The Animal and Plant Health Inspection Service (APHIS), U.S. Department of Agriculture (USDA), regulates the interstate movement of certain animals (including poultry) and animal products to prevent the spread of livestock and poultry diseases within the United States. The regulations are contained in 9 CFR chapter I, subchapter C, parts 70 through 89. The regulations in part 71 contain general provisions covering the interstate transportation of animals and animal products. The regulations in part 71 also provide the standards and other requirements that livestock facilities, including stockyards, livestock markets, buying stations, concentration points, or any other premises where livestock in interstate commerce are assembled, must follow in order to be approved by APHIS. The approval of facilities by APHIS is intended to ensure that such facilities are constructed and operated in a manner that will help prevent the interstate transmission of livestock diseases. Such facilities are subject to State or Federal veterinary supervision. We presently require the approval of livestock facilities that handle horses, cattle, bison, or swine in interstate commerce.

The regulations in part 79 contain certain restrictions and other requirements regarding the interstate movement of sheep and goats in order to control the spread of scrapie within the United States. Scrapie is a degenerative and eventually fatal disease affecting the central nervous systems of sheep and goats. It is a member of a class of diseases called transmissible spongiform encephalopathies. Its control is complicated because the disease has an extremely long incubation period without clinical signs of disease. APHIS also administers the Scrapie Flock Certification Program (SFCP), described at 9 CFR part 54, and produces a program standards document entitled “Program Standards—Voluntary Scrapie Flock Certification Program,” which is available on the Internet at http://www.aphis.usda.gov/vs/scrapie/umr . A copy of the program standards also may be obtained by contacting the person listed under FOR FURTHER INFORMATION CONTACT .

On August 21, 2001, we published in the Federal Register (66 FR 43964-44003, Docket No. 97-093-5) a final rule amending part 79 by providing additional restrictions for the interstate movement of sheep and goats. We also added new requirements with regard to the identification, recordkeeping, and health status of sheep and goats in order to provide a more effective national program for surveillance of scrapie and for the tracing of animals affected with scrapie. In our August 2001 final rule, we also amended part 54 by reinstating a scrapie indemnification program for sheep and goats. The recent changes to parts 54 and 79 were designed, in part, to provide a national standard for the control and eradication of scrapie. These changes also reflect our commitment to eliminating scrapie from the United States.

For the scrapie eradication program to be effective, it is imperative that the identification, recordkeeping, and other requirements in part 79 be carried out at livestock facilities that handle sheep and goats in interstate commerce. The regulations in part 79 do contain requirements relating to identification, recordkeeping, and handling of sheep and goats that must be followed by approved livestock markets. However, at this time, the regulations in part 71 do not provide for the approval of facilities that handle sheep and goats as they do for facilities that handle cattle and bison, swine, and horses. Therefore, it is imperative that an approval process be added to our regulations to ensure that certain uniform practices relating to identification, recordkeeping, and handling of sheep or goats be followed at these facilities in order to help minimize the risk of the spread of scrapie.

Therefore, we are proposing to amend the regulations in part 71 by requiring that livestock facilities handling sheep or goats in interstate commerce would have to be approved by APHIS and be subject to State or Federal veterinary supervision. Providing such approval would be contingent on the facility agreeing to comply with certain standards and conditions, which we would add to § 71.20 of the regulations.

The regulations in § 71.20(a) contain an agreement that sets out the requirements that livestock facilities handling certain classes of livestock in interstate commerce, i.e. , cattle and bison, swine, and horses, must agree to follow in order to be designated as an approved livestock facility. (We note that, although sheep are included in the definition of livestock in § 71.1, the agreement in § 71.20(a) contains no sheep-related provisions.) In that agreement, paragraphs (a)(1) through (a)(13) provide certain general requirements relating to oversight, recordkeeping, animal identification, cleaning and disinfection, and facility and equipment standards. These requirements include:

• Providing the State animal health official and the APHIS area veterinarian in charge a schedule of the facility's sale days that indicates the types of animals that will be handled at the facility on each sale day;

• Ensuring that an accredited veterinarian, State representative, or APHIS representative is on the facility premises on sale days to perform duties in accordance with State and Federal regulations;

• Allowing State representatives and APHIS representatives access to the facility during normal business hours to evaluate whether the facility and its operations are in compliance with applicable regulations;

• Providing immediate notification to an APHIS representative, a State representative, or an accredited veterinarian of any livestock at the facility that are known to be infected, exposed, or suspect, or that show signs of possibly being infected, with any infectious, contagious, or communicable disease;

• Placing reactor, suspect, or exposed livestock in quarantined pens apart from all other livestock while such animals are at the facility;

• Prohibiting the sale of any reactor, suspect, or exposed livestock, and any livestock that show signs of being infected with any communicable disease, except when authorized by an APHIS representative, State representative, or accredited veterinarian;

• Maintaining documents such as weight tickets, sales slips, and records of origin, identification, and destination relating to livestock handled by the facility for a period of 5 years. Such documentation is subject to review by APHIS representatives and State representatives;

• Ensuring that all livestock are officially identified in accordance with the applicable regulations;

• Maintaining the facility, including all yards, docks, pens, alleys, sale rings, chutes, scales, means of conveyance, and other associated equipment, in a clean and sanitary condition in accordance with the regulations. The facility also must maintain an adequate supply of disinfectant and serviceable equipment for cleaning and disinfection;

• Maintaining the facility and equipment in good repair. The facility must provide well-constructed and well-lighted livestock handling chutes, pens, alleys, and sales rings for the inspection, identification, vaccination, testing, and branding of livestock. Electrical outlets also must be provided at the chute area for branding purposes; and

• Ensuring that quarantined pens are clearly marked as such and are cleaned and disinfected in accordance with the regulations in part 71 before being used to pen livestock that are not reactor, suspect, or exposed animals. The quarantined pens also must have adequate drainage, and the floors and other parts of the quarantined pens with which reactor, suspect, or exposed livestock, or their excrement or discharges, may have contact must be constructed of materials that are substantially impervious to moisture and able to withstand continuing cleaning and disinfection.

We propose to amend the agreement in § 71.20(a) so that livestock facilities handling sheep or goats in interstate commerce also would be specified as being subject to the general standards just discussed.

In the agreement in § 71.20, paragraphs (a)(14), (a)(15), and (a)(16) provide specific additional handling and identification standards applicable to cattle and bison, swine, and horses, respectively, that approved livestock facilities must comply with to help prevent the spread of certain animal diseases specific to those livestock species. We would amend the agreement in § 71.20(a) to provide specific additional standards applicable to sheep and goats that livestock facilities receiving sheep or goats in interstate commerce would have to follow in order to minimize the risk in the spread of scrapie. A number of additional conditions would be based on requirements appearing in part 79 of the regulations.

This proposed rule would provide for the establishment of standards for the approval of livestock facilities that handle sheep or goats in interstate commerce, and would facilitate our enforcement of existing animal identification and recordkeeping requirements in part 79 of the regulations. A more detailed discussion of the proposed changes to part 71 of the regulations follows.

We are proposing to add definitions to § 71.1 of the regulations for the terms consistent States and inconsistent States . Both of these terms would be used in conjunction with the approval of livestock facilities handling sheep or goats, as discussed below. Consistent States would be defined as those States listed as consistent States in 9 CFR 79.1 because they meet certain standards, as provided in part 79, for conducting an active State scrapie program that involves the identification of scrapie in sheep and goats for the purpose of controlling the spread of scrapie. Inconsistent States would be defined as those States not included in the list of consistent States appearing in § 79.1. Inconsistent States would generally include those States that do not consider scrapie a reportable disease or do not require the quarantine of infected flocks or source flocks, or that otherwise do not meet the requirements in 9 CFR 79.6. Section 79.6 sets forth the standards for States to qualify as consistent States. We note that, under the regulations in § 79.1, all 50 States currently hold consistent State status.

We also would amend the definition of livestock in § 71.1 of the regulations by adding goats, cervids, and camelids to the current list of animals that includes horses, cattle, bison, sheep, and swine.

Section 71.3 of the regulations covers the interstate movement of diseased animals and poultry. Paragraph (a) of § 71.3 provides that animals or poultry affected with a communicable disease endemic to the United States cannot be moved interstate except as provided in paragraphs (c), (d), and (e) of that same section. Scrapie is listed among the diseases endemic to the United States in § 71.3(a). Paragraphs (c) and (d) of § 71.3 authorize the interstate movement of certain classes of livestock affected with particular diseases under specific circumstances, while in § 71.3(e), the Administrator is authorized to grant exceptions in specific cases involving individual animals being moved to a designated diagnostic or research facility.

Section 71.3 of the regulations does not provide a specific exception from the general interstate movement prohibition for animals affected with scrapie. However, the scrapie regulations in part 79 do allow for the interstate movement of sheep and goats with scrapie status designations under certain conditions. Since part 79 does authorize the restricted movement of animals with scrapie status designations, we would amend § 71.3 of the regulations and add a new paragraph (c)(5) that would stipulate that sheep and goats designated, with regard to scrapie, as exposed, high-risk, suspect, or scrapie-positive animals, as those terms are defined in part 79 of the regulations, may be moved interstate in accordance with the regulations in part 79.

The regulations in § 71.20(a) provide the standards and other conditions that livestock facilities handling horses, cattle, bison, or swine in interstate commerce must follow in order to be approved by us. These standards and conditions are intended, in part, to ensure that the facilities are constructed and operated in a manner that will prevent the transmission of livestock diseases in interstate commerce. Some of the standards and conditions provided in § 71.20(a) apply to all approved livestock facilities, while other standards and conditions apply only to those facilities that handle specific classes of livestock.

To be designated as an approved livestock facility, the facility operator must execute a livestock facility agreement that indicates his or her intention to comply with all applicable standards and conditions provided in § 71.20(a). The facility operator also must indicate, by initialing the appropriate paragraphs of the agreement, the class or classes of livestock that will be handled at the facility. Paragraph (b) of § 71.20 sets forth the basis and procedures for APHIS withdrawing or denying approval of a livestock facility.

We would amend § 71.20(a) to require that livestock facilities handling sheep or goats in interstate commerce would now have to be approved by APHIS. APHIS approval would be contingent on the facility meeting certain standards and conditions, as provided in § 71.20(a), that would relate to facility construction, maintenance, and equipment, as well as other requirements relating to the receipt, handling, and release of animals. Facility operators also would be subject to certain identification and recordkeeping requirements relating to sheep and goats handled at the facility.

In broadening the applicability of § 71.20(a) to cover those livestock facilities that handle sheep or goats in interstate commerce, we would amend § 71.20(a) to include those particular animal health-status designations covering sheep and goats affected with scrapie. We also would amend § 71.20(a) by referencing the applicability of the scrapie regulations in part 79, where appropriate.

Paragraph (a)(3) of § 71.20 provides that State representatives and APHIS representatives must be granted access to an approved livestock facility during normal business hours to evaluate whether the facility and its operations are in compliance with the livestock facility agreement, as well as with other applicable provisions in 9 CFR parts 71, 75, 78, and 85. Part 75 contains additional restrictions with regard to the interstate movement of horses, asses, ponies, mules, and zebras with communicable diseases; part 78 contains additional interstate movement restrictions for animals with brucellosis; and part 85 contains additional interstate movement restrictions for animals with pseudorabies.

In broadening the scope of § 71.20 to include the approval of livestock facilities handling sheep and goats, we would amend § 71.20(a)(3) by adding a reference to the scrapie regulations in part 79. With this change, livestock facilities approved to handle sheep or goats under part 71 of the regulations also would be subject to the requirements in part 79, which include movement restrictions, identification and recordkeeping requirements, and other conditions affecting the interstate movement of sheep and goats in order to control the spread of scrapie.

Paragraph (a)(4) of § 71.20 provides that an APHIS representative, a State representative, or an accredited veterinarian shall be immediately notified of the presence at the facility of any livestock that are known to be infected, exposed, or suspect, or that show signs of possibly being infected, with any infectious, contagious, or communicable disease. We are proposing to amend § 71.20(a)(4) to clarify the applicability of this provision to all animal health-status designations involving scrapie. As discussed previously, sheep and goats with scrapie disease classifications are classified as exposed, high-risk, suspect, or scrapie-positive animals in accordance with part 79 of the regulations. The term scrapie-positive would be covered by the term infectious. So, to cover classifications relating to scrapie, we would amend § 71.20(a)(4) by adding the scrapie status designation “high-risk.”

Paragraph (a)(5) of § 71.20 provides that any reactor, suspect, or exposed livestock shall be held in quarantined pens apart from all other livestock at an approved livestock facility. We require the separation of animals affected with communicable livestock diseases as a further safeguard against the spread of such diseases. To emphasize the applicability of the quarantine requirements in § 71.20(a)(5) to animals subject to scrapie, we would amend § 71.20(a)(5) and add references to “high-risk” and “scrapie-positive” alongside the existing animal health-status designations of reactor, suspect, or exposed livestock. We would qualify this change, however, by noting that the quarantine requirements would not apply to those sheep or goats designated as scrapie-exposed or high risk animals that will be moved directly to slaughter in accordance with parts 71 and 79. We would provide this exception since these particular slaughter animals would pose a negligible risk for the spread of scrapie.

Paragraph (a)(6) of § 71.20 provides that no reactor, suspect, or exposed livestock, nor any livestock that show signs of being infected with any infectious, contagious, or communicable disease, may be sold at an approved livestock facility, except as authorized by an APHIS representative, State representative, or an accredited veterinarian. We would make a number of changes to this provision. First, we would expand the coverage of § 71.20(a)(6) to apply not only to the sale of livestock, but also to any other situation in which the animals are moved from the facility. To clarify the regulatory basis for allowing the sale or movement of such animals, we would provide that such sale or movement from the facility must be in accordance with 9 CFR parts 71, 75, 78, 79, or 85. Referring to those specific regulatory authorities would provide additional guidance as to when affected animals could be sold or moved from the facility. Finally, in order to broaden the applicability of § 71.20(a)(6) to cover livestock facilities with sheep or goats, we would add references to the scrapie health-status designations “high-risk” and “scrapie-positive.” This would mean that sheep and goats designated as suspect, exposed, high-risk, or scrapie-positive animals could not be sold at or moved from an approved livestock facility except in accordance with 9 CFR parts 71 and 79.

