The FAA has implemented new procedures for maintaining AD dockets electronically. As of May 17, 2004, new AD actions are posted on DMS and assigned a docket number. We track each action and assign a corresponding directorate identifier. The DMS AD docket number is in the form “Docket No. FAA-2004-99999.” The Transport Airplane Directorate identifier is in the form “Directorate Identifier 2004-NM-999-AD.” Each DMS AD docket also lists the directorate identifier (“Old Docket Number”) as a cross-reference for searching purposes.

We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2004-19757; Directorate Identifier 2001-NM-273-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of our docket web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You can review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78), or you can visit http://dms.dot.gov.

We are reviewing the writing style we currently use in regulatory documents. We are interested in your comments on whether the style of this document is clear, and your suggestions to improve the clarity of our communications that affect you. You can get more information about plain language at http://www.faa.gov/language and http://www.plainlanguage.gov.

You can examine the AD docket on the Internet at http://dms.dot.gov, or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone (800) 647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the DMS receives them.

On August 10, 1999, we issued AD 99-17-12, amendment 39-11260 (64 FR 45870, August 23, 1999), for certain British Aerospace Model BAe 146 and Model Avro 146-RJ series airplanes. That AD requires a one-time measurement to determine the thickness of the outer links of the side stays of the main landing gear (MLG), and corrective actions, if necessary. That AD also provides for replacement of a thin outer link with a new or serviceable part in lieu of certain related investigative inspections. That action was prompted by mandatory continuing airworthiness information that was issued by the Civil Aviation Authority (CAA), which is the airworthiness authority for the United Kingdom. At that time, the CAA had advised that the MLG side stays were susceptible to cracking due to the insufficient thickness of the outer links. We issued that AD to prevent this cracking, which could result in failure of a side stay and consequent collapse of the landing gear.

Since we issued AD 99-17-12, cracks have been found on the outer link shoulders of several MLG side stays. The cracks have been attributed to inadequate greasing, which generated high bearing torque. One of those affected side stays, which had a thicker web, was not subject to AD 99-17-12.

In addition, the existing AD requires certain corrective actions if the profile gauge slips over the top edge of the outer link profile when the link's thickness is measured. We have since determined that the profile gauge's slipping over the outer link profile is not a factor in the identified unsafe condition.

The manufacturer has issued BAE Systems (Operations) Limited Inspection Service Bulletin ISB.32-156, Revision 1, dated July 3, 2001, which describes procedures for repetitive visual inspections for signs of cracks through the paint on the outer link of the MLG side stays. Depending on crack length, corrective actions may include repetitive inspections for cracks of the spherical bearings/greaseways and replacement of the outer link of the MLG side stays with a new or serviceable part. The service bulletin recommends contacting the manufacturer for additional instructions for crack repair. The CAA classified this service bulletin as mandatory and issued British airworthiness directive 004-05-2001 to ensure the continued airworthiness of these airplanes in the United Kingdom.

The optional accomplishment of the actions specified in either Messier-Dowty Limited Service Bulletin 146-32-152, or the combination of Messier-Dowty Limited Repair Scheme 450187952 and Messier-Dowty Limited Service Bulletin 146-32-144, eliminates the need for the repetitive inspections.

Secondary service information references are listed in the following table:

These airplane models are manufactured in France and are type certificated for operation in the United States under the provisions of § 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the DGAC has kept the FAA informed of the situation described above. We have examined the DGAC's findings, evaluated all pertinent information, and determined that AD action is necessary for airplanes of this type design that are certificated for operation in the United States.

This proposed AD would supersede AD 99-17-12 to require repetitive inspections for cracks of the outer links on the MLG side stays. The proposed AD would also expand the applicability and provide for optional terminating action for the repetitive inspections. The actions would be required to be accomplished in accordance with BAE Systems (Operations) Limited Inspection Service Bulletin ISB.32-156, described previously, except as discussed under “Differences Between Proposed AD and Service Bulletin.”

The applicability of the British airworthiness directive specifies “side stays as listed in Messier-Dowty Service Bulletin 146-32-145.” We have determined, in conjunction with the CAA and the manufacturer, that Messier-Dowty Service Bulletin 146-32-147 properly lists all the affected side stays by serial number and/or part number. Therefore, this proposed AD refers to Service Bulletin 146-32-147 for the additional information regarding the applicability.

Unlike the procedures described in Service Bulletin ISB.32-156, this proposed AD would not permit further flight if cracks are detected in a flange. We have determined that, because of the safety implications and consequences associated with such cracking, any cracked flange must be repaired or modified before further flight.

Service Bulletin ISB.32-156 recommends contacting the manufacturer for instructions on how to repair certain conditions, but this proposed AD would require repairing those conditions using a method approved by the FAA or the CAA (or its delegated agent). In light of the type of repair that would be required to address the unsafe condition, and consistent with existing bilateral airworthiness agreements, we have determined that, for this proposed AD, a repair approved by the FAA or the CAA would be acceptable for compliance with this proposed AD.

The Accomplishment Instructions of Messier-Dowty Service Bulletin 146-32-147 describe procedures for reporting the inspection findings to the manufacturer; however, this proposed AD would not require a report.

The following table provides the estimated costs for U.S. operators to comply with this proposed AD.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD. See the ADDRESSES section for a location to examine the regulatory evaluation.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

The FAA has implemented new procedures for maintaining AD dockets electronically. As of May 17, 2004, new AD actions are posted on DMS and assigned a docket number. We track each action and assign a corresponding directorate identifier. The DMS AD docket number is in the form “Docket No. FAA-2004-99999.” The Transport Airplane Directorate identifier is in the form “Directorate Identifier 2004-NM-999-AD.” Each DMS AD docket also lists the directorate identifier (“Old Docket Number”) as a cross-reference for searching purposes.

We invite you to submit any written relevant data, views, or arguments regarding this proposed AD. Send your comments to an address listed under ADDRESSES. Include “Docket No. FAA-2004-19750; Directorate Identifier 2003-NM-192-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov , including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of our docket Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You can review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78), or you may visit http://dms.dot.gov .

We are reviewing the writing style we currently use in regulatory documents. We are interested in your comments on whether the style of this document is clear, and your suggestions to improve the clarity of our communications that affect you. You can get more information about plain language at http://www.faa.gov/language and http://www.plainlanguage.gov .

You can examine the AD docket in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone (800) 647-5227) is on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the DMS receives them.

On July 29, 2002, we issued AD 2002-16-03, amendment 39-12842 (67 FR 52396, August 12, 2002), for all Boeing Model 737-600, -700, -700C, -800, and -900 series airplanes. That AD requires either determining exposure to runway deicing fluids containing potassium formate or performing repetitive inspections of certain electrical connectors in the wheel well of the main landing gear (MLG) for corrosion, and follow-on actions. That AD was prompted by reports of significant corrosion of the electrical connectors in the main wheel well. We issued that AD to prevent such corrosion, which could result in incorrect functioning of critical airplane systems essential to safe flight and landing of the airplane, including fire warning systems.

Since we issued AD 2002-16-03, we have received reports of significant corrosion of the electrical connectors located in the wheel well of the MLG on Model 737 series airplanes that land on runways treated with deicing fluids containing potassium acetate. Investigation revealed that the corrosive effects of potassium acetate on the electrical connectors are similar to those of potassium formate, and the requirements in the existing AD do not account for exposure to deicing fluids containing potassium acetate. Significant corrosion can lead to loss of the cadmium plating of the electrical connectors and subsequent moisture ingress into the connectors, which could result in an electrical short and consequent incorrect functioning of critical airplane systems essential to safe flight and landing of the airplane, including fire warning systems.

We have reviewed Boeing Alert Service Bulletin 737-24A1148, Revision 1, dated July 10, 2003 (the original issue was referenced in the existing AD as the appropriate source of service information for accomplishment of the actions). The service bulletin describes procedures for inspecting electrical connectors (including the contacts and backshells) of the line replaceable unit (LRU) in the wheel well of the MLG for corrosion, and related corrective actions if necessary. Signs of corrosion are the presence of moisture, corrosion pits, or white-colored material buildup on the connectors; black or reddish discoloration on the contacts; or loss of the olive-drab conversion coating on the backshells. The related corrective actions include cleaning the LRU connectors and applying corrosion inhibiting compound (CIC) if no corrosion is found, and replacing the LRU with a new LRU and applying CIC if corrosion is found. The service bulletin also recommends an operational test of the affected systems after doing the applicable actions. Accomplishing the actions specified in the revised service information is intended to adequately address the unsafe condition.

We have evaluated all pertinent information and identified an unsafe condition that is likely to exist or develop on other products of this same type design. Therefore, we are proposing this AD, which would supersede AD 2002-16-03. This proposed AD would require either determining exposure to runway deicing fluids containing potassium formate and/or potassium acetate, or performing repetitive inspections of certain electrical connectors in the wheel well of the main landing gear for corrosion, and significant/corrective actions if necessary. This proposed AD would require you to use the service information described previously to perform these actions, except as discussed under “Difference Between the Proposed AD and Service Information.”

The service bulletin specifies an “examination” for corrosion of the electrical connectors in the MLG wheel well. For the purposes of this AD, we have determined that the procedures in the service bulletin constitute a “detailed inspection.” Note 1 of this proposed AD defines that inspection.

We have reviewed the figures we have used over the past several years to calculate AD costs to operators. To account for various inflationary costs in the airline industry, we find it necessary to increase the labor rate used in these calculations from $60 per work hour to $65 per work hour. The cost impact information, below, reflects this increase in the specified hourly labor rate.

This proposed AD would affect about 587 airplanes of U.S. registry. The new determination of airplane exposure would take about 1 work hour per airplane, at an average labor rate of $65 per work hour. Based on these figures, the estimated cost of the actions specified in this proposed AD for U.S. operators is $38,155, or $65 per airplane, per cycle.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD. See the ADDRESSES section for a location to examine the regulatory evaluation.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

The FAA has implemented new procedures for maintaining AD dockets electronically. As of May 17, 2004, new AD actions are posted on DMS and assigned a docket number. We track each action and assign a corresponding directorate identifier. The DMS AD docket number is in the form “Docket No. FAA-2004-99999.” The Transport Airplane Directorate identifier is in the form “Directorate Identifier 2004-NM-999-AD.” Each DMS AD docket also lists the directorate identifier (“Old Docket Number”) as a cross-reference for searching purposes.

We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed under ADDRESSES. Include “Docket No. FAA-2004-19751; Directorate Identifier 2002-NM-59-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments submitted by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of our docket Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You can review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78), or you can visit http://dms.dot.gov.

We are reviewing the writing style we currently use in regulatory documents. We are interested in your comments on whether the style of this document is clear, and your suggestions to improve the clarity of our communications that affect you. You can get more information about plain language at http://www.faa.gov/language and http://www.plainlanguage.gov.

You can examine the AD docket on the Internet at http://dms.dot.gov, or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone (800) 647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the DMS receives them.

The Civil Aviation Authority (CAA), which is the airworthiness authority for the United Kingdom, notified us that an unsafe condition may exist on all BAE Systems (Operations) Limited (Jetstream) Model 4101 airplanes. The CAA advises that corrosion has been found along aft fuselage frames. This corrosion occurs on frame areas below floor panel level in the vicinity of the toilet, galley, and rear baggage door due to the ingress of water or liquid. Corrosion of the aft fuselage frames, if not detected and corrected in a timely manner, could result in reduced structural integrity of the fuselage.

BAE Systems (Operations) Limited has issued Service Bulletin J41-53-051, dated January 25, 2002; and Revision 1, dated May 2, 2003. The service bulletins describe procedures for doing repetitive detailed visual inspections of the aft fuselage frames for discrepancies ( i.e. , corrosion, soft spots, and suspected corrosion), doing any applicable corrective action, and submitting inspection reports to the manufacturer. The corrective actions include repairing any corrosion found during the inspections; replacing any soft floor panels; reapplying any sealant, membrane, or tape removed during the inspection; and contacting the manufacturer for disposition of damage outside of limits.

Accomplishing the actions specified in the service information is intended to adequately address the unsafe condition. The CAA mandated the service information and issued British airworthiness directive 003-01-2002 to ensure the continued airworthiness of these airplanes in the United Kingdom.

This airplane model is manufactured in the United Kingdom and is type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the CAA has kept the FAA informed of the situation described above. We have examined the CAA's findings, evaluated all pertinent information, and determined that we need to issue an AD for products of this type design that are certificated for operation in the United States.

Therefore, we are proposing this AD, which would require accomplishing the actions specified in the service information described previously, except as discussed under “Differences Between the AD and the Service Bulletins.”

The service bulletins specify that you may contact the manufacturer for instructions on how to repair corrosion outside limits defined in the service bulletins, but this proposed AD would require you to repair those conditions using a method that we or the CAA (or its delegated agent) approve. In light of the type of repair that would be required to address the unsafe condition, and consistent with existing bilateral airworthiness agreements, we have determined that, for this proposed AD, a repair we or the CAA approve would be acceptable for compliance with this proposed AD.

Operators should also note that, although the Accomplishment Instructions of the service bulletins describe procedures for submitting inspection reports, this proposed AD would not require those actions. We do not need this information from operators.

