On September 18, 2003, the MSPB issued an interim rule amending several provisions of its practices and procedures regulations to improve the agency's service to its customers by facilitating the expeditious adjudication of appeals. These changes in the MSPB's rules of practice and procedure were, in part, a response to the directives contained in the President's Management Agenda (2002). The President's management reform initiative directs agencies to “reshape their organizations to meet a standard of excellence in attaining the outcomes important to the nation.” Among other actions, agencies are directed to reduce the time they take to make decisions. In addition, appellants and agencies had also expressed concern about the amount of time it took to adjudicate or otherwise process a case through the MSPB. As a result, the MSPB reviewed its practice and procedure regulations and determined that aspects of the regulations could be modified to improve its efficiency and effectiveness while maintaining the rights of the parties to a fair and impartial adjudication of appeals before the MSPB.

The September 18, 2003 interim rule amended 5 CFR 1201.28 to allow the judge to grant a joint or unilateral request for suspension of a case for only one 30-day period rather than two 30-day periods. Moreover, the amended regulation provided that such requests would only be granted for good cause shown at the discretion of the judge, rather than automatically. Finally, the amendment specified a 30-day limit on the amount of time the judge could grant for a unilateral request.

The September 18, 2003 interim rule also added two new subsections to the MSPB's regulations governing discovery procedures. These subsections, 5 CFR 1201.72(d) and 1201.73(e), permitted the administrative judge to impose limits on the frequency or extent of the use of discovery methods and the number of discovery requests. The MSPB noted at that time that it had decided to follow the guidance of the Federal Rules of Civil Procedure (Fed. R. Civ. P.) in adopting these changes to its discovery procedures. The September 18, 2003 interim rule also amended 1201.73(d)(2) to reduce the number of days for filing subsequent discovery requests from 10 days to 7 days.

This revised interim rule makes several changes to the MSPB's regulations as follows:

5 CFR 1201.28(g) is added to provide that the date on which a case returns to the adjudication process following a suspension is the 31st day after the suspension went into effect, but that if that date falls on a day when the MSPB is not open for business, such as a weekend or Federal holiday, then the first business day after that date is substituted. The MSPB's regulations were previously silent on this point and it is anticipated that this amendment will serve its and the parties' interests by assuring that deadlines restart and parties are held responsible for meeting processing requirements only on days that the MSPB is open to conduct official business.

5 CFR 1201.72(c) is clarified by adding the words “to parties” after “interrogatories” in response to a comment received from a practitioner suggesting that there may be some confusion about whether interrogatories may be served on nonparties.

5 CFR 1201.72(d) is clarified by moving the words “the discovery sought is” from the introduction to the beginning of paragraph (1) of that section.

5 CFR 1201.73 is amended by adding a new section (a) concerning initial disclosures required of the parties. This new provision, which is similar to Fed. R. Civ. P. Rule 26, requires the parties to make certain specific initial disclosures to each other within 10 days of the date of the Acknowledgment Order, so as to jump start the discovery process.

5 CFR 1201.73(e)(1) and 74(a) are amended to add an express requirement that the parties attempt to resolve a discovery dispute before filing a motion to compel with the MSPB. Parties often file a motion to compel discovery when interrogatories are only one day late or there is a minor disagreement over the scope of discovery, before they make any reasonable effort to discuss the issue with the opposing party. At a minimum, the MSPB believes that this amendment will cause the parties to narrow the discovery issues in dispute, saving time and effort.

The MSPB received 8 comments from appellants' representatives and agency representatives in response to the September 18, 2003 interim rule. The MSPB is considering these comments and will respond to them when a final rule is issued. However, as agency and appellant representatives have now had a significant period of time operating under the amendments effected by the September 18, 2003 interim rule, the MSPB is interested in receiving additional comments based upon such actual experience prior to issuing a final rule. The MSPB also invites comments concerning other changes to its regulations discussed herein that could facilitate the expeditious adjudication of appeals without adversely affecting the rights of the parties.

History

On Friday, February 1, 2008, the FAA proposed to amend part 71 of the Federal Aviation Regulations (14 CFR part 71) to establish Class E airspace upward from 700 ft. above the surface and from 1,200 ft. above the surface at Kobuk, AK (73 FR 6056). The action was proposed in order to create Class E airspace sufficient in size to contain aircraft while executing SIAPs for the Kobuk Airport. Class E controlled airspace extending upward from 700 ft. above the surface and from 1,200 ft. above the surface in the Kobuk Airport area is established by this action.

Interested parties were invited to participate in this rulemaking proceeding by submitting written comments on the proposal to the FAA. No comments were received. The rule is adopted as proposed.

The area will be depicted on aeronautical charts for pilot reference. The coordinates for this airspace docket are based on North American Datum 83. The Class E airspace areas designated as 700/1,200 ft. transition areas are published in paragraph 6005 of FAA Order 7400.9R, Airspace Designations and Reporting Points, signed August 15, 2007, and effective September 15, 2007, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This amendment to 14 CFR part 71 establishes Class E airspace at the Kobuk Airport, Alaska. This Class E airspace is established to accommodate aircraft executing new DP and SIAPs, and will be depicted on aeronautical charts for pilot reference. The intended effect of this rule is to provide adequate controlled airspace for Instrument Flight Rules (IFR) operations at the Kobuk Airport, Kobuk, Alaska.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle 1, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority.

This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart 1, Section 40103, Sovereignty and use of airspace. Under that section, the FAA is charged with prescribing regulations to ensure the safe and efficient use of the navigable airspace. This regulation is within the scope of that authority because it creates Class E airspace sufficient in size to contain aircraft executing instrument procedures for the Kobuk Airport and represents the FAA's continuing effort to safely and efficiently use the navigable airspace.

This rule amends Title 14, Code of Federal Regulations, Part 97 (14 CFR part 97) by amending the referenced SIAPs. The complete regulatory description of each SIAP is listed on the appropriate FAA Form 8260, as modified by the National Flight Data Center (FDC)/Permanent Notice to Airmen (P-NOTAM), and is incorporated by reference in the amendment under 5 U.S.C. 552(a), 1 CFR part 51, and § 97.20 of Title 14 of the Code of Federal Regulations.

The large number of SIAPs, their complex nature, and the need for a special format make their verbatim publication in the Federal Register expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs, but refer to their graphic depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP contained in FAA form documents is unnecessary. This amendment provides the affected CFR sections and specifies the types of SIAP and the corresponding effective dates. This amendment also identifies the airport and its location, the procedure and the amendment number.

This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP as amended in the transmittal. For safety and timeliness of change considerations, this amendment incorporates only specific changes contained for each SIAP as modified by FDC/P-NOTAMs.

The SIAPs, as modified by FDC P-NOTAM, and contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these changes to SIAPs, the TERPS criteria were applied only to specific conditions existing at the affected airports. All SIAP amendments in this rule have been previously issued by the FAA in a FDC NOTAM as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for all these SIAP amendments requires making them effective in less than 30 days.

Because of the close and immediate relationship between these SIAPs and safety in air commerce, I find that notice and public procedure before adopting these SIAPs are impracticable and contrary to the public interest and, where applicable, that good cause exists for making these SIAPs effective in less than 30 days.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) is not a “significant regulatory action” under DOT Regulatory Order 12866; (2) is not a “significant rule” under DOT regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The Peace Corps published a proposed rule on February 22, 2008 (Volume 73, Number 36) for public review and comment. The Peace Corps did not receive any public comments and the Agency has not made any further revisions. Therefore, this rule is final and will be effective on the date stated above.

The subpart announces the general purpose and scope of the regulation, provides definitions and terms used in this regulation, and this regulation's interaction with other regulations and procedures. Charges for interest, penalties and administrative expenses are addressed. Procedures for installment payments are provided. Authority to carry out the necessary duties for debt collection is delegated to the Chief Financial Officer.

The subpart provides for aggressive collection efforts by the Peace Corps, and the timely turnover of past due collections to the Department of the Treasury. Procedures for written demand of payment and debtor review of the debt are provided. Methods of debt collection are listed.

The subpart provides for salary offset collection procedures. Coordination of salary offset of another Federal Agency is addressed. Notice requirements prior to salary offset are listed. Outside hearings prior to salary offset is addressed.

This regulation has been determined to be non-significant within the meaning of Executive Order 12866.

The Peace Corps Director, in accordance with the Regulatory Flexibility Act, (5 U.S.C. 605) has reviewed this regulation and by approving it certifies that this regulation will not have a significant economic impact on a substantial number of small entities. This regulation pertains to the administrative collection of individual debts owed to the Peace Corps, and does not affect acquisition, inter-Agency, or foreign claims.

This rule will not result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more in any one year, and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

Background

The final and temporary regulations that are the subject of this document are under section 1502 of the Internal Revenue Code.

As published, final and temporary regulations (TD 9383) contain an error that may prove to be misleading and is in need of clarification.

Accordingly, the publication of the final and temporary regulations (TD 9383), which were the subject of FR Doc. E8-4573, is corrected as follows:

On page 12266, column 1, in the preamble, under the paragraph heading “Background”, lines 3 through 5 from the bottom of the column, the language “extent “the Commissioner determines that treating S's intercompany item as excluded from gross income is consistent with the purposes of § 1.1502-13 and other provisions of the” is corrected to read “extent “[t]he Commissioner determines that treating S's intercompany item as excluded from gross income is consistent with the purposes of [§ 1.1502-13] and other provisions of the”.

Background

The final and temporary regulations that are the subject of this document are under section 1502 of the Internal Revenue Code.

As published, final and temporary regulations (TD 9383) contain an error that may prove to be misleading and is in need of clarification.

NARA published an interim final rule on February 1, 2008 (73 FR 6030) to restore extended evening and Saturday research room hours in its Washington, DC, area archival research rooms, effective April 14, 2008. The research rooms will be open from 9 a.m. to 5 p.m. on Monday, Tuesday, and Saturday. On Wednesday, Thursday, and Friday they will be open from 9 a.m. to 9 p.m.

We received 53 comments on the interim final rule from individuals and representatives of organizations, all supportive of the increased hours. While one comment expressed disappointment with the choice of evenings because the extended hours overlap with the Library of Congress, a number of comments specifically endorsed having three consecutive evenings and Saturday to maximize the cost-effectiveness of research room use by out-of-town researchers.