Paragraph (a)(7) of § 71.20 provides that documents such as weight tickets, sales slips, and records of origin, identification, and destination that relate to livestock that are in, or that have been in, the facility shall be maintained by the facility for a period of 2 years. APHIS representatives and State representatives must be permitted to review and copy those documents during normal business hours. We would amend § 71.20(a)(7) to require that facilities must maintain documents relating to sheep or goats for a period of 5 years. These documents are used to trace a positive animal back to its flock of origin, so the additional 3 years are necessary because the incubation period for scrapie is between 2 and 5 years.

Paragraph (a)(8) of § 71.20 provides that all livestock must be officially identified in accordance with the applicable regulations in 9 CFR parts 71, 75, 78, and 85 at the time of, or prior to, entry into an approved livestock facility. As noted previously, parts 75, 78, and 85 include requirements not covered in the general provisions of part 71 of the regulations with regard to the interstate movement of particular classes of livestock that are affected with certain communicable livestock diseases. Identification and recordkeeping requirements relating to the interstate movement of sheep and goats are provided in part 79. Therefore, to enlarge the scope of part 71 to cover approved livestock facilities handling sheep or goats, we would amend § 71.20(a)(8) by adding a reference to part 79 so that operators of approved livestock facilities handling sheep or goats in interstate commerce would be subject to the identification and recordkeeping requirements found in part 79 of the regulations.

Paragraph (a)(11) of § 71.20 provides that quarantined pens at approved livestock facilities must be clearly labeled with paint or placarded with the word “Quarantined” or the name of the disease of concern, and must be cleaned and disinfected in accordance with the regulations in part 71 before the pens may be used to hold livestock that are not reactor, suspect, or exposed animals. In order for this provision to be applicable to facilities handling sheep or goats affected with scrapie, we would amend § 71.20(a)(11) and insert references to the animal health-status designations “high-risk” and “scrapie-positive” alongside the existing designations of reactor, suspect, and exposed. In addition, because the regulations in 9 CFR part 54, “Control of Scrapie,” contain specific cleaning and disinfection procedures related to scrapie, we would also amend paragraph (a)(11) so that it specifies that quarantined pens used to hold animals affected with scrapie would have to be cleaned and disinfected in accordance with 9 CFR 54.7(e)(2), which contains specific procedures on the cleaning and disinfection of non-earth surfaces of premises used to hold animals affected with scrapie.

Paragraph (a)(12) of § 71.20 provides that quarantined pens shall have adequate drainage, and the floors and those parts of the walls of the quarantined pens with which reactor, or suspect, or exposed livestock, or their excrement or discharges, may have contact shall be constructed of materials that are substantially impervious to moisture and able to withstand continued cleaning and disinfection. Similar to changes proposed elsewhere in part 71 of the regulations, we would amend § 71.20(a)(12) by adding references to the animal health-status designations of “high-risk” and “scrapie-positive” alongside the references to reactor, suspect, or exposed livestock in order to cover sheep and goats affected with scrapie.

Paragraphs (a)(14) through (a)(16) of § 71.20 provide additional standards that operators of approved livestock facilities must follow in order for their facility to handle particular classes of livestock, i.e., cattle and bison, swine, and horses. We are proposing to add a new paragraph (a)(17) that would list additional standards and conditions that operators of approved livestock facilities handling sheep or goats in interstate commerce would have to follow in order for their facility to handle sheep or goats in interstate commerce. To add this paragraph at § 71.20(a)(17), we would redesignate existing paragraphs (a)(17) through (a)(20) as paragraphs (a)(18) through (a)(21).

Under proposed § 71.20(a)(17), the facility operator would have to indicate in the livestock facility agreement whether the facility would be handling sheep or goats; and if so, whether those animals would be breeding or slaughter animals. The operator also would have to indicate in the agreement whether the facility would be receiving sheep or goats classified as scrapie-positive, exposed, high-risk, or suspect animals; and if so, whether those particular animals are breeding animals or for slaughter only.

Under proposed § 71.20(a)(17) of the regulations, operators of livestock facilities handling sheep or goats in interstate commerce also would have to adhere to the following operating practices:

• The facility would have to receive, handle, and release sheep and goats in accordance with parts 71 and 79 of the regulations;

• The facility operator would have to officially identify all sheep and goats handled at the facility, including whether the animals are from consistent or inconsistent States, and maintain relevant records pertaining to those animals in accordance with part 79 of the regulations;

• Breeding and slaughter animals would have to remain separated at all times while at the facility, so that no contact will occur;

• Any breeding sheep or goats that are designated, with regard to scrapie, as exposed, high-risk, suspect, or scrapie-positive animals, or any slaughter sheep or goats that are designated as scrapie-positive or suspect animals, would have to be held in quarantined pens while at the facility;

• Any sheep or goats that are designated as scrapie-exposed or high-risk animals could be consigned from the facility only in accordance with part 79 of the regulations; and

• Any sheep or goats that are designated as scrapie-positive or suspect animals would have to be reported immediately by the facility operator to a State representative, an APHIS representative, or an accredited veterinarian. Such animals could be released or consigned from the facility only if accompanied by a permit issued by a State representative, an APHIS representative, or an accredited veterinarian, allowing movement of the animals to an approved disposal site or research facility in accordance with parts 71 and 79 of the regulations.

We would make miscellaneous nonsubstantive changes in § 71.1 to the definitions of accredited veterinarian, area veterinarian in charge, interstate commerce, State, State animal health official, and State representative, to be consistent with how these terms appear elsewhere in the regulations, as well as to be consistent with the Government Printing Office Style Manual.

We also would amend § 71.6(a) to include a specific reference to goats among the listed animals subject to this provision on cleaning and disinfecting of conveyances used in the interstate transportation of affected with or infected with a livestock or poultry disease.

The proposed addition of paragraph (a)(17) to § 71.20 would require several nonsubstantive changes in § 71.20 to include a reference to that paragraph or to update references to other paragraphs that would be redesignated as a result of the addition of paragraph (a)(17). We also would amend § 71.20(a)(18) to refer to part 79 in addition to parts 71, 75, 78, and 85.

This proposed rule has been reviewed under Executive Order 12866. The rule has been determined to be significant for the purposes of Executive Order 12866 and, therefore, has been reviewed by the Office of Management and Budget.

We have prepared an economic analysis for this rule, which is set out below. The economic analysis provides a cost-benefit analysis as required by Executive Order 12866 and an analysis of the potential economic effects on small entities as required by the Regulatory Flexibility Act.

We do not have enough data for a comprehensive analysis of the economic effects of this proposed rule on small entities. Therefore, in accordance with 5 U.S.C. 603, we have performed an initial regulatory flexibility analysis for this proposed rule. We are inviting comments about this proposed rule as it relates to small entities. In particular, we are interested in determining the number and kind of small entities who may incur benefits or costs from implementation of this proposed rule and the economic effect of those benefits or costs. Based on the information we have, there is no basis to conclude that this rule will result in any significant economic effect on a substantial number of small entities.

Under the Animal Health Protection Act (7 U.S.C. 8301-8317), USDA is authorized to conduct programs for the control of communicable animal diseases and to regulate the interstate movement of animals that may spread disease. The regulations are contained in 9 CFR chapter I, subchapter C, parts 70 through 89. The regulations in part 71 (referred to below as the regulations) contain general provisions covering the interstate transportation of animals and animal products. The regulations also set forth requirements that livestock facilities handling certain classes of livestock in interstate commerce, including cattle and bison, swine, and horses, must follow in order to be designated by us as approved livestock facilities.

This proposed rule would establish a means for APHIS approval of livestock facilities that handle sheep or goats in interstate commerce. The conditions for approval would be based, in part, on recently implemented regulations relating to the interstate movement of sheep and goats in order to control the spread of scrapie.

To be designated as an approved livestock facility for handling sheep or goats, the facility would have to enter into an agreement in which it agrees to follow certain identification, recordkeeping, and handling practices with respect to animals under its control in accordance with 9 CFR parts 71 and 79. Any reactor, suspect, exposed, scrapie high-risk, or scrapie-positive livestock would have to be held in quarantined pens apart from all other livestock at the facility. The quarantined pens holding such animals would have to be clearly marked, and would have to be cleaned and disinfected before being used by other animals not affected with disease. The quarantined pens also would have to have proper drainage and be constructed of materials that are substantially impervious to moisture and able to withstand continued cleaning and disinfection.

To be approved, such facilities would have to provide access to accredited veterinarians, State representatives, and APHIS representatives, as well as comply with certain notification requirements with respect to livestock known to be infected, exposed, or suspect, or that show signs of being infected with a communicable disease. Such facilities also would have to keep State animal health officials and APHIS informed of upcoming sale days at the facility.

This proposed rule, if implemented, would strengthen scrapie control programs on the national level, reduce the losses that scrapie causes to the sheep and goat industries, and prevent the further spread of scrapie. Proper handling and identification of animals that may be infected with scrapie is essential for an effective scrapie eradication program. States do not have uniform requirements for markets handling sheep and goats in interstate commerce. Therefore, it is imperative that a process for approving livestock facilities that handle sheep or goats in interstate commerce be established to ensure that such livestock facilities follow certain identification, recordkeeping, and handling practices and procedures designed to prevent the spread of scrapie and other communicable diseases.

The primary alternative to the proposed rule would be to make no changes at all to the existing regulations. The regulations in part 79 already include certain requirements to be followed by approved livestock markets with respect to the identification, recordkeeping, and handling of sheep and goats in interstate commerce. However, the regulations in part 71 do not specify the process by which these facilities are to be approved. Therefore, it is imperative that an approval process be added to our regulations.

We considered how we could consolidate or simplify the compliance and reporting requirements contained in this proposal. We believe we accomplish this objective by including the approval standards for sheep and goat facilities in part 71 amongst the existing requirements for approval of livestock facilities handling other classes of livestock. In this way, many of the same requirements for approving sheep and goat facilities would parallel those requirements for approving facilities handling other classes of livestock.

As of January 1, 2004, there were 6.09 million sheep and lambs in the United States, valued at approximately $721 million. This represented a 3 percent decline from the level on January 1, 2003. The above total of 6.09 million sheep and lambs consists of 4.48 million breeding sheep and lambs and 1.61 million market sheep. There were approximately 64,170 operations that produced sheep and lambs in 2002, which is 1.5 percent less than the previous year. 1

Sheep are produced in all parts of the United States, although stock levels vary from State to State. Ten States (California, Colorado, Idaho, Iowa, Montana, Oregon, South Dakota, Texas, Utah, and Wyoming) account for nearly 69 percent of the total inventory, mostly in the Mountain, North Central, and South Central States. The northeastern and southeastern States have the smallest sheep populations, accounting only for 5.2 percent of the total.

About 92 percent of the producers had fewer than 100 animals each, but these accounted only for about 30 percent of the total inventory of sheep and lambs. On the other hand, large sheep operations with 5,000 sheep or more each represented less than 1 percent of the farms but accounted for about 13 percent of the total inventory. The overall average size of a flock was 95 animals in 2003; therefore, most sheep operations would be classified as small entities with annual sales of $750,000 or less. The average size of a flock on large operations of 5,000 sheep or more was 12,367 animals, while that of small operations was 82 animals. Of the total number of operations, about 60 percent of producers were full owners, about 32 percent were part owners, and 8 percent were tenants.

A total of about 5.65 million sheep and lambs were marketed in 2003. A little over 85 percent of these were lambs and the rest were mature sheep. Marketing includes animals for slaughter market, younger animals shipped to other States for feeding and breeding purposes, and some exports. Approximately 81 percent of sheep and lambs are marketed, involving the crossing of State lines in most cases. 2

A total of 3.042 million sheep and lambs were slaughtered in 2003, of which 95.2 percent were lambs. 3 Most of the sheep and lambs shipped for immediate slaughter would not be affected by this proposed rule since they would not be handled by a livestock market or other assembly point en route to the slaughter facility.

In 1997 (the latest year for which data are available for all States), there were 57,925 goat operations in the United States, which raised about 1.99 million goats, valued at approximately $74 million, a decline of about 21 percent from the 1992 level. About 40.7 percent were Angora goats, about 7.4 percent were milk goats, and about 52 percent were goats other than Angora or milk goats. The number of Angora goats declined from about 1.8 million in 1992 to about 0.8 million in 1997, as many mohair producers shifted from producing Angora goats to meat type goats because of the repeal of the Wool and Mohair Act in October 1993. The State of Texas accounted for about 64.3 percent of the goat inventory. Other important goat-raising States are Arizona, California, Georgia, New Mexico, North Carolina, Oklahoma, and Tennessee. These States together represented another 14.2 percent of the U.S. goat holdings. Goat holdings vary in size and degree of commercialization, with many producers relying on other sources of income. With an average holding of about 35 goats, most, if not all, goat operations are relatively small, and would be classified as small entities with annual sales of $750,000 or less.

There are currently about 1,300 livestock facilities that handle cattle and calves, swine, or sheep and goats moving in interstate commerce. Of this total, about 126 handle sheep or goats.

The United States produced about 204 million pounds of lamb and mutton in 2003, a decline of about 8 percent from the previous year. Imports of lamb and mutton increased from 162.8 million pounds in 2002 to 170.9 million pounds in 2003, an increase of about 5 percent.

An increasing proportion of domestic demand for lamb and mutton is met by imports. The share of imports in domestic consumption of lamb and mutton increased from about 11 percent in 1991 to about 46.5 percent in 2003. Even with such increased imports both total consumption as well as per capita consumption of lamb declined. Total consumption declined from about 396 million pounds to 367.5 million pounds, a decline of about 7.2 percent. Per capita consumption (based on carcass weight equivalent) of lamb and mutton slightly declined from 1.6 pounds per person in 1991 to 1.1 pounds per person in 2002. This decline in sheep meat consumption is not unique to the United States but is a worldwide phenomenon.