This proposed AD would affect about 57 airplanes of U.S. registry. The proposed inspections would take about 30 work hours per airplane, at an average labor rate of $65 per work hour. Based on these figures, the estimated cost of the proposed AD for U.S. operators is $111,150, or $1,950 per airplane, per inspection cycle.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD. See the ADDRESSES section for a location to examine the regulatory evaluation.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

The FAA has implemented new procedures for maintaining AD dockets electronically. As of May 17, 2004, new AD actions are posted on DMS and assigned a docket number. We track each action and assign a corresponding directorate identifier. The DMS AD docket number is in the form “Docket No. FAA-2004-99999.” The Transport Airplane Directorate identifier is in the form “Directorate Identifier 2004-NM-999-AD.” Each DMS AD docket also lists the directorate identifier (“Old Docket Number”) as a cross-reference for searching purposes.

We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed under ADDRESSES. Include “Docket No. FAA-2004-19752; Directorate Identifier 2004-NM-170-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments submitted by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of our docket Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You can review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78), or you can visit http://dms.dot.gov.

We are reviewing the writing style we currently use in regulatory documents. We are interested in your comments on whether the style of this document is clear, and your suggestions to improve the clarity of our communications that affect you. You can get more information about plain language at http://www.faa.gov/language and http://www.plainlanguage.gov.

You can examine the AD docket on the Internet at http://dms.dot.gov, or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone (800) 647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESS section. Comments will be available in the AD docket shortly after the DMS receives them.

The Luftfartsverket (LFV), which is the airworthiness authority for Sweden, notified us that an unsafe condition may exist on certain Saab Model SAAB SF340A and SAAB 340B series airplanes. The LFV advises that it has received reports of premature failures of the direct current (DC) starter generator. Failure of the starter generator could cause a low voltage situation in flight and result in increased pilot workload and reduced redundancy of the electrical powered systems.

Saab has issued Service Bulletin 340-24-035, dated July 5, 2004. The service bulletin describes procedures for repetitive visual inspections for wear of the brushes and leads and for loose rivets of the DC starter generator. The service bulletin also specifies replacing the starter generator with a new or serviceable starter generator for brush wear that is outside certain specified limits or if any loose rivet is found. The LFV mandated the service information and issued Swedish airworthiness directive 1-196 R1, effective July 15, 2004, to ensure the continued airworthiness of these airplanes in Sweden.

The Saab service bulletin references Goodrich Service Information Letter 23080-03X-24-01, dated July 1, 2004, as an additional source of service information.

These airplane models are manufactured in Sweden and are type certificated for operation in the United States under the provisions of § 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the LFV has kept the FAA informed of the situation described above. We have examined the LFV's findings, evaluated all pertinent information, and determined that we need to issue an AD for products of this type design that are certificated for operation in the United States.

Therefore, we are proposing this AD, which would require accomplishing the actions specified in the Saab service information described previously.

This is considered to be interim action until final action is identified, at which time we may consider further rulemaking.

This proposed AD would affect about 170 airplanes of U.S. registry. The proposed actions would take about 1 work hour per airplane, at an average labor rate of $65 per work hour. Based on these figures, the estimated cost of the proposed AD for U.S. operators is $11,050, per inspection cycle, or $65 per airplane, per inspection cycle.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

1. Is not a “significant regulatory action” under executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD. See the ADDRESSES section for a location to examine the regulatory evaluation.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

The FAA has implemented new procedures for maintaining AD dockets electronically. As of May 17, 2004, new AD actions are posted on DMS and assigned a docket number. We track each action and assign a corresponding directorate identifier. The DMS AD docket number is in the form “Docket No. FAA-2004-99999.” The Transport Airplane Directorate identifier is in the form “Directorate Identifier 2004-NM-999-AD.” Each DMS AD docket also lists the directorate identifier (“Old Docket Number”) as a cross-reference for searching purposes.

We invite you to submit any written relevant data, views, or arguments regarding this proposed AD. Send your comments to an address listed under ADDRESSES. Include “Docket No. FAA-2004-19753; Directorate Identifier 2002-NM-264-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of our docket Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc. ). You may review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78), or you may visit http://dms.dot.gov.

We are reviewing the writing style we currently use in regulatory documents. We are interested in your comments on whether the style of this document is clear, and your suggestions to improve the clarity of our communications that affect you. You can get more information about plain language at http://www.faa.gov/language and http://www.plainlanguage.gov.

You may examine the AD docket in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone (800) 647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the DMS receives them.

On April 27, 2001, we issued AD 2001-09-13, amendment 39-12220 (66 FR 23538, May 9, 2001), for certain Boeing Model 767-200, -300, and -300F series airplanes. That AD requires inspections for fatigue cracking of the horizontal stabilizer pivot bulkhead, and repetitive inspections or other follow-on actions. That AD also provides a permanent repair, which is optional for airplanes with no cracks, and, if accomplished, ends the repetitive inspections. That AD was prompted by reports of fatigue cracking of the horizontal stabilizer pivot bulkhead on several affected airplanes. We issued that AD to find and fix fatigue cracking of the horizontal stabilizer pivot bulkhead and adjacent structure, which could result in loss of the horizontal stabilizer.

Since we issued AD 2001-09-13, an airplane operator reported three incidents of loose tension bolts at stringer 12A. Another operator reported that there were indications of cracks in the fuselage skin at “Area 1” as shown on Sheet 2 of Figure 2 of Boeing Alert Service Bulletin 767-53A0078, Revision 4, dated September 26, 2002.

In addition, the preamble to AD 2001-09-13 said that we were considering further action to require the permanent repair that was an option in that AD. However, further information shows that operators have found cracks at the repaired area. Therefore, we are not requiring the permanent repair from AD 2001-09-13 as a preventive modification in this proposed AD.

We have reviewed Boeing Alert Service Bulletin 767-53A0078, Revision 4, dated September 26, 2002.

The alert service bulletin describes the following procedures for airplanes on which the permanent repair, described in previous revisions of the service bulletin, was not installed:

• Inspections for cracks of the forward and aft outer chord, the splice fitting, the tension fitting, the aft mid chord, and the upper and lower intercostals. The inspection methods include the following, as applicable: Repetitive detailed inspections, surface high frequency eddy current (HFEC) inspections, open-hole HFEC inspections, and low frequency eddy current (LFEC) inspections.

• Corrective action and related investigative action if cracks are found in the forward outer chord. The corrective action is installing a permanent repair. The related investigative action is repetitive inspections of the repaired area.

• Installing a time-limited repair as an alternative to the permanent repair, which includes the related investigative and corrective actions of an additional visual inspection for cracks, and installation of the permanent repair either before further flight after this inspection if cracks are found, or within 3,000 flight cycles or 18 months after the inspection (whichever occurs first), if no cracks are found.

• A torque check of the bolt in the tension fitting, and related investigative and corrective actions. The related investigative action is doing a visual inspection of the bolt and bolt-hole for damage, and an HFEC inspection of the bolt-hole for damage. The corrective action is to contact Boeing for repair data.

• If any crack is found in the aft outer chord, the aft mid chord, the splice fitting, the tension fitting, or the intercostal, the service bulletin recommends that operators contact Boeing for repair data.

For airplanes on which the permanent repair was installed using previous revisions of the service bulletin, Revision 4 of the service bulletin describes procedures for repetitive inspections of the repaired area. The service bulletin recommends that operators contact Boeing for any necessary corrective action.

We have determined that accomplishment of the actions specified in the service information will adequately address the unsafe condition.

We have evaluated all pertinent information and identified an unsafe condition that is likely to exist or develop on other products of this same type design. Therefore, we are proposing this AD, which would supersede AD 2001-09-13. This proposed AD would continue to require inspections for fatigue cracking of the horizontal stabilizer pivot bulkhead, and repetitive inspections or other follow-on actions. For airplanes with cracks, this proposed AD also would continue to require a permanent repair, which is optional for airplanes with no cracks. This proposed AD would require, for airplanes on which the permanent repair is not installed, repetitive inspections of the same and additional inspection locations at new inspection intervals; a one-time torque test; and other related corrective and investigative actions. For airplanes on which the permanent repair is installed, this proposed AD would require repetitive inspections of the repaired area, and corrective action if necessary. This proposed AD would require you to use the service information described previously to perform these actions, except as discussed under “Difference Between the Proposed AD and the Service Bulletin.”

The service bulletin specifies that you may contact the manufacturer for instructions on how to repair certain conditions, but this proposed AD would require you to repair those conditions in one of the following ways:

• Using a method that we approve; or

• Using data that meet the type certification basis of the airplane, and that have been approved by a Boeing Company Designated Engineering Representative who has been authorized by the FAA to make such findings.

This proposed AD would retain all requirements of AD 2001-09-13 with revised repetitive inspection intervals. Since AD 2001-09-13 was issued, the AD format has been revised, and certain paragraphs have been rearranged. As a result, the corresponding paragraph identifiers have changed in this proposed AD, as listed in the following table:

The FAA has implemented new procedures for maintaining AD dockets electronically. As of May 17, 2004, new AD actions are posted on DMS and assigned a docket number. We track each action and assign a corresponding directorate identifier. The DMS AD docket number is in the form “Docket No. FAA-2004-99999.” The Transport Airplane Directorate identifier is in the form “Directorate Identifier 2004-NM-999-AD.” Each DMS AD docket also lists the directorate identifier (“Old Docket Number”) as a cross-reference for searching purposes.

We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2004-19754; Directorate Identifier 2004-NM-181-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments submitted by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov , including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of our docket Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You can review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78), or you can visit http://dms.dot.gov .

We are reviewing the writing style we currently use in regulatory documents. We are interested in your comments on whether the style of this document is clear, and your suggestions to improve the clarity of our communications that affect you. You can get more information about plain language at http://www.faa.gov/language and http://www.plainlanguage.gov .

You can examine the AD docket on the Internet at http://dms.dot.gov, or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone (800) 647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the DMS receives them.

Transport Canada Civil Aviation (TCCA), which is the airworthiness authority for Canada, notified us that an unsafe condition may exist on certain Bombardier Model CL-600-2C10 (Regional Jet Series 700 & 701) series airplanes, and Model CL-600-2D24 (Regional Jet Series 900) series airplanes. TCCA advises that there have been a number of reported cases of hydraulic pressure loss in either the number 1 or number 2 hydraulic systems due to breakage or leakage of hydraulic lines in the aft equipment bay. In some cases, hydraulic lines and connector jam nuts were found loose at the aft pressure bulkhead web. Loosening of the jam nuts also resulted in elongation of the affected feed-through holes on the aft pressure bulkhead web at fuselage station 1098.2, stringers 8 and 9, left- and right-hand sides. In addition, cracks were found on the aft pressure bulkhead web around these feed-through holes. Loss of hydraulic pressure, if not corrected, could result in reduced controllability of the airplane. Cracks on the aft pressure bulkhead web, if not detected and corrected, could result in reduced structural integrity of the aft pressure bulkhead.

Bombardier has issued CRJ 700/900 Series Temporary Revision (TR) MRM2-129, dated June 1, 2004. The TR describes procedures for new repetitive inspections of the aft pressure bulkhead and pylon pressure pan in the vicinity of the hydraulic fittings, and the hydraulic tube adapters. The TR also describes an optional terminating action for the repetitive inspections. Accomplishing the actions specified in the service information is intended to adequately address the unsafe condition. TCCA mandated the service information and issued Canadian airworthiness directive CF-2004-14, dated July 20, 2004, to ensure the continued airworthiness of these airplanes in Canada.

These airplane models are manufactured in Canada and are type certificated for operation in the United States under the provisions of § 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, TCCA has kept the FAA informed of the situation described above. We have examined TCCA's findings, evaluated all pertinent information, and determined that we need to issue an AD for products of this type design that are certificated for operation in the United States.

Therefore, we are proposing this AD, which would require revising the Airworthiness Limitations section of the Instructions of Continued Airworthiness by incorporating new repetitive inspections and an optional terminating action for the repetitive inspections, and would require repairing any crack.

Canadian airworthiness directive CF-2004-14 specifies that you may contact the manufacturer for instructions on how to repair certain conditions, but this proposed AD would require you to repair those conditions using a method that we or TCAA (or its delegated agent) approve. In light of the type of repair that would be required to address the unsafe condition, and consistent with existing bilateral airworthiness agreements, we have determined that, for this proposed AD, a repair we or TCAA approve would be acceptable for compliance with this proposed AD.

This proposed AD would affect about 116 airplanes of U.S. registry. The proposed actions would take about 1 work hour per airplane, at an average labor rate of $65 per work hour. Based on these figures, the estimated cost of the proposed AD for U.S. operators is $7,540, or $65 per airplane.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD. See the ADDRESSES section for a location to examine the regulatory evaluation.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

The FAA has implemented new procedures for maintaining AD dockets electronically. As of May 17, 2004, new AD actions are posted on DMS and assigned a docket number. We track each action and assign a corresponding directorate identifier. The DMS AD docket number is in the form “Docket No. FAA-2004-99999.” The Transport Airplane Directorate identifier is in the form “Directorate Identifier 2004-NM-999-AD.” Each DMS AD docket also lists the directorate identifier (“Old Docket Number”) as a cross-reference for searching purposes.

