address identified in the ADDRESSES section of this document. 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. Written comments should be addressed to the EPA Regional office listed in the ADDRESSES section of this document. For public commenters, it is important to note that EPA's policy is that public comments, whether submitted electronically or on 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, confidential business information (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.

Submittal of CBI Comments —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.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). This rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely approves a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant. In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by April 12, 2004. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action approving West Virginia's revisions to the base-year and 2005 MVEBs of its 1-hour ozone maintenance plans for the Greenbrier County and the Charleston, Huntington and Parkersburg areas to reflect the use of MOBILE6 may not be challenged later in proceedings to enforce its requirements. ( See section 307(b)(2).)

FEMA makes the final determinations listed below of modified BFEs for each community listed. These modified elevations have been published in newspapers of local circulation and ninety (90) days have elapsed since that publication. The Mitigation Division Director of the Emergency Preparedness and Response Directorate has resolved any appeals resulting from this notification.

The modified BFEs are not listed for each community in this notice. However, this rule includes the address of the Chief Executive Officer of the community where the modified base flood elevation determinations are available for inspection.

The modifications are made pursuant to section 206 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001 et seq. , and with 44 CFR part 65.

For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.

The modified BFEs are the basis for the floodplain management measures that the community is required to either adopt or to show evidence of being already in effect in order to qualify or to remain qualified for participation in the National Flood Insurance Program (NFIP).

These modified elevations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own, or pursuant to policies established by other Federal, State or regional entities.

These modified elevations are used to meet the floodplain management requirements of the NFIP and are also used to calculate the appropriate flood insurance premium rates for new buildings built after these elevations are made final, and for the contents in these buildings.

The changes in BFEs are in accordance with 44 CFR 65.4.

This rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because modified BFEs are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are required to maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This final rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated October 26, 1987.

This rule meets the applicable standards of section 2(b)(2) of Executive Order 12778.

The modified BFEs are not listed for each community in this interim rule. However, the address of the Chief Executive Officer of the community where the modified BFE determinations are available for inspection is provided.

Any request for reconsideration must be based upon knowledge of changed conditions, or upon new scientific or technical data.

The modifications are made pursuant to section 201 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001 et. seq., and with 44 CFR part 65.

For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.

The modified BFEs are the basis for the floodplain management measures that the community is required to either adopt or to show evidence of being already in effect in order to qualify or to remain qualified for participation in the National Flood Insurance Program (NFIP).

These modified elevations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own, or pursuant to policies established by other Federal, State or regional entities.

The changes in BFEs are in accordance with 44 CFR 65.4.

This rule is categorically excluded from the requirement of 44 CFR part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because modified BFEs are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are required to maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This interim rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated October 26, 1987.

This rule meets the applicable standards of section 2(b)(2) of Executive Order 12778.

The modified BFEs are not listed for each community in this interim rule. However, the address of the Chief Executive Officer of the community where the modified BFE determinations are available for inspection is provided.

Any request for reconsideration must be based on knowledge of changed conditions or new scientific or technical data.

The modifications are made pursuant to section 201 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001 et seq. , and with 44 CFR part 65.

For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.

The modified BFEs are the basis for the floodplain management measures that the community is required to either adopt or to show evidence of being already in effect in order to qualify or to remain qualified for participation in the National Flood Insurance Program (NFIP).

These modified BFEs, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own, or pursuant to policies established by other Federal, State, or regional entities.

The changes in BFEs are in accordance with 44 CFR 65.4.

This rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because modified base flood elevations are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are required to maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This interim rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated October 26, 1987.

This rule meets the applicable standards of section 2(b)(2) of Executive Order 12778.

FEMA makes the final determinations listed below for the modified BFEs for each community listed. These modified elevations have been published in newspapers of local circulation and ninety (90) days have elapsed since that publication. The Mitigation Division Director of the Emergency Preparedness and Response Directorate, has resolved any appeals resulting from this notification.

This final rule is issued in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR part 67.

The Agency has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR part 60.

Interested lessees and owners of real property are encouraged to review the proof Flood Insurance Study and FIRM available at the address cited below for each community.

The BFEs and modified BFEs are made final in the communities listed below. Elevations at selected locations in each community are shown.

This rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because final or modified BFEs are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and are required to establish and maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This final rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated October 26, 1987.

This rule meets the applicable standards of section 2(b)(2) of Executive Order 12778.

FEMA makes the final determinations listed below for the modified BFEs for each community listed. These modified elevations have been published in newspapers of local circulation and ninety (90) days have elapsed since that publication. The Mitigation Division Director of the Emergency Preparedness and Response Directorate, has resolved any appeals resulting from this notification.

This final rule is issued in accordance with Section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR Part 67.

The Agency has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR Part 60.

Interested lessees and owners of real property are encouraged to review the proof Flood Insurance Study and FIRM available at the address cited below for each community.

The BFEs and modified BFEs are made final in the communities listed below. Elevations at selected locations in each community are shown.

This rule is categorically excluded from the requirements of 44 CFR Part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because final or modified BFEs are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and are required to establish and maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This final rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated October 26, 1987.

This rule meets the applicable standards of section 2(b)(2) of Executive Order 12778.

This is a summary of the Commission's Third Report and Order in CC Docket No. 02-6; FCC 03-323, released on December 23, 2003. There was also a Companion Second Further Notice of Proposed Rulemaking released in CC Docket No. 02-6; FCC 03-323, on December 23, 2003. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 Twelfth Street, SW., Washington, DC 20554.

1. In this Third Report and Order, we address several matters related to the administration of the schools and libraries universal service mechanism (also known as the e-rate program). First, we adopt rules that will limit the ability of schools and libraries to engage in wasteful or fraudulent practices when obtaining internal connections. Specifically, we conclude that eligible entities should be precluded from upgrading or replacing internal connections on a yearly basis. Instead, our rules will permit a particular eligible entity to receive support for discounted internal connections services no more than twice in every five years. We will permit, however, entities to receive discounts on basic maintenance associated with internal connections on a yearly basis, but clarify our rules regarding permissible maintenance costs to ensure that such discounts are appropriately narrow. We also prohibit a school or library from transferring equipment purchased with universal service discounts, as part of eligible internal connections services, for a period of three years except in limited circumstances. These rules will advance the goals of the schools and libraries program by making support for internal connections regularly available to a larger number of applicants and by discouraging waste, fraud, and abuse. We also adopt a rule creating a more formal process for updating annually the list of services eligible for support. In addition, we codify the Universal Service Administrative Company's (USAC or the Administrator) current practices for allocating costs of services between eligible and ineligible components consistent with Commission rules and requirements, codify a prohibition on the provision of free services to entities receiving discounts, and codify with one modification procedures for service substitutions. We also clarify existing requirements for eligibility of certain equipment and services. Finally, we adopt rules to implement our prior decision to carry forward unused funds from the schools and libraries mechanism for use in subsequent funding years. All rule changes and clarifications shall be implemented upon the effective date of this Order, unless specified otherwise.

2. This Order is one of a series of orders designed to simplify program administration, ensure equitable distribution of funds, and protect against waste, fraud, and abuse. In taking these additional steps today, we draw on information from a number of sources, including issues raised in a public forum held in May 2003 on ways to improve the schools and libraries support mechanism, the Office of the Inspector General's semi-annual reports, beneficiary audit reports, and the recommendations of USAC's Waste, Fraud, and Abuse Task Force. We remain committed to making ongoing changes to ensure that this program continues to benefit school children and library patrons across America.

3. In this Order, we adopt a rule limiting each eligible entity's receipt of discounts on internal connections to twice every five funding years. We exempt basic maintenance services from this restriction. We also clarify the types of maintenance services that are eligible for discounts. In addition, we adopt a rule that limits an entity's ability to transfer equipment purchased with universal service funds.

4. Frequency of Discounts. We conclude that each eligible entity may receive commitments for discounts on Priority Two services, except as discussed further, no more than twice every five funding years. The practical effect of this rule will be to permit applicants to receive funding once every three years for internal connections, as supported by the record, but will allow applicants to obtain internal connections in two consecutive years as part of a staged implementation of internal connections. In order to give applicants sufficient planning time, we conclude that this rule will become effective beginning with support received in Funding Year 2005. Commitments for Priority Two services received in years prior to Funding Year 2005 will not be considered in determining an applicant's eligibility to receive support for Priority Two services.

5. For the purpose of determining whether an applicant is eligible to receive a funding commitment for Priority Two services under this rule, the five-year period begins in any year, starting with Funding Year 2005, in which the entity receives discounted Priority Two services. The rule is applicable to discounts for services that are site-specific to the entity and for services that are shared by the entity with other entities. Thus, if an entity receives support only for shared services in a particular funding year, that funding will be counted as one of the two years out of five that it may receive support. The restriction does not apply to consortium members who do not actually receive Priority Two funding when other members of the consortium receive discounts in specific funding periods.