The United States has a limited foreign trade both in live sheep and goats and their products. Both the sources of imports and destinations of exports are concentrated in a few countries. During calendar year 2003, the United States exported 172,726 head of sheep valued at $10.273 million (see table 2). Most exports were to Mexico (170,595 head). Other sheep markets were Ecuador (878 head), Trinidad and Tobago (463 head), Dominican Republic (277 head), Canada (257 head), Netherlands (233 head), Venezuela (15 head) and Japan (8 head). The United States also exported 29,579 goats valued at $1.615 million in 2003. The primary importers were Mexico (25,202 head), China (4,112 head), Canada (133 head), Netherlands (81 head), and Jamaica (33 head) in 2003. Other destinations included Grenada (6 head), Philippines (6 head), and Japan (6 head).

In 2003, the United States imported 67,778 sheep valued at $7.106 million. All sheep imports in 2003 were from Canada (67,766 head) and Australia (12 head). Additionally, the United States imported 7,453 goats valued at $0.578 million in 2003, of which 5,967 were from Canada and 1,486 were from Australia. In 2003, the United States imported 170.9 million pounds of sheep and goat meat, valued at $353 million and exported 7.4 million pounds of sheep and goat meat valued at $7.9 million. Most lamb and mutton imports came from Australia and New Zealand.

This proposed rule, if implemented, could result in additional administrative burdens and costs for livestock facilities handling sheep or goats in interstate commerce in order to qualify for and maintain their status as approved livestock facilities.

There are currently 126 facilities that handle sheep and goats moving in interstate commerce. These facilities would have to provide access to accredited veterinarians, State representatives, and APHIS representatives, as well as comply with certain notification requirements with respect to livestock known to be infected, exposed, or suspect, or that show signs of being infected with a communicable disease. Such facilities also would have to keep State animal health officials and APHIS informed of upcoming sale days at the facility. Some of the livestock facilities covered by this rule, if implemented, are already subject to these requirements as approved livestock facilities handling other classes of livestock.

To be approved, such livestock facilities also would have to follow certain identification, recordkeeping, and handling practices with respect to sheep or goats under their control as provided in 9 CFR parts 71 and 79. Documents such as weight tickets, sales slips, and records of origin, identification, and destination relating to livestock at the facility would have to be maintained by the facility for a period of 5 years. Some of these requirements are already provided for elsewhere in the regulations, and thus would not represent a new burden. However, any new paperwork and administrative burdens may result in additional costs to facility operators who find it necessary to adjust their operations to meet the new requirements. We do not expect that this will be a significant issue for most facilities.

The livestock facility and equipment would have to be maintained in a state of good repair. Chutes, pens, alleys, and sales rings would have to be well-constructed and well-lighted for the inspection, identification, vaccination, testing and branding of livestock. Electrical outlets would have to be provided at the chute area for branding purposes. The facility, including all yards, docks, pens, alleys, sale rings, chutes, scales, means of conveyance and their associated equipment would have to be maintained in a clean and sanitary condition. The operator of the facility would be responsible for maintaining an adequate supply of disinfectant and serviceable equipment for cleaning and disinfection. Meeting these standards could entail additional costs for some livestock facilities seeking to qualify as approved livestock facilities. However, we do not expect this to be a significant issue as a number of these conditions represent good business practices that most facilities already follow. In addition, some of these facilities would already be complying with these conditions as approved livestock facilities handling other classes of livestock. So the additional changes in this proposed rule should not have a significant effect on facilities conducting their businesses.

In addition, as a condition of approval, reactor, suspect, exposed, scrapie high-risk, or scrapie-positive livestock would have to be held in quarantined pens apart from all other livestock at the facility. The quarantined pens in which such animals are held would have to be clearly marked and would have to be cleaned and disinfected before being used to hold other animals not affected with diseases. The quarantined pens also would have to have proper drainage and be constructed of materials that are substantially impervious to moisture and able to withstand continued cleaning and disinfection. The regulations in § 71.20(a)(5) already require that approved livestock facilities hold any reactor, suspect, or exposed livestock in quarantined pens apart from all other livestock at the facility; facilities handling sheep or goats that do not have quarantined pens would likely incur a one time capital investment of about $3,000 to $5,000 to install such a pen. Otherwise, we expect that the number of reactor, suspect, exposed, scrapie high-risk, or scrapie-positive livestock handled by approved livestock facilities to be very small, and thus quarantining of such animals should not have a significant effect on facility operations or economic activity.

Producers who are engaged in intrastate and interstate marketing also may pay higher consignment fees as approved livestock facilities pass their increased costs of providing services to affected producers. Other costs to producers of this proposed action could result for those animals requiring special handling at approved livestock facilities.

This proposal, if implemented, could result in a small increase in the time that APHIS and State representatives would spend monitoring livestock facilities. In those cases where a facility is already operating as approved livestock facility for other classifications of livestock, and APHIS or State representatives (as opposed to an accredited veterinarian) are already on site, the addition of sheep and goats to the classifications of livestock covered by the agreement is unlikely to substantially increase the workload for those representatives. In those cases where a facility handling sheep and goats is not already an approved livestock facility, APHIS or State representatives are also present in order to monitor compliance with the identification requirements of the scrapie regulations in part 79. Thus, we believe that any additional monitoring responsibilities on the part of State or Federal representatives that may result from implementation of this proposed rule could be handled by existing staff.

In spite of the potential burdens to facility operators and producers, we believe that the long-term avoided costs of coping with losses associated with scrapie by the U.S. sheep and goat industry far exceed the potential costs of this proposed rule. This includes the avoidance of those veterinary and associated costs for managing scrapie-affected flocks. A recent agency estimate showed that scrapie costs the U.S. sheep industry about $24 million per year in direct losses. This includes an estimated $10 million in lost breeding stock and embryo sales, $10.5 million in disposal costs for offal, and $2.8 million in lost meat sales and of bone meal sales from non-federally inspected plants.

Accelerating the eradication of scrapie in the United States also could facilitate the U.S. sheep and goat industry to once again become competitive both in the domestic and global market, particularly in the export of live sheep and goats. Currently, producers in countries such as Australia and New Zealand have a competitive advantage over U.S. producers, based in part on the absence of scrapie in those countries. The achievement of “scrapie-free” status in the United States could neutralize the competitive advantage of such countries.

Since both actual product quality as well as purchaser's perception of quality contribute to continued market acceptance, efforts to eradicate scrapie and secure the health of U.S. sheep and goats will continue to serve the economic interests of the industry and the Nation.

This proposed rule should not affect the interstate flow of sheep and goats. The interstate movement of sheep and goats is important as it reduces interstate price differences faced by consumers of livestock products and it allows movement of sheep and goats from areas of surplus to areas of deficit. A majority of sheep and goats moving across State lines are slaughter animals. Although we do not have specific data, based on our observation of livestock markets and the sheep and goat industry, we believe that most of these slaughter animals move directly to the slaughterhouse and bypass the types of livestock facilities that are the subject of this proposed rule. In addition, the operators of livestock facilities that agree to handle animals affected by scrapie would be most impacted under this proposed rule. However, the number of sheep or goats affected by scrapie and handled by these livestock facilities is likely to be very small. So this proposed rule should not pose a significant burden on operators of livestock facilities or producers so as to reduce interstate commerce or retard economic activity.

Agencies are required under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) to evaluate the potential economic effects of proposed rules on small entities. We do not have enough information to fully evaluate the potential effect of this proposed rule on small entities. As such, we are inviting comments addressing this issue. In particular, we are interested in determining the number and kinds of small entities that may incur benefits or costs from implementation of this proposed rule, and if there are any special issues relating to the business practices of these small entities that would make them particularly different from larger firms in their ability to comply with this proposed rule. We also are interested whether any other costs may result from implementation of this proposed rule that are not discussed in this analysis. Based on what information we have, we have made some initial conclusions.

The changes in this proposed rule would directly affect livestock facilities that handle sheep or goats in interstate commerce. This would include stockyards, livestock markets, buying stations, concentration points, or any other premises under State or Federal veterinary supervision where sheep or goats have been assembled. Producers of sheep or goats also could be affected by the proposed rule if livestock facilities pass their increased costs of providing services to affected producers.

The Small Business Administration (SBA) has established guidelines for determining which types of firms are to be considered small under the Regulatory Flexibility Act. Facilities that handle livestock such as stockyards, livestock markets, buying stations, concentration points, or any other premises under State or Federal veterinary supervision where livestock are assembled are considered small if they have 100 or fewer employees. There are currently about 1,300 livestock facilities that handle cattle and calves, swine, or sheep and goats moving in interstate commerce. Of this total, about 126 handle sheep or goats. Of those livestock facilities that handle sheep and goats, only 1 facility may be considered to be large and all other facilities are small entities of 100 employees or less.

Livestock facilities that are considered small entities would have to meet the same standards as other larger firms. This would include following certain identification, recordkeeping, and handling practices with respect to sheep or goats. Some of these requirements are already provided in part 79 of the regulations, and thus would not represent a new burden. In addition, a certain number of these facilities already comply with many of the conditions in this proposed rule in operating as approved livestock facilities for other classes of livestock.

We considered the feasibility of exempting small entities from some or all of the requirements in this proposed rule or establishing differing compliance or reporting requirements that take into account the resources available to small entities. However, one of the aims of an effective national program to control and eradicate scrapie is to establish uniform standards that will be followed by all livestock facilities handling sheep or goats in interstate commerce. Programs relating to disease surveillance and control do not lend themselves to different compliance standards based on the size of the entity subject to regulation. Also, the requirements in part 79 pertaining to identification, recordkeeping, and handling of sheep and goats make no distinction as to the size of producer or other livestock facility handling the animals.

As discussed above, producers who are engaged in intrastate and interstate marketing may be indirectly affected by this proposed rule if they have to pay higher consignment fees as livestock facilities pass their increased costs of providing services. Other costs to producers of this proposed action could result for those animals requiring special handling at approved livestock facilities. An establishment engaged in sheep or goat production is considered small if it has annual sales of less than $750,000. As discussed previously, the vast majority of sheep and goat producers would be considered small entities based on such criteria. Based on our initial analysis, the potential costs to sheep and goat producers considered small entities should not be significant.

In sum, it is reasonable to expect that both small and large entities would benefit from this proposed rule, which would strengthen scrapie control programs resulting in long-term avoided costs of coping with market losses associated with scrapie to the U.S. sheep and goat industry, currently estimated as high as $24 million per year in direct losses to the U.S. sheep industry alone. We expect any costs to operators of livestock facilities or to producers to be more than offset by the added benefits to the industry at large in providing a more effective scrapie eradication program.

This proposed rule would entail information collection requirements. These requirements are described in this document under the heading “Paperwork Reduction Act.”

This program/activity is listed in the Catalog of Federal Domestic Assistance under No. 10.025 and is subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials. (See 7 CFR part 3015, subpart V.)

This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. If this proposed rule is adopted: (1) All State and local laws and regulations that are in conflict with this rule will be preempted; (2) no retroactive effect will be given to this rule; and (3) administrative proceedings will not be required before parties may file suit in court challenging this rule.

An environmental assessment has been prepared for this proposed rule. The assessment provides a basis for the conclusion that Animal and Plant Health Inspection Service approval of livestock facilities that handle sheep or goats in interstate commerce under the conditions specified in this proposed rule would not have a significant impact on the quality of the human environment.

The environmental assessment was prepared in accordance with: (1) The National Environmental Policy Act of 1969 (NEPA), as amended (42 U.S.C. 4321 et seq. ), (2) regulations of the Council on Environmental Quality for implementing the procedural provisions of NEPA (40 CFR parts 1500-1508), (3) USDA regulations implementing NEPA (7 CFR part 1b), and (4) APHIS' NEPA Implementing Procedures (7 CFR part 372).

Copies of the environmental assessment are available for public inspection in our reading room (information on the location and hours of the reading room is provided under the heading ADDRESSES at the beginning of this docket). In addition, copies may be obtained by writing to the individual listed under FOR FURTHER INFORMATION CONTACT.

In accordance with section 3507(d) of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ), the information collection or recordkeeping requirements included in this proposed rule have been submitted for approval to the Office of Management and Budget (OMB). Please send written comments to the Office of Information and Regulatory Affairs, OMB, Attention: Desk Officer for APHIS, Washington, DC 20503. Please state that your comments refer to Docket No. 00-094-1. Please send a copy of your comments to: (1) Docket No. 00-094-1, Regulatory Analysis and Development, PPD, APHIS, suite 3C03, 4700 River Road Unit 118, Riverdale, MD 20737-1238, and (2) Clearance Officer, OCIO, USDA, room 404-W, 14th Street and Independence Avenue, SW., Washington, DC 20250. A comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication of this proposed rule.

We are proposing that livestock facilities that handle sheep or goats in interstate commerce would have to meet certain standards and follow certain operating practices in order to be approved by us. Complying with the proposed standards and other conditions described in this proposed rule would necessitate the use of several information collection activities, including (1) executing a livestock facility agreement that provides the conditions under which the facility must operate in order to be approved by us, (2) notifying an APHIS or State representative or accredited veterinarian concerning the presence of any sick animal at the facility, (3) completing an application for permit in order for the facility to release certain sheep and goats affected with scrapie, and (4) maintaining records relating to the identity of sheep handled at the facility. We note that much of the information that would be requested under the proposed rule is already being recorded by livestock facility owners/operators as part of their routine business practices. In addition, much of the information requested is currently required by our regulations in 9 CFR parts 54, 71, and 79, and is thus already being provided by many of the respondents who would be affected by the proposed regulations.

We are soliciting comments from the public (as well as affected agencies) concerning our proposed information collection and recordkeeping requirements. These comments will help us:

(1) Evaluate whether the proposed information collection is necessary for the proper performance of our agency's functions, including whether the information will have practical utility;

(2) Evaluate the accuracy of our estimate of the burden of the proposed information collection, including the validity of the methodology and assumptions used;

(3) Enhance the quality, utility, and clarity of the information to be collected; and

(4) Minimize the burden of the information collection on those who are to respond (such as through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology; e.g., permitting electronic submission of responses).

Estimate of burden: Public reporting burden for this collection of information is estimated to average 0.5068226 hours per response.

Respondents: Owners/operators of certain livestock facilities that handle sheep or goats moving interstate, accredited veterinarians, and State animal health authorities.

Estimated annual number of respondents: 1,026.

Estimated annual number of responses per respondent: 1.

Estimated annual number of responses: 1,026.