We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2004-19755; Directorate Identifier 2004-NM-23-AD” in the subject line of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments submitted by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov , including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of that Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You can review DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78), or you can visit http://dms.dot.gov .

We are reviewing the writing style we currently use in regulatory documents. We are interested in your comments on whether the style of this document is clear, and your suggestions to improve the clarity of our communications that affect you. You can get more information about plain language at http://www.faa.gov/language and http://www.plainlanguage.gov .

You can examine the AD docket on the Internet at http://dms.dot.gov , or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone (800) 647-5227) is on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the DMS receives them.

We have received a report indicating that inspections have revealed deteriorating sealants both inside and outside the center wing fuel tank on certain Boeing Model 747 airplanes. The deterioration is attributed to damage caused by hot air leaking from the trim air diffuser ducts or sidewall riser duct assemblies (collectively referred to in this proposed AD as “TADDs”), which are part of the cabin air distribution system that is located between the top of the center wing fuel tank and the floor of the passenger cabin. These hot air leaks occur when the fiberglass diffuser ducts are damaged by the hot bleed air that they carry, leading the fiberglass diffuser ducts to leak or disconnect from the titanium trim air manifold. The release of hot air can damage the upper skin of the center wing section, the longitudinal floor beams, and the fuselage frame intercostals, as well as the sealants of the center wing fuel tank. Damage to the sealants inside or outside the center wing fuel tank could allow fuel or fuel vapors to leak into an area where ignition sources may be present. This condition, if not corrected, could result in a fire or explosion.

We have reviewed Boeing Alert Service Bulletin 747-21A2418, Revision 2, dated March 4, 2004; including Information Notice (IN) 747-21A2418 IN 01, dated March 11, 2004. The service bulletin describes procedures for repetitive tests to detect hot air leaking from the TADDs, related investigative actions, and corrective actions if necessary. The related investigative actions are repetitive general visual inspections for discrepancies or damage of the TADDs; and, if necessary, for damage of adjacent structure, the primary and secondary fuel barriers of the center wing fuel tank, control cables, and cable pulleys, and for raised cable seals. The corrective actions, if any damage is found, consist of replacing any damaged TADD with a new TADD having the same part number, or a new, improved TADD that has a higher temperature tolerance; and repairing any damage to adjacent structure, the primary and secondary fuel barriers of the center wing fuel tank, control cables, cable pulleys, or raised cable seals. After a TADD is replaced with a new TADD having the same part number, there is no need to test or inspect the replaced TADD until 21,200 flight hours after the replacement. After a TADD is replaced with a new, improved TADD, the repetitive inspections are no longer needed for that TADD. Accomplishing the actions specified in the service information is intended to adequately address the unsafe condition.

IN 747-21A2418 IN 01 identifies some headings that were inadvertently omitted from the Accomplishment Instructions of Boeing Alert Service Bulletin 747-21A2418, Revision 2. These headings clarify what procedures apply to which airplane configuration.

The service bulletin refers to Chapter 21-61-20 of the 747 Airplane Maintenance Manual as an additional source for service information for the test and inspection of the TADDs. Chapter 21-61-20 contains, among other things, detailed procedures for the general visual inspection of the TADDs for damage or discrepancies, including detachment of the trim air duct from the diffuser duct, delamination, missing or softened surface material, or blackened material. For any discrepant TADD, Chapter 21-61-20 also describes procedures for a general visual inspection for damage of the primary and secondary fuel barriers of the center wing tank; structure adjacent to the discrepant TADD; and cables, cable pulleys, and raised cable seals in the over-wing area.

We have evaluated all pertinent information and identified an unsafe condition that is likely to exist or develop on other airplanes of this same type design. Therefore, we are proposing this AD, which would require doing the actions specified in the service information described previously, except as discussed under “Differences Between the Proposed AD and Service Information.”

This proposed AD also provides an optional terminating action for the repetitive inspections, which is replacing the existing TADDs with new, improved TADDs. We have determined that it is acceptable to allow you to continue doing repetitive tests and inspections in lieu of requiring that you do the terminating action. In making this determination, we considered that long-term continued operational safety in this case will be adequately ensured by repetitive inspections to detect hot air leaking from the TADDs or discrepancies of the TADDs before these conditions are a hazard to the airplane.

This proposed AD would require that any replacement TADD must be new. Used TADDs are not acceptable replacement parts. Because the material of the TADDs deteriorates at a known rate, an operator would have to know how many total flight hours had been accumulated on a serviceable TADD, and would have to test and inspect that TADD at appropriate intervals. We find that it is unlikely that operators will have all of the data that would be needed for a serviceable TADD to be an acceptable replacement. Therefore, this proposed AD would allow replacement only with new parts.

For the hot air leak test, the service bulletin provides a compliance time of the earlier of 180 days or 2,000 flight hours after the release date of Revision 2 of the service bulletin, once the airplane has accumulated 20,000 total flight hours. For this test, this proposed AD would require the initial test to be done prior to the accumulation of 21,200 flight hours, or within 1,200 flight hours after the effective date of this AD, whichever is later. This compliance time is the equivalent of the inspection threshold of 20,000 total flight hours, plus a grace period of 1,200 flight hours (which is equivalent to one repetitive interval, as specified in the service bulletin). In developing an appropriate compliance time for this AD, we considered the manufacturer's recommendation, and the degree of urgency associated with the subject unsafe condition. In light of these factors, we find that a 1,200-flight-hour grace period represents an appropriate interval of time for affected airplanes (with close to or more than 20,000 total flight hours as of the effective date of the AD) to continue to operate without compromising safety.

This proposed AD would affect about 1,305 airplanes worldwide. The following table provides the estimated costs for U.S. operators to comply with this proposed AD.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD. See the ADDRESSES section for a location to examine the regulatory evaluation.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

On January 5, 1999, the Commission first published its Minimum Internal Control Standards (MICS) as a Final Rule. As gaming Tribes and the Commission gained practical experience applying the MICS, it became apparent that some of the standards required clarification or modification to operate as the Commission had intended and to accommodate changes and advances that had occurred over the years in Tribal gaming technology and methods. Consequently, the Commission, working with an Advisory Committee composed of Commission and Tribal representatives, published the new final revised MICS rule on June 27, 2002.

As the result of the practical experience of the Commission and Tribes working with the newly revised MICS, it has once again become apparent that additional corrections, clarifications, and modifications are needed to ensure that the MICS continue to operate as the Commission intended. To identify which of the current MICS need correction, clarification or modification, the Commission initially solicited input and guidance from NIGC employees, who have extensive gaming regulatory expertise and experience and work closely with Tribal gaming regulators in monitoring the implementation, operation, and effect of the MICS in Tribal gaming operations. The resulting input from NIGC staff convinced the Commission that the MICS require continuing review and prompt revision on an ongoing basis to keep them effective and up-to-date. To address this need, the Commission decided to establish a Standing MICS Advisory Committee to assist it in both identifying and developing necessary MICS revisions and revisions on an ongoing basis.

In recognition of its government-to-government relationship with Tribes and related commitment to meaningful Tribal consultation, the Commission requested gaming Tribes, in January 2004, for nominations of Tribal representatives to serve on its Standing MICS Advisory Committee. From the twenty-seven (27) Tribal nominations that it received, the Commission selected nine (9) Tribal representatives in March 2004 to serve on the Committee. The Commission's Tribal Committee member selections were based on several factors, including the regulatory experience and background of the individuals nominated, the size(s) of their affiliated Tribal gaming operation(s), the types of games played at their affiliated Tribal gaming operation(s), and the areas of the country in which their affiliated Tribal gaming operation(s) are located. The selection process was very difficult, because numerous highly qualified Tribal representatives were nominated to serve on this important Committee. As expected, the benefit of including Tribal representatives on the Committee, who work daily with the MICS, has proved to be invaluable.

Tribal representatives selected to serve on the Commission's Standing MICS Advisory Committee are: Tracy Burris, Gaming Commissioner, Chickasaw Nation Gaming Commission, Chickasaw Nation of Okalahoma; Jack Crawford, Chairman, Umatilla Gaming Commission, Confederated Tribes of the Umatilla Indian Reservation; Patrick Darden, Executive Director, Chitimacha Gaming Commission, Chitimacha Indian Tribe of Louisiana; Mark N. Fox, Compliance Director, Four Bears Casino, Three Affiliated Tribes of the Fort Berthold Reservation; Sherrilyn Kie, Senior Internal Auditor, Pueblo of Laguna Gaming Authority, Pueblo of Laguna; Patrick Lambert, Executive Director, Eastern Band of Cherokee Gaming Commission, Eastern Band of Cherokee Indians; John Meskill, Director, Mohegan Tribal Gaming Commission, Mohegan Indian Tribe; Jerome Schultze, Executive Director, Morongo Gaming Agency, Morongo Band of Mission Indians; and Lorna Skenandore, Assistant Gaming Manager, Support Services, Oneida Bingo and Casino, formerly Gaming Compliance Manager, Oneida Gaming Commission, Oneida Tribe of Indians of Wisconsin. The Advisory Committee also includes the following Commission representatives: Philip N. Hogen, Chairman; Nelson Westrin, Vice-Chairman; Cloyce V. Choney, Associate Commissioner; Joe H. Smith, Acting Director of Audits; Ken Billingsley, Region III Director; Nicole Peveler, Field Auditor; Ron Ray, Field Investigator; and Sandra Ashton, Staff Attorney, Office of General Counsel.

In the past, the MICS were comprehensively revised on a large wholesale basis. Such large-scale revisions proved to be difficult for Tribes to implement in a timely manner and unnecessarily disruptive to Tribal gaming operations. The purpose of the Commission's Standing Committee is to conduct a continuing review of the operation and effectiveness of the existing MICS, in order to promptly identify and develop needed revisions of the MICS, on a manageable incremental basis, as they become necessary to revise and keep the MICS practical and effective. By making more manageable incremental changes to the MICS on an ongoing basis, the Commission hopes to be more prompt in developing needed revisions, while, at the same time, avoiding larger-scale MICS revisions which take longer to implement and can be unnecessarily disruptive to Tribal gaming operations. In accordance with this approach, the Commission has developed the following proposed MICS rule revisions, with the assistance of its Standing MICS Advisory Committee. In doing so, the Commission is carrying out its statutory mandate under the Indian Gaming Regulatory Act, 25 U.S.C. 2706(b)(10), to promulgate necessary and appropriate regulations to implement the provisions of the Act. In particular, the following proposed MICS rule revisions are intended to address Congress' purpose and concern stated in Section 2702(2) of the Act, that the Act “provide a statutory basis for the regulation of gaming by an Indian tribe adequate to shield it from organized crime and other corrupting influences, to ensure the Indian tribe is the primary beneficiary of the gaming operation, and to ensure the gaming is conducted fairly and honestly by both the operator and the players.”

The Commission, with the Committee's assistance, identified three specific objectives for the following proposed MICS rule revisions: (1) To ensure that the MICS are reasonably comparable to the internal control standards of established gaming jurisdictions; (2) to ensure that the interests of the Tribal stakeholders are adequately safeguarded; and (3) to ensure that the interests of the gaming public are adequately protected.

The Advisory Committee initially met on April 8, 2004, and then again on October 21, 2004, to discuss the revisions set forth in the following proposed MICS rule revisions. The input received from the Committee Members has been invaluable to the Commission in its development of the following proposed MICS rule revisions. In accordance with the Commission's established Government-to-Government Tribal Consultation Policy, the Commission provided a preliminary working draft of all of the proposed MICS rule revisions contained herein to gaming Tribes on June 22, 2004, for a thirty (30)-day informal review and comment period, before formulation of this proposed rule. In response to its requests for comments, the Commission received approximately fifty (50) comments from Commission and Tribal Advisory Committee members, individual Tribes, and other interested parties regarding the proposed revisions. A summary of these comments is presented below in the discussion of each proposed revision to which they relate.

For reasons stated above in this preamble, the National Indian Gaming Commission proposes to revise the following specific sections of its MICS rule, 25 CFR part 542. The following discussion includes the Commission's responses to general comments concerning the MICS and is followed by a discussion regarding each of the specifically proposed revisions, along with previously submitted informal comments to the proposed revisions and the Commission's responses to those comments. As noted above, prior commenters include Commission and Tribal Advisory Committee members, gaming Tribes, and others.

Many of the previous informal comments to the preliminary working draft of the proposed MICS revisions pertained to the Commission's authority to promulgate rules governing the conduct of Class III gaming. Positions were expressed asserting that Congress intended the NIGC's Class III gaming regulatory authority to be limited exclusively to the approval of tribal gaming ordinances and management contracts. Similar comments were received concerning the first proposed MICS back in 1999. The Commission, at that time, determined in its publication of the original MICS in 1999 that it possessed the statutory authority to promulgate Class III MICS. As stated in the preamble to those MICS: “The Commission believes that it does have the authority to promulgate this final rule. * * * [T]he Commission's promulgation of MICS is consistent with its responsibilities as the Federal regulator of Indian gaming.” 64 FR 509 (Jan. 5, 1999). The current Commission reaffirms that determination. The Indian Gaming Regulatory Act, which established the regulatory structure for all classes of Indian gaming, expressly provides that the Commission “shall promulgate such regulations as it deems appropriate to implement the provisions of (the Act)”. 25 U.S.C. 2707(b)(10). Pursuant to this clearly stated statutory duty and authority under the Act, the Commission has determined that MICS are necessary and appropriate to implement and enforce the regulatory provisions of the Act governing the conduct of both Class II and Class III gaming and accomplish the purposes of the Act.