6. We find that, by limiting the frequency in which applicants may receive Priority Two discounts, funds will be made available to more eligible schools and libraries on a regular basis. Specifically, we find that the twice-every-five-years rule we adopt balances this goal with the need to ensure that the most disadvantaged schools and libraries are able to maintain functioning internal connections networks. Permitting applicants to receive support more often than twice every five years would not make funds available to significantly more eligible schools and libraries, while limiting applicants to support less frequently than twice every five years could prevent applicants from updating their internal connections as necessary.

7. We are not persuaded by those commenters that assert that the most disadvantaged applicants will suffer from a policy restricting receipt of internal connections discounts. The Commission remains committed to ensuring that discounts continue to flow to schools and libraries that are economically disadvantaged. Indeed, program rules continue to provide greater discounts for the most economically disadvantaged schools and libraries. We recognize, however, that many applicants below the very highest discount levels are also economically disadvantaged and also unable to acquire internal connections without universal service support. We also recognize that demand for universal service discounts will likely continue to exceed the annual funding cap. Thus, we agree with commenters that without revising our existing policies, some economically disadvantaged applicants will continue to be denied Priority Two funding. We find that the twice-every-five-years restriction is appropriate and necessary to make advanced technologies more accessible to all schools and libraries. We further find that the twice-every-five-years policy will increase the mechanism's funding reach to a greater number of economically disadvantaged schools and libraries.

8. It is important to note that even with this revised policy on the funding of internal connections, funding commitments will continue to be made in accordance with the annual funding cap. Thus, it is conceivable that an applicant may be eligible to apply for discounts on Priority Two services and still be denied funding because demand for discounts exceeds available funding. In this instance, we encourage applicants to reapply for discounts during the following funding year. We further note that it is the receipt of support for Priority Two services, rather than the application for support, that counts toward the limitation that an entity may receive in only two out of five years.

9. Furthermore, we conclude that, by precluding a particular entity from receiving support for Priority Two discounts every year, our modified rule strengthens incentives for applicants to fully use equipment purchased with universal service funds. Our current rules permit applicants in the highest discount bands to upgrade their equipment on a yearly basis, even when existing equipment continues to have a useful life. By limiting each eligible entity's ability to receive support for internal connections, recipients will have greater incentive not to waste program resources by replacing or upgrading equipment on an annual basis.

10. A few commenters maintain that limiting funding of internal connections will disrupt applicants' planning and budgets. We recognize that our modified rule will limit applicant flexibility to some extent, particularly for those applicants that wish to make modest infrastructure investments on a yearly basis. But, we conclude that the benefits of the rule—namely, making support available to more applicants on a regular basis and preventing wasteful and abusive practices—outweigh the potential impact on such applicants. We find that the twice-every-five-years restriction provides sufficient flexibility for applicants to make efficient use of Priority Two funding, and thus is reasonable. In particular, we recognize that for a variety of different reasons, an applicant may not be able to make efficient use of program discounts in a single year. For example, an applicant's annual resources may require the applicant to extend its costs over a period of years. Our modified rule allows an applicant to seek internal connections discounts in two consecutive years, thus, enabling an entity to spread its costs over two funding years. We conclude that providing applicants the flexibility to implement internal connections over two consecutive years is sufficient to accommodate the differing planning and budgetary needs of most applicants. We expect applicants to assume the responsibility of adequately planning and budgeting to make the most effective use of discounts available to them.

11. USAC also suggests that in an effort to counter funding limitations, some applicants may request more funding than they will be able to use in a given funding year. We emphasize that existing program rules require applicants to examine their technology needs and budgetary resources before making funding requests to ensure that applicants make effective use of any discounted services that they receive. Failure to have an approved technology plan is a violation of our current rules. We expect funding requests to be based on an applicant's technology plan, not based on a scheme to maximize funding. A funding request that is not reasonably based on a technology plan does not constitute a bona fide request for services. Further, the Administrator's review and enforcement of the necessary resources certification must and will continue to serve as a safeguard against unreasonable funding requests.

12. Maintenance Costs. We agree with commenters that maintenance costs should be exempt from the twice-every-five-years restriction. The Universal Service Order , 62 FR 32862, June 17, 1997, provides that support for internal connections includes “basic maintenance.” Maintenance costs associated with internal connections services are currently eligible for discounts as a Priority Two service. Proper maintenance of internal connections products ensures that equipment functions properly, thereby limiting uneconomical replacement of equipment. We therefore continue to allow applicants to apply for discounts for maintenance of equipment each funding year.

13. We instruct USAC to revise Block 5 of the FCC Form 471 to include a separate category of service for maintenance requests, with this form change to take effect for Funding Year 2005. Maintenance requests will continue to be funded as Priority Two funding. However, maintenance requests will be considered for funding separately from other requests for Priority Two funding and, therefore, will not be subject to the twice-every-five years funding rule we adopt in this Order. The revision of the FCC Form 471 will allow efficient review of the Priority Two funding requests.

14. In response to allegations of waste, fraud, and abuse, we prospectively clarify the services eligible for Priority Two support as basic maintenance costs for internal connections. Although the Universal Service Order allows support for those internal connections services that are “necessary to transport information all the way to individual classrooms” and public areas of a library, and specifically authorizes support for “basic maintenance services” that are “necessary to the operation of the internal connections network,” our rules do not expressly specify the types of maintenance costs that are eligible for support. In light of our concerns about allegations of waste, fraud, and abuse in this area and our changes, we conclude that we should provide further clarity on what maintenance services are “necessary” under the terms of the Universal Service Order , and thus eligible for support and exempt from the twice-every-five-years rule.

15. Basic maintenance services are “necessary” if, but for the maintenance at issue, the connection would not function and serve its intended purpose with the degree of reliability ordinarily provided in the marketplace to entities receiving such services without e-rate discounts. Basic maintenance services do not include services that maintain equipment that is not supported or that enhance the utility of equipment beyond the transport of information, or diagnostic services in excess of those necessary to maintain the equipment's ability to transport information. For example, basic maintenance will include repair and upkeep of previously purchased eligible hardware, wire and cable maintenance, and basic technical support, including configuration changes. On-site technical support is not necessary to the operation of the internal connection network when off-site technical support can provide basic maintenance on an as-needed basis. Services such as 24-hour network monitoring and management also do not constitute basic maintenance. Such services are therefore ineligible for discounts under the schools and libraries universal service mechanism.

16. We also provide greater clarity as to how USAC should address requests for discounts on technical support for internal connections. When confronted with products or services that contain both eligible and ineligible functions, USAC, in the past, has utilized cost allocation to determine what portion of the product price may receive discounts. We generally endorse this practice as a reasonable means of addressing mixed use products and services. At the same time, however, we are concerned that it is administratively difficult and burdensome to derive reasonable cost allocations for the eligible portions of services provided under a technical support contract. In a rapidly-changing marketplace, with vendors supplying complex packages of services, it simply is not administratively feasible to determine what portion of a technical support contract is directed to basic maintenance. Therefore, we hereby clarify prospectively that technical support, including on-site Help Desks, is not eligible under our rules if it provides any ineligible features or functions. A Help Desk system typically goes beyond the level of support authorized by the Commission in the Universal Service Order , which stated that “[s]upport should be available to fund discounts on such items as routers, hubs, network file services, and wireless LANs and their installation and basic maintenance * * *.” There is no language in the Universal Service Order that contemplates the provision of discounts for the comprehensive level of support typically provided by a Help Desk. On the contrary, the Universal Service Order indicates that support will be provided for a product or service “only if it is necessary to transport information all the way to individual classrooms. That is, if the service is an essential element in the transmission of information within the school or library * * *.” We conclude that if a technical support contract provides more than basic maintenance, it shall be ineligible for discounts under our modified rules. We instruct USAC to review and fund requests for discounts on maintenance services in accordance with this clarification, as of the effective date of this Order.

17. Equipment Transfers. We also find it appropriate to amend our rules expressly to prohibit, except as provided below, the transfer of equipment purchased with discounts from the schools and libraries universal service support mechanism. The Act prohibits the sale or transfer of equipment purchased with discounts from the universal service program in consideration of money or anything else of value. Here, in order to promote the goal of preventing waste, fraud, and abuse, we extend that prohibition to all transfers, without regard to whether money or anything of value has been received in return for a period of three years after purchase.

18. Recipients of support are expected to use all equipment purchased with universal service discounts at the particular location, for the specified purpose for a reasonable period of time. Purchasing equipment with universal service discounts and then replacing or upgrading that equipment annually or almost annually is unnecessary and not economically rational. Unnecessary replacement of equipment suggests that entities are not fully utilizing the equipment purchased with universal service discounts. We agree with commenters that such practices deprive other eligible entities of the full benefits of the schools and libraries universal services program. Moreover, the practice of purchasing equipment with universal service funds, then transferring that equipment to other schools and libraries with lower discount rates would undermine the intent of the Commission's priority rules, and is therefore prohibited. We find, however, that it would be wasteful to prevent recipients from transferring equipment that, after a reasonable period of time, has been replaced or upgraded. We therefore permit recipients freely to transfer equipment to other eligible entities three years or more after the purchase of such equipment. Consistent with the Act, however, such transfers must not be in consideration of money or anything else of value.