Estimated total annual burden on respondents: 520 hours. (Due to averaging, the total annual burden hours may not equal the product of the annual number of responses multiplied by the reporting burden per response.)

Copies of this information collection can be obtained from Mrs. Celeste Sickles, APHIS’ Information Collection Coordinator, at (301) 734-7477.

The Animal and Plant Health Inspection Service is committed to compliance with the Government Paperwork Elimination Act (GPEA), which requires Government agencies in general to provide the public the option of submitting information or transacting business electronically to the maximum extent possible. For information pertinent to GPEA compliance related to this proposed rule, please contact Mrs. Celeste Sickles, APHIS' Information Collection Coordinator, at (301) 734-7477.

Accordingly, we propose to amend 9 CFR part 71 as follows:

The Federal Election Commission (“Commission”) has received a Petition for Rulemaking from Mr. Robert F. Bauer, acting on his own behalf and not on behalf of any client or other interested party. Petitioner asks the Commission to revise 11 CFR 100.29(c) to exempt from the term “electioneering communications” any communication appearing in a promotion for a political documentary film “by corporations and other entities established and operating for such purpose in the ordinary course of their businesses,” provided that the promotion does not “promote, support, attack or oppose” a candidate for federal office within the meaning of 2 U.S.C. 431(20)(A)(iii). Petitioner seeks to have any such protections also apply to the promotion, in the ordinary course of business, of “books, plays, and other forms of political expression that may involve references to Federal candidates.”

The Commission seeks comments on whether the Commission should initiate a rulemaking on “electioneering communications” and on whether there are other issues regarding the electioneering communications rules that should also be addressed in a rulemaking at this time. 1

Copies of the Petition are available for public inspection at the Commission's Public Records Office, 999 E Street, NW., Washington, DC 20463, Monday though Friday between the hours of 9 a.m. and 5 p.m., and on the Commission's Web site, http://www.fec.gov. Interested persons may also obtain a copy of the Petition at any time by dialing the Commission's Faxline service at (202) 501-3413 and requesting document # 257.

Consideration of the merits of the Petition will be deferred until the close of the comment period. If the Commission decides that the Petition has merit, it may begin a rulemaking proceeding. Any subsequent action taken by the Commission will be announced in the Federal Register .

The collection of information contained in this notice of proposed rulemaking has been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of information should be received by October 25, 2004. Comments are specifically requested concerning:

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

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

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

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

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

The collection of information in this proposed regulation was previously approved and reviewed by the Office of Management and Budget under control number 1545-1774. The collection of information is required to allow the taxpayer to make certain elections to determine the amount of allowable loss under § 1.1502-20 in its entirety, § 1.1502-20 without regard to the duplicated loss factor, or § 1.337(d)-2T; to allow the taxpayer to reapportion a section 382 limitation in certain cases; to allow the taxpayer to waive certain loss carryovers; and to ensure that loss is not disallowed under § 1.337-2T and basis is not reduced under § 1.337(d)-2T to the extent that the taxpayer establishes that the loss or basis is not attributable to the recognition of built-in gain on the disposition of an asset.

This collection of information is modified with respect to §§ 1.1502-20T and 1.1502-32T. Regarding § 1.1502-20T, the collection of information also is necessary to allow the common parent of the selling group to reapportion a separate, subgroup or consolidated section 382 limitation when the acquiring group amends its § 1.1502-32(b)(4) election. With respect to § 1.1502-32T, the collection of information also is necessary to allow the acquiring group to amend its previous § 1.1502-32(b)(4) election, so that it may use previously waived losses of its subsidiary.

The collection of information is required to obtain a benefit. The likely respondents are corporations that file consolidated income tax returns.

Estimated total annual reporting and/or recordkeeping burden: 36,720 hours.

Estimated average annual burden per respondent: 2 hours.

Estimated number of respondents: 18,360.

Estimated annual frequency of responses: Once.

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

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

Temporary regulations in the rules and regulations section of this issue of the Federal Register amend the Income Tax Regulations (26 CFR Part 1) relating to section 1502. The temporary regulations extend the time for consolidated groups to elect to apply a method for determining allowable loss on a disposition of subsidiary stock, and permit consolidated groups to revoke such elections. The temporary regulations affect corporations filing consolidated returns, both during and after the period of affiliation, and also affect purchasers of the stock of members of a consolidated group. The text of those regulations serves as the text for these proposed regulations. The preamble to the temporary regulations explains the amendments and these proposed regulations.

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It is hereby certified that these proposed regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that the regulations provide relief to consolidated groups by extending the time in which a group may make, or allowing a group to revoke, certain elections of methods for determining allowable loss. In addition, members of consolidated groups are generally large corporations rather than small businesses. Therefore, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Nevertheless, the IRS and Treasury Department request comments from small entities that believe they might be adversely affected by these regulations. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on the impact of these regulations.

Before the proposed regulations are adopted as final regulations, consideration will be given to any written comments (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be made available for public inspection and copying. A public hearing may be scheduled. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register .

The principal authors of these regulations are Theresa Abell and Martin Huck of the Office of Associate Chief Counsel (Corporate). However, other personnel from the IRS and Treasury Department participated in their development.

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

This action is rulemaking on a non-regulatory planning document intended to ensure the attainment of the 1-hour ozone air quality standard in the Northwest Indiana Area. This action establishes MVEBs for Northwest Indiana that will allow transportation planning to proceed.

1. Submitting CBI. Do not submit this information to EPA through EDOCKET, regulations.gov or e-mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, 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 claimed as CBI. In addition to one complete version of the comment that includes 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 public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2.

2. Tips for Preparing Your Comments. When submitting comments, remember to:

a. Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).

b. Follow directions—The agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

c. Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

d. Describe any assumptions and provide any technical information and/or data that you used.

e. If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

f. Provide specific examples to illustrate your concerns, and suggest alternatives.

g. Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

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

For additional information, see the Direct Final Rule which is located in the Rules section of this Federal Register . Copies of the request and the EPA's analysis are available electronically at EDOCKET or in hard copy at the above address. (Please telephone Patricia Morris at (312) 353-8656 before visiting the Region 5 Office.)

This is a summary of the Media Bureau's Notice of Proposed Rulemaking ( NPRM ) in MB Docket No. 04-256, FCC 04-173, adopted July 13, 2004, and released on August 2, 2004. The full text of this NPRM is available for inspection and copying during regular business hours in the FCC Reference Center, 445 Twelfth Street, SW., Room CY-A257, Portals II, Washington, DC 20554, and may also be purchased from the Commission's copy contractor, Best Company and Printing, Inc., Room CY-B402, telephone (800) 378-3160, e-mail www.BCPIWEB.COM. To request materials in accessible formats for people with disabilities (electronic files, large print, audio format and Braille), send an email to fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

1. In its Report and Order and Notice of Proposed Rulemaking (68 FR 46286, August 5, 2003, and 68 FR 46359, August 5, 2003) ( R&O ), arising from the third biennial review of its broadcast ownership rules, the Commission attributed the “brokered station” to the “broker” in certain radio JSAs. 1 A JSA is an agreement with a licensee of a brokered station that authorizes a broker to sell some or all of the advertising time for the brokered station in return for a fee or percentage of revenues paid to the licensee. (47 CFR 73.3555, Note 2(k)) Because the broker normally assumes much of the market risk with respect to the station it brokers, radio JSAs generally give the broker authority to hire a sales force for the brokered station, set advertising prices, and make other decisions regarding the sale of advertising time, subject to the licensee's preemptive right to reject the advertising. As a result of the Commission's decision, its attribution rules, which define what interests are counted for purposes of applying the Commission's broadcast ownership rules, now state that a party with a cognizable interest in a radio station that brokers more than 15 percent of the weekly advertising time of another radio station in the same local market is considered to have an attributable interest in the brokered station R&O. (47 CFR 73.3555) In this NPRM, the Commission invites comment on whether comparable, same-market TV JSAs should also be attributable.

2. Although the Commission attributed radio JSAs in the R&O it did not address TV JSAs or its other attribution rules. The biennial, now quadrennial, review requirement of section 202(h) of the Telecommunication Act of 1996 does not encompass attribution. The attribution rules merely determine what interests are cognizable under the Commission's broadcast ownership rules; they are not ownership limits in themselves. Moreover, the basis of the attribution rules differs from the statutory factors the Commission applies in the biennial reviews. The Commission addressed the attribution of radio JSAs in the R&O only because the issue was raised in the local radio ownership proceeding, which was incorporated into the 2002 biennial review. Since prior notice had not been given regarding the issue of whether the Commission should attribute TV JSAs, the Commission said that it would seek comment on whether to attribute TV JSAs in a future NPRM. The Commission has no reason to believe that the terms and conditions of TV JSAs differ substantively from those of radio JSAs, and, in this NPRM , the Commission tentatively concludes that JSAs have the same effect in local TV markets that they have in local radio markets and should be treated similarly.

3. The Commission's attribution rules seek to identify those interests in licensees that confer on their holders a degree of “influence or control such that the holders have a realistic potential to affect the programming decisions of licensees or other core operating functions.”  2 Influence and control are important criteria with respect to the attribution rules because these rules define which interests are significant enough to be counted for purposes of the Commission's multiple ownership rules.

4. In its 1999 attribution proceeding, the Commission considered whether to attribute several types of business arrangements, including JSAs and TV local marketing agreements (LMAs). 3 The Commission acknowledged that same-market JSAs could raise competitive concerns but said it did not believe that such agreements conveyed a sufficient degree of influence or control over station programming or core operations to warrant attribution, adding that JSAs could promote diversity by “enabling smaller stations to stay on the air.” ( 1999 Attribution Order ) The Commission required that JSAs be placed in the station's public inspection file, and specifically noted that it retained the discretion to conduct a public interest review of specific JSAs, if warranted, on a case-by-case basis. ( 1999 Attribution Order )

5. In 1999, the Commission distinguished JSAs from LMAs, holding that JSAs are contracts that affect primarily the sale of advertising time, as distinguished from LMAs, which may affect programming, personnel, advertising, physical facilities, and other core operations of radio stations. ( 1999 Attribution Order ) Although the Commission did not adopt a rule attributing TV or radio JSAs, it did attribute same-market TV LMAs, stating that its rationale in the 1992 Radio Ownership Order for attributing same-market radio LMAs— i.e ., to prevent their use to circumvent its ownership limits—applies equally to same-market TV LMAs. The Commission also repeated its concern that LMAs among stations serving the same market could undermine broadcast competition and diversity. ( 1999 Attribution Order , citing 1992 Radio Ownership Order , 57 FR 18089, April 29, 1992) After the 1999 Attribution Order took effect, the Commission's rules specified that a party with a cognizable interest in either a radio or a TV station that brokers more than 15 percent of the weekly broadcast time of another radio or TV station in the same local market is considered to have an attributable interest in the brokered station. (47 CFR 73.3555, Notes 2(j)(1), 2(k)(1))

6. In 2001, the Commission reopened the issue of whether to attribute radio JSAs in the Local Radio Ownership NPRM . ( Rules and Policies Concerning Multiple Ownership of Radio Broadcast Stations in Local Markets , 66 FR 63986, December 11, 2001. This proceeding was incorporated into the 2002 biennial review.) As part of its larger inquiry into possible changes to local radio ownership rules and policies, the Commission asked whether it should reconsider its blanket exemption of JSAs from attribution, and whether radio JSAs and LMAs or TBAs should be treated similarly. (66 FR 63986, December 11, 2001) In its 2002 Ackerley decision, the Commission interpreted the language in the 1999 Attribution Order , in which it reserved the ability to conduct a review of specific JSAs on a case-by-case basis. It concluded that the parties' TV JSA, which was intertwined with the parties' non-attributable TBA, should be attributable due to the level of influence it permitted the broker to exercise over the brokered station's programming decisions. ( Shareholders of the Ackerley Group, Inc. (Transferor) and Clear Channel Communications, Inc. (Transferee) For Transfer of Control of the Ackerley Group, Inc., and Certain Subsidiaries, 17 FCC Rcd. 10828, 2002.) ( Ackerley )) In Ackerley , Ackerley Group, Inc. had both a TBA and a JSA with KCBA (TV). The TBA expressly limited the amount of programming to be provided under the TBA to 15 percent of the licensee's weekly programming hours, which was the permissible limit without triggering the Commission's attribution rules. However, the brokered station, under the terms of the combined agreements, did not have the right to collect advertising revenue from non-network programming not included within the 15 percent provided under the TBA, and so did not have an economic incentive to refuse programming suggestions by the broker.

7. The Commission explained in Ackerley that it had, in the 1999 Attribution Order , declined to impose new rules attributing JSAs “as long as they deal primarily with the sale of advertising time and do not contain terms that materially affect programming or other core operations of the stations such that they are substantively equivalent to LMAs.” ( Ackerley , 17 FCC Rcd 10842, citing 1999 Attribution Order , 14 FCC Rcd at 12612-13) The Commission concluded in Ackerley that the TBA and related agreements did not provide the licensee with an economic incentive to control the 85 percent of programming not provided by the broker under the LMA. It concluded that, as a result, the agreements together were “substantively equivalent” to an LMA for more than 15 percent of KCBA(TV)'s weekly broadcast hours and were therefore attributable.

8. In 2003, the Commission decided to attribute radio JSAs. In the R&O , the Commission reiterated that the attribution rules seek to identify and include those positional and ownership interests that convey a degree of influence or control to their holder sufficient to warrant limitation under the ownership rules. Where the Commission has referred to an interest that confers “influence” it has viewed it as an interest that is less than controlling, but through which the holder is likely to induce a licensee to take actions to protect the interests of the holder, and where a realistic potential exists to affect a station's programming and other core operational decisions. The Commission found that the use of in-market radio JSAs may undermine its interest in broadcast competition sufficiently to warrant limitation under the multiple ownership rules.

9. Prior to 2003 the Commission distinguished JSAs from LMAs, finding that only LMAs have the ability to affect programming, personnel, advertising, physical facilities, and other core operations of stations. In the R&O, however, the Commission found that because the broker controls the advertising revenue of the brokered radio station, JSAs have the same potential as LMAs to convey sufficient influence over core operations of a radio station to raise significant competition concerns warranting attribution. The Commission found that the threat to competition and the potential impact on the influence over the brokered station outweighed any potential benefits that non-attribution of radio JSAs may have on the radio industry.