The Commission believes that the importance of internal control systems in the casino operating environment cannot be overemphasized. While this is true of any industry, it is particularly true and relevant to the revenue generation processes of a gaming enterprise, which, because of the physical and technical aspects of the games and their operation and the randomness of game outcomes, makes exacting internal controls mandatory. The internal control systems are the primary management procedures used to protect the operational integrity of gambling games, account for and protect gaming assets and revenues, and assure the reliability of the financial statements for Class II and III gaming operations. Consequently, internal control systems are a vitally important part of properly regulated gaming. Internal control systems govern the gaming enterprise's governing board, management, and other personnel who are responsible for providing reasonable assurance regarding the achievement of the enterprise's objectives, which typically include operational integrity, effectiveness and efficiency, reliable financial statement reporting, and compliance with applicable laws and regulations.

The Commission believes that strict regulations, such as the MICS, are not only appropriate but necessary for it to fulfill its responsibilities under the IGRA to establish necessary baseline, or minimum , Federal standards for all Tribal gaming operations on Indian lands. 25 U.S.C. 2702(3). Although the Commission recognizes that many Tribes had sophisticated internal control standards in place prior to the Commission's original promulgation of its MICS, the Commission also continues to strongly believe that promulgation and revision of these standards is necessary and appropriate to effectively implement the provisions of the Indian Gaming Regulatory Act and, therefore, within the Commission's clearly expressed statutory power and duty under Section 2706(b)(10) of the Act.

Comments were also received suggesting that the NIGC should re-issue the MICS as a bulletin or guideline for Tribes to use voluntarily, at their discretion, in developing and implementing their own Tribal gaming ordinances and internal control standards.

The Commission disagrees. The MICS are common in established gaming jurisdictions and, to be effective in establishing a minimum baseline for the internal operating procedures of Tribal gaming enterprises, the rule must be concise, explicit, and uniform for all Tribal gaming operations to which they apply. Furthermore, to nurture and promote public confidence in the integrity and regulation of Indian gaming and ensure its adequate regulation to protect Tribal gaming assets and the interests of Tribal stakeholders and the public, the Commission's MICS regulations must be reasonably uniform in their implementation and application and regularly monitored and enforced by Tribal regulators and the NIGC to ensure Tribal compliance.

The Commission proposes to add or revise definitions of the following four terms in section 542.2. A discussion of each proposed new or revised definition follows in alphabetical order. The text of the proposed new or revised definition is set forth following the conclusion of this preamble in which of all of the proposed revisions to the Commission's MICS rule, 25 CFR part 542, are discussed.

This is a new definition. Several Tribal and Commission Committee members recommended that a definition of the term “drop period” be added to the current existing MICS definitions. In conjunction with other proposed revisions to the MICS which include this term, the NIGC has determined that to ensure that such revisions are clear and unambiguous, insertion of the definition of the term “drop period” into the MICS Definitions section 542.2 is worthwhile. This definition was included in the preliminary working draft sent to Tribes for informal review and comment prior to formulation of the proposed new definition, and no comments were received objecting to the definition.

The Commission proposes to revise the existing MICS definition of this term to more accurately define the scope of the referenced term, as it is used in the MICS. Commission and Committee members recommended that the existing definition for “gaming machine” be revised to cover central server based linked gaming machines or player stations that are being increasingly utilized in Indian gaming. Comments were subsequently received supporting the proposed revision to the gaming machine definition, which was set forth in the preliminary working draft sent to the Committee and Tribes prior to formulation of the proposed revised definition. Comments were also received suggesting that the definition should differentiate Class II and Class III gaming machines. Comments were also received suggesting that instead of attempting to list all the various cash equivalents a machine might accept, it would be better simply to refer to the items as cash, coin or cash equivalents.

The Commission disagrees with the comment that the definition should attempt to narrow or define the applicability of the definition based on game classification. The definition is intended to be broadly applied to all gaming machines that are not otherwise separately defined in the MICS, such as an electronic bingo machine.

The Commission agrees with the suggestion that the term “cash equivalents” should be used in the definition. We believe the term is more representative of the various items that could be wagered, in addition to cash and coin. The following proposed revised definition of “gaming machine” has been modified accordingly to reflect this recommendation.

The Commission proposes to revise the existing MICS definition of this term to more accurately define the applicability of the referenced term. Committee members recommended that the definition of “promotional progressive pots and/or pools” be revised to also apply to poker games. The proposed revision was included in the preliminary working draft sent to the Committee and Tribes for informal review and comment before the following proposed revised definition was formulated. Comments were subsequently received supporting the proposed revision since most progressive promotional pots are utilized in poker games. One commenter contended that the proposed revision to the progressive promotional pots and/or pools definition would create a conflict with the definition of secondary jackpots. The Commission will further consider this comment and examine how the two referenced terms are used in the MICS. If necessary, we may consider in the future whether there is any contradiction between the two terms that requires modification of the definition of secondary jackpots.

This is a new definition. The referenced term is used in the current MICS but is not defined. Since it has been the frequent subject of inquiry regarding its meaning, the NIGC has determined that a definition of the term is warranted. Comments to the preliminary working draft were received from Committee members and Tribes uniformly supporting the addition of this proposed new definition to section 542.2 of the MICS:

The Commission identified and proposes to correct several referencing and citation errors in the current MICS. The sections where corrective revisions are proposed include the following: §§ 542.7(g)(1)(i), 542.8(h)(1)(i), 542.12(i)(4), 542.12(k)(1)(v), 542.12(k)(1)(ix), 542.12(k)(1)(xvii), and 542.13(l)(4).

Each of the referencing and citation corrections proposed above was set forth in the preliminary working draft provided to the Committee and Tribes for informal review and comment before this proposed rule was formulated. No comments were received objecting to the proposed corrections.

It is common practice in the gaming industry that gaming machine manufacturers provide gaming operators with a Pay Analysis Report (PAR) or PAR sheet for each gaming machine that they supply to the operator. The PAR sheet provides information regarding certain design specifications for the gaming machine, including the statistical theoretical percentage(s) that the gaming machine is designed to win or hold for the operator (house), based on an adequate level of wagering activity after payment of game winnings to players. A theoretical hold worksheet also accompanies the PAR sheet and provides additional theoretical hold information for the gaming machine, frequently including probability calculations of the machine's theoretical hold percentages for different specified levels of coin-in wagering activity. The converse to a gaming machine's theoretical hold percentage is its theoretical payback percentage, which is the percentage of total money wagered that the machine is designed to pay back to players as game winnings based on adequate levels of wagering activity. A gaming machine's theoretical payback percentage can be calculated by deducting its specified theoretical hold percentage(s) from one.

Periodic statistical tracking of actual gaming machine performance, by comparing each machine's actual hold and payback percentages in relation to its theoretical hold and/or payback percentages, has become a necessary standard of management practice to ensure the integrity of gaming machine operations and safeguard related machine revenues and assets. To effectively monitor gaming machine operations for performance irregularities, whether due to machine defect, malfunction, embezzlement, cheating, or other improper tampering, gaming operators are required to periodically prepare a gaming machine analysis report that compares each machine's actual hold percentages to its specified theoretical hold percentage(s), based on the levels of coin-in wagering activity for each reporting period. Any material deviations between the actual and theoretical hold percentages must be thoroughly investigated by gaming machine department management and other management personnel independent of the gaming operation's gaming machine department. The ultimate objective of the gaming machine analysis report and investigative process is to ensure that any material uncharacteristic deviation between actual and theoretical hold is not due to machine defect, malfunction, embezzlement, cheating, or other improper tampering; but instead, a reasonably expected mathematical deviation based on the randomness of the machine's game outcome selection mechanism and the number of game plays and outcomes analyzed.

The standards set forth in section 542.13(h) of the MICS are intended to provide a minimum benchmark for effective use of gaming machine performance analysis by Tribal gaming enterprises to safeguard the integrity of their gaming machine operations and related Tribal gaming assets. In establishing these standards, the Commission strives to keep them as practical and effective as possible for the diverse nature and scale of the Tribal gaming machine operations to which they apply. For that reason, the Commission proposes several revisions to section 542.13(h).

The Commission's proposed deletion of subsection 542.13(h)(2) will eliminate the current requirement that Tribal operators utilize a weighted average calculation to adjust and determine the appropriate theoretical hold percentages for periodic analysis of complex gaming machines (excluding multi-game multi-denominational gaming machines), which have manufacturer's PAR or theoretical hold worksheets that specify multiple theoretical hold or payback percentages, with or without a spread of more than 4% between their minimum and maximum specified theoretical hold/payback percentages.

Although the manufacturer's PAR sheets and theoretical hold worksheets for most gaming machines specify a single theoretical hold percentage, which can be reliably used for analysis of the machine's actual performance, there are other more complex gaming machines (excluding multi-gaming and multi-denominational gaming machines) that have multiple specified theoretical hold percentages. Identifying the most reliable theoretical hold percentage to use for analysis of the performance of these more complex gaming machines can be very difficult and challenging, because the most appropriate theoretical hold percentage is so dependent upon the different amounts of permitted coin-in betting wagers ( e.g. 1-coin, 2-coin, 3-coin, etc. ) that players may actually decide to make during a given reporting period. The weighted average calculation, which is currently required by subsection 542.13(h)(2), essentially weighs the different permitted player wagering decisions, by multiplying the total amount wagered for each permitted coin-in wager amount times the specified theoretical hold percentage for that wager. Then the sum of the individual theoretical hold results for each permitted coin-in wager amount is divided by the total amount of coin-ins, to give a weighted average theoretical hold percentage for use in analyzing that gaming machine's overall performance during the reporting period.

Based on past MICS compliance audits and consultation with other gaming jurisdictions, the Commission has determined that the currently required weighted average calculation does not necessarily produce the most reliable adjusted theoretical hold percentage for analyzing the performance of complex gaming machines (other than multi-gaming and multi-denominational gaming machines) which have multiple specified theoretical hold percentages. Practical experience also demonstrates that this is also true regardless of whether the spread between the minimum and maximum specified theoretical hold percentages for such complex gaming machines exceeds 4%. Accordingly, the Commission proposes to delete subsection 542.13(h)(2) in its entirety.

In particular, the Commission has determined that, excluding multi-game and multi-denominational gaming machines, complex gaming machines with multiple specified theoretical hold percentages possess certain characteristics that generally result in most bettors making the maximum allowed coin-in wager. Typically, the pay tables for such machines provide for a disproportionately larger payout for maximum coin-in wagers. This naturally causes most players to bet the maximum allowable number of coins-in. Consequently, the weighted average calculation generally produces an adjusted theoretical hold percentage that is not significantly different than simply selecting the machine's most conservative or smallest specified theoretical hold percentage. Therefore, it is proposed that the required weighted average calculations in subsection 542.13(h)(2) for complex gaming machines, other than multi-game and multi-denomination gaming machines, be deleted regardless of the spread between the machines' minimum and maximum specified multiple theoretical hold percentages. Although no longer required, circumstances may still dictate use of the weighted average calculation for such gaming machines, instead of simply selecting the most conservative or smallest specified theoretical hold percentage for the machine. In those circumstances, it will remain the responsibility of Tribal gaming management, subject to Tribal Gaming Regulatory Authority (TGRA) oversight, to utilize appropriate weighted average calculations to determine the proper adjusted theoretical hold percentages for accurate and reliable analysis of gaming machine performance.

The Commission also proposes to revise subsection 542.13(h)(4) by renumbering it as the new subsection 542.13(h)(2); extending the required use of weighted average calculations to determine the adjusted theoretical hold percentage for both multi-game and multi-denominational gaming machines; and deleting the 4% or greater spread criteria regarding the minimum and maximum specified theoretical payback percentage for such machines. While concluding that weighted average calculations need not be required for determining the most appropriate adjusted theoretical hold percentage for other complex gaming machines with multiple specified theoretical hold percentages, the Commission has determined that such calculations are essential for reliable analysis of the performance of multi-game and multi-denominational gaming machines, regardless of whether the spread between their minimum and maximum specified theoretical hold percentages is more or less than 4%. Therefore, the Commission proposes to add multi-denominational gaming machines to the weighted average calculation requirement in current subsection 542.13(h)(4), and also to delete the current requirement that the spread between the minimum and maximum specified multiple theoretical hold percentages must exceed 4% before any weighted average calculations are required to determine the appropriate adjusted theoretical hold percentage for either multi-game or multi-denominational gaming machines. In contrast to other complex gaming machines with multiple specified theoretical hold percentages, multi-game and multi-denominational gaming machines do not possess common characteristics that result in reasonably predictable player decisions regarding the individual programmed games of the multi-game gaming machine they elect to play or the amount or denomination of their wager. Instead player wagering decisions can vary widely and player game/denomination selections are also highly unpredictable and often subject to the effects of intervening management decisions, such as the activation/cancellation of game options, device location, gaming floor mix, and paytable alternatives. Thus, to effectively identify a reliable adjusted theoretical hold percentage for analysis of multi-game and multi-denominational gaming machine performance requires a weighted average calculation of player coins-in-wagering for each wager/game/denomination paytable player option. Furthermore, it is the Commission's considered judgment that such calculations are required and necessary regardless of whether the spread between the minimum and maximum specified multiple theoretical hold percentage for the multi-game and/or multi-denominational gaming machine exceeds 4%.

Based on past experience and interaction with Tribal gaming regulatory authorities, the Commission has determined that the current six (6) months play threshold in subsection 542.13(h)(19) for determining when a gaming machine is required to be included in the gaming machine analysis report is not practical or appropriate. Consequently, to more accurately define when the comparison and investigation of large variances between actual and theoretical hold is required, the Commission proposes to revise subsection 542.13(h)(19) by renumbering it as subsection 542.13(h)(18) and replacing the six (6) months play threshold with a play threshold of at least 100,000 wagering transactions.

In recognition of the varying processes that exist in the gaming industry relative to the time period between currency drops for gaming machines, the Commission has determined that the current standard in subsection 542.13(m)(6) requiring weekly comparison of the bill-in meter readings to the total bill acceptor drop is impractical and too inflexible. Accordingly, the Commission proposes to delete the currently required weekly comparison and replace it within an every “drop period” requirement. The term “drop period” is proposed to be defined in section 542.2 as the period of time between sequential drops.

Furthermore, in consideration of the above proposed revision, the Commission also proposes to revise subsection 542.13(m)(7) by deleting the current $200.00 threshold for required follow-up investigation of an unresolved variance between actual currency drop and bill-in meter reading and replacing it with a threshold amount that is “both more than $25.00 and at least 3 percent (3%) of the actual currency drop.”

Comments were received supporting the deletion of both standards, indicating that the process will potentially become simpler. Comment was received supporting the deletion of the standards and the willingness of the Commission to accept alternative methods of identifying the appropriate theoretical payback/hold percentage for the machines in question, which will often involve simply selecting the most conservative theoretical hold percentage within the range of acceptable parameters established by the game manufacturer. Such a procedure is founded upon the premise that patrons will generally opt for max coin bet. Comment was received objecting to the proposed striking of the weighted average calculation for complex gaming machines with a spread between theoretical payback percentages greater than 4%. It was noted that on-line computerized accounting systems for gaming machines capture the required data and facilitate the identification of an optimal theoretical payback/hold percentage for game analysis. Consequently, the commenter contended there is no compelling need to strike the standard. Comment was received questioning whether the standard requires the data to be collected by hard meter or whether soft meters are acceptable.

The Commission concurs with the commenter that the selection of the most conservative hold percentage will generally produce a benchmark for analysis of complex gaming machines, other than multi-game and multi-denominational machines, that will enable the gaming machine analysis report to be accurate and effective. However, should such a procedure not be reflective of the method of play of the gaming operation's patrons, the weighted average calculation would become the desired alternative. By striking the standard, the Commission is deferring to the Tribal Gaming Regulatory Authority (TGRA) to ensure Tribal gaming management employs procedures appropriate to identify reliable theoretical payback/hold percentages for analyzing the performance of their complex gaming devices with multiple specified theoretical hold percentages (excluding multi-gaming and multi-denominational gaming machines). The Commission acknowledges that industry standard gaming machines and current technology on-line accounting systems greatly aid the process of collecting data. However, such on-line systems are not at this time required by the MICS for all gaming machines. Therefore, we do not agree that the striking of the standard lacks compelling justification.

The Commission refers the commenter to the MICS definitions regarding the question of whether hard or soft meters may be used to collect necessary game data and determine reliable theoretical payback/hold percentages for game performance analysis. In accordance with section 542.2, the term “meter” is defined as either hard or soft. Consequently, to satisfy the standard, either method of collection is permissible.

Comments were received acknowledging the need to extend the scope of the standard to include multi-denominational machines in addition to multi-game devices. Comment was received supporting the striking of the 4% theoretical payback percentage spread criteria with regards to multi-game and multi-denomination machines. The devices in question generally represent only a small portion of the typical gaming floor. Comment was received suggesting that, instead of quarterly meter reads, the meters could be read annually. Comment was also received questioning the need to make annual adjustments to the theoretical hold percentage for multi-game and multi-denomination devices, since the recalculation of the theoretical hold percentage results in only a nominal change. In addition, comment was also received regarding the task of calculating theoretical payback and hold percentages for multi-game machines that are also multi-denomination. The commenter questioned whether the necessary data could be extracted from such devices and, even if it could be obtained, the multi-tiered calculations would be exceedingly cumbersome. Finally, comment was received questioning whether the potential annual adjustment to theoretical hold required the gaming machine to be considered a new device for purposes of the gaming machine analysis report.

The Commission does not concur with the commenter recommendation that collecting the meter data on an annual basis is acceptable. With regards to the collection of wagering data from multi-game and multi-denominational gaming machines, the more data collected the greater the confidence in the analysis of patron betting habits and, consequently, the more reliable the identification of a reliable theoretical hold percentage. Due to the changes in machine mix and location that frequently occur on the gaming floor, the Commission believes the subject data should be collected on a quarterly basis. The Commission does not agree with the comment that the annual review and adjustment of the previously determined theoretical hold percentage is of no value. We agree with the premise that, if the gaming floor remained unaltered from one year to the next, the betting habits of the patrons are likely to remain constant. However, changes to the gaming floor are typically frequent, as management attempts to generate the greatest return on the square footage allocated to the gaming machine department. Such modifications may involve additions and removals of devices, movement of machines on the gaming floor, activation/deactivation of various game options (such as bonusing), changing the mix of games offered or increasing or restricting the different denominations accepted. Each of these management decisions can impact the theoretical hold of the multi-game and multi-denominational gaming machines in question. We can certainly understand management electing not to make an adjustment to the theoretical hold when the amount of the adjustment will have no significant impact on the reliability of the gaming machine analysis reports. However, due to the volatility of the gaming floor and the potential effect such volatility can have on patron betting habits, we believe the annual testing of previously determined theoretical hold percentages to be a necessary management practice.

The Commission appreciates the concern raised by a commenter regarding the process of determining a reliable theoretical hold percentage for multi-game devices that also accept multi-denomination wagers. The Commission acknowledges that the standard is intended to address either multi-game or multi-denomination but is awkward in its application with regards to devices that possess both characteristics. The standard would imply that a multi-tiered level of weighted average calculations would be required. That, for each denomination within each game, the corresponding theoretical hold would be weighted by patron selection and then the resulting game weighted average theoretical hold would be weighted by patron game selection. Although the exercise would certainly produce a theoretical hold percentage for use in the game analysis report possessing a high level of confidence, we question whether such an in depth examination of the various theoretical percentages, weighted by patron selection, is necessary to identify a reasonable benchmark to measure actual game performance. Generally speaking, we believe it would be acceptable to calculate a simple weighted average of the various denominational theoretical hold percentages contained within each game, and then use that average theoretical hold percentage in the weighted average calculation based on patron game selection. Furthermore, to make additional reductions in the number of calculations, management might consider grouping games with similar theoretical hold percentages, i.e. those with a difference of less than 0.5 percentage points. In summation, it is important not to lose sight of the ultimate objective of the standards relevant to the statistical tracking of gaming performance, which is to employ a process that is effective in identifying deviations of actual performance from the manufacturer's specifications that warrant investigation. Such deviations may simply result from normal play, or be caused by gaming machine defect, malfunction, cheating, embezzlement, or other improper tampering. Relevant to this overall process is the fact that many frauds have occurred in Tribal gaming over the past few years involving false or fraudulent gaming machine payouts that could have been detected sooner, if the gaming operation had had an effective process for measuring the appropriateness of actual gaming machine performance.

In response to the question raised by a commenter whether the annual adjustment to theoretical hold percentage requires a gaming machine to be given a new machine (asset) number for purposes of the gaming machine analysis report, the Commission refers the commenter to section 542.13(h)(16). That section explicitly exempts annual theoretical hold adjustments made in accordance with section 542.13(h)(2) from the general requirement that the adjusted machine be treated as a new machine. Consequently, creation of a new machine number is not required when such adjustments occur.

Comment was received recommending that, instead of the Commission just striking the six (6) month play threshold from section 542.13(h)(18), consideration should be given to replacing it with a threshold of 100,000 wagering transactions, which should be sufficient to trigger a gaming machine's required inclusion in the gaming machine analysis report. Comments were received strongly supporting the change from a specified time period to a fixed number of wagering transactions, to determine when a gaming machine should be included in the analysis of actual hold performance to theoretical hold. Comment was also received suggesting that the PAR sheets provide information more relevant to when a particular device has experienced sufficient play to be included in the gaming machine analysis process. Comment was also received suggesting that the recommended range of acceptable deviations from theoretical of +/−3 percentage points should be struck from the MICS. The commenter noted that it should be left up to the discretion of the TGRA as the primary gaming regulator to make the determination. Additional comment was also received recommending that it should also be left to the TGRA to determine when sufficient play exists to require the machine to be included in the gaming analysis report, since the performance of some devices should be examined prior to 100,000 wagering transactions, while others may require more play before any investigation of deviations between actual and theoretical performance is worthwhile. Finally, comment was received suggesting that a computerized application utilizing a volatility indexing mathematical program should be an acceptable alternative to the process required by the MICS. Such programs employ a mathematical formula that estimates the minimum and maximum ranges of acceptable theoretical payback/hold percentages for a given machine based on the following: (1) The theoretical payback/hold over the expected life of the machine; (2) the number of winning combinations; (3) the payback/hold for the winning combinations; and (4) the number of games played. In essence, the program considers the game characteristics and determines a tolerable range of accepted performance, which narrows as performance predictability increases. Typically predictability increases commensurate with increasing levels of wagering activity.

The Commission concurs with the commenter's recommendation that the standard would be better served by replacing the specified time period with a minimum number of wagering transactions. The proposed revision to section 542.13(h)(18) has, accordingly, been modified to reflect that recommendation. The Commission also appreciates the suggestion made by the commenter that determining when sufficient data exists to perform the analysis of actual game performance should include consideration of the data contained within the PAR sheet. It is important to recognize that the 100,000 wagering transaction standard establishes a minimum threshold for devices to be included in the required gaming machine analysis report; however, it is also well understood that the investigation of unacceptable deviations between actual and theoretical game performance is a complex process. To comment on how the Commission determined the proposed 100,000 wager transaction threshold, a random number generator (RNG) with a ten (10) million cycle will produce a range between minimum and maximum confidence factors of approximately three (3) percentage points, which we believe justifies an investigation of an unacceptable deviation, which industry practice would identify to be +/− 3 percentage points between actual hold and theoretical hold. However, the analyst should also consider the relevant PAR sheet in determining the extent to which follow-up analysis and investigation is warranted. For example, a multi-game device, particularly if it also accepts multi-denomination, may in fact need more than 100,000 wagering transactions before it is worthwhile to review past performance, i.e. look for an abnormally large payout within the audit period. With such a device, the analyst may determine that insufficient play has occurred to perform an in depth review of past performance and would merely document his/her determination. Within reason, we would not consider such a determination to be noncompliant with the standard.

The Commission does not agree with the commenter's suggestion that the recommended acceptable deviation range of +/− 3 percentage points be struck from the MICS. We believe the recommended range represents industry practice and is a reasonable threshold to ensure that the gaming machine analysis process will be effective. The Commission also disagrees with the commenter's recommendation that it should be left to the discretion of the TGRA to decide when a device must be included in the gaming machine analysis report. For the regulations governing the statistical tracking of gaming performance and the comparison of actual performance to the manufacturer's theoretical performance specifications to be effective, the regulation must be precise and reasonably uniform in defining its applicability. However, we do acknowledge that the analysis of the data possesses an element of subjectivity, which in turn necessitates that the analyst have a professional level of expertise. Inclusion of a gaming machine in the required gaming analysis report does not necessarily dictate that an in depth investigation of all variances is warranted, but does require that the gaming performance analyst/reviewer document the results of their determination.

Finally, the Commission appreciates the suggestion by a commenter that a volatility indexing mathematical program may produce results as reliable as, or even more reliable, than the weighted average calculation required for multi-game and multi-denominational gaming machines in the MICS. In response, it is noteworthy that at section 542.3(c), the TGRA is required to adopt regulations that provide a level of control that equals or exceeds the MICS. Although the rule does not condone the TGRA accepting management procedures that are in conflict with the MICS, it does not preclude acceptance of procedures or controls that are different and at least as stringent as those contained within the MICS. Furthermore, at section 542.13(b), computerized applications that provide at least the same level of control as the MICS are deemed to be acceptable under the current MICS. Based on the data provided by the commenter, it is the belief of the Commission that the noted mathematical formula would be an acceptable alternative procedure. However, it is incumbent upon management to adequately document the process and its effectiveness in providing the required level of control and reliability in analyzing game performance.

Comments were received concurring with the proposed revision. Comment was also received noting that the proposed standard is stricter, but also acknowledging that the impact on management's gaming machine accounting/audit function should be nominal. Finally, comment was received supporting the proposed revision and noting that it should make the follow-up process less cumbersome.

Comment was received suggesting language in the initially proposed revision to clarify the applicability of $25 or 3%. Comment was received objecting to the revision because it would allow variances to go uninvestigated that should be subjected to review. Basically, the commenter contends that the rule is too liberal and results in the control being ineffective. Comment was received recommending the threshold be 5% and $25.

The Commission accepts the commenter recommendation regarding more explicit language and has modified the proposed revision accordingly. The Commission understands the commenter concern for the rule becoming less stringent and possibly ineffective. However, the existing rule requires that a variance of $200 per machine per week must be investigated. Assuming the Tribal gaming operation performs a daily drop, the average variance threshold per day would be $28.57. Because the drop must exceed $833.33 before the 3% criteria becomes effective, for all practical purposes, the vast majority of variances will be subject to the $25 threshold. Consequently, we do not believe the revision will have a material impact on the effectiveness of the control. However, by changing the time frame from a week to a drop period, we believe the standard becomes more consistent with the workflows of the revenue audit process. The Commission does not concur with the recommendation that the threshold be increased to 5% or $25. With regards to drop amounts, the proposed rule results in the $25 threshold being applicable to drops of $25 to $833.33. The commenter recommendation would cause the $25 threshold to be applicable to drops of $25 to $500, which would, in effect, result in a lessening of the control. We do not believe there is a compelling basis for making the recommended change.

Since initial adoption, this standard has often been a troublesome requirement for management and Tribal gaming regulatory authorities to implement and enforce. The NIGC is not unsympathetic to the challenges created by the regulation when a vendor is uncooperative. Although not wishing to discourage Tribal regulators or gaming operators from striving to ensure that vendor products are compliant with all applicable Tribal laws and regulations, the NIGC does not believe such a control contained within the part 542 is appropriate as a minimum standard and proposes to delete and revise the Information Technology Section accordingly.

Comment was received supporting deletion of the standard, but noting that management should continue to be held accountable by the TGRA to ensure that agreements/contracts are not entered into that would cause the gaming operation to be noncompliant with any Tribal, State or Federal laws or regulations. Furthermore, the TGRA should not hesitate to enact and enforce such regulations of their own specific to vendor contract requirements. Comment was also received supporting deletion of the standard because it creates an undue hardship on management in the negotiation of vendor agreements. Additional comment was received supporting the deletion of the standard because violations by vendors are often difficult and troublesome to enforce, which causes the regulation to be fairly meaningless. Other comment was received objecting to deletion of the standard because it provides an added level of protection for Tribes from unscrupulous vendors in their gaming enterprises. Additional comment was received from a TGRA noting that, notwithstanding deletion of the standard from the MICS, the Tribe intends to keep the control in their regulations, which is a Tribe's right as primary regulator under IGRA.

The Commission does not concur with the comments objecting to deletion of the standard. Although it could be argued that the Commission should exercise greater regulatory authority over gaming vendors to protect the integrity of Tribal gaming, we do not believe the standard in question represents an appropriate and effective vehicle for accomplishing that objective.

To more clearly describe the current variance process, the NIGC proposes to revise section 542.18 of the MICS. Specifically, the revisions are intended to more clearly describe the authority and duties of the Chairman, his/her designee, and the full Commission, and the appeal rights of the Tribal petitioner. The proposed revisions are also proposed to ensure that an adequate factual investigation and record is developed for administrative and judicial review of the merits of the Chairman's decision on each variance request.

Comment was received supporting the proposed revisions. Comment was also received supporting the revisions, except for that part that prohibits the implementation of a TGRA approved variance until after concurrence has been received from the Commission. Comment was received questioning whether the petitioner Tribe has the authority to extend stipulated time frames in the variance process. Additional comment was received questioning whether the thirty (30) day period associated with a review by NIGC staff of a resubmission was sufficient. Further comment was received questioning the potential result of a petitioner objecting to an extension of a stipulated time period requested by NIGC staff. Specifically, the concern is that refusal of such a request might result in summary denial of the variance request. Comment was also received questioning the need for extensions of the time frames provided. A commenter represented that the stipulated time periods should be sufficient. Finally, comment was received suggesting that the Commission should consider variance requests only after they have been approved by the TGRA.

The Commission understands the commenter's objection to deferring implementation of a TGRA approved variance until receipt of Commission concurrence; however, to preserve the integrity of the MICS, the regulatory body responsible for its enactment must have the latitude to prohibit the implementation of procedures deemed to be unacceptable and contrary to the NIGC's MICS regulations. The Commission also recognizes that the variance concurrence process is one initiated by the petitioner. Therefore, the Commission would not be unreasonable in considering requests for additional time from the petitioner. It is noteworthy to such a position that the implementation of the proposed alternative procedure is precluded until after the Commission has concurred. The Commission acknowledges the concern expressed by a commenter regarding the time afforded NIGC staff to review a resubmission. Therefore, language has been added to enable staff to extend the period, subject to concurrence by the petitioner. The Commission understands the concern expressed by a commenter regarding a possible decision not to concur, if acceptance of an extension to a stipulated time period was not agreed. Certainly, the petitioner should be well aware that the investigation of pertinent facts and data associated with a variance request may take hours or many months, depending upon its complexity. Although requests for additional time should be reasonable and based on cause, the petitioner should also be well aware that the undue refusal to grant additional time may result in a determination different than that which would have otherwise been rendered, if the petitioners had agreed to the Chairman's request for more adequate time to investigate and decide their variance request. Notwithstanding the question pertaining to extension of time frames, the petitioner's right to appeal would continue to exist.

The Commission disagrees with the commenter's contention that time period extensions are not warranted. Although some variance requests can be readily addressed, particularly if the staff charged with performing the research has past experience with similar requests, most will involve extensive analysis. Seldom is a petition simply responded to. Instead, a filing will generally initiate a back and forth exchange with the petitioner as staff seeks additional information or clarifications regarding the requested variance. Alternative procedures involving new technology often involve travel by staff to consult with manufactures and other regulators or operators. Inherent to the analysis of a variance request is the identification of risk and evaluation of compensating controls. The time periods contained within the regulation will generally be appropriate for the more simple concurrence requests; however, complex requests will typically require one or more extensions of the allotted time frame. The Commission concurs with the commenter's suggestion regarding consideration of variance requests only after they have been approved by the TGRA. In accordance with the proposed rule, a variance request received by the Commission lacking evidence of the TGRA approval would not be considered. Since such a submission would lack authority.

Section 542.21(t)-(w) What are the minimum internal controls for drop and count for Tier A gaming operations?

Section 542.31(t)-(w) What are the minimum internal controls for drop and count for Tier B gaming operations?

Section 542.41(t)-(w) What are the minimum internal controls for drop and count for Tier C gaming operations?

These are proposed new MICS sections. In recognition of an increasing number of gaming operations utilizing or considering the utilization of computerized key control systems, the NIGC has determined that regulations addressing such systems are warranted for Tier A, B, and C Tribal gaming operations.

Comment was received supporting the proposed revisions noting that electronic key control systems are becoming more prevalent. Comment was also received supporting the determination by the Commission to adopt standards specifically covering the use of computerized key control systems in Tier A, B, and C gaming operations and not rely solely on the general MICS regulation covering computerized applications. Comment was also received supporting the new regulation and noting that the controls also provide for an audit function. Comment was received supporting the new regulation, but noting that the TGRA should also consider more stringent standards. Comment was received recommending that the auditing procedures, particularly the quarterly inventory of keys, be performed by accounting/auditing personnel independent of the key control process. Additional comment was received questioning the need for the regulations since most of the controls are already in the MICS. Comment was received recommending that the regulation more clearly differentiate the function of key custodian from system administrator. Comment was also received questioning the need for three persons to be involved in accessing the manual override key to open the box to perform repairs. It was noted that the persons accessing the box would not have access to the slot drop and count keys. For the purpose of making repairs, only two persons should be required to gain access to the manual override key.

The Commission disagrees with the commenter questioning the need for the new regulations. Computerized key control systems have been the subject of several Tribal variance requests over the past few years. Therefore, the Commission believes it appropriate to establish minimum standards specific to such systems. The Commission concurs with the commenter recommendation that the auditing procedures be performed by accounting/auditing personnel independent of the key control process. The proposed regulation for all three tiers has been changed accordingly. The Commission also concurs with the commenter's recommendation that the key custodian functions be more clearly defined and noted as being separate from those of the system administrator. Accordingly, the proposed revisions been modified in all three new sections to more clearly define separation of the two functions. The Commission also concurs with the commenter's suggestion that only two people be required to access the manual override key to make repairs to the key control box. Such access would not include access to the coin drop and count keys. The proposed revisions have been modified to reflect the suggestion of the commenter in all three proposed new MICS sections.

The Commission certifies that the proposed revisions to the Minimum Internal Control Standards contained within this regulation will not have a significant economic impact on small entities, 5 U.S.C. 605(b). The factual basis for this certification is as follows:

Of the 330 Indian gaming operations across the country, approximately 93 of the operations have gross revenues of less than $5 million. Of these, approximately 39 operations have gross revenues of under $1 million. Since the proposed revisions will not apply to gaming operations with gross revenues under $1 million, only 39 small operations may be affected. While this is a substantial number, the Commission believes that the proposed revisions will not have a significant economic impact on these operations for several reasons. Even before implementation of the original MICS, Tribes had internal controls because they are essential to gaming operations in order to protect assets. The costs involved in implementing these controls are part of the regular business costs incurred by such an operation. The Commission believes that many Indian gaming operation internal control standards that are more stringent than those contained in these regulations. Further, these proposed rule revisions are technical and minor in nature.

Under the proposed revisions, small gaming operations grossing under $1 million are exempted from MICS compliance. Tier A facilities (those with gross revenues between $1 and $5 million) are subject to the yearly requirement that independent certified public accountant testing occur. The purpose of this testing is to measure the gaming operation's compliance with the tribe's internal control standards. The cost of compliance with this requirement for small gaming operation is estimated at between $3,000 and $5,000. The cost of this report is minimal and does not create a significant economic effect on gaming operations. What little impact exists is further offset because other regulations require yearly independent financial audits that can be conducted at the same time. For these reasons, the Commission has concluded that the proposed rule revisions will not have a significant economic impact on those small entities subject to the rule.

These following proposed revisions do not constitute a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. The revisions will not have an annual effect on the economy of $100 million or more. The revisions also will not cause a major increase in costs or prices for consumers, individual industries, federal, state or local government agencies or geographic regions and does not have a significant adverse effect on competition, employment, investment, productivity, innovation, or the ability of U.S. based enterprises to compete with foreign-based enterprises.

The Commission is an independent regulatory agency and, as such, is not subject to the Unfunded Mandates Reform Act. Even so, the Commission has determined that the proposed rule revisions do not impose an unfunded mandate on State, local, or Tribal governments, or on the private sector, of more than $100 million per year. Thus, this is not a “significant regulatory action” under the Unfunded Mandates Reform Act, 2 U.S.C. 1501 et seq.

The Commission has, however, determined that the proposed rule revisions may have a unique effect on Tribal governments, as they apply exclusively to Tribal governments, whenever they undertake the ownership, operation, regulation, or licensing of gaming facilities on Indian lands, as defined by the Indian Gaming Regulatory Act. Thus, in accordance with Section 203 of the Unfunded Mandates Reform Act, the Commission undertook several actions to provide Tribal governments with adequate notice, opportunity for “meaningful” consultation, input, and shared information, advice, and education regarding compliance.

These actions included the formation of a Tribal Advisory Committee and the request for input from Tribal leaders. Section 204(b) of the Unfunded Mandates Reform Act exempts from the Federal Advisory Committee Act (5 U.S.C. App.) meetings with Tribal elected officials (or their designees) for the purpose of exchanging views, information, and advice concerning the implementation of intergovernmental responsibilities or administration. In selecting Committee members, consideration was placed on the applicant's experience in this area, as well as the size of the Tribe the nominee represented, geographic location of the gaming operation, and the size and type of gaming conducted. The Commission attempted to assemble a Committee that incorporates diversity and is representative of Tribal gaming interests. The Commission will meet with the Advisory Committee to discuss the public comments that are received as a result of the publication of the following proposed MICS rule revisions, and will consider all Tribal and public comments and Committee recommendations before formulating the final rule revisions. The Commission also plans to continue its policy of providing necessary technical assistance, information, and support to enable Tribes to implement and comply with the MICS as revised.

The Commission also provided the proposed revisions to Tribal leaders for comment prior to publication of this proposed rule and considered these comments in formulating the proposed rule.

In accordance with Executive Order 12630, the Commission has determined that the following proposed MICS rule revisions do not have significant takings implications. A takings implication assessment is not required.

In accordance with Executive Order 12988, the Office of General Counsel has determined that the following proposed MICS rule revisions do not unduly burden the judicial system and meet the requirements of sections 3(a) and 3(b)(2) of the Order.

The following proposed MICS rule revisions require information collection under the Paperwork Reduction Act 44 U.S.C. 3501 et seq. , as did the rule it revises. There is no change to the paperwork requirements created by these proposed revisions. The Commission's OMB Control Number for this regulation is 3141-0009.

The Commission has determined that the following proposed MICS rule revisions do not constitute a major Federal action significantly affecting the quality of the human environment and that no detailed statement is required pursuant to the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq ).

Accordingly, for all of the reasons set forth in the foregoing preamble, the National Indian Gaming Commission proposes to amend 25 CFR part 542 as follows:

For further information, please see the direct final action, of the same title, which is located in the Rules and Regulations section of this Federal Register . EPA is approving the State's SIP revision as a direct final rule without prior proposal because EPA views this as a noncontroversial SIP revision and anticipates no adverse comments. A detailed rationale for the approval is set forth in the preamble to the direct final rule. If EPA receives no adverse comments, EPA will not take further action on this proposed rule.

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

Outline: The information presented in this NODA is organized as follows:

To expedite review of your comments by Agency staff, you are encouraged to send a separate copy of your comments, in addition to the copy you submit to the official docket, to William Maxwell, U.S. EPA, Office of Air Quality Planning and Standards, Emission Standards Division, Mail Code C439-01, Research Triangle Park, North Carolina 27711, telephone (919) 541-5430, e-mail maxwell.bill@epa.gov.

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.

On January 30, 2004, EPA issued a proposed CAMR under the CAA concerning power plants. 3 That proposed rule presents two primary approaches to regulating Hg and Ni from power plants. Those approaches are (1) retaining the Agency's December 20, 2000, determination that regulating power plants under CAA section 112 is “appropriate and necessary” and issuing final emission standards under CAA section 112(d); and (2) revising our December 2000 “appropriate and necessary” determination, removing power plants from the CAA section 112(c) list, and issuing final standards of performance for coal-fired power plants using a “cap-and-trade” methodology. 4

In response to the January 2004 proposal and the March 2004 supplemental proposal, we received over 680,000 public comments, including almost 5,000 unique comments. Among other things, the comments addressed how the power sector could respond to different levels of control on Hg emissions. In particular, we received comments on EPA's IPM modeling results, including our modeling assumptions. We also received modeling analyses conducted by different commenters, some of which used models and/or assumptions different from EPA's. Based on the importance of, and the level of interest in, these modeling analyses, this NODA summarizes the modeling analyses performed by commenters and solicits comment on the inputs and assumptions underlying those analyses and other issues related to benefit-cost analysis.

We also received comments concerning the speciation of Hg. As we explained in the proposed rule, the degree to which emissions control devices can remove Hg depends, in large part, on the amount of each form (or species) of Hg present in the flue gas. The three relevant species of Hg are elemental Hg (Hg 0 ), ionic or oxidized Hg (Hg + 2 ), and particulate Hg (Hg p ). 5 The Hg in the flue gas from a coal-fired utility unit consists of these three forms of Hg. Because of the importance of the relationship between Hg speciation and the level of Hg reduction achievable, we are seeking additional information on Hg speciation from coal-fired power plants to further inform our regulatory decision.

The comments concerning the impact of different levels of emissions control on the power sector and the speciation of Hg relate to both of the two proposed regulatory approaches described above. With respect to the CAA section 112(d) regulatory approach, the comments are relevant to whether EPA should adopt a CAA section 112(d) standard that is more stringent than the floor ( i.e. , a beyond-the-floor standard) and at what level such a standard should be set. In evaluating a beyond-the-floor standard under CAA section 112(d), EPA must consider cost, nonair quality health and environmental impacts, and energy impacts. 6 With respect to the CAA section 111 regulatory approach, the comments are relevant to the level at which standards of performance should be set. Similar to the beyond-the-floor analysis under CAA section 112(d), EPA must consider cost, nonair quality health and environmental impacts, and energy requirements in defining the best system of emission reduction under CAA section 111.

We recognize that the public already has access to the comments submitted on the January 2004 proposed rule and the March 2004 supplemental proposal. However, because of the large volume of comments received on those proposals, we issue the NODA today to summarize and solicit comment on the new data and information presented in the comments that are relevant to benefit-cost analysis and to the regulatory approaches under consideration.

The Agency intends to make a final decision on its pending utility proposal by March 15, 2005. EPA is still considering the comments submitted on the proposal and supplemental proposal and evaluating which regulatory approach to pursue.

1. Overview. This section of the NODA addresses how the power sector is predicted to respond to different levels of emissions control. As we explained in the proposed CAMR, in designing regulatory programs for the electric power sector, it is important to consider (forecast) ways the power sector could respond to such programs.

In the proposed CAMR, EPA provided a forecast of how the power generation mix in the United States (U.S.) would respond to a particular regulatory approach. 7 In response to the proposed rule, several commenters provided their own forecasts of power sector response. In some cases, the regulatory scenarios modeled by commenters were the same or similar to those modeled by EPA. In these cases, we can better understand the importance of different input assumptions by comparing and contrasting the modeling performed. In other cases, the commenters modeled alternative approaches and provided information about the tradeoffs in regulatory design. The submitted modeling addresses regulatory alternatives that are both more and less stringent than our proposal. In all cases, the models are designed to predict a least-cost solution to meeting electricity demand, subject to the model input assumptions and constraints imposed. These constraints can include restrictions on the availability of specific control technologies. EPA is currently performing an evaluation of the modeling analyses submitted by commenters.

To aid in our decision-making process, we are seeking comment on the different input assumptions and constraints and the different modeled regulatory approaches as presented in the commenter's modeling analyses described below. We also identify below our questions of particular interest concerning the new data and information presented in the comments.

2. What is IPM? EPA uses IPM, developed by ICF Consulting (ICF), to assess how the electric power industry will respond to various environmental policies affecting that industry. IPM is a dynamic linear programming model that can be used to examine air pollution control policies for Hg and other pollutants throughout the contiguous U.S. for the entire power system. IPM finds the least-cost solution to meeting electricity demand subject to environmental, transmission, reserve margin, and other system operating constraints for any specified region and time period. For a given control policy, IPM provides an electricity generator with various compliance options, including adding pollution controls, changing fuel type, and changing dispatch considerations. In addition, IPM provides information on fuel market interactions and impacts on the cost of electricity.

Through licensing agreements with ICF, IPM is used by both public and private sector clients. EPA contracted with ICF to develop a version of IPM that EPA uses for its own power sector modeling. EPA has used IPM to model the nitrogen oxides (NO X ) State implementation plan (SIP) call, the Clear Skies legislative proposal, the proposed Clean Air Interstate Rule (CAIR), and the proposed CAMR. 8 Documentation for how EPA has configured IPM for pollution control analysis can be found at http://www.epa.gov/airmarkets/epa-ipm.

Since it began using IPM as a power sector modeling tool, EPA has periodically reviewed and updated the assumptions and modeling capability of IPM. These updates have included the addition to IPM of the capability to model Hg emissions and Hg control costs. However, EPA recognizes that its Hg-related assumptions are more uncertain than sulfur dioxide (SO 2 )- and NO X -related assumptions due to limited information on controlling Hg from the power sector. This is because, although we have recent data on Hg emissions from the power sector, and some data on how the Hg speciation profile influences the ability to control Hg emissions, the electric power industry has much less experience implementing Hg controls than it does SO 2 and NO X controls. Further, as described later in this NODA, the full impact of the mix of the various Hg species found in the flue gas on the level of control achievable continues to be investigated. 9

As discussed further below, some of the commenters submitted analyses using IPM. EPA's power sector modeling of the proposed CAMR CAA section 112(d) maximum achievable control technology (MACT) alternative using IPM 2003 is available in the docket in a memorandum titled “Economic and Energy Impact Analysis for the Proposed Utility MACT Rulemaking” (OAR-2002-0056-0048). EPA's power sector modeling of the proposed CAMR CAA section 111 trading rule can also be found in the docket at OAR-2002-0056-0338 to -0344.

3. What specific comments did EPA receive on its IPM modeling in response to the January 2004 proposal and the March 2004 supplemental proposal? During the comment period, EPA received numerous comments related to the regulatory approaches outlined in the January 2004 proposal and the March 2004 supplemental proposal. EPA received specific comments on the power sector modeling results from the following commenters: Center for Clean Air Policy (CCAP) (OAR-2002-0056-3447); Cinergy (OAR-2002-0056-4317 and -4318); Clean Air Task Force (CATF), Natural Resources Defense Council (NRDC), et al. (OAR-2002-0056-3459 and -3460); Edison Electric Institute (EEI) (OAR-2002-0056-2929, -4894, -4895, and -4896); and Electric Power Research Institute (EPRI) (OAR-2002-0056-2578).

Two of these commenters submitted the results of power sector modeling using a version of IPM and two commenters submitted analyses using a similar linear programming model. The CCAP submitted analyses of multi-pollutant control options for the power sector using a version similar to IPM 2003 employing different assumptions about electricity demand growth and natural gas prices. Cinergy submitted analyses performed using a version of IPM operated by ICF that included Cinergy's own unique modeling assumptions. The CATF submitted analyses on behalf of several environmental groups using EPA's IPM 2003. EEI submitted an analysis performed by Charles River Associates (CRA) using the Electric Power Market Model (EPMM; a linear programing model similar to IPM). The EPRI comments included the same EPMM analysis. The salient details of the individual analyses are described below.

a. What were the results of CCAP's power sector modeling? CCAP established a stakeholder policy dialogue on alternative designs of multi-pollutant legislative programs designed to control emissions from the power sector. Their analysis was performed using a version of IPM similar to EPA's IPM 2003 with different assumptions about electricity demand growth and natural gas prices. Some modeling was conducted using EPA's IPM 2002 assumptions about demand growth and natural gas prices, and some modeling analysis was conducted using the Energy Information Administration (EIA) assumptions about demand growth and natural gas prices.

CCAP sponsored a series of modeling runs to look at the costs and benefits of incremental changes in Hg cap levels and timing. The analysis was based on policy options similar to the Clear Skies proposal, using the same SO 2 and NO X caps and first phase Hg cap of 26 tons. Among the options analyzed, CCAP examined three scenarios that implemented incrementally more stringent Hg requirements in Phase 2: 15-ton cap in 2018 (Clear Skies), 10-ton cap in 2015, and 7.5-ton cap in 2015.

Although their comments included several other modeling runs, for comparison purposes EPA has summarized in Table 1 below CCAP's model runs assuming EIA AEO2003 gas and growth assumptions. EPA notes that the term “total installed capacity” used in Table 1 includes all currently installed controls and control retrofits needed to meet the modeled policy. EPA also notes that CCAP's results for the Phase 2 cap of 15 tons are taken from EPA's analyses of the Clear Skies Act. CCAP recommended that EPA adopt a tighter Phase 2 cap for the proposed Hg trading rule, concluding that incremental changes in the timing and stringency of a Hg cap have, in CCAP's opinion, relatively modest cost implications.

We solicit comments or suggestions from the public, other concerned governmental agencies, Tribes, the scientific community, industry, or any other interested parties concerning our proposed designation of critical habitat for Allium munzii (69 FR 31569) and our draft economic analysis for the proposed critical habitat designation. We particularly seek comments concerning:

(1) The reasons why any habitat should or should not be determined to be critical habitat as provided by section 4 of the Act, including whether the benefit of exclusion outweigh the benefits of specifying such area as part of the critical habitat;

(2) Specific information on the amount and distribution of Allium munzii and its habitat, and which habitat is essential to the conservation of the species and why;

(3) Land use designations and current or planned activities in the subject areas and their possible impacts on proposed critical habitat;

(4) Any foreseeable economic, national security or other potential impacts resulting from the proposed designation and, in particular, any impacts on small entities or families;

(5) Whether the economic analysis identifies and adequately addresses the likely effects and resulting costs arising from the California Environmental Quality Act and other State and local laws attributable to the proposed critical habitat designation. If not, what other cost are overlooked?;

(6) Whether the economic analysis makes appropriate assumptions regarding current practices and likely regulatory changes imposed as a result of the designation of critical habitat for Allium munzii ;

(8) Whether the economic analysis adequately addresses the indirect effects ( e.g. , property tax losses due to reduced home construction, losses to local business due to reduced construction activity), and accurately defines and captures opportunity costs associated with the critical habitat designation;

(9) Whether the economic analysis correctly assesses the effect on regional costs associated with land and water use regulatory controls that could arise from the designation of critical habitat for this species;

(10) Whether the designation of critical habitat will result in disproportionate economic or other impacts to specific areas that should be evaluated for possible exclusion from the final designation;

(11) Whether the economic analysis is consistent with the Service's listing regulations because this analysis should identify all costs related to the designation of critical habitat for Allium munzii and this designation was intended to take place at the time this species was listed; and

(12) All but one known occurrence of Allium munzii have been proposed for exclusion from this proposed designation of critical habitat for because they are within approved HCPs or the Western Riverside MSHCP. These areas are proposed for exclusion from critical habitat because we believe the value of excluding these areas outweighs the value of including them. We specifically solicit comment on the inclusion or exclusion of such areas and: (a) Whether these areas are essential; (b) whether these areas warrant exclusion; and (c) the basis for excluding these areas as critical habitat (section 4(b)(2) of the Act); and

(13) Whether our approach to critical habitat designation could be improved or modified in any way to provide for greater public participation and understanding, or to assist us in accommodating public concern and comments.

Comments previously submitted for this proposed rule need not be resubmitted as they have already been incorporated into the public record and will be fully considered in any final decision. If you wish to comment, you may submit your comments and materials concerning this proposal by any one of several methods ( see ADDRESSES section).