19. We agree also with commenters that argue that applicants may have legitimate reasons to transfer internal connections equipment due to the closing of a school or other eligible facilities. For example, due to a natural disaster, a school district may conclude that its needs are best served by temporarily or permanently closing a particular school and transferring its students, as well as any valuable equipment purchased with supported discounts, to other locations. Similarly, a school district may choose to close, remodel, or consolidate a particular school to meet changing demographic needs or fiscal realities, and thereby transfer the students and useable school property to a nearby school. Likewise, a county or municipality may choose to close a library branch for financial reasons. Under these circumstances, we find that it would be economically rational and consistent with the goals of the schools and libraries program for the support recipient to transfer any equipment it has purchased with universal service discounts to another eligible location where the equipment may be used effectively. We therefore conclude that a recipient may transfer equipment purchased with universal service discounts to other eligible entities if the particular location where the equipment was originally installed is permanently or temporarily closed. In these limited circumstances, we note that it is not necessary for the transferring and receiving entities to have comparable discount levels, as long as each is eligible under the schools and libraries program.

20. In the event that a recipient is permanently or temporarily closed and equipment is transferred, the transferring entity must notify the Administrator of the transfer, and both the transferring and receiving entities must maintain detailed records documenting the transfer and the reason for the transfer for a period of five years. We instruct the Administrator to verify compliance with this requirement as part of its beneficiary audit reviews. In order to enable the Administrator to verify compliance with this transfer prohibition, we require all recipients of internal connections support to maintain asset and inventory records for a period of five years sufficient to verify the actual location of such equipment.

21. This rule change shall be implemented upon the effective date of this Order. To facilitate enforcement of this rule, we will amend the FCC Form 471 for Funding Year 2005 to include a reasonable use certification. In order to receive discounts, applicants must certify that they will use all equipment purchased with universal service discounts at the particular location for the specified purpose. Applicants will thereafter be held accountable for their compliance with the reasonable use certification.

22. We decline to institute useful life criteria for equipment purchased with universal service funds. Useful life criteria could provide a more equitable distribution of Priority Two funding and ensure that more applicants receive the full benefit of the program by ensuring that applicants did not replace equipment components of internal connections services more frequently than necessary. We believe, however, that measures adopted, including the restriction of transfers and our revised policy governing the funding of Priority Two equipment, will provide similar results in achieving these goals. We also conclude that developing and enforcing useful life criteria would add a significant degree of complexity to the program, which would result in increased administrative costs and burden for both recipients and USAC.

23. Although the current cost allocation approach used by the Administrator reasonably implements the Commission's rules and requirement regarding eligible and ineligible services, we conclude that administration of the schools and libraries support mechanism would benefit from an explicit rule regarding the cost allocation for services with mixed eligibility. We also conclude that the eligibility process would be improved by adopting a rule for the yearly updating of the eligible services list. Additionally, we codify rules prohibiting the provision of “free” services to recipient schools and libraries by service providers that also provide supported services to those schools and libraries and codify procedures for applicants to modify funding requests that have been granted but not yet funded. Finally, we provide additional guidance on the provision of discounts on services that include the lease of on-premises equipment.

24. Cost Allocation. We specifically amend our rules to make clear how applicants and service providers should allocate costs of a service or product that, although generally eligible for universal service support, contains both eligible and ineligible components. In the Universal Service Order , the Commission concluded that, when a school or library signs a contract for both eligible and ineligible services, the contract must break out the price of eligible services separately from ineligible services. Since that time, the marketplace has seen an evolution of products and services that contain both eligible and ineligible features but which are not commercially available on an unbundled basis. Thus, the issue has evolved from merely separately listing eligible services and products from ineligible services and products to one of determining what components or features of an otherwise eligible service or product may be ineligible when the service or product is not commercially available on an unbundled basis. Consistent with the Commission's directive to separate these costs, the Administrator has generally required schools, libraries, or the service provider to separate the costs of an ineligible component from what generally would be an eligible service or product. As explained, the Administrator has provided reasonable guidance, consistent with Commission rules and requirements, to schools, libraries, and service providers in determining the allocation approach.

25. As part of our efforts to improve the operation of the eligibility determination process, we explicitly amend our rules to include cost allocation rules for services and products that contain mixed eligible and ineligible components, features, or functions to provide greater clarity in this area. Under these rules, if a product or service contains ineligible components, costs should be allocated to the extent that a clear delineation can be made between the eligible and ineligible components. The clear delineation must have a tangible basis and the price for the eligible portion must be the most cost-effective means of receiving the eligible service. If the ineligible functionality is ancillary, the costs need not be allocated to the ineligible functionality. An ineligible functionality may be considered “ancillary” if (1) a price for the ineligible component that is separate and independent from the price of the eligible components cannot be determined, and (2) the specific package remains the most cost-effective means of receiving the eligible services, without regard to the value of the ineligible functionality.

26. These cost allocation rules address the widespread availability of products and services with mixed eligibility and are fully consistent with the overriding requirement that support be provided for eligible services, while preventing support for ineligible services. By providing service providers and applicants a means of allocating costs between eligible and ineligible components, features or functions of what would otherwise be an eligible service, the cost allocation method increases the variety of service options available to schools and libraries, improving each school or library's ability to purchase the most useful and cost-effective service possible. Without this cost allocation approach, applicants may fail to pursue the purchase of certain advanced telecommunications and information services, contrary to the intent of section 254. Our E-rate rules should not drive the development of communications services and technologies, but rather should permit the marketplace to flourish and innovate in ways that meet consumer needs and facilitate access to these innovations. Schools and libraries should continue to allocate eligible and ineligible costs in their contracts with service providers. In the interests of ensuring that support be provided only for eligible services, the Administrator also should continue to employ the use of the cost allocation method when necessary.

27. The Commission recently addressed those circumstances where an applicant erroneously identifies certain costs as eligible for support by adopting the 30 percent rule. Specifically, we concluded in the Second Report and Order , 68 FR 36931, June 20, 2003, that where less than 30 percent of a request for support is ineligible, the Administrator is permitted to grant support, reduced by the amount of ineligible services. We clarify that the Administrator may rely on the cost allocation methods we adopt today in applying the 30 percent rule and performing any resulting adjustments.

28. Eligible Services List. We now adopt a more formalized process for updating the eligible services list, beginning with Funding Year 2005. Under the new rule, USAC will be required to submit by June 30 of each year a draft of its updated eligible services list for the following funding year. The Commission will issue a Public Notice seeking comment on USAC's proposed eligible services list. At least sixty days prior to the opening of the window for the following funding year, the Commission will then issue a public notice attaching the final eligible services list for the upcoming funding year. The Commission anticipates that this public notice will be released on or before September 15 of each year. This process will provide greater transparency to the development of the eligible services list. The yearly updated list will interpret what may be funded under current rules, and will represent a safe harbor that all applicants can rely on in preparing their applications for the coming funding year. It will provide interested parties, both recipients and service providers, an opportunity to bring to the Commission's attention areas of ambiguity in the application of current rules in a rapidly changing marketplace. Currently, the only way an applicant can determine whether a particular service or product is eligible under our current rules is to seek funding for that service or product, and then seek review of the Administrator's decision to deny discounts. The rule we adopt today will simplify program administration and facilitate the ability of both vendors and applicants to determine what services are eligible for discounts.

29. Prohibition of “Free” Services. We also take this opportunity to clarify and amend our rules to codify a prohibition on the provision of free services to an eligible entity by a service provider that is also providing discounted services to the entity. The Commission requires that an entity must pay the entire undiscounted portion of the cost of any services it receives through the schools and libraries program. For the purpose of this program, the provision of unrelated free services by the service provider to the entity constitutes a rebate of the undiscounted portion of the costs, a violation of the Commission's rules. Codifying this existing restriction will clarify the obligations of schools and libraries that receive discounted services under the schools and libraries program and improve the ability of the Commission to take appropriate enforcement action.

30. Service Substitution. Again, as part of our efforts to improve the operation of the schools and libraries support mechanism, we also formally adopt and codify the Administrator's current procedures relating to requests for service or equipment changes. These procedures provide flexibility to applicants where it has become necessary to make a minor modification to their original funding request. We find that the Administrator's service substitution procedures are consistent with the Commission's goal of affording schools and libraries maximum flexibility to choose the offering that meets their needs most effectively and efficiently. We conclude that codifying these existing procedures in our rules will facilitate USAC's administration of the schools and libraries support mechanism. In codifying USAC's procedures in our rules, we make one modification, however. USAC's current procedures permit a service substitution only if the substitution does not result in an increase in the pre-discount price of the eligible service. We will permit applicants to substitute an eligible service with a higher pre-discount price, but will provide support based on the lower, original price, rather than the higher price for the substituted service. We agree with commenters that this will further maximize flexibility for schools and libraries to meet their needs effectively and efficiently, without additional cost to the E-rate program.

31. Accordingly, we amend our rules to specify that service change requests will be granted for a substitute service or product where (1) that service or product has the same functionality; (2) the substitution does not violate any contract provisions or state or local procurement laws; (3) the substitution does not result in an increase in the percentage of ineligible services or functions, but (4) support shall be provided based on the lesser of the pre- discount price of the original service or the substitute service. In order to ensure the integrity of the competitive bidding process, we require the applicant's request for a service change to include a certification that the requested change in service is within the scope of the controlling Form 470, including any associated Requests for Proposal (RFP), for the original services. We also require that support not be provided in excess of the amount for which the applicant originally would have been eligible. By adopting these procedures as rules, we recognize that events may occur between the time of the original funding request and the time when commitments are made that make the original funding request impractical or even impossible to fulfill.

32. Eligibility of On-Premises Equipment as Part of Priority One Service. In the Schools and Libraries NPRM , 67 FR 7327, February 19, 2002, the Commission sought comment on whether to modify its policies regarding the funding of Priority One services (telecommunications service and Internet access) that include service provider charges for capital investments for wide area networks. Those policies were established in the 1999 Tennessee Order and the Brooklyn Order.

33. We decline at this time to modify our existing policies in this area, and in the companion Further Notice of Proposed Rulemaking seek more focused comment on specific rule changes that would limit the availability of discounts for service provider charges that recoup the cost of significant infrastructure investment. We do, however, clarify the scope of the existing requirements in this area to facilitate USAC's processing of applications.

34. In the 1999 Tennessee Order , the Commission addressed the issue of whether certain facilities located on the applicant's premises (namely, routers and hubs) are part of an end-to-end Internet access service or part of internal connections. The Commission determined that facilities located on an applicant's premises should be presumed to be internal connections, but that an applicant may rebut that presumption. In analyzing the facts presented in the 1999 Tennessee Order , the Commission concluded that this presumption had been rebutted. In support of the rebuttal, the Commission noted that the hub sites at issue constituted the Internet access provider's points of presence and that the applicant's internal connections networks would continue to function without the hub sites, indicating that the hub sites were not necessary to transport information within the schools' instructional buildings on a single campus. Further, the Commission found that other indicia—the ownership of the facility, the lack of a lease-purchase arrangement, the lack of an exclusivity arrangement, and the fact that the service provider was responsible for its maintenance—supported its conclusion that, on balance, the facilities should be deemed part of an end-to-end service. The Commission found that these factors weighed against a finding of internal connections, even though the cost of leasing those facilities represented nearly 67 percent of the total funding request. The decision was based on the facts presented; the Commission did not establish a per se requirement that an applicant must meet all factors in order to receive discounts on service provider charges for the cost of leasing on-premises equipment.

35. We conclude it is administratively efficient for USAC to use the factors relied upon in the 1999 Tennessee Order as a processing standard. USAC has posted an advisory on its website providing guidance to help applicants and service providers understand how it has implemented the 1999 Tennessee Order . Specifically, USAC has provided guidance that a private branch exchange (PBX) that routes calls within a school or library is not eligible for support as Priority One on-premises equipment. This guidance is consistent with our 1999 Tennessee Order because a PBX, like most on-premises equipment, is presumed to be Priority Two internal connections. Moreover, it is unlikely that an applicant would be able to establish a rebuttal to that presumption, because the PBX functions to transmit information from and between multiple locations within a local network. If the PBX were removed from a school, the school would lose its ability to route phone calls within the building or campus, but could maintain its access to the public switched telephone network. In other words, the PBX is necessary to maintain the internal communications network, but not its end-to-end access to telecommunications services.

36. We now clarify that the 1999 Tennessee Order does not preclude the provision of support for on-premises equipment that constitutes basic termination equipment. Accordingly, an applicant may receive a discount for the lease of a cable modem as part of Priority One Internet access. A cable modem is a type of basic terminating component. It is analogous to a channel service unit/data service unit (CSU/DSU) or a network interface device (NID) in that it functions as the termination point for a Priority One service. The language in the 1999 Tennessee Order stating that facilities located on the school premises are presumed to be internal connections was enunciated in the context of considering the status of network hubs and routers, and should not be read to encompass basic termination equipment. A basic terminating component, though normally located on a customer's premises, is necessary to receive the end-to-end Internet access service because it provides translation of the digital transmission using the appropriate protocols. In the case of a cable modem, it would not be possible to receive the Internet access service in question without the cable modem on the customer's premises. Conversely, the internal connections on the site would continue to function without the cable modem. Moreover, while customers may obtain cable modems from other sources, providers of cable modem service typically offer customers the opportunity to lease a cable modem in conjunction with the provision of cable modem service. We also note that the cost of leasing a cable modem is a relatively low proportion of the yearly cost of the service. The fact that technical limitations would, as a practical matter, preclude the service provider from using the cable modem to deliver service to other customers, creating a de facto exclusivity arrangement, in our view does not support a finding that such equipment must be viewed as internal connections. Rather, we conclude that it is appropriate to provide discounts on the lease of a single basic terminating component used at a site as a Priority One service.

37. We also clarify that it is appropriate to provide Priority One discounts on service provider charges to recoup the cost of leasing optical equipment to light fiber, when that optical equipment is the single basic terminating component of an end-to-end network and it is necessary to provide an end-to-end telecommunications or Internet access service. We reach that conclusion even though the optical equipment on the customer's end, as a technical matter, is dedicated to the customer's sole use.

38. We adopt the procedures for carrying forward unused funds for the schools and libraries program proposed in the Schools and Libraries Further Notice, 68 FR 36961, June 20, 2003. Specifically, we amend our rules to require the Administrator to provide quarterly estimates to the Commission regarding the amount of unused funds that will be available for carryover in the subsequent full funding year. We further amend our rules so that the Commission will carry forward available unused funds from prior years on an annual basis. We find that, in light of the high demand for discounts, such action is consistent with section 254 and the public interest, as well as the framework established in the Schools and Libraries Order, 67 FR 41862, June 20, 2002. Accordingly, we amend § 54.507(a) of our rules.

39. The Administrator shall continue to estimate unused funds as the difference between the amount of funds collected, or made available for that particular funding year, and the amount of funds disbursed or to be disbursed. We note that the Administrator already considers the remaining appeals for a funding year when identifying unused funds. Therefore, we do not believe that the carryover of unused funds will detract from the funding of outstanding appeals.

40. Consistent with the proposed rules in the Schools and Libraries Further Notice , we also amend the rules to require the Administrator to file with the Commission quarterly estimates of unused funds from prior years of the schools and libraries support mechanism when it submits its projection of schools and libraries program demand for the upcoming quarter. This amendment codifies the Administrator's existing reporting practice and reporting cycle. The quarterly estimate serves to prepare the Administrator for the annual release of carryover funds and provides schools and libraries with general notice regarding the amount of unused funds that may be made available in the subsequent year. We disagree with the National Association of Independent Schools (NAIS) that the quarterly reporting procedure would become too cumbersome and hinder the “overall integrity of the program.” We do not believe that the Administrator will be overburdened by this requirement because it has been reporting quarterly estimates of unused funds for six quarters without a problem.

41. We further amend the rules to make unused funds available annually in the second quarter of each calendar year for use in the next full funding year of the schools and libraries mechanism. Based on the estimates provided by the Administrator, the Commission will announce a specific amount of unused funds from prior funding years to be carried forward in accordance with the public interest to increase funds for the next full funding year in excess of the annual funding cap. For example, the Commission will carry forward the unused funds as of second quarter 2004 for use in the Schools and Libraries Funding Year 2004, thereby increasing the available funds in Funding Year 2004 above the annual funding cap of $2.25 billion. The Wireline Competition Bureau will announce the availability of carryover funds during the second quarter of the calendar year, when it announces the universal service contribution factor for the third quarter of each year. The amount of unused funds to be carried forward will be deemed approved by the Commission if it takes no action within 14 days of release of the public notice announcing the contribution factor and the amount of unused funds.

42. We determine that it is in the public interest to carry forward unused funds for disbursement on an annual basis in the second quarter of the calendar year. Distribution of unused funds on an annual basis allows the Administrator to refine its calculation of available funds over four reporting quarters as the funding year progresses starting with the third quarter of the calendar year. The annual carryover of funds during the second quarter of the calendar year also coincides with the time of year the Administrator begins making funding commitment decisions for the upcoming funding year. We believe that the timing of this process provides certainty regarding when unused funds will be carried forward for use in the schools and libraries program with minimal disruption to the administration of the program.

43. In order to implement the Commission's prior decision to carry over funds beginning April 1, 2003, we modify the schedule for this year only in order to implement the process for Funding Year 2003. We direct the Administrator to carry forward unused funds as projected for the first quarter of 2004 for use during the remainder of Funding Year 2003. While there will be an increase in the amount of funds available in Funding Year 2003, we note that no decisions previously made by USAC concerning the distribution of funds for Funding Year 2003 will be reversed or revisited. Only funding requests that are currently pending will be considered for the Funding Year 2003 carryover funding. Henceforth, starting with the second quarter of 2004, funds will be carried over on an annual basis as described in the previous paragraph.