10. When the Commission attributed JSAs involving radio stations, it said that, where an entity owns or has an attributable interest in one or more stations in a local radio market, joint advertising sales of another station in that market for more than 15 percent of the brokered station's advertising time per week will result in counting the brokered station toward the brokering licensee's ownership limits. (47 CFR 73.3555, Note 2(k)) Additionally, attributable radio JSAs must be filed with the Commission, and placed in the public file. The Commission gave parties two years from the effective date of the new rule to terminate agreements, or otherwise come into compliance with the applicable media ownership rules. (However, if a party sells an existing combination of stations within the two year grace period, it may not sell or assign the JSA to the new owner if the JSA causes the new owner to exceed any of the Commission's ownership limits; the JSA must be terminated at the time of the sale of the stations.)

11. In Prometheus v. FCC, the Third Circuit Court upheld the Commission's decision to attribute radio JSAs. The court held that the Commission had adequately explained its change in policy with respect to attribution of radio JSAs. The court accepted “that the Commission's determination upon ‘reexamination of the issue’ that the JSAs convey (and always have conveyed) a potential for influence—sufficiently rationalizes [the Commission's] decision to jettison its prior nonattribution policy and replace it with one that more accurately reflects the conditions of local markets.” The court also held that attribution of JSAs is not a regulatory taking in violation of the Fifth Amendment. According to the court, in deciding to attribute JSAs, the Commission has not invalidated or interfered with any contracts, but has merely determined that stations subject to JSAs should, in certain circumstances, count toward the regulatory limit in determining how many stations the broker may own in a market. The court also held that stations have no vested right in the continuation of any regulatory scheme.

12. In this NPRM, the Commission seeks comment on whether or not to attribute TV JSAs. The Commission tentatively concludes that it should. The Commission asks for comments on the similarities and differences between TV and radio JSAs. Are there differences between TV and radio JSAs such that the Commission should not attribute TV JSAs?

13. A licensee assumes all of the market risk associated with a broadcast TV station's programming when the licensee receives all of the advertising revenue generated by a program. The assumption of all market risk provides a licensee with strong incentives to select the station's programming and oversee other core operations of the station. The Commission's experience with the Ackerley case suggests that TV JSAs may reduce a licensee's incentive to select programming and oversee other core operations of the station whose ad time is brokered. For example, a JSA providing a licensee with a fixed monthly fee, regardless of the advertising sales or audience share of the TV station, transfers all market risk from the licensee to the broker. With the JSA, it is the broker's profits that are directly affected by the advertising revenues generated by a program. As such, the broker has strong incentives to induce a licensee to select programming to protect the broker's interests, and the brokered station has little incentive to resist such influence.

14. In the context of radio JSAs, the Commission found that licensees of radio stations subject to JSAs typically receive a monthly fee regardless of the advertising sales or audience share of the station and, therefore, may have less incentive to maintain or attain significant competitive standing in the market. It concluded that, because the broker controls the advertising revenue of the brokered radio station, JSAs have the potential to convey sufficient influence over core operations of a radio station to raise significant competition concerns warranting attribution. Is the same fee structure typical for TV JSAs? If not, are the incentives different and does this have implications for the Commission's decision? In this NPRM, the Commission seeks comment on whether broadcast TV JSAs have a similar potential to influence program selection and other core operations of a TV station.

15. Beyond the issue of potential influence by a JSA broker over a brokered station's operations, which alone may warrant attribution, the unattributable nature of JSAs could lead to the exercise of market power by brokering stations and raise related competition concerns. In the R&O, in addressing local TV ownership, the Commission stated, “[o]ur competition goal seeks to ensure that for each TV market, numerous strong rivals are actively engaged in competition for viewing audiences.” In the context of radio, JSAs raise concerns regarding the ability of broadcasters who are not in a JSA or LMA combination to compete, and may negatively affect the health of the local radio industry generally. In any given radio market, a broker may own or have an ownership interest in stations, operate stations pursuant to an LMA, or sell advertising time for stations pursuant to a JSA. Instead of stations competing with one another, the Commission, in the R&O, said that radio JSAs put pricing and output decisions in the hands of one firm that sells packages of time for all stations that are party to the agreement. As such, radio JSAs have the potential to lessen competition in the market. Do TV JSAs raise the same competitive concerns as radio JSAs? In situations where a party would exceed our ownership limits if a TV JSA is attributed, does the TV JSA provide the broker with the ability to exercise market power, or raise concerns regarding the ability of smaller broadcasters to compete? Is there a difference in the radio and TV markets that would justify treating TV JSAs differently from radio JSAs? What benefits and harms from JSAs have occurred in the radio context that could occur in the TV context?

16. The Commission seeks concrete information on the terms and conditions of TV JSAs. The Commission asks commenters that are parties to TV JSAs to answer the following questions, which can help us to assess the typical terms and significance of TV JSAs. What is the duration of the agreement? What terms and conditions are associated with TV JSA agreements besides advertising terms? The Commission wishes to know the nature of the other terms as well. How are the station owner and broker compensated? Are there package deals among several stations? Does the broker get involved in the operation of the station, including programming and finances, either directly or indirectly? As a practical matter, do typical TV JSAs differ from TV LMAs? Are TV JSAs also usually accompanied by program agreements, or are they mostly solely advertising agreements? What other arrangements typically occur between parties in terms of station operations or joint use of production facilities? For example, are TV JSAs often accompanied by shared services or joint services agreements? If so, what terms are involved and what services or facilities are shared? What is the impact of these attributes of JSAs and terms of these contracts on the Commission's concerns about influence or control? Are TV JSAs typically accompanied by non-attributable financial investments? If such combinations occur, what are their terms?

17. Why do parties enter into TV JSAs? What are the benefits they enjoy? Do these benefits differ from those of LMAs? What kind of efficiencies arise with TV JSAs? How are these shared among parties to the TV JSAs? What benefits accrue to the public from TV JSAs? The Commission has seen TV JSA agreements that are accompanied by non-attributable TV LMAs, sometimes involving a situation where a stronger station provides local news programming to a weaker station in the market as part of the agreements. This may enable such stations to provide news that they were not able to provide previously. Is this a frequent occurrence and, if so, what impact should it have on our decision? What effect, if any, might attribution of TV JSAs have on the digital transition?

18. What impact do TV JSAs have on competition? What are the disadvantages of having a TV JSA? Under what circumstances, if any, should the interest of the broker/JSA holder be held attributable? The Commission particularly asks station owners who compete with stations that are parties to TV JSAs, as well as other commenters, to speak to the effects of any TV JSAs in their market.

19. If the Commission does decide to attribute TV JSAs, are there any compelling reasons why the Commission should not apply the existing radio JSA attribution guidelines, including the filing requirements, to TV JSAs? If a rule similar to the radio JSA attribution rule is applied to TV JSAs, should the Commission use the fifteen percent benchmark that it used in the radio context, or is some other percentage more appropriate? Alternatively, should TV JSAs be examined only on a case-by-case basis, and be attributed only if their likely degree of influence is similar to that of an LMA, as in Ackerley ?

20. The commission did not grandfather existing radio JSAs. Parties having existing, attributable JSAs that would cause them to exceed relevant ownership limits were required to file a copy with the Commission, and were given two years from the effective date of the R&O to terminate those JSAs or otherwise come into compliance with the local radio ownership rules. Should these same transition provisions apply to TV JSAs? What effects, if any, should JSAs have on the renewal expectancy of TV stations? Information contained in the parties' comments is essential to the Commission's assessment of whether to grandfather existing TV JSAs in the event they are deemed attributable, and the form this grandfathering should take. Parties to existing JSAs are the best source of this information. It is critical that the Commission be provided the information it needs to make a reasoned decision, and to fashion appropriate grandfathering rights, if any, in the event it deems JSAs attributable. For parties to TV JSAs, the Commission asks that the licensee of the brokering station and/or the licensee of the brokered station include the information described above in their comments, along with any other information that they think is relevant.

21. Finally, while this NPRM concerns TV JSAs, the Commission notes that TV LMAs entered into before November 5, 1996, were grandfathered until the conclusion of the 2004 biennial review of the broadcast ownership rules. As part of that review, the Commission was to reevaluate these grandfathered TV LMAs, on a case-by-case basis, using specified factors, to determine whether they should continue to be grandfathered. ( Review of the Commission's Regulations Governing TV Broadcasting, TV Satellite Stations Review of Policy & Rules, 64 FR 54225, October 6, 1999, clarified in Memorandum Opinion & Second Order on Reconsideration, 66 FR 9039, February 6, 2001) On January 22, 2004, President Bush signed into law the Appropriations Act. (Consolidated Appropriations Act, 2004, Public Law 108-199, section 629, 118 Stat. 3, 2004) Section 629 of the Appropriations Act amends section 202(h) of the Telecommunications Act of 1996, modifying the biennial review requirement of the 1996 Act to a quadrennial review requirement. According to the amended statute, the next ownership review will commence in 2006. Since the Commission will not undertake an ownership review in 2004, it invites comment as to whether it should nonetheless commence the reevaluation of the grandfathered LMAs in 2004 or postpone it till the next quadrennial ownership review in 2006.

22. Ex Parte Rules. This is a permit-but-disclose notice and comment rulemaking proceeding. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided that they are disclosed as provided in the Commission's Rules. See generally 47 CFR 1.1202, 1.1203, and 1.1206(a).

23. Comments and Reply Comments. Pursuant to applicable procedures set forth in sections 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415 and 1.419, interested parties may file comments on the notice of proposed rulemaking on or before September 27, 2004, and reply comments on or before October 12, 2004. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS) or by filing paper copies. See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998). All comments should reference MB Docket No. 04-256.

24. Comments filed through the ECFS can be sent as an electronic file via the Internet to http://www.fcc.gov/e-file/ecfs.html. Generally, only one copy of an electronic submission must be filed. In completing the transmittal screen, commenters should include their full name, U.S. Postal Service mailing address, and the applicable docket or rulemaking number. Parties may also submit an electronic comment by Internet e-mail. To get filing instructions for e-mail comments, commenters should send an e-mail to ecfs@fcc.gov, and should include the following words in the body of the message, “get form.” A sample form and directions will be sent in reply. Parties who choose to file by paper must file an original and four copies of each filing. Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail (although the Commission continues to experience delays in receiving U.S. Postal Service mail). The Commission's contractor, Natek, Inc., will receive hand-delivered or messenger-delivered paper filings for the Commission's Secretary at 236 Massachusetts Avenue, NE., Suite 110, Washington, DC 2002. The filing hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes must be disposed of before entering the building. Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743. U.S. Postal Service first-class mail, Express Mail, and Priority Mail should be addressed to 445 12th Street, SW., Washington, DC 20554. All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.

25. Parties must also serve either one copy of each filing via e-mail or two paper copies to Best Copy and Printing, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone (800) 378-3160 or (202) 488-5300, or via email to fcc@bcpiweb.com. In addition, parties should serve one copy of each filing via email or three paper copies to Brenda Lewis, 445 12th Street, SW., 2-C266, Washington, DC 20554. Parties should also serve one copy of each filing via email or one paper copy to Debra Sabourin, Media Bureau, 445 12th Street, SW., 2-C165, Washington, DC 20554.

26. Availability of Documents . Comments, reply comments, and ex parte submissions will be available for public inspection during regular business hours in the FCC Reference Center, Federal Communications Commission, 445 12th Street, SW., CY-A257, Washington, DC 20554. These documents also will be available electronically from the Commission's Electronic comment Filing System. Documents are available electronically in ASCII text, Word 97, and Adobe Acrobat. Copies of filings in this proceeding may be obtained from Best Copy and Printing, Inc., Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone (800) 378-3160 or (202) 488-5300, facsimile (202) 488-5563, or via e-mail at fcc@bcpiweb.com . To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

27. Regulatory Flexibility Act . As required by the Regulatory Flexibility Act, ( See 5 U.S.C. 603) the Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities of the proposals addressed in this Notice of Proposed Rulemaking . The IRFA is set forth full in the full text of this NPRM . Written public comments are requested on the IRFA. These comments must be filed in accordance with the same filing deadlines for comments on the NPRM , and they should have a separate and distinct heading designating them as responses to the IRFA.

28. Paperwork Reduction Act . This document contains proposed information collection requirements. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public to comment on the information collection requirements contained in this document, as required by the Paperwork Reduction Act of 1995, Public Law 104-13. Public and agency comments are due October 25, 2004. Comments should address: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we seek specific comment on how we might “further reduce the information collection burden for small business concerns with fewer than 25 employees.

OMB Control Number: 3060-XXXX.

Title: Rules and Policies Concerning Attribution of Joint Sales Agreements In Local Television Markets, NPRM, MB Dock. No. 04-256, FCC 04-173.

Form Number: N.A.

Type of Review: New collection.

Respondents: Business or other for profit entities.

Estimated Number of Respondents: 1,360.

Estimated Time Per Response: 1 hour.

Frequency of Response: 1 time.

Estimated Total Annual Burden: 1,360 hours.

Estimated Total Annual Costs: 0.

Privacy Act Impact Assessment: No impacts.

Needs and Uses: The data would be used by the Commission to determine whether the applicants meet basic statutory requirements to become a Commission licensee/permittee and to assure that the public interest would be best served by grant of the application. The proposed filing requirements would also help to determine whether the applicant and/or filer is in compliance with the Commission's multiple ownership rules.

29. Pursuant to the authority contained in sections 1, 2(a), 4(i), 303, 307, 309, and 310 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152(A), 154(I), 303, 307, 309, AND 310, and section 202(h) of the Telecommunications Act of 1996, the Notice of Proposed Rulemaking is adopted.

30. The Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, will send a copy of the NPRM , including the IRFA, to the Chief Counsel for Advocacy of the Small Business Administration, in accordance with the Regulatory Flexibility Act. ( See 5 U.S.C. 603(a).)

31. As required by the Regulatory Flexibility Act (RFA), 4 the Commission has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on small entities of the policies and rules proposed in this Notice of Proposed Rulemaking ( NPRM ). Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the NPRM . The Commission will send a copy of the NPRM , including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (SBA).