If you submit comments via e-mail, please submit them as an ASCII file and avoid the use of special characters or any form of encryption. Please also include “Attn: RIN 1018-AJ10” in your e-mail subject header and your name and return address in the body of your message. If you do not receive a confirmation from the system that we have received your internet message, contact us directly by calling our Carlsbad Fish and Wildlife Office at phone number (760) 431-9440. Please note that the e-mail address, fw1cfwoalmu@r1.fws.gov, will be closed out at the termination of the public comment period.

Our practice is to make comments, including names and home addresses of respondents, available for public review during regular business hours. Individual respondents may request that we withhold their home addresses from the rulemaking record, which we will honor to the extent allowable by law. There also may be circumstances in which we would withhold from the rulemaking record a respondent's identity, as allowable by law. If you wish us to withhold your name and/or address, you must state this prominently at the beginning of your comment. However, we will not consider anonymous comments. We will make all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, available for public inspection in their entirety. Comments and materials received will be available for public inspection, by appointment, during normal business hours at the above address.

Allium munzii is a bulb-forming perennial herb in the Liliaceae (lily family). The plants are dormant except in the spring and early summer months, and 3 to 5 years are required after seeds germinate for the plant to reach maturity and produce flowers (Schmidt 1980). Allium munzii is endemic to mesic clay soils in western Riverside County, California, throughout the foothills east of the Santa Ana Mountains extending south and east to the low hills south of Hemet (69 FR 31569; June 4, 2004). At present, there are 19 occurrences of Allium munzii according to the California Natural Diversity Database (CNDDB 2004). One historical population in the CNDDB was lost to development; however, the extent of the historical distribution of this plant is unknown. At the time of listing, the Service estimated the total population to be approximately 20,000 to 70,000 individuals. Please refer to the final listing rule for a more detailed discussion of the species' taxonomic history and description.

We published the final rule listing Allium munzii as endangered under the Endangered Species Act of 1973, as amended (Act) (16 U.S.C. 1531 et seq. ), in the Federal Register on October 13, 1998 (63 FR 54975). The listing was based on a variety of factors including habitat destruction and fragmentation from agricultural and urban development, clay mining, off-road vehicle activity, cattle and sheep grazing, weed abatement, fire suppression practices, and competition from alien plant species. A recovery plan for this species has not yet been completed.

At the time of listing, we concluded that designation of critical habitat for Allium munzii was not prudent because such designation would not benefit the species. On November 15, 2001, a lawsuit was filed against the Department of the Interior (DOI) and the Service by the Center for Biological Diversity and California Native Plant Society, challenging our “not prudent” determinations for eight plants including A. munzii (No. CV-01-2101) ( CBD et al. v. USDOI ). A second lawsuit asserting the same challenge was filed against DOI and the Service by the Building Industry Legal Defense Foundation (BILD) on November 21, 2001 (No. CV-01-2145) ( BILD v. USDOI ). Both cases were consolidated on March 19, 2002, and all parties agreed to remand the critical habitat determinations to the Service for additional consideration. In an order dated July 1, 2002, the U.S. District Court for the Southern District of California directed us to reconsider our not prudent finding and publish a proposed critical habitat rule for Allium munzii, if prudent, on or before May 30, 2004.

On June 4, 2004, we published a proposed rule to designate critical habitat for Allium munzii (69 FR 31569). We proposed to designate 227 acres (ac) (92 hectares (ha)) of critical habitat on Federal (U.S. Forest Service) lands in western Riverside County, California. We excluded 1,068 ac (433 ha) of State, local, and private lands from proposed critical habitat within approved Habitat Conservation Plans (HCPs) and the Western Riverside Multiple Species HCP (MSHCP), Riverside County, California. The first public comment period on the proposed designation closed on August 3, 2004.

Critical habitat identifies specific areas, both occupied and unoccupied, that are essential to the conservation of a listed species and that may require special management considerations or protection. If the proposed rule is made final, section 7 of the Act prohibits the destruction or adverse modification of critical habitat by any activity funded, authorized, or carried out by any Federal agency. Federal agencies proposing actions affecting areas designated as critical habitat must consult with us on the effects of their proposed actions, pursuant to section 7(a)(2) of the Act. We note, however, that a recent 9th Circuit judicial opinion, Gifford Pinchot Task Force v. United State Fish and Wildlife Service, has invalidated the Service's regulation defining destruction or adverse modification of critical habitat. We are currently reviewing the decision to determine what effect it may have on the outcome of consultations pursuant to section 7 of the Act.

Section 4(b)(2) of the Act requires that we designate or revise critical habitat on the basis of the best scientific and commercial data available, after taking into consideration the economic impact, impact to national security, and any other relevant impacts of specifying any particular area as critical habitat. We have prepared a draft Economic Analysis of the April 27, 2004 (69 FR 31569), proposed designation of critical habitat for Allium munzii.

The draft Economic Analysis considers the potential economic effects of actions relating to the conservation of Allium munzii, including costs associated with sections 4, 7, and 10 of the Act, and those cost attributable to designating critical habitat. It further considers the economic effects of protective measures taken as a result of other Federal, State, and local laws that aid habitat conservation for Allium munzii in essential habitat areas. The analysis considers both economic efficiency and distributional effects. In the case of habitat conservation, efficiency effects generally reflect the “opportunity costs” associated with the commitment of resources to comply with habitat protection measures ( e.g. , lost economic opportunities associated with restrictions on land use). This analysis also addresses how potential economic impacts are likely to be distributed, including an assessment of any local or regional impacts of habitat conservation and the potential effects of conservation activities on small entities and the energy industry. This information can be used by decision-makers to assess whether the effects of the designation might unduly burden a particular group or economic sector. Finally, this analysis looks retrospectively at costs that have been incurred to date since the date the species was listed as endangered species, and projects those costs that may occur in the 20 years following the designation of critical habitat.

Total economic impacts resulting from past Allium munzii -related conservation activities ( i.e. , activities since the species was listed in 1998) on all essential habitat are estimated to be $4.2 million. For the actual component of essential habitat being designated as critical habitat, the total estimated economic impact would be $9,866. In terms of future economic impacts, total economic efficiency costs resulting from Allium munzii -related conservation activities are estimated at $6.4 million from 2005 through 2025 for all essential habitat. For the actual component of essential habitat being designated as critical habitat, the total estimated economic efficiency costs would be $23,964 from 2005 through 2025. All of those costs are attributable to project modification and administrative costs that would be borne by the U.S. Forest Service.

In accordance with Executive Order 12866, this proposed designation of critical habitat is a significant rule only in that it may raise novel legal and policy issues. However, the Economic Analysis indicates that the proposed designation will not have an annual effect on the economy of $100 million or more or affect the economy in a material way. The Office of Management and Budget (OMB) has not formally reviewed this rule.

Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. , as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996), whenever an agency is required to publish a notice of rulemaking for any proposed or final rule, it must prepare and make available for public comment a regulatory flexibility analysis that describes the effects of the rule on small entities ( i.e. , small businesses, small organizations, and small government jurisdictions). However, no regulatory flexibility analysis is required if the head of the agency certifies the rule will not have a significant economic impact on a substantial number of small entities. The SBREFA amended the Regulatory Flexibility Act (RFA) to require Federal agencies to provide a statement of the factual basis for certifying that the rule will not have a significant economic impact on a substantial number of small entities. However, the SBREFA does not explicitly define “substantial number” or “significant economic impact.” Consequently, to assess whether a “substantial number” of small entities is affected by this designation, this analysis considers the relative number of small entities likely to be impacted in an area. The SBREFA also amended the RFA to require a certification statement. We are hereby certifying that this proposed rule will not have a significant effect on a substantial number of small entities.

According to the Small Business Administration, small entities include small organizations, such as independent nonprofit organizations, and small governmental jurisdictions, including school boards and city and town governments that serve fewer than 50,000 residents, as well as small businesses (13 CFR 121.201). Small businesses include manufacturing and mining concerns with fewer than 500 employees, wholesale trade entities with fewer than 100 employees, retail and service businesses with less than $5 million in annual sales, general and heavy construction businesses with less than $27.5 million in annual business, special trade contractors doing less than $11.5 million in annual business, and agricultural businesses with annual sales less than $750,000. To determine if potential economic impacts to these small entities are significant, we considered the types of activities that might trigger regulatory impacts under this rule as well as the types of project modifications that may result. In general, the term significant economic impact is meant to apply to a typical small business firm's business operations.

Designation of critical habitat only affects activities conducted, funded, or permitted by Federal agencies; non-Federal activities are not affected by the designation if they lack a Federal nexus. In areas where the species is present, Federal agencies funding, permitting, or implementing activities are already required to avoid jeopardizing the continued existence of Allium munzii through consultation with us under section 7 of the Act. If this critical habitat designation is finalized, Federal agencies must also consult with us to ensure that their activities do not destroy or adversely modify designated critical habitat through consultation with us.

Should a federally funded, permitted, or implemented project be proposed that may affect designated critical habitat, we will work with the Federal action agency and any applicant, through section 7 consultation, to identify ways to implement the proposed project while minimizing or avoiding any adverse effect to the species or critical habitat. In our experience, the vast majority of such projects can be successfully implemented with at most minor changes that avoid significant economic impacts to project proponents.

Based on our experience with section 7 consultations for all listed species, virtually all projects—including those that, in their initial proposed form, would result in jeopardy or adverse modification determinations in section 7 consultations—can be implemented successfully with, at most, the adoption of reasonable and prudent alternatives. These measures, by definition, must be economically feasible and within the scope of authority of the Federal agency involved in the consultation. The kinds of actions that may be included in future reasonable and prudent alternatives include avoidance, conservation set-asides, management of competing non-native species, restoration of degraded habitat, construction of protective fencing, and regular monitoring. These measures are not likely to result in a significant economic impact to project proponents.

In the case of Allium munzii, our review of the consultation history for this plant suggests that the proposed designation of critical habitat is not likely to have a significant impact on any small entities or classes of small entities. We considered the potential relative cost of compliance to these small entities and evaluated only small entities that are expected to be directly affected by the proposed designation of critical habitat. Based on the consultation history for Allium munzii, we do not anticipate that the proposed designation of critical habitat will result in increased compliance costs for small entities. The business activities of these small entities and their effects on Allium munzii or its proposed critical habitat have not directly triggered a section 7 consultation with the Service under the jeopardy standard and likely would not trigger a section 7 consultation under the adverse modification standard after designation of critical habitat. The proposed designation of critical habitat does not, therefore, create a new cost for the small entities to comply with the proposed designation. Instead, proposed designation only impacts Federal agencies that conduct, fund, or permit activities that may affect critical habitat for Allium munzii. Moreover, none of the small entities have been applicants with a Federal agency for a section 7 consultation with the Service.

As discussed in the Economic Analysis, activities in the proposed critical habitat unit are expected to result in small additional costs borne by the U.S. Forest Service and, possibly, the current special permit holders at the electric tower site. The U.S. Forest Service is a Federal agency and therefore not considered a small entity under SBREFA. In addition, only one of the four special permit holders is a small entity, and the projected impact to that small business is $250 to $1,000 in one year (representing 0.2 to 0.4 of the company's revenue). Utility companies are not expected to incur additional project-related costs in the critical habitat unit, but may incur additional costs in essential habitat areas. However, the utility companies involved do not qualify as small entities. Of the local government jurisdictions in close proximity to the critical habitat unit or essential habitat, only one qualifies as a small government. This government is not expected to be impacted by future conservation efforts for Allium munzii, according to the Economic Analysis.

In summary, we have considered whether this proposed designation would result in a significant economic impact on a substantial number of small entities, and we have concluded that it would not. Future consultations are not likely to affect a substantial number of small entities. We have no indication that the types of activities we review under section 7 of the Act will change significantly in the future. Thus, we conclude that the proposed designation of critical habitat for Allium munzii is not likely to result in a significant impact to this group of small entities. Therefore, we are certifying that the proposed designation of critical habitat for Allium munzii will not have a significant economic impact on a substantial number of small entities, and an initial regulatory flexibility analysis is not required.

Under the Small Business Regulatory Enforcement Fairness Act (5 U.S.C. 801 et seq. ), this rule is not a major rule. As previously discussed, we have excluded critical habitat from lands within the Western Riverside MSHCP and other HCPs under section 4(b)(2) of the Act. The exclusion of these lands and the activities associated with the Western Riverside MSHCP and HCPs eliminates the potential for critical habitat in these excluded areas to have any effect on the increase in costs or prices for consumers or any significant adverse effects on competition, employment, investment, productivity, innovation or the ability of U.S.-based enterprises to compete with foreign-based enterprises. Moreover, 100 percent of the designated critical habitat is on Forest Service lands that are not intensively used for commercial or business purposes, and we anticipate that the designation will have little to no effect on costs or prices for consumers or any other significant commercial or business related activities. In addition, the Economic Analysis indicates that the proposed designation will not have an annual effect on the economy of $100 million or more. Therefore, we believe that this critical habitat designation will not have an effect on the economy of $100 million or more, will not cause a major increase in costs or prices for consumers, and will not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises.

The primary authors of this notice are the staff of the Carlsbad Fish and Wildlife Office ( see ADDRESSES section).