44. Finally, we take this opportunity to revise § 54.509(b) of the Commission's rules to conform to the Fifth Order on Reconsideration, 63 FR 43088, August 12, 1998. Section 54.509(b) provides that, if the estimates of future funding needs of schools and libraries lead to a prediction by the Administrator that total funding requests will exceed available funding for a funding year, the Administrator shall adjust the discount matrix by calculating a percentage reduction of support to all schools and libraries, except those in the two most disadvantaged categories, in order to permit all requests in the next funding year to be fully funded. The technical correction we make to § 54.509(b) clarifies that the reduction in percentage discounts explained in § 54.509(b) does not apply within a filing window or period, as described in § 54.507(c). Priority within a filing window is determined in accordance with § 54.507(g)(1) of the rules. Thus, § 54.509(b) applies only during a funding year in which the Administrator is acting in accordance with § 54.507(g)(2). We find that the rule change is exempt from the notice and comment requirements of the Administrative Procedure Act because it concerns a non-substantive technical change to the existing rules.

45. The action contained herein has been analyzed with respect to the Paperwork Reduction Act of 1995 (PRA) and found to impose new or modified reporting and/or recordkeeping requirements or burdens on the public. Implementation of these new or modified reporting and/or recordkeeping requirements will be subject to approval by the Office of Management and Budget (OMB) as prescribed by the PRA. Specifically, § 54.513(c) will go into effect upon announcement in the Federal Register of OMB approval, to the extent OMB approval is required.

46. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Schools and Libraries NPRM. The Commission sought written public comment on the proposals in the Schools and Libraries NPRM, including comment on the IRFA. This present Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.

47. In this Third Report and Order, we adopt rules whereby eligible entities may receive discount rates for internal connections services, except for certain basic maintenance services, twice every five years and that prohibit a school or library from transferring equipment purchased with universal service discounts, except in limited circumstances. These rules will advance the goals of the schools and libraries program by making support for internal connections regularly available to a larger number of applicants and by reducing the likelihood of waste, fraud, and abuse.

48. There were no comments filed specifically in response to the IRFA. Nevertheless, the agency has considered the potential impact of the rules proposed in the IRFA on small entities. Based on analysis of the relevant data, the Commission concludes the new rules limit the burdens on small entities and result in a de minimis recordkeeping requirement. The Commission also concludes that the new rules will positively impact schools and libraries, including small ones, seeking universal service support.

49. The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A small business concern is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA. A small organization is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” Nationwide, as of 1992, there were approximately 275,801 small organizations. 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.” As of 1997, there were about 87,453 governmental jurisdictions in the United States. 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.

50. The Commission has determined that the group of small entities directly affected by the rules herein includes eligible schools and libraries and the eligible service providers offering them discounted services, including telecommunications service providers, Internet Service Providers (ISPs) and vendors of internal connections. Further descriptions of these entities are provided. In addition, the Universal Service Administrative Company is a small organization (non-profit) under the RFA, and we believe that circumstances triggering the new reporting requirement will be limited and does not constitute a significant economic impact on that entity.

51. As noted, “small entity” includes non-profit and small government entities. Under the schools and libraries universal service support mechanism, which provides support for elementary and secondary schools and libraries, an elementary school is generally “a non-profit institutional day or residential school that provides elementary education, as determined under state law.” A secondary school is generally defined as “a non-profit institutional day or residential school that provides secondary education, as determined under state law,” and not offering education beyond grade 12. For-profit schools and libraries, and schools and libraries with endowments in excess of $50,000,000, are not eligible to receive discounts under the program, nor are libraries whose budgets are not completely separate from any schools. Certain other statutory definitions apply as well. The SBA has defined for-profit, elementary and secondary schools and libraries having $6 million or less in annual receipts as small entities. In Funding Year 2 (July 1, 1999 to June 20, 2000) approximately 83,700 schools and 9,000 libraries received funding under the schools and libraries universal service mechanism. Although we are unable to estimate with precision the number of these entities that would qualify as small entities under SBA's size standard, we estimate that fewer than 83,700 schools and 9,000 libraries might be affected annually by our action, under current operation of the program.

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

53. Incumbent Local Exchange Carriers (LECs). Neither the Commission nor the SBA has developed a size standard for small incumbent local exchange services. The closest size standard under SBA rules is for Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 1,337 incumbent carriers reported that they were engaged in the provision of local exchange services. Of these 1,337 carriers, an estimated 1,032 have 1,500 or fewer employees and 305 have more than 1,500 employees. Consequently, the Commission estimates that most providers of incumbent local exchange service are small businesses that may be affected by the rules and policies adopted herein.

54. Competitive Local Exchange Carriers (CLECs), Competitive Access Providers (CAPs) and “Other Local Exchange Carriers.” Neither the Commission nor the SBA has developed a size standard for small businesses specifically applicable to providers of competitive exchange services or to competitive access providers or to “Other Local Exchange Carriers.” The closest applicable size standard under SBA rules is for Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 609 companies reported that they were engaged in the provision of either competitive access provider services or competitive local exchange carrier services. Of these 609 companies, an estimated 458 have 1,500 or fewer employees and 151 have more than 1,500 employees. In addition, 35 carriers reported that they were “Other Local Exchange Carriers.” Of the 35 “Other Local Exchange Carriers,” an estimated 34 have 1,500 or fewer employees and one has more than 1,500 employees. Consequently, the Commission estimates that most providers of competitive local exchange service, competitive access providers, and “Other Local Exchange Carriers” are small entities that may be affected by the rules and policies adopted herein.

55. Interexchange Carriers (IXCs). Neither the Commission nor the SBA has developed a size standard for small businesses specifically applicable to interexchange services. The closest applicable size standard under SBA rules is for Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to the Commission's most recent data, 261 companies reported that their primary telecommunications service activity was the provision of payphone services. Of these 261 companies, an estimated 223 have 1,500 or fewer employees and 48 have more than 1,500 employees. Consequently, the Commission estimates that the majority of payphone service providers are small entities that may be affected by the rules and policies adopted herein.

56. Wireless Service Providers. The SBA has developed a small business size standard for wireless small businesses within the two separate categories of Paging and Cellular and Other Wireless Telecommunications. Under both SBA categories, a wireless business is small if it has 1,500 or fewer employees. According to the Commission's most recent data, 1,761 companies reported that they were engaged in the provision of wireless service. Of these 1,761 companies, an estimated 1,175 have 1,500 or fewer employees and 586 have more than 1,500 employees. Consequently, the Commission estimates that most wireless service providers are small entities that may be affected by the rules and policies adopted herein.

57. Private and Common Carrier Paging. In the Paging Third Report and Order, 62 FR 16004, April 3, 1997, we developed a small business size standard for “small businesses” and “very small businesses” for purposes of determining their eligibility for special provisions such as bidding credits and installment payments. A “small business” is an entity that, together with its affiliates and controlling principals, has average gross revenues not exceeding $15 million for the preceding three years. Additionally, a “very small business” is an entity that, together with its affiliates and controlling principals, has average gross revenues that are not more than $3 million for the preceding three years. An auction of Metropolitan Economic Area licenses commenced on February 24, 2000, and closed on March 2, 2000. Of the 985 licenses auctioned, 440 were sold. Fifty-seven companies claiming small business status won. At present, there are approximately 24,000 Private-Paging site-specific licenses and 74,000 Common Carrier Paging licenses. According to Commission data, 474 carriers reported that they were engaged in the provision of either paging and messaging services or other mobile services. Of those, the Commission estimates that 457 are small, under the SBA approved small business size standard.

58. Internet Service Providers. The SBA has developed a small business size standard for “On-Line Information Services,” North American Industry Classification System (NAICS) code 514191. This category comprises establishments “primarily engaged in providing direct access through telecommunications networks to computer-held information compiled or published by others.” Under this small business size standard, a small business is one having annual receipts of $18 million or less. Based on firm size data provided by the Bureau of the Census, 3,123 firms are small under SBA's $18 million size standard for this category code. Although some of these Internet Service Providers (ISPs) might not be independently owned and operated, we are unable at this time to estimate with greater precision the number of ISPs that would qualify as small business concerns under SBA's small business size standard. Consequently, we estimate that there are 3,123 or fewer small entity ISPs that may be affected by this analysis.

59. The Commission has not developed a small business size standard specifically directed toward manufacturers of internal network connections. The closest applicable definitions of a small entity are the size standards under the SBA rules applicable to manufacturers of “Radio and Television Broadcasting and Communications Equipment” (RTB) and “Other Communications Equipment.” According to the SBA's regulations, manufacturers of RTB or other communications equipment must have 750 or fewer employees in order to qualify as a small business. The most recent available Census Bureau data indicates that there are 1,187 establishments with fewer than 1,000 employees in the United States that manufacture radio and television broadcasting and communications equipment, and 271 companies with less than 1,000 employees that manufacture other communications equipment. Some of these manufacturers might not be independently owned and operated. Consequently, we estimate that the majority of the 1,458 internal connections manufacturers are small.

60. Wireless Communications Equipment Manufacturers. The SBA has established a small business size standard for radio and television broadcasting and wireless communications equipment manufacturing. Under this standard, firms are considered small if they have 750 or fewer employees. Census Bureau data for 1997 indicate that, for that year, there were a total of 1,215 establishments in this category. Of those, there were 1,150 that had employment under 500, and an additional 37 that had employment of 500 to 999. The percentage of wireless equipment manufacturers in this category is approximately 61.35%, so the Commission estimates that the number of wireless equipment manufacturers with employment under 500 was actually closer to 706, with an additional 23 establishments having employment of between 500 and 999. The Commission estimates that the majority of wireless communications equipment manufacturers are small businesses.