32. The Commission, in a Report and Order and Notice of Proposed Rulemaking ( R&O ), arising form the third biennial review of its broadcast ownership rules, adopted a rule attributing the “brokered station” to the “broker” in certain radio joint sales agreements (JSAa). A JSA is an agreement with a licensee of a “brokered station” in return for a fee paid to the licensee. The Commission's attribution rules seek to identify those interests in licensees that confer on their holders a degree of “influence or control such that the holders have a realistic potential to affect the programming decisions of licensees or other core operating functions.” Influence and control are important criteria with respect to the attribution rules because the rules define which interests are significant enough to be counted for purposes of the Commission's multiple ownership rules.

33. In the R&O , the Commission decided to attribute radio JSAs but found the issue as it relates to TV stations was beyond the scope of the proceeding. In extending the attribution rule to include radio JSAs, the Commission found that the use of in-market radio JSAs may undermine out interest in broadcast competition sufficiently to warrant limitation under the multiple ownership rules. Accordingly, in the R&O , the Commission revised the attribution rules, which define what interests are counted for purposes of applying the Commission's media ownership rules, to state that a party with a cognizable interest in a radio station that brokers more than 15 percent of the weekly advertising time of another radio station in the same local market is considered to have an attributable interest in the brokered station. These new rules have been stayed. The NPRM invites comment on whether same-market TV JSAs should also be attributable under the same terms. The NPRM also invites comment on whether the factors that led the Commission to attribute radio JSAs apply as well in the context of TV JSAs. For example, the Commission asks whether TV JSAs have a similar potential to influence core operations of the brokered TV station and whether TV JSAs raise similar competitive concerns as radio JSAs.

34. This NPRM is adotped pursuant to sections 1, 2(a), 4(i), 303, 307, 309, 310, of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 154(i), 303, 307, 309, 310, and section 202(h) of the Telecommunications Act of 1996.

35. 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 defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental entity” under Section 3 of the Small Business Act. 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.

36. In this context, the application of the statutory definition to television stations is of concern. An element of the definition of “small business” is that the entity not be dominant in its field of operation. The Commission is unable at this time and in this context to define or quantify the criteria that would establish whether a specific television station is dominant in its field of operation. Accordingly, the estimates that follow of small businesses to which the rules may apply do not exclude any television station from the definition of a small business on this basis and are therefore over-inclusive to that extent. An additional element of the definition of “small business” is that the entity must be independently owned and operated. The Commission notes that it is difficult at times to assess these criteria in the context of media entities, and our estimates of small businesses to which they apply may be over-inclusive to this extent.

37. Television Broadcasting. The Small Business Administration defines a television broadcasting station that has no more than $12 million in annual receipts as a small business. Business concerns included in this industry are those “primarily engaged in broadcasting images together with sound.” According to Commission staff review of the BIA Financial Network, Inc. Media Access Pro Television Database as of June 26, 2004, about 860 (68%) of the 1,270 commercial television stations in the United States have revenues of $12 million or less. The Commission notes, however, that in assessing whether a business entity qualifies as small under the above definition, business control affiliations must be included. The Commission's estimates, therefore, likely overstate the number of small entities that might be affected by any changes to the ownership rules, because the revenue figures on which these estimates are based do not include or aggregate revenues from affiliated companies.

38. The NPRM invites comment as to whether, if the Commission adopts a rule attributing same-market TV JSAs, it should adopt a requirement that attributable TV JSAs must be filed with the Commission.

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

40. The Commission invites comment on the options of leaving TV JSAs unattributable, attributing same-market TV JSAs under certain circumstances or examining TV JSAs on a case-by-case basis. The Commission tentatively concludes that it should attribute TV JSAs. The NPRM , however, invites comment on the various harms and benefits of TV JSAs, including whether TV JSAs may hinder the ability of smaller broadcasters and broadcasters who are not in a JSA to compete. The Commission has previously recognized the JSAs can have benefits. For example, the Commission, in the Report and Order in MM Docket Nos. 94-150, 92-51, and 87-154 (64 FR 50622, September 17, 1999), while acknowledging concern with the possible competitive consequences of business agreements such as JSAs, noted that “some JSAs may actually help promote diversity by enabling smaller stations to stay on the air.” Also, the NPRM refers to JSAs accompanied by non-attributable LMAs, sometimes involving a situation where a stronger station provides local news programming to a weaker station in the market as part of the agreements and allowing such stations to provide news that they were not able to provide previously. The NPRM invites comment on whether this is a frequent occurrence and if so, what impact it should have on the Commission's decision. The Commission also invites comment on the impact of attribution of TV JSAs on the digital transition.

41. Finally, the NPRM considers whether, if TV JSAs are made attributable, the Commission should grandfather existing TV JSAs. As discussed in the NPRM, the R&O did not grandfather radio JSAs, but gave licensees two years from the effective date of the R&O to terminate those JSAs or otherwise come into compliance with the Commission's ownership rules. The NPRM invites comment on whether the same provisions should apply in the context of TV JSAs. The Commission invites comment on the effects of the alternatives and proposals in the NPRM on small businesses.

42. None.

The Joint Frameworks were adopted by the Council on February 24, 2004. The Council initially submitted the Joint Frameworks and associated analyses on April 20, 2004, and a final revised submission was provided to NMFS on July 2, 2004. The Joint Frameworks were developed to establish Scallop Access Areas within the NE multispecies closed areas (CAI, CAII, and NLCA). The regulations that govern these NE multispecies closed areas currently prohibit fishing for scallops to prevent NE multispecies mortality, as scallop gear is capable of catching NE multispecies. The Scallop Access Areas will allow controlled access to these areas in order to harvest appropriately from the large biomass of scallops in the NE multispecies closed areas.

Amendment 10, which was implemented by a final rule published June 23, 2004 (69 FR 35194) contemplated that a controlled access program for the NE multispecies closed areas would be incorporated into the area rotation program through scheduled openings of the areas. However, Amendment 10 did not include the detailed management measures, particularly with respect to NE multispecies bycatch, that were necessary to implement the access program under Amendment 10. In addition, in order to allow controlled access by scallop vessels to the NE multispecies closed areas, complementary action was necessary under the Multispecies FMP. In order to ensure that the management measures included in Amendment 13 to the Multispecies FMP (Amendment 13) and their environmental impacts were considered under the action to allow scallop fishing in the NE multispecies closed areas, the Council delayed action on the Joint Frameworks until Amendment 13 was completed by the Council. Amendment 13 was implemented through a final rule published April 27, 2004 (69 FR 22906). In doing so, the Council and NMFS ensured that the effects of allowing controlled access to the NE multispecies closed areas by the scallop fleet would be fully considered in light of the overall impacts on NE multispecies under Amendment 13 and Amendment 10.

Finally, due to inconsistency between the Multispecies FMP and the Scallop FMP with respect to closures to protect EFH, the Joint Frameworks propose to make the EFH closed areas the same in the Scallop FMP as in the Multispecies FMP.

The management measures that are applicable to the fishery within the Scallop Access Areas in CAI, CAII and NLCA are outlined in Items 1-13 below, and the remaining measures are described in Items 14-16. NMFS is publishing for public comment all of the measures adopted by the Council in the Joint Frameworks. NMFS has particular concerns about two measures, and is seeking public comment specifically on both of them in light of these concerns, to provide additional information.

The first measure that NMFS is concerned with is described in detail in Item 10 of this preamble. The measure would require the Regional Administrator (RA) to monitor catches of Georges Bank (GB) yellowtail flounder (yellowtail) reported by both scallop and NE multispecies vessels and, on or after December 1 each year, determine whether the GB yellowtail allocation for the Scallop Access Area can be increased without resulting in total catches above the overall allocation for GB yellowtail. NMFS is concerned that it may be too early in the multispecies fishing year, which began May 1, 2004, to effectively assess the likelihood of attaining the overall GB yellowtail allocation; the NE multispecies fishery continues through April 30. In addition, it may not be possible for the scallop fishery to effectively utilize an additional yellowtail allocation before the Scallop Access Areas close to scallop fishing on February 1 each year. NMFS specifically seeks comment on this measure in order to further assess its feasibility.

The second measure that NMFS has concerns with is a provision adopted by the Council that would have no associated regulation. The Council included the measure to encourage the scallop industry to avoid areas or times of high bycatch of yellowtail and other species and take voluntarily action to reduce such bycatch through information disseminated by NMFS or the Council. Under this proposal, either NMFS or the Council would distribute existing information about seasonal distribution of yellowtail and other finfish species so that catches of such species can be avoided by scallop vessels. Furthermore, data provided by fishing vessels through VMS would be used to identify areas where finfish bycatch is high and NMFS would provide an alert to vessel captains via VMS. NMFS is concerned that the costs of enacting such a system do not outweigh the potential benefits. NMFS also notes that the Council included measures in the Joint Frameworks to prevent the yellowtail bycatch from exceeding specified levels, and these measures may offset the benefits associated with enacting a real-time alert system.

Scallop Access Areas are proposed within portions of CAI, CAII, and NLCA. While the coordinates are specified in the proposed regulations, the areas are generally described as the central portion of CAI, the southern portion of CAII, and the eastern portion of NLCA. These Scallop Access Areas are similar to the areas where scallop fishing was allowed through the 2000 Sea Scallop Exemption Program for the period June 15, 2000—March 1, 2001. The Sea Scallop Exemption Program was implemented under Framework 13 to the Scallop FMP and Framework 34 to the Multispecies FMP (65 FR 37903, June 19, 2000). The Scallop Access Areas would not authorize scallop fishing in the EFH closed areas proposed in this rule. The proposed Scallop Access Areas would focus scallop fishing in the most productive scallop areas to maximize scallop yield while minimizing bycatch of other species and impacts on EFH.

Two of the three Scallop Access Areas would be open for access each fishing year. CAII and NLCA would be opened for the rest of the 2004 fishing year, followed by CAI and CAII in the 2005 fishing year, and CAI and NLCA in the 2006 fishing year. This cycle would repeat beginning in the 2007 fishing year, unless modified by the Council through framework action or an amendment to the Scallop FMP. The rotational order is based on the expected concentrations of scallops within each area, so that each area is accessed when scallop concentrations are projected to maximize yield.

The total DAS allocated for scallop Access Area fishing, the number of access trips into each area, the DAS charge per trip, and the scallop possession limit are specified for each Scallop Access Area. These measures would be established for vessels issued limited access scallop permits according to permit category: Full-time, Part-time, and Occasional. Vessels in each permit category would be allocated a specific number of DAS for use in Scallop Access Areas, with a specified number of DAS charged for each area trip, regardless of actual trip length. In addition, the Joint Frameworks specify the maximum number of trips that can be made into any one access area, by vessel permit category. The Joint Frameworks also allocate a possession limit for trips into each access area.

The following tables provides the trip, DAS charges, and possession limits, by permit category and by year, through 2006. The Hudson Canyon (HC) Access Area trip allocations, DAS charges, and possession limits are included in the table as part of the complete area rotation program as implemented under Amendment 10 and proposed in this action. Part-time and Occasional scallop vessels have separate allocations for the HC Access Area in the 2004 fishing year because the possession limit and DAS charges are different between the Closed Area Access Areas and the HC Access Area.

An example, using a Part-time vessel, illustrates the flexibility provided by the allocation of trips and DAS. In the 2004 fishing year, a Part-time vessel would be allocated a total of 22.4 DAS and two trips. The trips could be taken in either CAII or NLCA, though only one trip could be taken in NLCA. The vessel owner may choose to take one trip in the NLCA and one trip in CAII. Alternatively, the vessel owner may choose to take both trips in CAII, because CAII has two trips allocated in the 2004 fishing year; if the vessel owner chooses to take two trips into the CAII Access Area, the vessel would not be eligible to fish any trips in NLCA, because it would have fully utilized its allocation of two trips.

The management measures within the Scallop Access Areas are established to attain a target TAC of scallops as specified in the area rotation program established in the Scallop FMP by Amendment 10. These TACs would be used to monitor fishing activity and determine whether to adjust fishing effort levels for future years. These TACs are also used to calculate TAC set-asides for research, observer coverage, and general category vessels. These TAC set-asides would be established as absolute limits on the amount of scallops harvested during a specific activity, and that activity would cease when the set-aside TAC was attained. The overall target TACs for the scallop fishery would be: (1) 8,395,203 lb (3,808 mt) for CAII and 7,718,384 lb (3,501 mt) for NLCA in the 2004 fishing year; (2) 3,243,000 lb (1,471 mt) for CAI and 7,698,542 lb (3,492 mt) for CAII in the 2005 fishing year; and (3) 2,824,122 lb (1,281 mt) for CAI and 6,796,852 lb (3,083 mt) for NLCA in the 2006 fishing year.

The Joint Frameworks would allow limited access vessels to exchange access area trips with other vessels. This provision was approved as part of Amendment 10, but was not available to be used by vessels because an exchange can only be made when more than one access area has been established (Amendment 10 established one access area, the HC Access Area). Vessels would be allowed to enter into agreements to exchange trips for 3 months following implementation of the Joint Framework. After the three month period, vessel owners would not be allowed to negotiate exchanges of trips. Vessel owners would be allowed to use trips authorized under the trip exchange program for the remainder of the fishing year. Because trip allocations, DAS charges, and possession limits would differ between scallop permit categories, vessels must exchange only with vessels issued permits in the same scallop permit category. Since Occasional vessels would be allocated only one trip, they would not be eligible to exchange trips.