Seven comments requested that NARA provide additional “record pull times” for retrieving records from the stacks for use in the research rooms on Saturdays and, in one case, weekdays. As we noted in the interim final rule, we are restoring the late afternoon time for pulling records from the stacks on the three weekdays that we are open in the evening, but we have never had Saturday “pull” service. We recognize that this would be a useful service to researchers who only use the research rooms on Saturdays, but we are unable to adopt the suggestion. The FY 2008 appropriation that is permitting us to restore extended hours does not cover adding staff to provide this additional new service. As a result, the finding aids room is open but there is no archival consultation. It is these archival professionals who would be needed to ensure successful records pulls. Every records request slip submitted is checked for accurate pull information by an archivist or specialist. We also do not have the pull and refile manager or pull and refile technicians available on Saturdays.

This rule is not a major rule as defined in 5 U.S.C. Chapter 8, Congressional Review of Agency Rulemaking.

The purpose of this action is to announce that on October 4, 2007, EPA Region 10, delegated partial administrative authority for implementation of certain provisions of the Quinault FIP to the Quinault Indian Nation. See 40 CFR part 49, subpart M, sections 10581 through 10590, as authorized by 40 CFR 49.122 of the Federal Air Rules for Reservations (FARR), 40 CFR part 49, subpart C.

Federal regulation 40 CFR 49.122 provides EPA authority to delegate to Indian Tribes partial administrative authority to implement provisions of the Federal Air Rules for Reservations (FARR), 40 CFR part 49, subpart C. Tribes must submit a request to the Regional Administrator that meets the requirements of 40 CFR 49.122.

On July 25, 2006, the President of the Quinault Indian Nation submitted to the Regional Administrator a request for delegation of certain provision of the Quinault FIP. That request included all the information and demonstrations required by the FARR for delegation. A copy of all documentation is on file at EPA Region 10, Seattle, Washington (see ADDRESSES above).

The Quinault Indian Nation requested delegation for the following provisions; 40 CFR 49.10590 (a) General provisions, 40 CFR 49.10586 (b) Rule for limiting visible emissions, 40 CFR 49.10586 (g) General rule for open burning, and 40 CFR 49.10586 (i) Rule for air pollution episodes.

EPA and the Quinault Indian Nation signed the Delegation Agreement that specifies the provisions and authorities delegated. The Quinault Indian Nation is delegated the following provisions; 40 CFR 49.10590 (a) General provisions, 40 CFR 49.10586 (b) Rule for limiting visible emissions, 40 CFR 49.10586 (g) General rule for open burning, and 40 CFR 49.10586 (i) Rule for air pollution episodes. In addition, the agreement delegates to the Tribe authority to investigate complaints and assist EPA in inspections. The Agreement also includes terms and conditions applicable to the delegation. A copy of the Agreement is kept at EPA Region 10 at the address above.

EPA solicited by letter, advice and insight from the State of Washington, Grays Harbor County, Jefferson County Olympic National Park, and the Olympic National Forest on the Quinault request for delegation. One comment supporting delegation was received.

Section 553 of the Administrative Procedure Act, 5 U.S.C. 553(b)(B), provides that, when an agency for good cause finds that notice and public procedure are impracticable, unnecessary or contrary to the public interest, the agency may issue a rule without providing notice and an opportunity for public comment. EPA has determined that there is good cause for making today's rule final without prior proposal and opportunity for comment because EPA is merely informing the public of partial delegation of administrative authority to the Quinault Indian Nation and making a technical amendment to the Code of Federal Regulations (CFR) by adding a note announcing the partial delegation. Thus, notice and public procedure are unnecessary. EPA finds that this constitutes good cause under 5 U.S.C. 553(b)(B).

Moreover, since today's action does not create any new regulatory requirements, EPA finds that good cause exists to provide for an immediate effective date pursuant to 5 U.S.C. 553(d)(3).

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely makes a technical amendment and gives notice of a partial delegation of administrative authority. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). This rule does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 6, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” “Policies that have tribal implications” is defined in the Executive Order to include regulations that have “substantial direct effects on one or more Indian tribes, on the relationship between the Federal government and the Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes.” Under section 5(b) of Executive Order 13175, EPA may not issue a regulation that has tribal implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by tribal governments, or EPA consults with tribal officials early in the process of developing the proposed regulation. Under section 5(c) of Executive Order 13175, EPA may not issue a regulation that has tribal implications and that preempts tribal law, unless the Agency consults with tribal officials early in the process of developing the regulation. EPA has concluded that this rule may have tribal implications. EPA's action fulfills a requirement to publish a notice announcing partial delegation of administrative authority to the Quinault Indian Nation and noting the partial delegation in the CFR. However, it will neither impose substantial direct compliance costs on tribal governments, nor preempt tribal law. Thus, the requirements of sections 5(b) and 5(c) of the Executive Order do not apply to this rule.

This action also does not have Federalism implications because it does not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This technical amendment merely notes that partial delegation of administrative authority to the Quinault Indian Nation is in effect. This rule also is not subject to Executive Order 13045, “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant.

This action does not involve technical standards; thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ). The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by June 2, 2008. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2)).

Throughout this document, “we,” “us” and “our” refer to EPA.

On June 21, 2007, EPA proposed to update the delegation tables in the Code of Federal Regulations, Title 40 (40 CFR) Parts 60 and 61, to allow easier access by the public to the status of delegations in Arizona and Nevada jurisdictions (see 72 FR 34209). The updated delegation tables include the delegations approved in response to recent requests, as well as those previously granted. The tables are shown at the end of this document.

EPA's proposed action provided a 30-day public comment period. During this period, we received one comment from the State of Nevada's Division of Environmental Protection (NDEP). NDEP noted that it requested delegation of Appendix B, Performance Specifications, of 40 CFR Part 60 (Appendix B), and that EPA approved this request by letter dated January 12, 2007. However, EPA's proposed rulemaking did not include Appendix B in the “Delegation Status for NSPS for Nevada” table. NDEP requested that EPA add Appendix B to Nevada's NSPS delegation status table.

Appendix B was included in our approval letter of January 12, 2007 in error. Appendices to 40 CFR Parts 60 and 61 are not performance standards and are not delegable under Clean Air Act Sections 111(c)(1) or 112(l)(1). However, all applicable test methods and other requirements in the Appendices must be followed as required by the delegated subparts (see EPA's proposed rule published on January 14, 2002 (67 FR 1676) and subsequent final rule published on April 26, 2002 (67 FR 20652)).

No comments were submitted that change our assessment of the delegations as described in our proposed action. Therefore, as authorized in Sections 111(c)(1) and 112(l)(1) of the Clean Air Act, EPA is updating the CFR tables for Arizona and Nevada as proposed in the Federal Register on June 21, 2007.

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

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

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

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under Section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by June 2, 2008. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements (see Section 307(b)(2)) of the Clean Air Act.

Throughout this document, “we,” “us” and “our” refer to EPA.

Section 112(l) of the Clean Air Act, as amended in 1990 (CAA), authorizes EPA to delegate to state or local air pollution control agencies the authority to implement and enforce the standards set out in the Code of Federal Regulations, Title 40 (40 CFR), part 63, National Emission Standards for Hazardous Air Pollutants for Source Categories. On November 26, 1993, EPA promulgated regulations, codified at 40 CFR part 63, Subpart E (hereinafter referred to as “Subpart E”), establishing procedures for EPA's approval of state rules or programs under section 112(l) (see 58 FR 62262). Subpart E was later amended on September 14, 2000 (see 65 FR 55810).

Any request for approval under CAA section 112(l) must meet the approval criteria in 112(l)(5) and Subpart E. To streamline the approval process for future applications, a state or local agency may submit a one-time demonstration that it has adequate authorities and resources to implement and enforce any CAA section 112 standards. If such demonstration is approved, then the state or local agency would no longer need to resubmit a demonstration of these same authorities and resources for every subsequent request for delegation of CAA section 112 standards. However, EPA maintains the authority to withdraw its approval if the State does not adequately implement or enforce an approved rule or program.

On May 27, 1998, EPA published a direct final action delegating to the Nevada Division of Environmental Protection (NDEP) several NESHAP and approving NDEP's delegation mechanism for future standards (see 63 FR 28906). That action explained the procedure for EPA to grant delegations to NDEP by letter, with periodic Federal Register listings of standards that have been delegated. On November 1, 2007, NDEP requested delegation of the following NESHAP contained in 40 CFR part 63:

• Subpart IIII—NESHAP: Surface Coating of Automobiles and Light-Duty Trucks

• Subpart PPPP—NESHAP for Surface Coating of Plastic Parts and Products

• Subpart GGGGG—NESHAP: Site Remediation

• Subpart HHHHH—NESHAP: Miscellaneous Coating Manufacturing

• Subpart DDDDDD—NESHAP for Polyvinyl Chloride and Copolymers Production Area Sources

• Subpart EEEEEE—NESHAP for Primary Copper Smelting Area Sources

• Subpart FFFFFF—NESHAP for Secondary Copper Smelting Area Sources

• Subpart GGGGGG—NESHAP for Primary Nonferrous Metals Area Sources—Zinc, Cadmium, and Beryllium

On December 4, 2007, EPA granted delegation to NDEP for these NESHAP, along with any amendments to previously-delegated NESHAP, as of July 1, 2007. Today's action is serving to notify the public of the December 4, 2007, delegations and to codify these delegations into the Code of Federal Regulations.

Today's document serves to notify the public of the delegation of NESHAP to NDEP on December 4, 2007. Today's action will codify these delegations into the Code of Federal Regulations.

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

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

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

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by June 2, 2008. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements (see section 307(b)(2)).

A. Why are Revisions to State Programs Necessary?

States that have received final authorization from EPA under RCRA section 3006(b), 42 U.S.C. 6926(b), must maintain a hazardous waste program that is equivalent to, consistent with, and no less stringent than the Federal program. As the Federal program is revised, States must revise their programs and ask EPA to authorize the revisions. Revisions to State programs may be necessary when Federal or State statutory or regulatory authority is modified or when certain other changes occur. Most commonly, States must revise their programs because of revisions to EPA's regulations in 40 Code of Federal Regulations (CFR) parts 124, 260 through 266, 268, 270, 273 and 279.

We conclude that Virginia's program revision application of October 10, 2007, to revise its authorized program meets all of the statutory and regulatory requirements established by RCRA. Therefore, we grant Virginia Final authorization to operate its hazardous waste program with the revisions described in the authorization application, except as described in Sections H. 1, 3, and 4 of this immediate final rule. Virginia has responsibility for permitting Treatment, Storage, and Disposal Facilities (TSDFs) within its borders and for carrying out the aspects of the RCRA program described in its revised program application, subject to the limitations of the Hazardous and Solid Waste Amendments of 1984 (HSWA). New Federal requirements and prohibitions imposed by Federal regulations that EPA promulgates under the authority of HSWA take effect in authorized States even before they are authorized for the requirements. Thus, EPA will implement those requirements and prohibitions in Virginia, including issuing permits, until the State is granted authorization to do so.

The effect of this decision is that a facility in Virginia subject to RCRA will have to comply with the authorized revised State requirements instead of the equivalent Federal requirements in order to comply with RCRA. While Virginia has enforcement responsibilities under its State hazardous waste program for violations of such program, EPA nevertheless retains its authority under RCRA sections 3007, 3008, 3013, and 7003, which include, among others, authority to:

• Take enforcement actions regardless of whether the State has taken its own actions;

• enforce RCRA requirements and suspend or revoke permits; and

• perform inspections, and require monitoring, tests, analyses or reports.

This action does not impose additional requirements on the regulated community because the regulations for which Virginia is being authorized by today's action are already effective, and are not changed by today's action.

EPA did not publish a proposal before today's rule because we view this as a routine program change and do not expect comments that oppose this approval. We are providing an opportunity for public comment now. In addition to this rule, in the proposed rules section of today's Federal Register we are publishing a separate document that proposes to authorize the State program changes.

If EPA receives comments that oppose this authorization, we will withdraw this rule by publishing a document in the Federal Register before the rule becomes effective. EPA will base any further decision on the authorization of the revised State program on the proposal mentioned in the previous paragraph. We will then address all public comments in a later final rule. You may not have another opportunity to comment. If you want to comment on this authorization, you must do so at this time.

If we receive comments that oppose only the authorization of a particular revision to the State hazardous waste program, we will withdraw that part of this rule but the authorization of the program revisions that the comments do not oppose will become effective on the date specified above. The Federal Register withdrawal document will specify which part of the authorization will become effective, and which part is being withdrawn.

Initially, Virginia received final authorization to implement its hazardous waste management program effective December 18, 1984 (49 FR 47391). EPA granted authorization for revisions to Virginia's regulatory program effective August 13, 1993 (58 FR 32855); September 29, 2000 (65 FR 46607); June 20, 2003 (68 FR 36925); and July 10, 2006 (71 FR 27216).

On October 10, 2007, Virginia submitted a program revision application, seeking authorization of revisions to its program in accordance with 40 CFR 271.21. Virginia's revision application includes various regulations that are equivalent to, and no less stringent than, revisions to the Federal hazardous waste program, as published in the Federal Register from July 1, 2004 through July 19, 2006, as well as miscellaneous changes to its previously authorized program. We now make an immediate final decision, subject to receipt of written comments that oppose this action, that Virginia's hazardous waste program revisions set forth in its October 10, 2007 application satisfy all of the requirements necessary to qualify for final authorization except as described in sections H. 1, 3, and 4 of this immediate final rule. Therefore, EPA grants Virginia final authorization for the following program revisions.

Virginia seeks authority to administer the Federal requirements that are listed in Table 1. Virginia incorporates by reference these Federal provisions, in accordance with the dates specified in Title 9, Virginia Administrative Code (9 VAC 20-60-18). Table 1 also lists Virginia's requirements that are being recognized as no less stringent than the analogous Federal requirements. The Virginia Waste Management Act (VWMA), enacted by the 1986 session of Virginia's General Assembly and recodified in 1988 as Chapter 14, Title 10.1, Code of Virginia, forms the basis of the Virginia program. The regulatory references are to Title 9, Virginia Administrative Code (9 VAC) effective May 22, 2006.

The Virginia hazardous waste program contains certain provisions that are beyond the scope of the Federal program. Virginia's statutory provision § 10.1-1426 F, which is related to the Federal Regulations at 40 CFR 261.5 and 261.4(b)(1), explains the requirements allowing local or state agencies to collect hazardous waste from exempt small quantity generators. The Virginia code is broader in scope because there is not a corresponding part of the Federal program that has such a restriction. These broader in scope provisions are not part of the program being authorized by today's action. EPA cannot enforce requirements that are broader in scope, although compliance with such provisions is required by Virginia law.

The Virginia hazardous waste program contains no new provisions that are more stringent than those required by the RCRA program as codified in the July 1, 2006 edition of title 40 of the Code of Federal Regulations (CFR).

In its regulations, Virginia has adopted EPA's decisions relative to the site-specific delistings published between September 21, 2004 and February 27, 2006 (69 FR 56357, 69 FR 60557, 70 FR 21153, 70 FR 42499, 70 FR 44496, 70 FR 49187, 70 FR 51638, 70 FR 71002, 70 FR 71002, 70 FR 76168, 71 FR 9723), as well as the site specific treatment variances from the Land Disposal Restrictions (LDR) treatment standards published on August 3, 2005 (70 FR 44505) and February 7, 2006 (71 FR 6209). EPA today is not authorizing Virginia to delist wastes or to grant treatment variances. With regard to waste delisted as a hazardous waste by EPA, the authority of the Department of Environmental Quality is limited to recognition of the waste as a delisted waste in Virginia, and the supervision of waste management activities for the delisted waste when the activities occur within the Commonwealth of Virginia. Virginia is not authorized to delist wastes on behalf of the EPA, or to otherwise administer any case decision to issue, revoke, or continue a delisting of a waste by EPA. Similarly, while Virginia is recognizing EPA's decision regarding the site-specific treatment variances, the authority to grant such variances remains with the EPA.

Virginia has adopted the Uniform Hazardous Waste Manifest Rule (70 FR 10776, March 4, 2005) without exception; however, there are non-delegable Federal functions addressed in that Rule. Specifically, authority must be left with the federal government as set forth in 40 CFR 262.21, 262.60(e), 263.20(g)(4), 264.71(a)(3), and 265.71(a)(3). In its incorporation by reference of 40 CFR Part 263, Virginia appropriately does not substitute the term “U.S. Customs Official” that appears in 40 CFR 263.20(g)(4). As a result, this provision is herein included in Virginia's authorized program. However, Virginia must make the following modifications to its incorporation by reference of 40 CFR parts 262, 264, and 265 in order to clarify that the enforcement authority for the non-delegable provisions in those parts remains with EPA:

• 9 VAC 20-60-262 B must state that, at 40 CFR 262.21 and 262.60(e), “EPA” means the United States Environmental Protection Agency, in order to maintain the Federal authority for the EPA Manifest Registry functions and the notification requirements for imports of hazardous waste;

• 9 VAC 20-60-264 B must state that, at 40 CFR 264.71(a)(3), “U.S. Environmental Protection Agency” means the United States Environmental Protection Agency, in order to maintain Federal authority for the notification requirements for imports of hazardous waste;

• 9 VAC 20-60-265 B must state that, at 40 CFR 265.71(a)(3), the term “U.S. Environmental Protection Agency” means the United States Environmental Protection Agency, in order to maintain the Federal Authority for the notification requirements for imports of hazardous waste.

Because these provisions have not yet been amended, EPA is not authorizing them at this time. EPA will authorize Virginia to administer the above regulations after they are modified accordingly.

After authorization, Virginia will issue permits for all the provisions for which it is authorized and will administer the permits it issues. EPA will continue to administer any RCRA hazardous waste permits or portions of permits which EPA issued prior to the effective date of this authorization until the timing and process for effective transfer to the State are mutually agreed upon. EPA and Virginia agree to coordinate the administration of permits in order to maintain consistency.

EPA will not issue any more new permits or new portions of permits for the provisions included in this revised authorization after the effective date of this authorization. EPA will continue to implement and issue permits for HSWA requirements for which Virginia is not yet authorized.

Virginia is not seeking authorization to operate the program on Indian lands, since there are no Federally-recognized Indian lands in Virginia.

Codification is the process of placing the State's statutes and regulations that comprise the State's authorized hazardous waste program into the Code of Federal Regulations. We do this by referencing the authorized State rules in 40 CFR part 272. We reserve the amendment of 40 CFR part 272, subpart VV for this authorization of Virginia's revised program until a later date.

The Office of Management and Budget has exempted this action from the requirements of Executive Order 12866 (58 FR 51735, October 4, 1993), and therefore this action is not subject to review by OMB. This action authorizes State requirements for the purpose of RCRA 3006 and imposes no additional requirements beyond those imposed by State law. Accordingly, I certify that this action will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Because this action authorizes pre-existing requirements under State law and does not impose any additional enforceable duty beyond that required by State law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). For the same reason, this action would not significantly or uniquely affect the communities of Tribal governments, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). In any case, Executive Order 13175 does not apply to this rule since there are no Federally recognized tribes in Region 3.

This action will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999), because it merely authorizes State requirements as part of the State RCRA hazardous waste program without altering the relationship or the distribution of power and responsibilities established by RCRA. This action also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it is not economically significant and it does not make decisions based on environmental health or safety risks that may disproportionately affect children. This rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355 (May 22, 2001)) because it is not a significant regulatory action under Executive Order 12866.

Under RCRA 3006(b), EPA grants a State's application for authorization as long as the State meets the criteria required by RCRA. It would thus be inconsistent with applicable law for EPA, when it reviews a State authorization application, to require the use of any particular voluntary consensus standard in place of another standard that otherwise satisfies the requirements of RCRA. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. As required by section 3 of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing this rule, EPA has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation, and provide a clear legal standard for affected conduct. EPA has complied with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining the takings implications of the rule in accordance with the Attorney General's Supplemental Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings issued under the executive order. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this document and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . Although this action is not a “major rule” as defined by 5 U.S.C. 804(2), this action will be effective June 2, 2008.