61. In this Third Report and Order, we adopt a rule that prohibits the transfer of equipment purchased with universal service discount, except in limited circumstances. Further, we provide that the excepted, limited circumstances consist of a discount recipient temporarily or permanently closing its operations where the original equipment was installed. In that instance, we require a recipient, who closes permanently or temporarily and transfers equipment to another eligible entity, to notify the Administrator of a transfer and require the transferring and receiving entities to maintain detailed records of the transfer consistent with the Commission's recordkeeping requirements for five years. We do not believe that these reporting and recordkeeping requirements will result in a significant economic impact.

62. The rule adopted today, limiting the frequency of receiving discount rates for internal connections, does not involve additional reporting, recordkeeping, or compliance requirements for small entities. Similarly, the rule adopted in this Third Report and Order, creating a more formal process for annually updating the list of services eligible for support, does not involve additional reporting, recordkeeping, or compliance requirements for small entities. The rules adopted governing cost allocation between eligible and ineligible services, provision of free services, and service substitution do not impose additional reporting, recordkeeping, or compliance requirements for small entities. Finally, the rules regarding carryover of unused funds do not require additional reporting or recordkeeping for small entities participating in the schools and libraries universal support mechanism.

63. The RFA requires an agency to describe any significant alternatives that it has considered in developing its approach, which may include the following four alternatives (among others): “(1) 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.”

64. Although we received no IRFA comments, we considered alternatives to the proposed recordkeeping requirements for small entities. In creating the narrow exception to the equipment transfer policy adopted in this Third Report and Order, we recognize the Commission's need to protect the integrity of the schools and libraries support mechanism by curbing waste, fraud, and abuse while acknowledging circumstances that justify permitting the transfer of discounted equipment received by a program beneficiary, small or large. We recognize that we must require certain recordkeeping to verify the appropriate use of universal service funds. Consideration was afforded to having the recipient file equipment transfer records with USAC and having USAC maintain the records. However, we conclude that requiring a filing with USAC would be more burdensome for the recipient than having the recipient collect and maintain its equipment transfer records. Complying with the processes promulgated by USAC would be more burdensome than requiring each beneficiary to retain its own files because the beneficiary would have to do more than send the documents to USAC. The beneficiary would have to comply with the procedural scheme devised by USAC for compiling, and mailing or delivering the records, and quality control measures for assuring that the records submitted were properly identified with the correct beneficiary. In the RFA, an exemption of small entities from the recordkeeping requirements is listed as a possible alternative. In this instance, exemption from the recordkeeping requirement would impede the Commission's ability to account for funds distributed through the schools and libraries program and would undermine the Commission's efforts to prevent waste, fraud, and abuse.

65. Report to Congress: The Commission will send a copy of the Order, including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A). In addition, the Commission will send a copy of the Order, including the FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. A copy of the Order and FRFA (or summaries thereof) will also be published in the Federal Register .

66. Pursuant to the authority contained in sections 1, 4(i), 4(j), 201-205, 214, 254, and 403 of the Communications Act of 1934, as amended, this Third Report and Order is adopted.

67. Part 54 of the Commission's rules, is amended as set forth, effective March 11, 2004 except for § 54.513(c) which contains information collection requirements that have not been approved by the Office of Management Budget (OMB). The Commission will publish a document in the Federal Register announcing the effective date of that section.

68. The Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Third Report and Order, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

This is a synopsis of the Report and Order in MB Docket No.02-14 adopted January 14, 2004, and Released January 16, 2004. The full text of this decision is available for inspection and copying during normal business hours in the FCC Reference Information Center at Portals ll, CY-A257, 445 12th Street, SW., Washington, DC. The complete text of this decision may also be purchased from the Commission's copy contractor, Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone (202) 863-2893, facsimile (202) 863-2898, or via e-mail qualixint@aol.com.

This is a synopsis of the Commission's Report and Order, MB Docket No. 03-164, adopted January 14, 2004, and released January 16, 2004. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC's Reference Information Center at Portals II, CY-A257, 445 12th Street, SW., Washington, DC. This document may also be purchased from the Commission's duplicating contractors, Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC, 20554, telephone 202-863-2893, facsimile 202-863-2898, or via e-mail qualexint@aol.com.

This is a synopsis of the Commission's Report and Order , MB Docket No. 03-26, adopted January 20, 2004, and released January 23, 2004. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC Information Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. The complete text of this decision may also be purchased from the Commission's duplicating contractor, Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, (202) 863-2893, facsimile (202) 863-2898, or via e-mail qualexint@aol.com.

This is a synopsis of the Commission's Report and Order, MM Docket No. 00-102, adopted December 31, 2003, and released January 16, 2004. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC Reference Information Center (Room CY-A257), 445 12th Street, SW., Washington, DC. The complete text of this decision may also be purchased from the Commission's copy contractor, Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20054.

Additionally, Channel 258A can be allotted to Frederiksted in compliance with the Commission's minimum distance separation requirements at city reference coordinates. The coordinates for Channel 258A at Frederiksted are 17-42-48 North Latitude and 64-53-00 West Longitude. To accommodate the allotments, Channel 293B can be substituted at Christiansted in compliance with the Commission's minimum distance separation requirements at Station WVIQ-FM's presently licensed site. The coordinates for Channel 293B at Christiansted are 17-44-07 North Latitude and 64-40-46 West Longitude.

This is a synopsis of the Commission's Report and Order, MB Docket Nos. 02-251, 02-254, and 02-370, adopted December 31, 2003, and released January 16, 2004. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC Information Center, Portals II, 445 12th Street SW., Room CY-A257, Washington, DC 20554. The complete text of this decision may also be purchased from the Commission's duplicating contractor, Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, (202) 863-2893, facsimile (202) 863-2898, or via e-mail qualexint@aol.com .

The Audio Division further allots, at the request of Linda Crawford, Channel 296C2 at Big Lake, Texas, as the community's fourth local FM service. See 67 FR 57203, September 9, 2002. Channel 296C2 can be allotted to Big Lake, Texas, in compliance with the Commission's minimum distance separation requirements with a site restriction of 26.9 km (16.7 miles) south of Big Lake. The coordinates for Channel 296C2 at Big Lake, Texas, are 30-57-18 North Latitude and 101-23-48 West Longitude. A filing window for Channel 296C2 at Big Lake, Texas, will not be opened at this time. Instead, the issue of opening this allotment for auction will be addressed by the Commission in a subsequent Order.

The Audio Division further allots, at the request of Linda Crawford, Channel 269A at Turkey, Texas, as the community's second local FM service. See 67 FR 78402, December 24, 2002. Channel 269A can be allotted to Turkey, Texas, in compliance with the Commission's minimum distance separation requirements with a site restriction of 14.5 km (9.0 miles) southwest of Turkey. The coordinates for Channel 269A at Turkey, Texas, are 34-17-32 North Latitude and 100-59-52 West Longitude. A filing window for Channel 269A at Turkey, Texas, will not be opened at this time. Instead, the issue of opening this allotment for auction will be addressed by the Commission in a subsequent Order.

This is a synopsis of the Commission's Report and Order in MM Docket No. 96-100, adopted December 31, 2003, and released January 16, 2004. The full text of this decision is available for inspection and copying during normal business hours in the FCC's Reference Information Center at Portals II, CY-A257, 445 12th Street SW., Washington, DC. The complete text of this decision may also be purchased from the Commission's copy contractor, Qualex International, Portals ll, 445 12th Street SW., Room CY-B402, Washington, DC 20554, telephone (202) 863-2893, facsimile (202) 863-2898, or via e-mail qualexint@aol.com.

On May 5, 2003, the Research and Special Programs Administration (RSPA, we) published an interim final rule (IFR) to enhance hazardous materials transportation security (68 FR 23832). The IFR described the current system of regulations applicable to the transportation of hazardous materials in commerce, and reviewed Department of Transportation (DOT) activities to enhance the security of hazardous materials shipments. In addition, the rule summarized the requirements of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act; Pub. L. 107-56, October 25, 2001, 115 Stat. 272) and regulations adopted by the Transportation Security Administration (TSA) and the Federal Motor Carrier Safety Administration (FMCSA) to implement the background check provisions of the Act. Further, the IFR described actions taken by the Federal Aviation Administration (FAA), TSA, and the U.S. Coast Guard to address security issues associated with the transportation of hazardous materials by air and vessel. The IFR also incorporated into the Hazardous Materials Regulations (HMR; 49 CFR parts 171-180) a requirement that shippers and transporters of hazardous materials comply with applicable Federal security regulations and revised the procedures for applying for an exemption from the HMR to require applicants to certify compliance with applicable Federal transportation security laws and regulations. Finally, DOT, in consultation with TSA, determined that these regulations adequately address the security risks posed by persons engaged in the transportation of explosives in commerce, and, accordingly, the provisions of 18 U.S.C. 842(i), which address categories of persons who are prohibited from possessing explosives, do not apply to persons while they are engaged in the transportation of explosives in commerce by motor carrier, aircraft, or vessel.

We received six comments on the IFR—from the Institute of Makers of Explosives (IME), the Dangerous Goods Advisory Council (DGAC), the Pennsylvania Department of Transportation (Pennsylvania DOT), the Texas Department of Public Safety (Texas), Transportation Trades Department (TTD), and a joint comment from the Wisconsin Federation of Cooperatives and the Minnesota Association of Cooperatives (Wisconsin-Minnesota Cooperatives). These comments are summarized below.

In response to the comments submitted, we are revising the procedures adopted in the IFR for persons applying for an exemption to transport certain explosives in commerce by aircraft. The revisions are minor and do not affect the security risks posed by such transportation. Therefore, the determinations made in the IFR concerning the applicability of 18 U.S.C. 842(i) to the transportation of explosives in commerce continue in effect.

The May 5, 2003 IFR amended Part 177 of the HMR to require motor carriers who transport hazardous materials in commerce to comply with Part 383 of the Federal Motor Carrier Safety Regulations (FMCSRs). Part 383 establishes commercial driver license requirements. On May 5, 2003, TSA published regulations to establish procedures for making determinations as to whether an individual poses a security threat warranting denial of a hazardous materials endorsement for a commercial driver's license (interim final rule; 68 FR 23851). Also on May 5, 2003, FMCSA amended Part 383 to prohibit states from issuing a commercial driver's license with a hazardous materials endorsement unless the Attorney General has conducted a background records check of the applicant and TSA has determined that the applicant does not pose a security threat warranting denial of the hazardous materials endorsement (interim final rule; 68 FR 23843).

Wisconsin-Minnesota Cooperatives, Texas, and TTD express concern about various aspects of the background check requirements in the TSA and FMCSA regulations. These comments are beyond the scope of this rulemaking. We have placed the comments in the appropriate TSA and FMCSA dockets to be addressed as those agencies finalize the interim final rules they adopted on May 5, 2003.

The FMCSA IFR amended Part 383 of the FMCSRs to require commercial drivers of motor vehicles used to transport select agents regulated by the Centers for Disease Control and Prevention under 42 CFR part 73 to obtain a commercial driver's license with a hazardous materials endorsement. Pennsylvania DOT suggests that motor vehicles used to transport select agents should be placarded. Again, this comment is beyond the scope of this rulemaking. We considered whether placarding for certain infectious substances should be required under Docket HM-226 (ANPRM published September 2, 1998, 63 FR 46843; NPRM published January 22, 2001, 66 FR 6941; final rule published August 14, 2002, 67 FR 53118). For the reasons outlined in the HM-226 NPRM (66 FR 6946), we determined that current hazard communication requirements for infectious substances shipments are sufficient to enable transportation workers and emergency response personnel to identity and address any potential hazards and, thus, decided against a placarding requirement.

IME offers a number of comments concerning the application of regulations promulgated by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) to the transportation of explosives. These comments are beyond the scope of this rulemaking and are appropriately addressed by ATF.

DGAC suggests that RSPA has no procedures for adopting interim final rules and asks if the requirements adopted in the IFR are intended to be temporary. DGAC is not correct that there are no procedures for adopting IFRs. Section 553(b) of the Administrative Procedure Act (5 U.S.C. 500 et seq. ) permits an agency to issue a rule without prior notice and comment when the agency for good cause finds that notice and comment are impracticable, unnecessary, or contrary to the public interest. Section 106.35 of 49 CFR part 106 sets forth the procedures for issuing an interim final rule that were adopted by RSPA in a final rule published July 25, 2002 (67 FR 42947). Section 106.35 explains that, consistent with section 553(b) of the Administrative Procedure Act, RSPA may issue an IFR without first publishing a notice of proposed rulemaking and accepting public comments if the agency finds for good cause that notice and public comment are impracticable, unnecessary, or contrary to the public interest. After considering comments received on an IFR, § 106.35 provides that the agency may revise the interim final rule and issue a final rule. In this rulemaking, we are doing precisely that.

IME is the only commenter that addressed the determinations made in the preamble to the May 5 IFR and is generally supportive of those determinations. The IFR provides an exception, pursuant to 18 U.S.C. 845(a)(1), to the prohibited persons provisions in 18 U.S.C. 842(i) for “any aspect of the transportation of explosive materials via railroad, water, highway, or air, which are regulated by the United States Department of Transportation (DOT) and agencies thereof, and which pertain to safety.”

IME requests that we clarify the effect of the transportation exception in 18 U.S.C. 842(i) on motor private carriers and their personnel. The TSA and FMCSA regulations implementing the USA PATRIOT Act and incorporated into the HMR in the May 5, 2003 IFR apply to the transport of placarded and non-placarded amounts of explosives by common, contract, or private motor carriers within the meaning of 18 U.S.C. 845(a)(1), and the provisions of 18 U.S.C. 842(i), accordingly, do not apply to persons engaged in such transportation in commerce.

IME also requests that we clarify the effect of the transportation exception in 18 U.S.C. 842(i) on non-driver/crew employees of companies that offer for transportation or transport explosives in commerce. As explained in the preamble to the May 5, 2003 IFR, DOT has determined that non-placarded shipments of explosives do not present a sufficient security risk to justify detailed background check or other security requirements at this time; in light of this determination, the provisions of 18 U.S.C. 842(i) do not apply to persons engaged in such transportation in commerce. For placarded shipments of explosives, the determinations explained in the preamble to the May 5, 2003 IFR with regard to the transportation by common/contract motor carriers, vessel, and air and the determinations concerning rail transportation of explosives explained in a notice published jointly by FRA, RSPA, and TSA on June 9, 2003 (68 FR 34470) apply to drivers employed by motor carriers and crews employed by vessel, air, and rail carriers.

Non-driver employees of motor carriers were not specifically addressed in the May 5, 2003 IFR. DOT and TSA have assessed the security risks posed by these individuals and have determined that no further regulation is needed at this time. Accordingly, the provisions of 18 U.S.C. 842(i) do not apply to non-driver employees of motor carriers when they are performing transportation functions regulated under the HMR. As defined in a final rule published October 30, 2003 (68 FR 61906)), transportation functions are functions performed as part of the actual movement of a hazardous material in commerce and include certain loading, unloading, and storage operations. (See the October 30, 2003 final rule for a complete discussion of the applicability of the HMR to specific transportation functions.)

The exemption under 18 U.S.C. 845(a)(1) does not apply to non-driver employees of Federal explosives licensees and permittees regulated by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). In fact, all persons who are employed by Federal explosives licensees and permittees and who possess explosives in the course of their employment are subject to 18 U.S.C. 842(i) prohibitions (with the limited exception of employee drivers).

The May 5, 2003 IFR adopted two new requirements for applicants seeking an exemption from the HMR. First, the IFR requires an applicant for an exemption to certify compliance with transportation security laws and regulations. Second, the IFR requires an applicant for an exemption to transport otherwise prohibited explosives on passenger or cargo-only aircraft to certify that no person within the prohibited persons categories listed in 18 U.S.C. 842(i) will participate in the transportation of the material.

In their comments, DGAC and IME express concern about the first requirement. DGAC notes that the text in § 107.105(c)(10) is inconsistent with the summary and preamble of the IFR in that it does not limit the certification requirement to Federal transportation security laws and regulations. Both DGAC and IME note that the requirement is quite broad and could be read to include state or local transportation security laws and regulations; DGAC makes the additional point that the IFR could be interpreted to apply to packaging manufacturers in addition to persons who offer or transport hazardous materials for transportation.

Our intention in adopting the general certification requirement for exemption applicants was to assure that they were aware of and in compliance with applicable Federal security requirements, including security requirements promulgated by agencies outside DOT. We agree with commenters that the requirement in the IFR is not clear as to its applicability. Upon further consideration, moreover, we have determined that the requirement is not necessary to assure that exemption holders comply with applicable security regulations. Instead of requiring applicants to certify compliance with applicable Federal security laws and regulations, we will include in the actual exemption document, where applicable, an indication that the exemption does not exempt the holder from compliance with the security plan requirements in Subpart I of Part 172 of the HMR, the security training requirements in § 172.704 of the HMR, and other specific Federal requirements that may apply to the exemption holder's operations. Therefore, in this final rule, the requirement for an applicant for an exemption to certify compliance with transportation security laws and regulations is deleted.

IME also expresses concern that the IFR requires applicants seeking an exemption for the transportation of explosives that are otherwise prohibited for air transportation to certify that no person within the prohibited persons categories listed in 18 U.S.C. 842(i) will participate in the transportation of the material. IME notes that exemption applicants must demonstrate an equivalent level of safety, including security, and suggests that this should be sufficient to assure the security of explosives shipped under exemption.

As explained in the May 5 IFR, we have issued a limited number of exemptions that permit the transportation of explosives that would be placarded if transported by highway or rail, including Division 1.1 and 1.2 explosives. All but one of these exemptions were issued to operators that are subject to TSA security requirements, including finger-print based background checks for all flightcrew members. The exception is an exemption that was issued for the transportation of explosives on aircraft with a maximum certificated takeoff weight of less than 12,500 pounds; aircraft with a certificated takeoff weight under 12,500 pounds are not subject to the TSA security requirements. IME is correct that exemption applicants who are subject to TSA security requirements should not also need to certify that no person within the prohibited persons categories listed in 18 U.S.C. 842(i) will participate in the transportation of the material. However, for applicants for exemptions to transport explosives who are not subject to TSA security requirements, the certification requirement will help to assure that prohibited persons under 18 U.S.C. 842(i) are not involved in the transportation of the explosives. In this final rule, we are modifying the certification requirement to clarify that it applies only to applicants for exemptions to transport explosives in amounts that would otherwise be prohibited for air transportation using aircraft with a maximum certificated weight of less than 12,500 pounds. The certification requirement is not necessary for flight crews on aircraft with a maximum certificated takeoff of 12,500 pounds or more because all such individuals are subject to the TSA security requirements.

The May 5, 2003 IFR inadvertently omitted adding the new certification requirement for applicants for party status to existing exemptions. Therefore, in this final rule we are amending 49 CFR 107.107 to require applicants seeking to be parties to existing exemptions to transport explosives in amounts that would otherwise be prohibited for air transportation using aircraft with a maximum certificated weight of less than 12,500 pounds to certify that no person within the prohibited persons categories listed in 18 U.S.C. 842(i) will participate in the transportation of the material.

The May 5, 2003 IFR adopted several provisions designed to assure that shippers and carriers comply with security requirements promulgated by other Federal agencies, as appropriate. First, the IFR amended § 171.12a to require rail and motor carriers transporting Class 1 materials from Canada into the United States to comply with TSA regulations applicable to such transportation. Second, the IFR added a new § 176.7 to require vessel owners and operators to assure that vessel personnel are licensed or documented as required under U.S. Coast Guard regulations. Third, the IFR amended § 177.804 to require motor carriers to comply with driver licensing requirements in the Federal Motor Carrier Safety Regulations. No persons commented on these provisions. They are adopted without change in this final rule.

This final rule is not a significant regulatory action under Executive Order 12866 and the regulatory policies or procedures of the Department of Transportation (44 FR 11034). This final rule imposes minimal new compliance costs on the regulated industry. The self-certification requirement for certain applicants for exemptions from the HMR will apply to one or two applicants each year.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) requires an agency to review regulations to assess their impact on small entities unless the agency determines that a rule is not expected to have a significant impact on a substantial number of small entities. This final rule imposes minimal new compliance costs on the regulated industry. I hereby certify that the requirements of this final rule will not have a significant impact on a substantial number of small entities.

This final rule has been developed in accordance with Executive Order 13272 (“Proper Consideration of Small Entities in Agency Rulemaking”) and DOT's procedures and policies to promote compliance with the Regulatory Flexibility Act to ensure that potential impacts of draft rules on small entities are properly considered.

This final rule has been analyzed in accordance with the principles and criteria contained in Executive Order 13132 (“Federalism”). This final rule preempts State, local, and Indian tribe requirements but does not impose any regulation with substantial direct effects on the States, the relationship between the National government and the States, or the distribution of power and responsibilities among the various levels of government. Therefore, the consultation and funding requirements of Executive Order 13132 do not apply.

This final rule has been analyzed in accordance with the principles and criteria contained in Executive Order 13175 (“Consultation and Coordination with Indian Tribal Governments”). Because this final rule does not have tribal implications, does not impose substantial direct compliance costs on Indian tribal governments, and does not preempt tribal law, the funding and consultation requirements of Executive Order 13175 do not apply and a tribal summary impact statement is not required.

This final rule does not impose unfunded mandates under the Unfunded Mandates Reform Act of 1995. It does not result in annual costs of $100 million or more, in the aggregate, to any of the following: State, local, or Indian tribal governments, or the private sector.

Under the Paperwork Reduction Act of 1995, no person is required to respond to a collection of information unless it displays a valid OMB control number. RSPA has a current information collection approval under OMB No. 2137-0051, “Rulemaking, Exemption, and Preemption Requirements” with 4,219 burden hours, which includes information collection estimates for the exemptions application process. The Office of Management and Budget approved the extension of this information collection on May 16, 2003, with an expiration date of May 31, 2006.

We estimate that an application for an exemption requires 5 hours to complete. An application to renew an exemption requires one hour to complete. The addition of a security certification as part of an exemption application will not add any appreciable time to this process.

Requests for a copy of the information collection should be directed to Deborah Boothe or T. Glenn Foster, Office of Hazardous Materials Standards (DHM-10), Research and Special Programs Administration, Room 8102, 400 Seventh Street, SW., Washington, DC 20590-0001, telephone (202) 366-8553.

A regulation identifier number (RIN) is assigned to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. The RIN contained in the heading of this document can be used to cross-reference this action with the Unified Agenda.

There are no significant environmental impacts associated with this final rule. It imposes a self-certification requirement for certain applicants for exemptions from the HMR.

Anyone is able to search the electronic form of any written communications and comments received into any of our dockets by the name of the individual submitting the document (or signing the document, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477) or you may visit http://dms.dot.gov.

The background regarding this action is detailed in the preamble to the proposed rule (68 FR 51147, August 25, 2003). This action is necessary to make the regulations implementing the AFA consistent with statutory requirements. The AFA implementing regulations were published on December 30, 2002 (67 FR 79692), became effective January 29, 2003, and were corrected on August 18, 2003 (68 FR 49374).

NMFS manages the groundfish fishery in the Gulf of Alaska (GOA) Exclusive Economic Zone in accordance with the Fishery Management Plan for Groundfish of the Gulf of Alaska and the Fishery Management Plan for the Groundfish Fishery of the Bering Sea and Aleutian Islands Area (FMPs). The FMPs were prepared by the North Pacific Fishery Management Council (Council) under the Magnuson-Stevens Act. While the FMPs are implemented by regulations at 50 CFR part 679, general regulations pertaining to these fisheries are codified in subpart H of 50 CFR part 600.

The fisheries in the BSAI are subject to observer requirements under regulations at § 679.50. These observer requirements have an independent sunset date of December 31, 2007. The AFA implementing regulations (67 FR 79692, December 30, 2002) made changes to the observer regulations. While the DATES section to that action contained a reference to the sunset date for these observer requirements, the sunset date was mistakenly applied to the entire final rule. This action corrects that error by stating that the phrase “effective through December 31, 2007” applies only to those paragraphs dealing with the observer program ( i.e. , § 679.50), and that the other provisions in the final rule are effective indefinitely.

NMFS received one written comment on the proposed rule.

Comment. Any regulations promulgated by NMFS are not to be trusted because the fishery management councils that recommend regulatory changes to NMFS are composed of representatives who seek to enlarge their profits instead of being concerned about the overall health of marine life. NMFS should act in the best interests of the American people as a whole, and not only the commercial fishing public.

Response. The commenter's concerns are noted. However, the comment does not specifically address the purpose of this rule, which is to make an administrative change to an effective date as required by statute. Rather, the comment indicates a general mistrust for the fishery management process. This rule is not intended to make any substantive changes to the conservation and management of fishery stocks.

This final rule has been determined to be not significant for purposes of Executive Order 12866.

The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration during the proposed rule stage that this action would not have a significant economic impact on a substantial number of small entities. No comments were received regarding this certification. As a result, a regulatory flexibility analysis was not prepared.

Beginning in 1995, fishing for Pacific halibut ( Hippoglossus stenolepis ) and sablefish ( Anoplopoma fimbria ) with fixed gear in the IFQ regulatory areas defined in § 679.2 has been managed under the IFQ Program. The IFQ Program is a regulatory regime designed to promote the conservation and management of these fisheries and to further the objectives of the Magnuson-Stevens Fishery Conservation and Management Act and the Northern Pacific Halibut Act. Persons holding quota share receive an annual allocation of IFQ. Persons receiving an annual allocation of IFQ are authorized to harvest IFQ species within specified limitations. Further information on the implementation of the IFQ Program, and the rationale supporting it, are contained in the preamble to the final rule implementing the IFQ Program published in the Federal Register , November 9, 1993 (58 FR 59375) and subsequent amendments.

This announcement is consistent with § 679.23(g)(1), which requires that the directed fishing season for sablefish managed under the IFQ program be specified by the Administrator, Alaska Region, and announced by publication in the Federal Register . This method of season announcement was selected to facilitate coordination between the sablefish season, chosen by the Administrator, Alaska Region, and the halibut season, chosen by the IPHC. The directed fishing season for sablefish with fixed gear managed under the IFQ program will open 1200 hrs, A.l.t., February 29, 2004, and will close 1200 hrs, A.l.t., November 15, 2004. This period runs concurrently with the IFQ season for Pacific halibut announced by the IPHC. The IFQ halibut season will be specified by a separate publication in the Federal Register of annual management measures pursuant to 50 CFR 300.62.

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA, (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent the Agency from responding to the most recent fisheries data in a timely fashion and would delay the opening of the sablefish fishery thereby increasing bycatch and regulatory discards between the sablefish fishery and the halibut fishery, and preventing the accomplishment of the management objective for simultaneous opening of these two fisheries.

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

This action is required by § 679.23(g)(1) and is exempt from review under Executive Order 12866.