Vessels issued open-access general category scallop permits would be allowed to fish within the Scallop Access Areas subject to the restrictions specified below. This provision is intended to provide vessels in the general category fleet with more flexibility in fishing opportunities by allowing access to productive scallop areas within the NE multispecies closed areas. Additional management restrictions have been proposed by the Council in order to ensure accurate accounting of catch, and to ensure that general category fishing effort does not cause bycatch or excessive effort and mortality on scallops. The Joint Frameworks would amend the Multispecies FMP to allow general category vessels to fish within the NE multispecies closed areas, where such fishing is currently prohibited. General category vessels would be subject to the following restrictions:

a. A possession limit of 400 lb (181.4 kg) of shucked or 50 U.S. bushel (17.6 hl) of in-shell scallops per trip.

b. A set-aside TAC for general category vessels, equal to 2 percent of the overall scallop TAC for each Scallop Access Area, requiring general category vessels to stop fishing in the specific scallop Access Area once the set-aside TAC is reached. The general category set-aside TACs for 2004, 2005, and 2006, are as follows: (1) 2004; 167,904 lb (76 mt) in CAII and 154,368 lb (70 mt) in NLCA; (2) 2005; 64,860 lb in CAI and 153,971 lb (70 mt) in CAII; and (3) 2006; 56,482 lb in CAI and 135,937 lb (62 mt) in NLCA.

c. A requirement to install and use a NMFS-certified Vessel Monitoring System (VMS) in order to notify NMFS when a vessel plans to fish in a Scallop Access Area.

d. A prohibition on retaining or landing NE multispecies with a requirement to report all catch of yellowtail caught, including discards, so it can be counted against the yellowtail TAC for the scallop fishery.

e. A requirement to carry at-sea observers when requested.

f. VMS reporting of scallop and yellowtail catch to monitor fishery activity and bycatch. (These requirements are also required of limited access scallop vessels).

g. A requirement that Scallop dredge gear used within a Scallop Access Area be constructed with rings with a minimum diameter of 4 inches (10.2 cm) (Amendment 10 imposed this requirement for General category vessels fishing in open areas, but delayed the requirement until December 23, 2004).

Limited access scallop vessels fishing within the Scallop Access Areas in CAI, CAII, and NLCA would be required to use scallop dredge gear only. The minimum diameter for rings used in the scallop dredge is proposed to be 4 inches (10.2 cm). Amendment 10 imposed the minimum ring size requirement for Limited Access vessels fishing in the HC Access Area, but delayed the requirement in the open areas until December 23, 2004. The requirement to use scallop dredge gear only is intended to maximize scallop catch selectivity and to minimize bycatch. The minimum dredge ring size is intended to reduce the catch of small scallops.

The CAI, CAII, and NLCA Scallop Access Areas would be open to scallop fishing from June 15 through January 31 each year. The season is intended to reduce scallop fishing effort in the areas during peak spawning periods for some NE multispecies species, when NE multispecies concentrations are expected to occur.

The Scallop Access Area program would be subject to a TAC for yellowtail set at 10 percent of the total TAC established in Amendment 13 to the Multispecies FMP for each yellowtail stock. Two percent of this scallop fishery yellowtail bycatch TAC ( i.e. , 2 percent of the 10 percent bycatch TAC, or 0.2 percent of the overall yellowtail TAC) would be set aside for vessels to harvest during approved research, as described below. The TAC governing the Scallop Access Area fishery would, therefore, be equal to 9.8 percent of the overall yellowtail TAC for each stock. The following table specifies the yellowtail bycatch TAC and yellowtail research TAC set-aside.

Scallop vessels fishing in the Scallop Access Areas would be required to report all yellowtail catches (all catch, including discards) and all catch would be counted toward the TAC. When the yellowtail TAC established for a Scallop Access Area is attained, the scallop fishery in the affected access area would close and any remaining access area trips would be redirected into open areas, as explained in Item 10 below.

The Multispecies FMP established a TAC for yellowtail under the U.S./Canada Resource Sharing Understanding in the Eastern U.S./Canada Area, and the NE multispecies fishery within the area closes when the TAC is fully attained. If the U.S./Canada yellowtail TAC is fully attained, scallop trips within the Scallop Access Areas in the Eastern U.S./Canada Area (CAI and CAII) would be allowed to continue, though retention of yellowtail would be prohibited, until the yellowtail catches by scallop vessels fully attain the scallop fishery's yellowtail set-aside. At that time, the scallop fishery in the Scallop Access Areas would be closed and any remaining access area trips would be redirected into open areas, as explained in Item 10 below.

As noted above, NMFS has concerns about the feasibility of implementing the measure requiring NMFS to monitor the landings of scallops and yellowtail through vessel VMS reports, dealer reports, and at-sea observer reports and, to take appropriate action based on projections of whether the yellowtail harvest will be achieved. Specifically, the measure states that if, on December 1 each year, the catch of yellowtail by scallop vessels fishing in the Scallop Access Area is below the yellowtail TAC set for the GB yellowtail stock, and if the overall GB yellowtail TAC is not projected to be harvested, then the RA could enact measures to increase the Scallop Access Area yellowtail TAC allocated to scallop vessels fishing in the Scallop Access Area. The Joint Frameworks specify that the yellowtail TAC would be increased only if such increase would not be expected to cause the yellowtail TAC under the Multispecies FMP to be exceeded. NMFS seeks public comment concerning the feasibility of implementing this measure, particularly regarding the likelihood that NMFS could assure that the increase in the yellowtail TAC in the Scallop Access Area would not result in the overall yellowtail TAC being exceeded.

The Joint Frameworks would establish a set-aside of 2 percent of the yellowtail TAC allocated for the Scallop Access Area for the harvest of yellowtail during research approved under the existing scallop research TAC set-aside program. If research fishing that would be conducted within the Scallop Access Areas is approved, a small amount of yellowtail would be allocated for catch by the vessels involved in the research activity. This is intended to enable researchers to conduct their activities, even if the overall yellowtail TAC has been attained. Without this research set-aside, scallop research approved as part of the scallop TAC set-aside program would be prohibited if the Scallop Access Area were closed due to attainment of the yellowtail TAC.

The Scallop Access Areas could close before limited access scallop vessels have taken all of their NE multispecies closed area access trips if the yellowtail TAC is fully attained. The Joint Frameworks propose that if the yellowtail TAC allocated to the scallop Area Access fishery is harvested, limited access scallop vessels would be allowed to take unused NE multispecies closed area access trips in open areas, up to the lesser of the following: (1) The difference in the number of equivalent DAS allocated for the affected Access Area and the number of DAS charged to a vessel for trips taken into the affected Access Area; or (2) the difference between open area DAS allocations specified in this rule with access and the 2004 default DAS allocation or open area DAS allocations prior to implementation of the Joint Frameworks ( i.e. , DAS allocations without access to the NE multispecies closed areas as specified in Amendment 10). A maximum number of DAS would only be available to a vessel if it had taken no trips in the Access Area prior to closure. If a vessel took any trips, the maximum number of DAS to be used in open areas would be deducted by the number of DAS charged for each trip in the Access Area. The following table summarizes the maximum number of DAS that a vessel may fish in open areas if the Access Area closes prior to completion of all trips.

For example, a Full-time scallop vessel with two unused trips into the CAII Scallop Access Area in the 2004 fishing year when the Access Area was closed could fish an additional 20 DAS in open areas. A Full-time scallop vessel with one remaining trip into the CAII Scallop Access Area in the 2004 fishing year when the Access Area was closed could fish an additional 12 DAS in open areas. This provision is intended to allow scallop vessels to reasonably utilize their DAS and trip allocations, even if the Scallop Access Areas close due to harvest of the yellowtail TAC.

Limited access scallop vessels fishing in a Scallop Access Area would be restricted to a possession limit of 1,000 lb (453.6 kg) of all NE multispecies combined, including 100 lb (45.4 kg) of cod which could be retained for personal use only. No cod could be sold from a scallop vessel participating in the Access Area program and all cod possessed on board must be whole and gutted for ease of enforcement. Limited Access scallop vessels would be restricted to existing possession limits for haddock, monkfish, and yellowtail. As explained above, yellowtail is further managed through the establishment of Scallop Access Area TACs, and possession of yellowtail would be prohibited when those TACs are attained.

One percent of the scallop target TAC would be set aside and available to help defray the cost of at-sea observers deployed on scallop vessels. Observers would collect information on catch and discards of scallops and other species including incidental catch of other finfish and sea turtles. Observer reports would provide more accurate estimates of yellowtail bycatch for use in monitoring the TAC for yellowtail, for estimation of bycatch of other finfish and sea turtles. Vessels would be allowed to catch extra scallops under the TAC set-aside, to help pay for the cost of carrying an observer on the vessel. This measure mirrors the observer set-aside established in Amendment 10, and is part of the Council's standardized bycatch reporting methodology.

The amount of observer coverage resulting from the 1-percent TAC set-aside, combined with NMFS-funded observer coverage, to cover at least 5 percent of the trips, is estimated to provide observer coverage for approximately 9, 5, and 12 percent of trips allocated in CAI, CAII, and the NLCA, respectively. The Council estimated that this amount of observer coverage would reduce variability in bycatch estimates for yellowtail, other finfish, and sea turtles, in order to provide more accurate and statistically sound bycatch estimates than would otherwise be achieved without the additional coverage.

All scallop vessels fishing in the Scallop Access Areas would be required to report their catches of scallops and yellowtail using VMS. Yellowtail reporting is critical to ensure accurate monitoring of the yellowtail TACs. The reports would be submitted via VMS on a daily basis.

Amendment 10 established some areas within the NE multispecies closed areas as EFH closed areas in order to specifically protect EFH from adverse effects of scallop fishing. This action proposes to modify those areas to make them identical to those implemented under Amendment 13. These areas, some of which would extend beyond the boundaries of the NE multispecies closed areas, are intended to more effectively protect EFH by establishing consistent area closures under the Scallop and Multispecies FMPs.

Amendment 10 established a default measure to increase the DAS allocated to limited access scallop vessels fishing in open areas, to take effect September 15, 2004. The measure specifies that the publication of a final rule enacting the Scallop Access Area program would prevent the default allocation from going into effect. Because the Council was concerned that final regulations might not be published by September 15, 2004, even if the Joint Frameworks are approved, the Joint Frameworks include a contingency measure that specifies that, if the default scallop DAS allocations go into effect, vessels that use any of those DAS could not fish in any Scallop Access Area until March 1, 2005. Vessels' owners who do not use any of the additional DAS allocated under the default would be eligible to fish in the Scallop Access Areas, if and when they are established.

This proposed rule includes corrections and clarifications to the scallop regulations, and a new prohibition on the sale of fish from Federally permitted vessels to dealers that have not been issued Federal dealer permits. It has come to NMFS's attention that some Federally permitted vessel crews may be selling scallops to dealers that have not been issued Federal dealer permits. This circumvents the Federal dealer permit and reporting requirement that is necessary for adequate administration and enforcement of the management program. The prohibition is proposed for both the Scallop and Multispecies FMPs.

At this time, NMFS has not determined that the action that this proposed rule would implement is consistent with the national standards of the Magnuson-Stevens Act and other applicable laws. NMFS, in making that determination, will take into account the data, views, and comments received during the comment period.

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

The Council prepared an IRFA as required under section 603 of the Regulatory Flexibility Act (RFA). The IRFA describes the economic impact that this proposed rule, if adopted, would have on small entities. A summary of the analysis follows:

A description of the action, why it is being considered, and the legal basis for the action are contained in the preamble to this proposed rule. This proposed rule does not duplicate, overlap or conflict with any relevant Federal rules.

The measures proposed in the Joint Frameworks would impact vessels issued limited access and general category sea scallop vessel permits. All of these vessels are considered small business entities for purposes of the RFA because all of them grossed less than $3.5 million according to the dealer reports for the 2001 and 2002 fishing years (the most recent complete fishing year landings information available). There are two main components of the scallop fleet: Vessels eligible to participate in the limited access sector of the fleet and vessels that participate in the open access general category sector of the fleet. Limited access vessels are issued permits to fish for scallops on a full-time, part-time, or occasional basis. According to permit data from the 2003 fishing year, there were 278 Full-time permits, 33 Part-time permits, and 10 Occasional permits. In addition, there were 2,257 vessels issued permits to fish in the General category in 2003. Annual scallop revenue for the limited access sector averaged from $615,000 to $665,600 for Full-time vessels, $194,790 to $209,750 for Part-time vessels, and $14,400 to $42,500 for Occasional vessels during the 2001 and 2002 fishing years. Total revenues per vessel, including revenues from species other than scallops, exceeded these amounts, but were less than $3.5 million per vessel.

Two criteria, disproportionality and profitability, were considered in determining the significance of regulatory impacts. The disproportionality criterion compares the effects of the regulatory action on small versus large entities. All of the vessels permitted to harvest sea scallops are considered to be small entities. The profitability criterion applies if the regulation significantly reduces profit for a substantial number of small entities, and is discussed in the Economic Impacts of the Proposed Action section of the IRFA summary in preamble of this proposed rule.

The Joint Frameworks propose new reporting, recordkeeping, and compliance requirements only upon general category scallop vessels. The new requirements proposed in this proposed rule are the following: (1) Installation of VMS units; (2) documentation of VMS unit installation; (3) notification through VMS of intent to fish in the NE multispecies closed area access areas; (4) notification via VMS of NE multispecies closed area access area trip specifics; (5) notification via VMS on the day the vessel departs for a NE multispecies closed area access area trip; (6) daily reporting of scallop and yellowtail catch; and (7) polling of the VMS units for general category vessels twice every hour. The total cost of compliance is relatively high because the cost of purchasing, installing, and operating the VMS unit is approximately $2,700 per vessel. Spread across the general category fleet, costs associated with VMS notifications and catch reporting are relatively low, at about $90 per vessel per year (based on the cost of a VMS message, equal to $0.79 per VMS message). Although these requirements will increase compliance costs for general category vessels, and will impose a high initial cost for purchasing the VMS unit and installation, without such requirements, the Council proposed no alternative that would allow access without the use of VMS. A vessel's ability to offset the cost of the VMS unit, its installation, and operation would dictate the number of vessels that are subject to the new compliance costs. Nevertheless, the proposed access fishery for general category vessels expands those vessels' flexibility and opportunity to fish in different areas.

The IRFA considers the economic impacts of the proposed management measures in aggregate, evaluating the effects of all of the proposed measures together. The IRFA also considers and compares the economic effects of each proposed management measure and its alternatives, distinct from other alternatives. All economic impacts were analyzed relative to no action, defined as the continuation of the scallop fishery without access to the NE multispecies closed areas, and subject to higher open area DAS allocations.