The beneficiary premiums for Prescription Drug Plans (PDPs) are based on an annual bidding process. Each year the beneficiary premium for a Part D plan can change as a result of this bidding process. In addition, each year, as required by statute, CMS recalculates the Federal Part D premium low-income subsidy (LIS) available to low-income beneficiaries based on the new premiums for plans in each region. As a result of these premium and subsidy changes, the premium for a Part D plan can be fully covered by the LIS in one year and not the following year.

The amount of the premium subsidy available to LIS-eligible individuals cannot be calculated until after bids are submitted for the calendar year in question, because the subsidy amount is based on the bids that are submitted. Therefore, a PDP sponsor whose premium for LIS-eligible enrollees is currently zero does not know at the time its bid is submitted whether the premium that would result from its bid will be higher or lower than the premium subsidy amount.

LIS-eligible individuals enrolled in a PDP that does not charge them a premium are faced with the possibility that the plan they are enrolled in will impose a premium during the next calendar year that would require them to make monthly payments. Section 1860D-1(b)(1)(C) of the Social Security Act (the Act) mandates the initial enrollment of full-benefit dual eligible individuals not choosing a plan into a PDP where they would not pay a premium. It does not, however, require that individuals be reassigned to a plan that would not charge them a premium, if they would be required to pay a premium in their plan the following calendar year. Using our authority under Section 1860D-1(b)(1)(A) of the Act to, “establish a process for the enrollment, disenrollment, termination, and change of enrollment of Part D eligible individuals in prescription drug plans,” we have specified that LIS-eligible individuals facing the above situation may “elect” a PDP with no premium (to which they would be randomly assigned) by taking no action. We have referred to this process as our reassignment process. Beneficiaries eligible for the full low-income premium subsidy who have not chosen a plan on their own, including beneficiaries dually eligible for benefits under Titles XVIII and XIX of the Act, are subject to reassignment. Beneficiaries eligible for a partial premium subsidy are not subject to reassignment.

For 2008, the number of beneficiaries reassigned to a different organization under this process varied widely by region, ranging from as few as 17 beneficiaries to approximately 402,322 beneficiaries. The average number of beneficiaries reassigned to an organization other than the one with which they were enrolled was 34,044 per region. Alternatively, LIS beneficiaries can affirmatively elect to stay in their plan and begin paying a premium, or choose another plan with or without a premium.

While the reassignment policy prevents an LIS-eligible individual who did not choose to elect a plan from being charged a premium, it disrupts continuity and stability in coverage. Individuals who are reassigned may have to change their pharmacy, get new copies of their prescription from their doctor, and determine whether they need a change in medications because the formulary might be different.

Currently, under the demonstration project entitled, “Medicare Demonstration to Transition Enrollment of Low-Income Subsidy Beneficiaries” (established in 2007 and extended to 2008), if the premium amount for a LIS-eligible individual in the above situation is lower than a specified “de minimis” amount, the individual would not be charged this de minimis amount, and could remain in his or her current plan without paying a premium. This demonstration also transitions the calculation of the low-income benchmark premium amount for a region from a method that weights the standardized Part D bids for PDPs equally to the statutory method required under the current regulation, which calculates the benchmarks by weighting the bids for PDPs and Medicare Advantage Prescription Drug (MA-PD) plans in that region based on each plan's share of total Part D enrollment. While the evaluation for this demonstration project is still underway, we believe it has demonstrated the advantages of continuity of care and stability.

In the proposed rule published on January 8, 2008, “Option for Prescription Drug Plans to Lower their Premiums for Low-income Subsidy Beneficiaries” (73 FR 1301), we proposed an approach to reducing the disruption caused by the re-assignment process. In that proposed rule, we proposed an approach that focused on the premiums that would be charged to LIS-eligible individuals in cases in which they would be subject to paying a premium if they stayed in the plan they were in. Specifically, we proposed, under certain circumstances, to give PDP Sponsors the option of setting a separate premium amount for such LIS-eligible individuals at the low-income benchmark amount. We expected this policy to reduce the number of beneficiaries who would have to be re-assigned, and would ensure a choice of at least five no-premium plans for full LIS-eligible individuals in each region.

Section 902 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) amended section 1871(a) of the Act and requires the Secretary, in consultation with the Director of the Office of Management and Budget, to establish and publish timelines for the publication of Medicare final regulations based on the previous publication of a Medicare proposed or interim final regulation. Section 902 of the MMA also states that the timelines for these regulations may vary but shall not exceed 3 years after publication of the preceding proposed or interim final regulation except under exceptional circumstances.

This final rule responds to comments we received on provisions set forth in the January 8, 2008 proposed rule. In addition, this final rule has been published within the 3-year time limit imposed by section 902 of the MMA. Therefore, we believe that the final rule is in accordance with the Congress' intent to ensure timely publication of final regulations.

We received 32 timely items of correspondence in response to the January 8, 2008 proposed rule. We received comments from a broad spectrum of commenters, including consumer groups, health plans and industry trade associations, and States. Approximately 13 comments were from consumer groups, 9 comments were from health plans and industry associations, 5 comments were from States, 3 comments were from pharmacists/providers, and 2 comments were from students. With a few exceptions, the commenters were concerned that the proposed rule would not adequately address the reassignment issue, and suggested alternative approaches. Virtually all of these commenters recommended that, rather than adopting the proposed approach, we consider alternative methods for calculating the low-income benchmark premium amounts. The following is a summary of the public comments and our responses.

Comment: Two commenters proposed that the low-income benchmark premium amounts be calculated by weighting each plan's premium by its share of total LIS enrollment, rather than its share of total Part D enrollment.

Response: Because section 1860D-14(b)(2) of the Act requires only that the premium calculation be “weighted”, we believe that the statute could reasonably be interpreted to permit this proposed weighting methodology, and in response to these comments we have determined that this approach more effectively addresses the LIS reassignment issue that the proposed rule was intended to address. Therefore, we are adopting this approach in our final rule instead of our originally proposed option for PDPs to reduce their premiums for full-subsidy eligible beneficiaries.

Specifically, the benchmark amounts for each Part D region will be calculated as a weighted average of the Part D premium amounts for basic Part D coverage with the weight for each PDP and MA-PD plan equal to a percentage in which the numerator is equal to the number of LIS eligible beneficiaries enrolled in the Part D plan in the reference month and the denominator is equal to the total number of LIS eligible beneficiaries enrolled in PDP and MA-PD plans (not including PACE, private fee-for-services plans or 1876 cost plans) in the reference month.

Currently, CMS calculates the weighted portion of the low-income benchmark premium amount using a weighted average of the MA and PDP premiums that is based on total Part D enrollment. MA-PD sponsors can lower their Part D premiums through the application of Part C rebates. As a result, the Part D premiums for MA-PD plans tend to be lower than PDP premiums. In addition, the benchmark amounts tend to be significantly lower in regions with high MA-PD penetration than in other Part D regions.

The lower benchmarks have contributed to large-scale reassignments of LIS beneficiaries in many of these regions. This is because the relatively low benchmarks result in many PDPs having a basic Part D premium that is not fully covered by the Federal premium subsidy. As noted above, CMS has reassigned full-subsidy beneficiaries in these PDPs to different, lower-premium PDPs in order to avoid a financial hardship for these beneficiaries.

The conclusion of the “Medicare Demonstration to Transition Enrollment of Low-Income Subsidy Beneficiaries,” will put increased downward pressure on the benchmarks in these regions with high MA-PD enrollment and upward pressure on the number of reassignments. Calculating the benchmark amounts using a weighted average based on LIS enrollment, however, will help stabilize the benchmarks in these regions. As noted above, Part D beneficiary premiums for PDPs tend to be higher than for MA-PDs. In addition, PDPs tend to have a greater share of LIS enrollment because of auto and facilitated enrollment. As a result, weighting Part D plan premiums by total LIS enrollment gives greater weight to PDP premiums and tends to increase the benchmarks. As compared to the current regulatory formula, we estimate that this change in the methodology for calculating the benchmarks would have reduced the number of 2008 reassignments by approximately 850,000 LIS beneficiaries. This is significantly greater than the 200,000 reassignment reduction estimated for the policy proposed in the proposed rule.

Comment: Many commenters expressed concerns about various features of the proposed policy and suggested clarifications or changes. Commenters asked CMS to describe the methodology for selecting participating sponsors and any contingencies. Commenters asked CMS to make the checkbox in the bid pricing tool (BPT) where PDP Sponsors were to indicate whether the plan will participate in the second premium visible and unambiguous. Commenters also asked whether certification and attestation requirements should be amended. In addition, commenters suggested changes including limiting plans' financial losses by placing a cap on the amount by which the premium could be reduced for LIS beneficiaries and commented on the complexity of explaining the rule to beneficiaries.

Response: We agree that the various features of the proposed rule would have needed clarification in the final rule. This final rule does not incorporate the option for PDP Sponsors to offer a reduced premium to full subsidy eligible individuals. The final rule takes a different approach and changes the weighting methodology used to calculate the low-income benchmark premium amount. This approach is relatively simple and transparent and does not raise the complexities of the dual premium policy in the proposed rule about which these commenters are concerned.

Comment: Many commenters suggested that we continue with our de minimis policy, rather than adopt the policy in the proposed rule.

Response: We believe that the methodology established in this final rule is a better approach to reducing reassignments than continuing with the de minimis policy as it directly addresses the benchmark disparities across regions. As stated in the proposed rule, we were concerned about an approach that permanently would employ a fixed dollar figure, and decided that a methodology under which the number is not known in advance would better preserve incentives for plans to submit a low bid.

Comment: Many commenters suggested calculating the benchmark before applying Part C rebates to MA-PD premiums. CMS currently calculates the low-income benchmark premium amount using MA-PD premiums after Part C rebates have been applied. Calculating the benchmarks using MA-PD premiums before the application of rebates would increase the benchmark amounts in areas with high MA-PD penetration and in turn decrease the number of reassignments in these Part D regions, compared to the current regulation. Commenters argued that this is a better representation of the true drug cost for MA-PDs. Commenters believed that such an approach is permissible under the statute.

Response: Section 1860D-14(b)(2) of the Act describes the calculation of the benchmark. The statute provides that for an MA-PD plan, CMS must use the weighted averages of the “portion of the MA monthly prescription drug beneficiary premium that is attributable to basic prescription drug benefits” to calculate the benchmark for each region. The Act states that the term “MA monthly prescription drug beneficiary premium” means, “the base beneficiary premium * * * as adjusted * * *, less the amount of rebate credited toward such amount * * *” CMS interprets the phrase “portion of the MA monthly prescription drug beneficiary premium that is attributable to basic prescription drug benefits” for an MA-PD plan to mean the base beneficiary premium adjusted for the difference between the bid and benchmark less the rebates. Therefore, we do not believe it is permissible under the statute to calculate the benchmarks with MA-PD premiums before the application of rebates. However, this regulation will have a comparable effect on LIS reassignments to calculating the benchmarks using the MA-PD premiums that have not been reduced by rebates, and hence produces the outcome recommended by the commenters.

Comment: Some commenters supported our alternative of allowing PDPs to waive the difference between the premium and the benchmark for full subsidy eligible beneficiaries. Commenters believed that CMS overestimated the impact this would have on bids as plans would be motivated to keep bids low in order to receive new auto-assignments.

Response: We continue to believe that this option would have a negative impact on bid competition and bid integrity. As stated in the proposed rule, we did not choose this approach for two reasons. First, if the difference between the two amounts were too great, this would produce a significant disparity between the revenue needs assumed in the bid, and the revenue that would be received under the reduced premium, and undermine the integrity of the bid process. More importantly, if a PDP sponsor knew that it could be assured of reducing its premium for LIS-eligible individuals to the LIS amount no matter how much the premium produced by its bid exceeded this amount, this would greatly reduce existing incentives to bid as low as possible. In response to the commenters' argument, we do not believe new auto-assignees would be enough incentive to keep bids low.

Comment: Many commenters did not support the alternative in which CMS would change the current reassignment process so that beneficiaries would be informed of plans that offer a zero premium for full-subsidy eligible beneficiaries but would have to take action to change to such a plan. Commenters believed that based on their experience, placing the burden on beneficiaries to make the change would result in beneficiaries remaining in plans they cannot afford and would increase premium collection problems. Two commenters believed that CMS should implement this alternative, because it would be easier to address non-payment of premium issues than the issues with continuity of care that come with reassignment.

Response: We agree with the commenters who opposed the alternative for the reasons stated in our proposed rule. We are concerned about charging beneficiaries a premium without them electing to pay it and the potential financial hardship for individual beneficiaries.

Comment: Several commenters suggested changes to the reassignment process, such as reassigning on other than a random basis, extending reassignment to people who have elected a plan with no premium and improvements to the premium information provided to choosers. One commenter asked CMS to review formularies to ensure they do not discourage access for vulnerable beneficiaries.

Response: We do not believe these changes would be appropriate. Congress has favored random assignment by specifying it in the case of initial assignment. We believe that it is appropriate to extend this to re-assignment. It is not clear what the commenter means by reassigning people who have elected a plan with no premium, since they would have made an affirmative choice that we believe should be respected. We also believe that the information currently provided to beneficiaries on their choices is appropriate. Finally, we believe that beneficiaries are in the best position to make plan choices based on plan formularies.

Comment: One commenter was concerned that the regulation would not come out in time for plans to use the information to model their bids.

Response: We agree that Part D sponsors need to know how the LIS benchmarks will be calculated in order to prepare their Part D bids. Therefore, we are releasing this final rule before April 7, 2008, which is the beginning of the formal bid preparation period for 2009. On April 7, 2008, CMS will release all other final Part D payment policy information for 2009 as part of the Announcement of CY 2009 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies. This document is released annually by statute on the first Monday in April. With the release of the Rate Announcement and the publication of this final rule, Part D sponsors will have all the information on Part D payment policies that is needed from CMS to prepare their 2009 bids.

As noted above, we believe that the statute can reasonably be interpreted to permit us to weight the premiums used for the benchmark calculation by total LIS enrollment for each plan. The calculation of the benchmarks is described in section 1860-14(b)(2) of the Act. The statute provides that we must take the “weighted average” of the premium amounts described to calculate the benchmarks. The term “weighted average,” however, is not definitively defined. The statutory language reads as follows:

We historically have interpreted “weighted average” to mean an average based on the plan's share of total Part D enrollment. We believe that “weighted average” could also reasonably be interpreted to mean weighted based on the plan's share of LIS enrollment, particularly given that the benchmarks are applicable to LIS beneficiaries only.

The revised interpretation requires a change in the regulation. Therefore, we are revising § 423.780(b)(2) to provide for the low-income benchmark premium amount for a PDP region to be a weighted average of the premium amounts described in § 423.780(b)(2)(ii). The weight for each PDP and MA-PD plan will be equal to a percentage. The numerator will be the number of Part D LIS eligible individuals enrolled in the plan in a reference month (as defined in § 422.258(c)(1)). The denominator will be equal to the total number of Part D LIS eligible individuals enrolled in all PDP and MA-PD plans (but not including PACE, private fee-for-service plans, or 1876 cost plans) in a PDP region in the reference month. We will include both partial and full-subsidy individuals in the weighting calculation.

This document does not impose information collection and recordkeeping requirements. Consequently, it need not be reviewed by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995.

We have examined the impact of this rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).

Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). This rule allows CMS to calculate the low-income premium benchmark amounts by weighting the premium amounts by total LIS enrollment for each plan in order to reduce the number of reassignments compared to the current regulatory framework. We believe this final rule will lead to additional Federal costs of approximately $90 million for calendar year (CY) 2009. The CY 2009 cost of $90 million represents our best estimate of the cost of the final rule. Generally, our best estimates reflect an equal likelihood of being too high or too low. The estimated cost over the next 10 fiscal years (2009 through 2018) is $1.68 billion. The year-by-year impacts in millions of dollars are shown in Table 1 below. The $90 million estimate above is for CY 2009. The table below summarizes the fiscal year (FY) costs. Yearly growth is due to an estimated increase in the number of enrollees in future years and increasing drug trends that cause higher estimated bids in future years.

This rule does reach the economic threshold of $100 million in the out-years and thus is considered a major rule, as outlined by Executive Order 12866.

This cost is due to increased Federal premium subsidy payments, which are the result of generally increasing the low-income benchmarks. The higher benchmarks allow a greater number of low-income beneficiaries to remain in their current plan, rather than reassigning them to a lower cost plan.

In each region, the low-income benchmark essentially functions as a ceiling for the Federal premium subsidy for low-income beneficiaries. That is, the Federal premium subsidy covers the full cost of the plan's basic Part D premium for a full-subsidy beneficiary, up to the low-income benchmark amount.

Weighting based on each plan's share of LIS enrollment generally is expected to increase the low-income benchmarks. We estimated that, in 2008, if the low-income benchmarks had been calculated based on LIS enrollment weighting (rather than based on total Part D enrollment weighting), the benchmarks would have been higher in 27 of the 34 PDP regions. Generally, the higher the low-income benchmarks, the lower the number of LIS reassignments. This is because, under the higher benchmarks, more PDPs are likely to have premiums that are equal to or less than the low-income benchmark and, as a result, will be fully covered by the premium subsidy. Low-income subsidy beneficiaries are able to remain in these PDPs and are not reassigned to other lower-premium PDPs.

We expect this rule will reduce the administrative costs for plan sponsors associated with the reassignment of LIS beneficiaries. These costs include the production of new member informational materials by the new plan, increased staffing of call centers to field beneficiary questions, and costs associated with implementing transition benefits for new enrollees.

Although there is no quantifiable monetary value to CMS to reducing reassignments, we feel this benefit is important, as it will increase program stability and continuity of care. The rule supports pharmacy and formulary consistency for the beneficiary. Particularly in regions with high MA-PD penetration, this rule will reduce the year-to-year volatility in reassignments of LIS beneficiaries and will help avoid the disruption that is inherent anytime a beneficiary is switched from one plan to another.

Based on the most recent bid results, we estimated that if the 2008 benchmarks had been calculated using LIS enrollment weighting, there would have been approximately 850,000 fewer reassignments than if the benchmarks had been calculated using total Part D enrollment weighting. Then we determined the impact of the revised benchmarks and reassignments on program payments throughout the projection period. We do not explicitly project reassignments in future years. The expectation is that the net effect of future reassignments will result in projected cost levels comparable to the results of the reassignments modeled on the most recent bid results.

The cost estimate assumes full enrollment weighting based on LIS enrollment for the calculations of the low-income benchmark premium amounts. The estimate was developed by applying this rule against the 2008 bids and this impact was projected throughout the forecast period. The estimate does not anticipate any change in bidding strategies or outcomes but does include the effect on the level of administrative costs plan sponsors will include in their bids to account for their expected number of LIS beneficiary reassignments.

The proposed rule estimated Federal savings of approximately $20 million per calendar year. However, the final rule estimates an additional $90 million in Federal costs for CY 2009. There are two reasons that the cost estimate has changed. First, the budget baseline has been updated since the issuance of the proposed rule. The Mid-Session Review baseline assumed the continuation of the $1 de minimis policy; the President's 2009 Budget baseline does not. Because of the change in assumptions about the de minimis policy, even if we had stayed with the five zero-premium organization policy in the proposed rule, the cost of the final rule would have changed from savings of approximately $20 million per year to costs of approximately $10 million per year. Second, this final rule changes the weighting methodology used to calculate the low-income benchmark premium amount. As discussed in the rationale, CMS has changed the method for calculating the Federal premium subsidy for LIS beneficiaries so that the subsidy amount better reflects the premiums of plans in which LIS beneficiaries are enrolled. The final rule uses each plan's share of LIS enrollment, rather than each plan's share of total Part D enrollment, to weight each plan's premium. This change results in fewer reassignments than the proposed rule (approximately 670,000) and greater low-income premium subsidy costs. The relationship between reassignments and the premium subsidy is described above.

The RFA requires agencies to analyze options for regulatory relief of small businesses. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of $6.5 million to $31.5 million in any 1 year. Individuals and States are not included in the definition of a small entity. We are not preparing an analysis for the RFA because we have determined, and the Secretary certifies, that this regulation will not have a significant economic impact on a substantial number of small entities.

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that this regulation will not have a significant impact on the operations of a substantial number of small rural hospitals.

Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $130 million. This rule will have no consequential effect on State, local, or tribal governments in the aggregate, or by the private sector.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. Since this regulation does not impose any costs on State or local governments, the requirements of E.O. 13132 are not applicable.

We have estimated the effect this regulation will have on the number of reassignments, the number of zero-premium plans available to full-subsidy eligible individuals in each region, and bid incentives.

This rule will reduce the number of reassignments compared to the current regulatory framework. In 2008, under the provisions of the “Medicare Demonstration to Transition Enrollment of Low-Income Subsidy Beneficiaries”, approximately 1.19 million LIS beneficiaries were reassigned to new Part D organizations. We estimated that if the 2008 benchmarks had been calculated under the current regulation (that is, full enrollment weighted using all enrollees), the number of LIS reassignments would have been 2.18 million. Under the policy in the proposed rule, the number of reassignments would have declined by approximately 200,000 (compared to the current regulation) to 2.0 million. We estimate that, if the 2008 benchmarks had been calculated using the LIS weighting methodology in this final rule, the benchmarks would have been higher in 27 of the 34 regions and the number of reassignments would have been 1.33 million—approximately 850,000 lower than under the current regulation.

We estimate that this final rule, if implemented in 2008, would have reduced the benchmarks slightly in seven regions as compared to the current regulation. These regions tend to have low MA-PD penetration and a concentration of LIS beneficiaries in PDPs with relatively low premiums. The amount of the benchmark reduction was typically less than $0.50. In 2008, these benchmark reductions would have increased reassignments in total by less than 50,000. The 1.33 million estimate noted above is net of these increased reassignments.

We estimate that this final rule, if implemented in 2008, would have increased the number of zero premium organizations available to beneficiaries in 20 of the 34 PDP regions. This is somewhat lower than the number of regions where the benchmarks would have been higher (27), because some regions did not have any new plans that landed under the benchmark with the new calculation. In addition, in 2008, this regulation would have resulted in at least five zero-premium organizations in every Part D region with the exception of one region, which would have had four zero-premium organizations.

This approach maintains a strong incentive to bid low to keep and possibly add LIS beneficiaries. Absent the rule, there may be a “winner take all” outcome in certain regions with one organization acquiring all of the LIS beneficiaries in the region. It is difficult to predict what will happen in the absence of this rule, but we expect some organizations will be induced to bid even lower while other organizations will give up on this population and bid higher.

As stated in the “Background” section of this final rule, we considered allowing PDP Sponsors to reduce their premium to the subsidy amount after it was established for LIS-eligible individuals without regard to the amount of their premium. We also considered allowing plans with premiums under a fixed dollar amount to reduce their low-income premiums to the premium subsidy amount (de minimis). We determined, however, that these options would undermine the integrity and competitiveness of the bidding process.

We also considered changing our approach to reassignment to an approach that would allow LIS-eligible individuals to be informed of zero-premium PDP options for full-subsidy eligibles, but would remain in their current plan, regardless of the premium, if they take no action. Beneficiary advocacy groups were concerned about beneficiaries being charged a premium without electing to pay it.

We also considered changing the regulation to calculate the benchmarks using MA-PD premiums before they have been reduced by Part C rebates. That approach, however, is not permitted under the statute.

Finally, we considered the policy in the proposed rule itself, which was an option for PDP Sponsors in regions with less than five zero-premium PDPs to offer a separate prescription drug premium amount for full subsidy eligible individuals subject to certain conditions. In response to comments received on the proposed rule, we determined that this approach did not address the reassignment issue as effectively as the LIS benchmark weighting approach recommended by commenters.

As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf ), in Table 2 below, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this final rule. This table provides our best estimate of the cost associated due to increased Federal low-income premium subsidy payments, which are primarily the result of allowing a greater number of low-income beneficiaries to remain in their current plan, rather than reassigning them to a lower cost plan. All expenditures are classified as costs to the Federal Government.

This rule is estimated to result in an increased Federal cost of $90 million in CY 2009 and $1.68 billion over the next 10 fiscal years (2009 through 2018). As explained above, these costs are primarily due to an increase in low-income premium subsidy payments. This rule will not have a significant economic impact on a substantial number of small entities, so we are not preparing an analysis for the RFA. In addition, the regulation will not have a significant impact on the operations of a substantial number of small rural hospitals, so we are not preparing an analysis for section 1102(b) of the Act. The analysis above, together with the preamble, provides a Regulatory Impact Analysis as it qualifies as a major rule under Executive Order 12866.

In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget.

I. Introduction

Under the authority of sections 1304 and 1345 of the National Flood Insurance Act of 1968, Public Law 90-448, 82 Stat. 476, as amended (42 U.S.C. 4011, 4081), the Federal Emergency Management Agency (FEMA) provides insurance protection against flood damage to homeowners, businesses, and others by means of the National Flood Insurance Program (NFIP). The sale of flood insurance is largely implemented by private insurance companies that participate in the NFIP Write-Your-Own (WYO) program. Through the WYO program, insurance companies enter into agreements with FEMA to sell and service flood insurance policies and adjust claims after flood losses.

Under the WYO program, 88 private sector property insurers issue flood insurance policies and adjust flood insurance claims under their own names based on the Financial Assistance/Subsidy Arrangement (Arrangement). The Arrangement is published at 44 CFR part 62, Appendix A and defines the duties and responsibilities of insurers that sell, service and market insurance under the WYO program. The Arrangement also identifies the responsibilities of the Government to provide financial and technical assistance to these insurers. The Arrangement is renewed yearly through written agreement between the WYO Companies and FEMA.

In this rule, FEMA makes three changes to the Arrangement. These changes either clarify existing practices or clarify how FEMA communicates certain information to WYO Companies.

Article II, section G. 3., is being added to address the WYO Companies' cooperation in helping ensure that agents writing flood insurance under the NFIP avail themselves of the training opportunities needed to meet the minimum NFIP training requirements called for in section 207 of the Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004, Public Law 108-264, 118 Stat. 733 (42 U.S.C. 4011 note) (the “BBB Act”). The new section of the Arrangement will not affect the training and education requirements, which are established by the States, but merely integrates WYO Companies into the effort to ensure agents meet those requirements. The new section commits the WYO Companies to notify their agents of the requirement to comply with State regulations regarding flood insurance agent education, notify them of flood insurance training opportunities, and assist FEMA in periodic assessment of agent training needs. Although WYO Companies are already undertaking these efforts, they are being added to the Arrangement to formalize the commitment.

Article III, section D. 1. of the Arrangement provides that loss payments under flood insurance policies are to be made by the WYO Company from Federal funds retained in the bank account(s) established under Article II, section E., and, if such funds are depleted, from Federal funds derived by drawing against the Letter of Credit established pursuant to Article IV. WYO Companies have sought clarification as to what would occur following a large scale flooding event if there are no funds available in the National Flood Insurance Fund (NFIF) to be drawn down through the company letter of credit.

Although the seventh “Whereas” clause in Article I already states that the Federal Treasury will back all flood policy claim payments by the Company, FEMA is revising Article VII, section A. to provide additional clarification that there is no requirement that WYO Companies use their own funds to pay NFIP claims when there are no funds available in the NFIF to be drawn down through the company letter of credit. As will be discussed in more depth below, in certain heavy loss years, the potential exists for the NFIP to exhaust its authority to borrow funds from the Treasury to pay claims. In such an event, there may be a period of time during which no funds are available in the Treasury until the Congress takes action to either increase the program's borrowing authority, or appropriate funds to relieve the debt. This interim rule revises Article VII, section A. to provide that in such circumstances, the Federal Insurance Administrator will suspend the NFIP's payment of claims until funds are again available in the Treasury, and that the WYO Companies are not required to pay claims from their own funds in the event of such a suspension.

FEMA is revising Article III, section C.1. of the Arrangement which deals with the Unallocated Loss Adjustment Expense (ULAE) for which WYO Companies receive reimbursement under the Arrangement. At present, the ULAE rate is an expense reimbursement of 3.3 percent of the incurred loss (except that it does not include “incurred but not reported”). The effect of this rule is to remove the ULAE compensation percentage from the Arrangement. Instead, the percentage will now be communicated by FEMA to the WYO Companies through a ULAE Schedule.

As currently written, the ULAE compensation rate is one of only a few compensation rates explicitly spelled out in the Arrangement. The WYO Allocated Loss Adjustment Expense Fee Schedule (also called the Adjuster fee schedule) was at one time also in the Arrangement, but was removed because it changed frequently (61 FR 37687). Similarly, the total WYO Allowance was once contained in the Arrangement. The WYO Allowance was a combination of a 15 percent agency commission rate and an operating expense rate. Because the operating expense portion of that figure changed from year-to-year, the operating expense portion of that figure was removed (64 FR 27705). In the Fiscal Year 2007 Arrangement, the only fixed compensation rates were the agency commission rate of 15 percent, a 2 percent marketing incentive, and the 3.3 percent ULAE.

Until now the ULAE has not changed. Pursuant to this rulemaking, however, the 3.3 percent fixed rate will be removed and, the ULAE compensation rate will be subject to change. Therefore, it makes sense to treat it in the same manner as the Adjuster fee schedule and the WYO Allowance by releasing it in an annual fee schedule. This will allow FEMA to adjust the rate as needed to reflect the actual expenses incurred by the WYO Companies.

In the aftermath of Hurricanes Katrina, Rita, and Wilma in 2005, FEMA became aware that while the ULAE compensation percentage is equitable for most loss years, it exposes the Federal Government to an excessive amount of reimbursement in loss years that reach a catastrophic level of losses. ULAE is intended to cover those claim handling expenses that are not associated with specific claims, such as maintaining the home office claims staff and establishing and running on-site claims field offices. The 3.3 percent rate functioned equitably during most years of the NFIP, under-compensating companies moderately in light loss years, while providing slightly more compensation in heavier loss years, but averaging out to an appropriate level. However, as FEMA experienced after Hurricane Katrina, the 3.3 percent schedule greatly exceeds the companies' actual ULAE out-of-pocket expenses in catastrophic loss years.

In an “average” loss year, the NFIP pays out approximately $16.8 million in ULAE ($302,775,669/18 years), while a single catastrophic event (Hurricane Katrina) resulted in over $613 million in ULAE payments. The data from 1987 to 2007 used to generate these figures is available in the public docket for this rulemaking. Generally, ULAE is expected to increase as claims payout increases. That is, ULAE expenses for the WYO Companies should be larger during heavy loss years. However, the ratio of ULAE to losses (either paid losses or incurred losses) is not constant.

For example, if paid losses increase ten-fold, the increase in ULAE expenditures (the administrative expense associated with processing each claim) will not also increase ten-fold. However, under the Arrangement, the ULAE reimbursement was a set 3.3 percent of the incurred loss. In an average year, claims tend to range between $15,000 and $30,000. So, for an average $30,000 insurance claim the ULAE reimbursement of 3.3 percent would be $990 per claim. However, claims from Hurricane Katrina, averaged around $90,000, so the ULAE reimbursement of 3.3 percent jumped to $2,970 per claim. When entering the realm of certain catastrophic flooding events like Hurricane Katrina, WYO Companies could benefit somewhat from the economy of scale.

To confirm this, FEMA sought data from the Institute for Business and Home Safety (IBHS), a nonprofit organization of insurers and reinsurers that conduct business in the United States or reinsure risks located in the United States. IBHS submitted a voluntary data call for unallocated loss figures related to Hurricane Katrina to the insurance companies on its flood subcommittee. FEMA received consolidated data from five of the companies.

The figures above reflect the amount of Direct Incurred Losses that were paid out to policyholders for flood loss. The Direct ULAE Incurred is the actual amount of cost that the WYO Companies incurred to process the claims. In 2005, the companies expended $328,235,999 which was 2.71 percent of the overall amount paid out. In contrast, in 2006, the companies actually saved $17,947,595, which is a negative 5.88 percent of the amount paid to insureds. The FY2006 cost savings was a result of efficiencies in scale resulting from the realization of the cost in FY2005. Because the losses in both years are attributed to Hurricane Katrina, FEMA has aggregated the figures which show an overall actual cost to the WYO Companies for their ULAE to be 2.5 percent of the incurred losses for a catastrophic event. This is in contrast to the 3.3 percent that the WYO Companies were actually paid under the terms of the Arrangement.

FEMA has considered four primary alternatives to the fixed 3.3 percent rate:

A. Status quo. This is an unacceptable position due to the inflated ULAE payments to the WYO Companies that occur after catastrophic events like Hurricane Katrina.

B. Straight reduction to the ULAE formula from the current 3.3 percent to a number that is more equitable for catastrophic years. While this would solve the problem for catastrophic years, it would greatly under-compensate the WYO Companies for the great preponderance of “routine” loss years. This would cause the companies to question their continued participation in the program and could greatly impact the long-term effectiveness of the program.

C. A blend of A and B that would maintain the current ULAE schedule of 3.3 percent of incurred losses for non-catastrophic loss years, while providing a lower ULAE rate for losses in excess of a specified threshold. While this approach has a certain appeal, as FEMA explored this option the formula quickly became very complicated as FEMA tried to adapt the formula so that it could be applied at the individual company level, taking into account the difference in what a catastrophic loss year would look like for a large company versus smaller geographically concentrated companies. It also had to be flexible enough to appropriately limit ULAE compensation for catastrophes where the loss payments span fiscal years. In short, the formula quickly grew so complicated that it would be difficult to administer.

D. Providing the ULAE reimbursement for companies to be based on a combination of a percentage of written premiums and a percentage of incurred loss. Shifting a portion of the ULAE compensation to be based on written premium would allow the companies a more equitable vehicle to cover their fixed expenses—such as home office claims staff—that are incurred every year whether a light loss year or a catastrophic loss year. However, under such an approach the appropriate percentage of written premium would probably vary over time depending upon the policy base and the premium adequacy of the NFIP. For example, as the current discounted premium (commonly referred to as “subsidized premiums”) is addressed through aggressive rate increases, the NFIP's written premium would increase without an associated increase in the WYO Companies' fixed expenses.

FEMA currently favors splitting the ULAE compensation between premium and incurred loss as described in alternative D. However, to assure that the ULAE Fee Schedule can be easily adjusted to reflect needed readjustments over time, the ULAE percentage should be removed from the Arrangement and handled similarly to the Adjuster Fee Schedule and WYO Allowance.

Transmitting the ULAE rate through a Fee Schedule will align it with the method that FEMA uses to transmit most of the other rates in the Agreement to WYO Companies and will allow FEMA to revise the rate more rapidly than through the formal rulemaking process. However, FEMA will not revise the rate during the Arrangement year. Pursuant to the terms of 44 CFR 62.23(i)(3), an established loss adjustment Fee Schedule is part of the Arrangement and cannot be changed during an Arrangement year.

FEMA has extended the FY2007 Arrangement until such time that the FY2008 Arrangement and Schedules are finalized. Concurrent with the release of the FY2008 Arrangement, FEMA will release the FY2008 ULAE Schedule. In the new schedule, FEMA intends to move from a fixed rate system to a formula. FEMA used the data above to generate the new ULAE formula which is expected to be 1 percent of the Written Premium plus 1.5 percent of the Incurred Loss. FEMA used data from 1985 to 2007 to compare ULAE payments under the 3.3 percent framework versus this new formula and found the difference to be negligible in routine loss years. From 1985 to 2007, excluding 2005 and 2006, the total (not annual) difference is an increase of approximately $14 million. Using data from 2005-2006, which are the catastrophic Katrina years, the difference is a total reduction of approximately $300 million. A chart depicting this data is available in the public docket for this rulemaking.

Although this rulemaking is focused on the manner in which the ULAE formula is communicated to the WYO Companies, and not the actual ULAE rate itself, FEMA seeks data to use in its efforts to revise the formula, and suggestions for ways to tailor the formula to ensure that it will accurately reimburse WYO Companies for their actual loss. WYO Companies are encouraged to submit actual ULAE data during the comment period of this rule to assist FEMA in continuing to refine the formula. Comments that include trade secrets, confidential commercial or financial information should be submitted using the methods described above in the “Handling of Confidential or Proprietary Information Submitted in Public Comments” portion of the ADDRESSES caption of this preamble.

The Administrative Procedure Act (APA), 5 U.S.C. 553, and 44 CFR 1.12, provides an exception from the standard notice and comment rulemaking procedures where the agency for good cause finds the procedures for comment and response contrary to public interest. The rapid implementation of this rule is in the best interest of the public, as delay could overwhelm the NFIP should a catastrophic disaster occur.

Although catastrophic loss events like Katrina are relatively infrequent events, the probability of another storm of similar magnitude remains the same for this year. Research has shown that there has been a significant increase in high-latitude cyclone frequency, with an increase in storm intensity. (“Trends in Northern Hemisphere Surface Cyclone Frequency and Intensity”, Gregory J. McCabe, Martyn P. Clark and Mark C. Serreze, American Meterological Society, June 15, 2001.) There has also been an increase of more than 30 percent in the modeled frequency of major hurricanes making landfall in the United States, which accounts for current elevated levels of hurricane activity in the Atlantic basin that are expected to persist for at least the next five years. Although experts hold different climatological perspectives on the underlying causes of elevated hurricane activity, warmer temperatures are expected to result in high activity in the Atlantic basin, leading to a greater potential for hurricanes to make landfall at higher intensities. (“Insurance Risk Models Rise with Elevated Storm Frequency, Severity” Environment News Service, April 13, 2006.)

Furthermore, hurricanes are not the only cause of floods. Catastrophic flooding can occur at anytime of the year. If a catastrophic event occurs before FEMA is able to revise the ULAE figure it could cause a financial hardship to the American taxpayer as there would be a drain on the NFIP funds that would not have occurred if the change in the ULAE was in place at the time of the event. After Hurricane Katrina, the NFIP was forced to borrow $17.31 billion from the Federal Treasury. If an event were to occur, the program's debt to the Treasury would only increase. Since a catastrophic flooding event has the possibility of happening at any time, any delay in implementing this rule puts the risk of financial hardship in the realm of possibility.

The program has been fortunate to have had two years in a row (2006 and 2007), in which the United States has not been hit with a large disaster; however, it is foolish to expect that such calm years will continue. Spurred by the constant threat of flood hazards, FEMA has been reviewing the NFIP to evaluate areas in which the program is inefficient. One area addressed is the ULAE rate. As discussed above, the fixed 3.3 percent ULAE rate established in the Arrangement is not aligned with the actual expenses incurred by WYO Companies in processing claims. If a catastrophic disaster or any disaster resulting in more than $3 million in losses hits before this rule goes into effect, it could overwhelm the NFIP. This rule is intended to reduce inefficiency in the NFIP and properly allocate relatively scarce resources to those in need.

FEMA has not considered these changes to the Arrangement in a vacuum. In the summer of 2007 FEMA met with IBHS, a nonprofit organization of insurers and reinsurers that conduct business in the United States or reinsure risks located in the United States. Forty-three of the 88 WYO companies are members of IBHS and those 43 companies write 85 percent of the WYO policies. The purpose of that meeting was to discuss the possibility of removing the fixed ULAE rate and methods that could be used in its place to more appropriately reimburse the actual expenses incurred by WYO Companies. IBHS provided helpful ideas, many of which are discussed above in the “Discussion of the Interim Rule” section. In those discussions, IBHS did not oppose the removal of the ULAE percentage from the text of the Arrangement or the revision of the ULAE formula.

FEMA believes it is contrary to the public interest to delay the benefits of this rule. In accordance with the APA, 5 U.S.C. 553(b)(B), for the reasons cited above FEMA finds that there is good cause for the interim final rule to be published without prior public comment FEMA, however, values public input to the regulatory process, and for this reason we are inviting post-effective-date comments on this interim rule. We may change this rule as a result of the comments we receive.

FEMA has sent this interim final rule to the Congress and to the Government Accountability Office under the Congressional Review of Agency Rulemaking Act, 5 U.S.C. 801-808. As discussed in depth below in the Executive Order 12866 analysis, this rule is not a “major rule” within the meaning of that Act and will not result in an annual effect on the economy of $100,000,000 or more. Moreover, it will not result in a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions. Nor does FEMA expect that it will have “significant adverse effects” on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises.

This rule is intended to revise the Arrangement between the WYO Companies and FEMA to encourage agents writing flood insurance under the NFIP to avail themselves of the training opportunities needed to meet the minimum NFIP training requirements, to clarify that there is no requirement that WYO Companies use their own funds to pay NFIP claims when there are no funds available in the NFIF to be drawn down through the company letter of credit, and to change the method in which FEMA communicates the ULAE rate to the WYO Companies. These changes are intended to improve the Arrangement and allow FEMA to run the NFIP in a more efficient and reasonable manner.

FEMA has prepared and reviewed this rule under the provisions of Executive Order 12866 (58 FR 51735, Oct. 4, 1993). This rulemaking is not a significant regulatory action under section 3(f) of Executive Order 12866; therefore, OMB has not reviewed it under that Order.

As explained in this preamble, the first change to the Arrangement involves adding section G.3. to Article II. Section G.3. clarifies a WYO Company's cooperation in helping market the NFIP flood insurance policy, including ensuring that property insurance agents writing flood insurance under the NFIP avail themselves of the training opportunities needed to meet the minimum NFIP training requirements called for in section 207 of the Flood Insurance Reform Act of 2004. As insurance companies, these entities are expected to ensure that agents who provide insurance to the public understand the policies they provide. Training agents in the content of policies they provide is a necessary and typical part of marketing any insurance policy. These are efforts WYO Companies are already undertaking.

Next, in Article VII of the Arrangement, FEMA revises section A. to clarify for WYO Companies that, as has always been the case, WYO Companies do not have to use company funds to pay NFIP claims when there are no funds available in the NFIF to be drawn down through the company letter of credit. In certain heavy loss years, the potential exists for the NFIF to exhaust its authority to borrow funds from the Treasury to pay claims. In such an event, there may be a period of time during which no funds are available in the Treasury until the Congress either takes action to increase the program's borrowing authority, or appropriates funds to relieve the debt. The change made to the Arrangement in this rule is consistent with past practices of the NFIP, clarifies that the practice will continue in the future, and has no monetary impact.

Finally, this rule revises section C.1. of Article III, to remove explicit reference to the 3.3 percent ULAE compensation percentage in the Arrangement to allow FEMA added flexibility in adjusting the rate as needed to best align it to the actual expenses incurred by the WYO Companies. Instead, the ULAE rate will be communicated by FEMA to the WYO Companies through a Fee Schedule. The ULAE compensation rate will be communicated to the WYO Companies in the same manner that other forms of its compensation have been communicated. This rule does not change the ULAE rate, only the way it is communicated; therefore, there is no monetary effect from this rule.

The Regulatory Flexibility Act (“RFA”) (5 U.S.C. 601 et seq. ), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121, 110 Stat. 857) mandates that an agency conduct a RFA analysis when an agency is “required by section 553 * * * to publish general notice of proposed rulemaking for any proposed rule * * *” 5 U.S.C. 603(a). Accordingly, RFA analysis is not required when a rule is exempt from notice and comment rulemaking under 5 U.S.C. 553(b). Good cause exists under 5 U.S.C. 553(b)(B) to exempt this rule from the notice and comment requirements of 5 U.S.C. 553(b). Therefore no RFA analysis under 5 U.S.C. 603 is required for this rule.

FEMA's regulations implementing the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq. ) at 44 CFR 10.8(d)(2)(ii) categorically exclude the preparation, revision, and adoption of regulations, directives, manuals, and other guidance documents related to actions that qualify for categorical exclusions. The changes made in this regulation constitute action to enforce Federal, State or local codes, standards or regulations. This rulemaking will not have a significant effect on the human environment and, therefore, neither an environmental assessment nor an environmental impact statement are required.

Executive Order 13132, entitled “Federalism” (64 FR 43255, Aug. 10, 1999), sets forth principles and criteria that agencies must adhere to in formulating and implementing policies that have federalism implications; that is, regulations that have substantial direct effects on the States, or on the distribution of power and responsibilities among the various levels of government. Federal agencies must closely examine the statutory authority supporting any action that would limit the policymaking discretion of the States, and to the extent practicable, must consult with State and local officials before implementing any such action. The changes in this rule affect the contractual relationship between FEMA and WYO Companies. Participation as a WYO Company is voluntary and does not affect State policymaking discretion. In accordance with Section 6 of Executive Order 13132, FEMA determines that this rule will not have federalism implications sufficient to warrant the preparation of a federalism impact statement.

As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ), an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. This rule does not impose any new reporting or recordkeeping requirements, nor does it revise information collection requirements currently approved under the Paperwork Reduction Act of 1995.

FEMA has reviewed this rule under Executive Order 12988, “Civil Justice Reform” (61 FR 4729, Feb. 7, 1996). This rule meets applicable standards to minimize litigation, eliminate ambiguity, and reduce burden.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies, to the extent permitted by law, to prepare a written assessment of the effects of any Federal mandate in a proposed or final agency rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. Though this rule will not result in such an expenditure, FEMA does discuss the effects of this rule elsewhere in this preamble.

Moreover, because this rule addresses a pre-existing Arrangement between FEMA, FIA, and WYO Companies it does not impose any additional enforceable duty beyond that already agreed to. Participation as a WYO Company is voluntary and does not affect State policymaking discretion. Accordingly, this rule does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995.

Under Executive Order 12898, “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, Feb. 16, 1994), FEMA incorporates environmental justice into its policies and programs. The Executive Order requires each Federal agency to conduct its programs, policies, and activities that substantially affect human health or the environment in a manner that ensures that those programs, policies, and activities do not have the effect of excluding persons from participation in programs, denying persons the benefits of programs, or subjecting persons to discrimination because of race, color, or national origin.

FEMA believes that no action under this rule will have a disproportionately high or adverse effect on human health or the environment. Accordingly, the requirements of Executive Order 12898 do not apply to this rule.

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

FEMA has reviewed this rule under Executive Order 13175, “Consultation and Coordination With Indian Tribal Governments” (65 FR 67249, Nov. 9, 2000). This rule will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

FEMA has reviewed this rule under Executive Order 12630, “Governmental Actions and Interference With Constitutionally Protected Property Rights” (53 FR 8859, Mar. 18, 1988) as supplemented by Executive Order 13406, “Protecting the Property Rights of the American People” (71 FR 36973, June 28, 2006). This rule will not affect a taking of private property or otherwise have taking implications under Executive Order 12630.

The NFIP enables property owners to purchase flood insurance which is generally not otherwise available. In return, communities agree to adopt and administer local floodplain management aimed at protecting lives and new construction from future flooding. Section 1315 of the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits flood insurance coverage as authorized under the NFIP, 42 U.S.C. 4001 et seq. ; unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed in this document no longer meet that statutory requirement for compliance with program regulations, 44 CFR part 59. Accordingly, the communities will be suspended on the effective date in the third column. As of that date, flood insurance will no longer be available in the community. However, some of these communities may adopt and submit the required documentation of legally enforceable floodplain management measures after this rule is published but prior to the actual suspension date. These communities will not be suspended and will continue their eligibility for the sale of insurance. A notice withdrawing the suspension of the communities will be published in the Federal Register .

In addition, FEMA has identified the Special Flood Hazard Areas (SFHAs) in these communities by publishing a Flood Insurance Rate Map (FIRM). The date of the FIRM, if one has been published, is indicated in the fourth column of the table. No direct Federal financial assistance (except assistance pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act not in connection with a flood) may legally be provided for construction or acquisition of buildings in identified SFHAs for communities not participating in the NFIP and identified for more than a year, on FEMA's initial flood insurance map of the community as having flood-prone areas (section 202(a) of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4106(a), as amended). This prohibition against certain types of Federal assistance becomes effective for the communities listed on the date shown in the last column. The Administrator finds that notice and public comment under 5 U.S.C. 553(b) are impracticable and unnecessary because communities listed in this final rule have been adequately notified.

Each community receives 6-month, 90-day, and 30-day notification letters addressed to the Chief Executive Officer stating that the community will be suspended unless the required floodplain management measures are met prior to the effective suspension date. Since these notifications were made, this final rule may take effect within less than 30 days.

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

Regulatory Flexibility Act. The Administrator has determined that this rule is exempt from the requirements of the Regulatory Flexibility Act because the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits flood insurance coverage unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed no longer comply with the statutory requirements, and after the effective date, flood insurance will no longer be available in the communities unless remedial action takes place.

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

Executive Order 13132, Federalism. This rule involves no policies that have federalism implications under Executive Order 13132.

Executive Order 12988, Civil Justice Reform. This rule meets the applicable standards of Executive Order 12988.

Paperwork Reduction Act. This rule does not involve any collection of information for purposes of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.

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

This final rule is issued in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR part 67. FEMA has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR part 60.

Interested lessees and owners of real property are encouraged to review the proof Flood Insurance Study and FIRM available at the address cited below for each community. The BFEs and modified BFEs are made final in the communities listed below. Elevations at selected locations in each community are shown.

National Environmental Policy Act. This final rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. An environmental impact assessment has not been prepared.

Regulatory Flexibility Act. As flood elevation determinations are not within the scope of the Regulatory Flexibility Act, 5 U.S.C. 601-612, a regulatory flexibility analysis is not required.

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

Executive Order 13132, Federalism. This final rule involves no policies that have federalism implications under Executive Order 13132.

Executive Order 12988, Civil Justice Reform. This final rule meets the applicable standards of Executive Order 12988.

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

This final rule is issued in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR part 67. FEMA has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR part 60.

Interested lessees and owners of real property are encouraged to review the proof Flood Insurance Study and FIRM available at the address cited below for each community. The BFEs and modified BFEs are made final in the communities listed below. Elevations at selected locations in each community are shown.

National Environmental Policy Act. This final rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. An environmental impact assessment has not been prepared.

Regulatory Flexibility Act. As flood elevation determinations are not within the scope of the Regulatory Flexibility Act, 5 U.S.C. 601-612, a regulatory flexibility analysis is not required.

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

Executive Order 13132, Federalism. This final rule involves no policies that have federalism implications under Executive Order 13132.

Executive Order 12988, Civil Justice Reform. This final rule meets the applicable standards of Executive Order 12988.