The combined economic impacts of the proposed action (including the suite of measures proposed by the Council in the Joint Frameworks) are positive for the majority of small business entities in the scallop fishing industry. The economic analyses demonstrated, however, that from 2004 through 2007, the proposed action would produce slightly lower revenues per year, on average, compared to the no action alternative. Revenues under the proposed action are expected to be approximately $60,000 less for the entire scallop fleet than the no action alternative. This is because, under no action, open area DAS would be higher in open areas for 2004 through 2007 without access to the NE multispecies closed areas. Open area landings are not restricted by a possession limit, and total scallop landings would be higher than if vessels were restricted by the possession limits and TACs under the proposed Scallop Area Access program. The price of scallops would decline, offsetting the increase in landings compared to the proposed action. Access to the NE multispecies closed areas would have positive impacts, however, on producer benefits and gross profits of the scallop fishery compared to no action. Because of the expected higher scallop abundance in the NE multispecies closed areas, which should result in higher landings per unit effort (LPUE), the operating expenses per pound of scallops are expected to decline by almost 30 percent with access, and gross profits, calculated as gross revenues net of operating costs and crew shares, are estimated to increase by 18 percent. The long-term economic impacts of allowing access to the NE multispecies closed areas are expected to be positive, as well, compared to no action, increasing revenues and profits by nearly 2 percent and 23 percent, respectively, on average per year. Without access, initial higher landings are expected to eventually have negative impacts on scallop biomass, LPUE, and landings in future years, resulting in overall revenues and total benefits of $3.1 million and $47.2 million, respectively, less than the proposed action.

(1) Access area boundaries —The Joint Frameworks considered four NE multispecies closed area access boundary alternatives. The economic impacts of the proposed and alternative Scallop Access Area boundaries are the same as those described in the aggregate impacts above because the analysis presumes that area boundaries are dependant on an overall access program. The proposed areas for the NE multispecies closed area scallop access program would have positive overall economic impacts on scallop vessels compared to the no action alternative, although short-term revenues would be slightly lower than under the no action alternative. The third Scallop Access Area alternative (non-selected), which would restrict the amount of area opened for access, resulted in the most negative impact, with a loss of $71,000 per year for the scallop fleet combined, on average, compared to the no action alternative.

(2) EFH closed areas —The Joint Frameworks considered three EFH closed area alternatives. The proposed EFH closed areas are consistent with the proposed Scallop Access Area boundary alternative and therefore have similar economic impacts. The boundaries of the EFH closures affect the scallop fishery similar to the proposed access boundaries and are not discussed separately. The economic impacts of the proposed EFH closed areas are similar among alternatives, with the exception of EFH closed area Alternative 3, which has the lowest economic benefit of all EFH closed area alternatives, because the area proposed for scallop access is constrained by the EFH closure boundaries, reducing the available scallop resource.

(3) Gear restrictions —In addition to the proposed measure, the Joint Frameworks considered allowing trawl gear to be used by scallop vessels in the NE multispecies closed areas (the no action alternative). Prohibiting trawls from accessing NE multispecies areas is expected to have negative economic impacts on scallop trawl vessels, but have positive impacts on the scallop fishing industry overall and the dredge gear sector. These impacts occur because fishing for scallops with trawl gear may result in larger catch of yellowtail and necessitate the closure of the Scallop Access Areas to scallop fishing if the finfish TACs are exceeded. Such a premature closure would reduce the net economic benefits for the majority of the scallop vessels. However, many scallop trawl vessels fish primarily in the Mid-Atlantic areas and do not fish in the GB areas. Only eight of the active trawl vessels in 1999 through 2002 fished in the GB areas and those that fished in the previous NE multispecies closed area access program in 1999 and 2000 used dredge gear. Therefore, the negative impacts of this gear requirement would be minimized if trawl vessels could use dredge gear, or trade their closed area access trips for HC or other Access Area trips, where vessels are allowed to use scallop trawls. Also, Amendment 10 provisions provide flexibility to Part-time and Occasional vessels fishing in the controlled access areas, and allows them to choose which Access Area to fish, up to the maximum number of trips allocated to each vessel. Therefore, Part-time and Occasional vessels may be able to use some or all of the closed area access trips in the Mid-Atlantic areas without the necessity to change gear.

(4) Yellowtail TACs and procedures to help avoid bycatch —Four measures were considered, three of which were proposed in the Joint Frameworks. The main difference between the proposed measures and the non-selected alternative is that, under the non-selected alternative, scallop vessels would not be allowed to redirect closed area access trips into open areas if the yellowtail TAC is harvested. The economic analysis is qualitative because it is not possible to determine when the yellowtail TAC could be harvested, thus closing the NE multispecies closed area access program. If the yellowtail TACs are exceeded before all scallop vessels have taken all of their eligible trips (meaning that target TAC would not be harvested), the landings of scallops, revenues and economic benefits would reduce the economic benefits from the access compared to the no action alternative. Without a measure to ensure that yellowtail catches do not exceed the yellowtail TACs and comply with the U.S./Canada Resource Sharing Understanding, however, it would not have been possible to provide access for scallop fishing to the NE multispecies closed areas. Therefore, the majority of the scallop vessels are expected to benefit from this measure, due to the opportunity provided to fish in those areas. In addition, the proposed action would allow transfer of unused closed area access trips to open areas under DAS in case of an early closure of the closed area access program. This measure could alleviate the negative impacts from hard TACs, reduce derby-style fishing, and may prevent a reduction in vessel revenues in the short-term, if access areas are closed early. Furthermore, the rotation schedule proposed by Framework 16 would allocate fewer trips to the Nantucket Lightship access area in 2004, and thus would be less likely to result in closure of the NE multispecies closed areas. The provision to increase the yellowtail TAC if a specified limit is not harvested by December 1 of each year is expected to also have positive impacts on vessels by potentially allowing fishing operations to continue to higher levels of yellowtail catch. The proposed yellowtail catch set-aside could have indirect benefits on scallop vessels due to potential improvements in management through research. Any voluntary actions by the scallop industry to direct fishing activity away from areas of high bycatch, through information gathered by the industry or disseminated by NMFS, would prolong the scallop fishery in the closed areas and increase potential benefits.

(5) Finfish possession limits —Because the proposed action would increase the possession limit of Northeast multispecies from 300 lb (136 kg) to 1,000 lb (453.6 kg), it would have positive economic impacts on the scallop vessels fishing in the NE multispecies closed areas. Retaining a possession limit for yellowtail, even at an increased level, may provide additional incentive to avoid yellowtail, reducing the risk of reaching yellowtail TACs before the scallop closed area access program fishery is completed. Therefore, these measures would have indirect economic benefits for the vessels in the scallop fishery. The proposed possession limit of 100 lb (45.4 kg) of cod per trip for personal use may also have some positive economic impacts, compared to a zero possession limit, by allowing the retention of catch that could be used to offset some food costs on fishing trips.

(6) Closed area access program seasons —The proposed closed area access season (June 15 through January 31) is expected to have positive impacts on scallop vessels compared to the no action alternative. The proposed season would prevent scallop fishing during months when many species of NE multispecies are at peak spawning activity, and as a result, it would ensure that access to the GB multispecies areas is consistent with conservation goals of the NE Multispecies FMP. By allowing simultaneous access to these areas, it would provide more flexibility to fishermen to maximize their landings and revenues from the closed areas. The proposed season would have negative economic impacts compared to the alternative of a year-round fishery. However, year-round access may increase the likelihood of the scallop fishery catching the proposed yellowtail TAC quicker, thus reducing benefits of the higher valued scallop resource in the closed areas, and more efficient fishing operations.

(7) At-sea observers, TAC set-asides, and fishery monitoring —The Joint Frameworks propose to continue with the existing sampling frequency that can be funded with a 1-percent TAC set-aside (status quo). The scallop industry may benefit from improved management that could result from more accurate fishery information. The TAC set-asides would reduce a small portion of the scallop revenue available to the scallop vessels by removing a portion of the TAC from the overall TAC. The funds generated from the set-aside landings would also reduce the compliance costs for vessels by providing compensation for observer coverage.

(8) VMS reporting requirements —The requirement to have a VMS onboard for all scallop vessels that fish in the closed area access program would increase the costs of fishing for occasional vessels and vessels with the general category permits. Currently, all full and part-time vessels are required to have a VMS onboard, thus they would not be impacted by this proposed measure. However, for occasional vessels, the revenues from the controlled access trips would exceed the VMS costs. Further, Occasional scallop vessels have been subject to the VMS requirement in Access Areas since 1999. The impacts of these requirements on the general category vessels are examined separately. Even though VMS and other reporting requirements would increase the fishing costs by about $3,500 for some Occasional vessels, the economic benefits are expected to be equal to approximately $41,000 in 2004 and $29,000 in 2005, per vessel, from only the access areas. The reporting requirements would also have indirect economic benefits for the scallop fishery through improved management of the scallop resource and area expected to outweigh the compliance costs.

(9) Closed area rotation schedule —The proposed rotation strategy minimizes the risk of high yellowtail bycatch in the NLCA and would, therefore, reduce the likelihood of scallop revenue loss and reduce the total net benefits from closure of access areas before the scallop closed area access program is complete. As a result, the mechanical rotation strategy proposed by the Joint Frameworks would have positive economic benefits on scallop vessels.

(10) Trip and DAS allocations —There are no changes to the possession limits and DAS trade-offs in the Joint Frameworks from those included in Amendment 10 for Full-time vessels. Therefore, the economic impacts of area-specific DAS and trip allocations are within the range of impacts analyzed in Amendment 10. The Joint Frameworks propose to change the possession trips for the Part-time and Occasional vessels, however, in order to correct the inequities in access area trip allocations. Specifically, the allocations for the Part-time and Occasional vessels would be proportional to the Full-time allocations, similar to the DAS allocations prior to Amendment 10. Overall impacts of this adjustment during the 2004-2007 period would be positive for Part-time vessels, but negative for Occasional vessels. Potential landings would be reduced by 1,200 lb (544 kg) per trip for Part-time vessels and 7,500 lb (3,402 kg) per trip for Occasional vessels in 2004, compared to allowing a 18,000-lb (8,165 kg) possession limit. Similar reductions are proposed for 2005, but in 2006, Occasional vessels would be allowed possession limit of only 3,000 lb (1,361 kg) for one trip. Potential revenue losses for Occasional vessels is expected to be approximately $57,000 per year, compared to allowing a possession limit of 18,000 lb (8,165 kg). Although many Occasional scallop vessels have not fished in the controlled Access Areas in the past, vessels are allocated trips that can only be taken in Access Areas, making the possession limit restrictive. However, NMFS cannot determine whether or not these access trips would be more profitable than open area trips under more restrictive DAS limitations.

The Joint Frameworks also propose a change in the DAS and trip exchange option in order to prevent administrative complications that could arise if trips with unequal possession limits were exchanged. Under this alternative, Full-time vessels would trade only with another Full-time vessel, and the trades between Part-time and Occasional vessels would be similarly restricted. Although this measure is necessary to avoid management complications from unequal exchanges, it would also reduce the number of opportunities for trading trips. It would be especially difficult for Part-time and Occasional vessels because the vessels in the Part-time and Occasional category have the flexibility to use their controlled access trips in any Access Area up to the maximum number of trips allocated to each vessel. This flexibility may reduce the need to exchange DAS allocations and mitigate some of the negative impacts resulting from a restrictive trade.

(11) General category access to closed areas —Allowing access to the closed areas by general category vessel would have positive impacts on the revenues of these vessels. Profitability of access area trips will depend, however, on net revenues (i.e., revenues net of operating costs, crew shares, and VMS costs). The requirement to carry a VMS onboard would impose additional compliance costs for these vessels, which are estimated to be approximately $3,500 for the most expensive VMS unit, including the monthly message costs. With a possession limit of 400 lb (181.4 kg) per trip, general category vessels would likely have to take at least six trips to one of the closed areas to experience positive net revenues. Without the requirements, however, it would be difficult to control scallop mortality and monitor bycatch, and it may not be possible to provide access to the NE multispecies closed areas by general category vessels. Although difficult to predict, the benefits of expanding fishing opportunity for general category vessels could outweigh the cost of compliance with VMS, observer coverage, and other reporting requirements.

The Joint Frameworks considered several alternatives that could have had less negative economic impact on scallop vessels, owners, operators, and crews. Specifically, the Council considered the following measures: (1) Allowing all gear types in the closed area access program; (2) alternatives for redirecting fishing effort from closed areas to open areas when the yellowtail bycatch TAC is harvested; (3) year-round access to the NE multispecies closed area access areas; and (4) exempting Occasional and general category vessels from VMS reporting requirements in the access areas. Each of these alternatives was considered in comparison with the proposed measures. The Joint Frameworks concluded that the measures would provide more revenues initially through increased scallop landings, or would have reduced compliance costs. However, the Joint Frameworks also concluded that these non-selected alternatives would likely offset the overall benefits of the proposed measures for the scallop resource and industry.

This proposed rule contains new collection-of-information requirements subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA). These requirements would apply to general category vessels only, and have been submitted to OMB for approval. Public reporting burden for these collections of information are estimated to average as follows:

1. Purchase and installation of VMS units, OMB #0648-0491 (1 hr per response);

2. Verification of VMS units, OMB #0648-0491 (0.083 hr per response);

3. Daily reporting via VMS without an at-sea observer on board, OMB #0648-0491 (0.17 hr per response);

4. Daily reporting via VMS with an at-sea observer on board, OMB #0648-0491 (0.17 hr per response);

5. VMS notification of intent to fish on the 25th of the month preceding the intended trip, OMB #0648-0491 (0.033 hr per response);

6. VMS notification of scheduled Access Area trip 72 hr prior to departure, OMB #0648-0491 (0.033 hr per response);

7. VMS notification of trip 1 hr prior to departure, OMB #0648-0491 (0.033 hr per response);

8. Polling of VMS units twice per hour, OMB #0648-0491 (0.0014 hr per response).

These estimates include the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection information.

Public comment is sought regarding: Whether this proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; the accuracy of the burden estimate; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection of information, including through the use of automated collection techniques or other forms of information technology. Send comments on these or any other aspects of the collection of information to NMFS and to OMB ( see ADDRESSES ).

Notwithstanding any other provision of the law, no person is required to respond to, and no person shall be subject to penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB control number.

For the reasons set out in the preamble, 50 CFR part 648 is proposed to be amended as follows: