Pursuant to Marketing Order No. 927 (7 CFR part 927), hereinafter referred to as the “order,” and the applicable provisions of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act,” it is hereby directed that a referendum be conducted to ascertain whether continuance of the order is favored by growers. The referendum shall be conducted from February 26 through March 11, 2011, among eligible Oregon and Washington pear growers. Only growers that were engaged in the production of pears in Oregon or Washington during the period of July 1, 2009, through June 30, 2010, may participate in the continuance referendum.

USDA has determined that continuance referenda are an effective means for determining whether growers favor the continuation of marketing order programs. USDA would consider termination of the order if less than two-thirds of the growers voting in the referendum and growers of less than two-thirds of the volume of Oregon and Washington pears represented in the referendum favor continuance of their program. In evaluating the merits of continuance versus termination, USDA will not exclusively consider the results of the continuance referendum. USDA will also consider all other relevant information regarding operation of the order and relative benefits and disadvantages to growers, handlers, and consumers to determine whether continuing the order would tend to effectuate the declared policy of the Act.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the ballot materials used in the referendum herein ordered have been submitted to and approved by the Office of Management and Budget (OMB) and have been assigned OMB No. 0581-0189. It has been estimated that it will take an average of 20 minutes for each of the approximately 1700 Oregon-Washington pear growers to cast a ballot. Participation is voluntary. Ballots postmarked after March 11, 2011, will not be included in the vote tabulation.

Teresa Hutchinson and Gary D. Olson of the Northwest Marketing Field Office, Fruit and Vegetable Programs, AMS, USDA, are hereby designated as the referendum agents of the Secretary of Agriculture to conduct this referendum. The procedure applicable to the referendum shall be the “Procedure for the Conduct of Referenda in Connection With Marketing Orders for Fruits, Vegetables, and Nuts Pursuant to the Agricultural Marketing Agreement Act of 1937, as Amended” (7 CFR §§ 900.400-900.407).

Ballots will be mailed to all growers of record and may also be obtained from the referendum agents or from their appointees.

We invite interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data. We ask that you send us two copies of written comments.

We will file in the docket all comments we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning these special conditions. You can inspect the docket before and after the comment closing date. If you wish to review the docket in person, go to the address in the ADDRESSES section of this preamble between 7:30 a.m. and 4 p.m., Monday through Friday, except Federal holidays.

We will consider all comments we receive on or before the closing date for comments. We will consider comments filed late if it is possible to do so without incurring expense or delay. We may change these special conditions based on the comments we receive.

If you want us to acknowledge receipt of your comments on this proposal, include with your comments a self-addressed, stamped postcard on which you have written the docket number. We will stamp the date on the postcard and mail it back to you.

On March 29, 2005, Gulfstream Aerospace Corporation (hereafter referred to as “Gulfstream”) applied for an FAA type certificate for its new Gulfstream Model GVI passenger airplane. Gulfstream later applied for, and was granted, an extension of time for the type certificate, which changed the effective application date to September 28, 2006. The Gulfstream Model GVI airplane will be an all-new, two-engine jet transport airplane with an executive cabin interior. The maximum takeoff weight will be 99,600 pounds, with a maximum passenger count of 19 passengers.

Under provisions of Title 14, Code of Federal Regulations (14 CFR) 21.17, Gulfstream must show that the Gulfstream Model GVI airplane (hereafter referred to as “the GVI”) meets the applicable provisions of 14 CFR part 25, as amended by Amendments 25-1 through 25-119, 25-122, and 25-124. If the Administrator finds that the applicable airworthiness regulations (i.e., 14 CFR part 25) do not contain adequate or appropriate safety standards for the GVI because of a novel or unusual design feature, special conditions are prescribed under the provisions of § 21.16.

In addition to complying with the applicable airworthiness regulations and special conditions, the GVI must comply with the fuel vent and exhaust emission requirements of 14 CFR part 34 and the noise certification requirements of 14 CFR part 36. The FAA must also issue a finding of regulatory adequacy pursuant to section 611 of Public Law 92-574, the “Noise Control Act of 1972.”

The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type certification basis under § 21.17(a)(2).

Special conditions are initially applicable to the model for which they are issued. Should the type certificate for that model be amended later to include any other model that incorporates the same novel or unusual design features, the special conditions would also apply to the other model under provisions of § 21.101.

The GVI is equipped with a high speed protection system that limits nose down pilot authority at speeds above V C /M C , and prevents the airplane from actually performing the maneuver required under § 25.335(b)(1). The applicable airworthiness regulations do not contain adequate or appropriate safety standards for this design feature. These proposed special conditions address this design feature. These proposed special conditions are identical or nearly identical to those previously required for type certification of other airplane models.

Gulfstream proposes to reduce the speed margin between V C and V D required by § 25.335(b), based on the incorporation of a high speed protection system in the GVI flight control laws. The GVI is equipped with a high speed protection system that limits nose down pilot authority at speeds above V C /M C and prevents the airplane from actually performing the maneuver required under § 25.335(b)(1).

Section 25.335(b)(1) is an analytical envelope condition which was originally adopted in Part 4b of the civil air regulations to provide an acceptable speed margin between design cruise speed and design dive speed. Freedom from flutter and the airframe design loads are affected by the design dive speed. While the initial condition for the upset specified in the rule is 1g level flight, protection is afforded for other inadvertent overspeed conditions as well. Section 25.335(b)(1) is intended as a conservative enveloping condition for all potential overspeed conditions, including non-symmetric ones.

To establish that all potential overspeed conditions are enveloped, the applicant would demonstrate that the dive speed will not be exceeded during pilot-induced or gust-induced upsets in non-symmetric attitudes.

In addition, the high speed protection system in the GVI must have a high level of reliability.

As discussed above, these proposed special conditions are applicable to the GVI. Should Gulfstream apply at a later date for a change to the type certificate to include another model incorporating the same novel or unusual design features, these proposed special conditions would apply to that model as well.

This action affects only certain novel or unusual design features of the GVI. It is not a rule of general applicability.

The authority citation for these special conditions is as follows:

Accordingly, the Federal Aviation Administration (FAA) proposes the following special conditions as part of the type certification basis for the GVI airplanes.

1. In lieu of compliance with § 25.335(b)(1), if the flight control system includes functions that act automatically to initiate recovery before the end of the 20 second period specified in § 25.335(b)(1), V D /M D must be determined from the greater of the speeds resulting from conditions (a) and (b) below. The speed increase occurring in these maneuvers may be calculated if reliable or conservative aerodynamic data are used.

(a) From an initial condition of stabilized flight at V C /M C , the airplane is upset so as to take up a new flight path 7.5 degrees below the initial path. Control application, up to full authority, is made to try to maintain this new flight path. Twenty seconds after initiating the upset, manual recovery is made at a load factor of 1.5 g (0.5 acceleration increment), or a greater load factor that is automatically applied by the system with the pilot's pitch control neutral. Power, as specified in § 25.175(b)(1)(iv), is assumed until recovery is initiated, at which time power reduction and the use of pilot controlled drag devices may be used.

(b) From a speed below V C /M C , with power to maintain stabilized level flight at this speed, the airplane is upset so as to accelerate through V C /M C at a flight path 15 degrees below the initial path (or at the steepest nose down attitude that the system will permit with full control authority if less than 15 degrees). The pilot's controls may be in the neutral position after reaching V C /M C and before recovery is initiated. Recovery may be initiated three seconds after operation of high speed warning system by application of a load factor of 1.5g (0.5 acceleration increment), or such greater load factor that is automatically applied by the system with the pilot's pitch control neutral. Power may be reduced simultaneously. All other means of decelerating the airplane, the use of which are authorized up to the highest speed reached in the maneuver, may be used. The interval between successive pilot actions must not be less than one second.

2. The applicant must also demonstrate that the speed margin, established as above, will not be exceeded in inadvertent or gust induced upsets resulting in initiation of the dive from non-symmetric attitudes, unless the airplane is protected by the flight control laws from getting into non-symmetric upset conditions. The upset maneuvers described in Advisory Circular 25-7A, Change 1, section 32, paragraphs c.(3)(i) and (iii) may be used to comply with this requirement.

3. Any failure of the high speed protection system that would affect the speed margin determined by paragraphs 1. and 2. must be improbable (occur at a rate less than 10 -5 per flight hour).

4. Failures of the system must be annunciated to the pilots, and flight manual instructions must be provided to reduce the maximum operating speeds, V MO /M MO . The operating speed must be reduced to a value that maintains a speed margin between V MO /M MO and V D /M D that is consistent with showing compliance with § 25.335(b) without the benefit of the high speed protection system.

5. Master minimum equipment list (MMEL) relief for the high speed protection system may be considered by the FAA Flight Operations Evaluation Board (FOEB) provided that the flight manual instructions indicate reduced maximum operating speeds as described in paragraph 4., and that no additional hazards are introduced with the high speed protection system inoperative. In addition, the cockpit display of the reduced operating speeds, as well as the overspeed warning for exceeding those speeds, must be equivalent to that of the normal airplane with the high speed protection system operative.

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2011-0042; Directorate Identifier 2010-NM-267-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD based on those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

On November 15, 2010, we issued AD 2010-24-08, Amendment 39-16527 (75 FR 71530, November 24, 2010). That AD required actions intended to address an unsafe condition on Model MYSTERE-FALCON 50 Airplanes.

In AD 2010-24-08, we pointed out that the corresponding EASA AD, AD 2010-0208-E, dated October 12, 2010, requires painting the pipes end of the emergency brake system number 2 and related unions within 7 months after the effective date of that AD. We explained that AD 2010-24-08 did not require that action, and that we might consider additional rulemaking to require this action in the future. We have determined that further rulemaking is indeed necessary to require that action, and this AD follows from that determination.

You may obtain further information by examining the MCAI in the AD docket.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.

We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information.

We might also have proposed different actions in this AD from those in the MCAI in order to follow FAA policies. Any such differences are highlighted in a Note within the proposed AD.

Based on the service information, we estimate that this proposed AD would affect about 248 products of U.S. registry.

The actions that are required by AD 2010-24-08 and retained in this proposed AD take about 2 work-hours per product, at an average labor rate of $85 per work hour. Based on these figures, the estimated cost of the currently required actions is $170 per product.

We estimate that it would take about 1 work-hour per product to comply with the new basic requirements of this proposed AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $21,080, or $85 per product.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

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

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

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

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

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

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.

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

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.

Communications should identify both docket numbers (FAA Docket No. FAA-2011-0016 and Airspace Docket No. 11-ANM-1) and be submitted in triplicate to the Docket Management System ( see ADDRESSES section for address and phone number). You may also submit comments through the Internet at http://www.regulations.gov.

Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2011-0016 and Airspace Docket No. 11-ANM-1”. The postcard will be date/time stamped and returned to the commenter.

All communications received on or before the specified closing date for comments will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the closing date for comments. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.

An electronic copy of this document may be downloaded through the Internet at http://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's Web page at http://www.faa.gov/airports_airtraffic/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received, and any final disposition in person in the Dockets Office ( see the ADDRESSES section for the address and phone number) between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the Northwest Mountain Regional Office of the Federal Aviation Administration, Air Traffic Organization, Western Service Center, Operations Support Group, 1601 Lind Avenue, SW., Renton, WA 98057.

Persons interested in being placed on a mailing list for future NPRMs should contact the FAA's Office of Rulemaking, (202) 267-9677, for a copy of Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure.

The FAA is proposing an amendment to Title 14 Code of Federal Regulations (14 CFR) part 71 by modifying Class E airspace extending upward from 700 feet above the surface at Poplar Municipal Airport, Poplar, MT. The airport has been moved 1.5 NM northeast of the original airport site. Controlled airspace is necessary to accommodate aircraft using the new RNAV (GPS) standard instrument approach procedures at Poplar Municipal Airport. This action would enhance the safety and management of aircraft operations at the Airport. This will also correct the name from Poplar Airport.

Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9U, dated August 18, 2010, and effective September 15, 2010, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be published subsequently in this Order.

The FAA has determined this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this proposed regulation: (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 this proposed rule, when promulgated, would 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 U.S. Code. Subtitle 1, section 106, describes the authority for 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 I, section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it establishes additional controlled airspace at Poplar Municipal Airport, Poplar, MT.

Accordingly, pursuant to the authority delegated to me, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

Later in this preamble under the Additional Information section, we discuss how you can comment on this proposal and how we will handle your comments. Included in this discussion is related information about the docket, privacy, and the handling of proprietary or confidential business information. We also discuss how you can get a copy of related rulemaking documents.

The Commercial Space Launch Act of 1984, as codified and amended in Title 49 of the United States Code (49 U.S.C.) Subtitle IX—Commercial Space Transportation, chapter 701, Commercial Space Launch Activities, 49 U.S.C. 70101-70121 (the Act), authorizes the Department of Transportation and thus the FAA, through delegations, to oversee, license, and regulate commercial launch and reentry activities, and the operation of launch and reentry sites as carried out by U.S. citizens or within the United States. 49 U.S.C. 70104, 70105. The Act directs the FAA to exercise this responsibility consistent with public health and safety, safety of property, and the national security and foreign policy interests of the United States. 49 U.S.C. 70105. The FAA is also responsible for encouraging, facilitating, and promoting commercial space launches by the private sector. 49 U.S.C. 70103.

Authority for this particular rulemaking is derived from 49 U.S.C. 70105, which requires that the FAA issue a license to operate a launch site consistent with public health and safety. See also 49 U.S.C. 322(a), 49 U.S.C. 70101(a)(7). Section 70101(a)(7) directs the FAA to regulate only to the extent necessary, in relevant part, to protect the public health and safety and safety of property.

In 2000, the FAA issued regulations governing the storing and handling of explosives as part of its regulations governing the licensing and operation of a launch site. Licensing and Safety Requirements for Operation of a Launch Site; Final Rule, 65 FR 62812 (Oct. 19, 2000) (Launch Site Rule). The FAA has requirements for obtaining a license to operate a launch site in Title 14, Code of Federal Regulations (14 CFR) part 420. Part of the application for a license requires an applicant to provide the FAA with an explosive site plan that complies with the explosive siting requirements of part 420. The plan must show how a launch site operator will separate explosive hazard facilities from the public. The plan must identify the location of the explosives and how the public is safeguarded. The explosive siting requirements of part 420 mandate how far apart a launch site operator should site its explosive hazard facilities based on the quantities of energetic materials housed in each facility. Distances vary based on the quantities at issue, the storing or handling of the energetic materials at a given facility, and whether or not the distance being calculated is a distance to a public area.

Since the original rulemaking, the FAA's experience with the requirements has led it to propose changes. At the time it promulgated the original requirements, the FAA anticipated that any new launch sites would be devoted to expendable launch vehicles, and, therefore, relied on the siting requirements of the Department of Defense (DOD) Explosive Siting Board's (DDESB) DOD Ammunition and Explosive Safety Standard, 6055.9-STD (1997) (1997 DOD Standard). 1 Instead, for the most part, the FAA has issued a number of licenses for the operation of launch sites at existing airports, such as Mojave Air and Space Port. At these airports, the presence of jet fuels regulated under existing requirements creates conditions requiring the FAA to reconcile its launch vehicle liquid propellant requirements with the presence of other industrial chemicals, such as aircraft fuels. Based on experience with these launch sites and on research on other regimes that address explosive materials, the FAA proposes to make changes to its own requirements.

Changes to definitions would be changes of general effect. Additionally, the FAA proposes to increase the flexibility it has in applying its explosive siting requirements by recognizing that approaches other than those mandated by part 420 may provide a level of safety equivalent to part 420. The FAA also proposes to dispense with separation distance requirements for storing liquid oxidizers and Class I, II and III flammable and combustible liquids. When oxidizers are isolated from incompatible energetic liquids and compliant with the design and operational requirements of other regulatory regimes, they do not pose a risk of fire or explosion. Isolating the storing of liquid oxidizers from a fuel source minimizes the risk associated with chemical explosion due to the mixing of the two. In accordance with current DDESB and National Fire Protection Association (NFPA) practice, the FAA proposes to dispense with the hazard groups of tables E-3 through E-6 of appendix E of part 420 as a means of classification because the NFPA classification system is more commonly used. A number of those changes are editorial, but the FAA also proposes to identify the minimum separation distances to public areas and public traffic routes for quantities between less than half a pound and 450 pounds of division 1.1 explosives and liquid propellants with TNT equivalency. The FAA would impose a new formula for determining distances to public areas containing a member of the public in the open. The FAA also proposes to change its separation requirements for division 1.3 explosives.

The FAA proposes to clarify an existing definition and to add four new ones. We would clarify the meaning of “explosive hazard facility.” We would define “energetic liquid,” “liquid propellant,” “maximum credible event,” and “public traffic route.”

The FAA proposes to define “energetic liquids” to mean a liquid, slurry, or gel, consisting of, or containing an explosive, oxidizer, fuel, or combination, that may undergo, contribute to, or cause rapid exothermic decomposition, deflagration, or detonation. “Energetic liquids” would thus include liquid fuels and oxidizers, monopropellant, hybrid, and liquid bipropellant systems.

The FAA would define “liquid propellants” to mean a monopropellant or incompatible energetic liquids co-located for purposes of serving as propellants on a launch vehicle or a related device, 2 such as an attitude control propulsion system. A monopropellant serves as a liquid propellant only if located on a launch vehicle. When not located on a launch vehicle a monopropellant is treated as a fuel or an oxidizer. Part 420 does not define “liquid propellant,” but refers to liquid fuel and oxidizers as liquid propellants whether stored in a storage tank and segregated from each other, or co-located as part of a launch vehicle assembly. In applying this term, the FAA has had to address uncertainty and confusion regarding its meaning. When part 420 was issued, most launch operations took place at federal launch ranges. There are now launch sites located at airports that house many of the same energetic liquids. The term “liquid propellant” as it applies to storing liquid fuel and oxidizer, such as kerosene and liquid oxygen, causes confusion. Kerosene has found a use in some new developmental launch vehicles as a liquid fuel, but is traditionally known for its use as a jet fuel. Liquid oxygen is commonly used as the oxidizer for launch vehicles, but is also widely used in the medical field and other industrial purposes. The labeling of these materials as liquid propellants, is, therefore, no longer suitable because of their multiple uses. To remove the confusion, the FAA would classify what it has been generically referring to as liquid propellants as energetic liquids, and would limit the use of the term “liquid propellant” to its more precise usage, namely, incompatible energetic liquids co-located for purposes of propulsion or operating power in rockets and related devices. With this definition, liquid fuels and oxidizers that are not yet part of a vehicle assembly or a propulsion unit would not be referred to as a liquid propellant, thus removing the ambiguity caused by the current characterization of too many energetic liquids as liquid propellants.

Limiting the use of the term would be more consistent with typical uses of the term “liquid propellants.” Explosive siting experts typically consider the term to mean incompatible energetic liquids that are co-located for purposes of serving as propellants on a launch vehicle. In other words, the same energetic liquid is a propellant if on a rocket, but not if in a storage tank. This special meaning is not obvious, but is understood by those persons who work on these issues. The FAA proposes to confine use of the term to § 420.69, which governs launch pads where solid explosives and energetic liquids are all within intraline distances of each other because they are used as fuels for a launch vehicle.

The FAA proposes to clarify that an “explosive hazard facility” means not only a facility, as identified in the present definition, but a location at a launch site where solid explosives, energetic liquids, or other explosives are stored or handled. Part 420 currently defines an “explosive hazard facility” as a facility at a launch site where solid propellant, liquid propellant, or other explosives are stored or handled. There are circumstances where it is not always clear what satisfies this definition. For example, under this definition, explosive hazard facility could be misinterpreted to only apply to buildings or storage sites. Clarifying that an explosive hazard facility is not only a facility, but is also any other location, would more clearly include hazardous areas such as launch pads and static firing areas with explosives or propellant present.

The FAA proposes to define “maximum credible event” to mean a hypothesized worst-case event, including an accident, explosion, fire, or agent release that is likely to occur from a given quantity and disposition of explosives, chemical agents, or reactive material. A “maximum credible event” is one with a reasonable probability of occurring, taking into account the propagation of the predicted explosion, burn rate, and physical protection such as barriers located around the explosive materials.

Although the FAA cites “public traffic route distance” in § 420.65, there is no definition for the term in the current rule. “Public traffic route” means any road or other mode of transportation on a launch site that serves the general public, and the FAA now proposes to codify that working definition. A “public traffic route” is a public area, but one that may permit shorter separation distances than other public areas due to the ability of a launch site operator to close off the public traffic route and the sporadic presence of members of the public.

Section 420.63 contains general requirements applicable to the preparation of an explosive siting plan, the explosive siting requirements for a launch site located on a federal range, and provision for establishing an equivalent level of safety for explosive siting issues not otherwise addressed by part 420. The FAA proposes only editorial changes to its explosive siting requirements at § 420.63, with two exceptions. The first is that the FAA proposes an explosive site map using a scale sufficient to show distance and structural relationships. The other substantive change would be proposed paragraph (d), which would allow a launch site operator to propose a different separation distance if able to clearly and convincingly demonstrate level of safety equivalent to that required by part 420.

The FAA proposes to require an explosive site map using a scale sufficient to show whether distances and structural relationships satisfy the requirements of this part. The FAA has had difficulty reviewing explosive site maps provided by some launch operators because they employed scales where 1 inch equaled 1500 feet or more. As a result, the maps lacked the fidelity necessary to determine compliance with part 420. The FAA intends by this proposal to ensure the scale is appropriate to the site while still being able to determine compliance.

Proposed § 420.63(d) would permit a launch site operator to separate each explosive hazard facility by distances other than those required by part 420 if the launch site operator could clearly and convincingly demonstrate a level of safety equivalent to that required by this part. Section 420.63(c) currently provides that for explosive siting issues not otherwise addressed by the regulations, a launch site operator must clearly and convincingly demonstrate a level of safety equivalent to that otherwise required by part 420. This has meant that there has been confusion over whether the FAA would permit a demonstration of an equivalent level of safety for explosive materials that part 420 already addresses. Proposed paragraph (d) is necessary to clarify that the FAA intended to permit alternative means of demonstrating an equivalent level of safety to what part 420 addressed as well as to what part 420 did not address. In the discussion accompanying the rulemaking promulgating part 420, the FAA noted that it would allow alternatives to the quantity-distance (Q-D) requirements in the form of, for example, hardening of structures or barricades, if the launch site operator demonstrated that such an approach clearly and convincingly provided an equivalent level of safety. See Launch Site Rule, 65 FR at 62821; Licensing and Safety Requirements for Operation of a Launch Site; Proposed Rule, (Launch Site NPRM), 64 FR 34316, 34322 (Jun. 25, 1999). However, as finally codified, § 420.63(c) states only that it applies to explosive siting issues not otherwise addressed by the requirements of part 420. Thus, allowing a launch site operator, under proposed paragraph (d), to demonstrate an equivalent level of safety for any explosive siting requirement of part 420 would resolve the apparent discrepancies between the explanatory preamble and § 420.63(c).

Section 420.67 addresses both storing and handling of energetic liquids. This is confusing and the FAA proposes to separate storing and handling into two separate sections, relying on proposed § 420.66 for storing and § 420.67 for the handling of energetic liquids. The FAA proposes to reduce its requirements for appropriate separation distances to address only the highly hazardous energetic liquids. The FAA would dispense with separation distance requirements for the storing of liquid oxidizers and RP-1 when they are sufficiently isolated from each other that a mishap associated with one material would not affect the other. This means the FAA would no longer impose separation requirements for RP-1 or for the oxidizers, liquid oxygen, nitrogen tetroxide, and hydrogen peroxide in concentrations below 91 percent. These energetic liquids are all currently governed by § 420.67(b) and tables E-3 through E-6 of Appendix E of this part.

The FAA bases this proposal on two factors: first, when isolated from incompatible materials, energetic liquids such as liquid oxygen and RP-1 do not pose a threat of chemical explosion due to accidental mixing, and, second, other federal and local requirements address fire prevention for most industrial chemicals. There are situations where these energetic liquids may contribute to the risks associated with explosions, and the FAA will continue to regulate them in that context under § 420.63(c).

For example, part 420 treats liquid oxygen as an explosive hazard because, when combined with incompatible materials, chemical explosion may occur. However, when stored as required by intraline distance requirements with appropriate mitigation measures to prevent contact with incompatible materials, such an effect should not result. The FAA proposes to reclassify liquid oxygen because current separation requirements always treat liquid oxygen as an explosive hazard, even when stored in the appropriate intraline distance away from the incompatible materials.

When the FAA promulgated part 420, it focused almost entirely on safety measures for expendable launch vehicles, including the safety issues surrounding storing and handling of energetic liquids, such as liquid propellants. The FAA modeled its separation requirements for table E-3's Hazard Groups I through III liquid propellants on the requirements employed at the federal launch ranges, where the majority of FAA licensed launches took place. Accordingly, the FAA followed the 1997 DOD Standard. Consequently, the FAA did not take into account the pervasive use by federal, state and local jurisdictions of requirements that address the storage of these classes of materials. Nor did the commercial space regulations account for the airport requirements governing fuels. See e.g., 14 CFR 139.321 (requiring each certificate holder to establish standards for protecting against fire and explosion in storing, dispensing and otherwise handling fuel on an airport); Aircraft Fuel Storage, Handling, and Dispensing on Airports, Advisory Circular (AC) No. 150/5230-4A (Jun. 18, 2004) (2004 AC for Aircraft Fuel). This 2004 AC for Aircraft Fuel accepts NFPA 407, Standard for Aircraft Fuel Servicing, as it pertains to fire safety in the safe storage, handling, and dispensing, of fuels used in aircraft on airports certificated under 14 CFR part 139. The federal Occupational Safety and Health Administration (OSHA) regulates the storing and handling of energetic liquids to provide for worker safety. OSHA provides procedural and design requirements for the materials at issue. See 29 CFR 1910.101, 1910.104, 1910.106 and 1910.119. OSHA regulates RP-1 under 29 CFR 1910.106 with separation distance, procedural, and design requirements, as well as with OSHA process safety management requirements for more than 10,000 pounds of RP-1 under 29 CFR 1910.119(a)(1)(ii). OSHA also regulates any quantity of liquid oxygen that is stored in “cylinders, portable tanks, rail tankcars or motor vehicle cargo tanks” by incorporating Compressed Gas Association (CGA) Pamphlet P-1 (1965) by reference in 29 CFR 1910.101(b). OSHA regulations for liquid oxygen address design, operational, and separation distance requirements. See 29 CFR 1910.104. For stationary tanks, OSHA regulates storage of liquid oxygen in quantities in excess of 13,000 cubic feet for a connected system or more than 25,000 cubic feet for an unconnected system at a normal temperature and pressure. 29 CFR 1910.104(b)(1). OSHA process safety management requirements apply to storage of more than 7500 pounds of hydrogen peroxide that is more than 52 percent concentration by weight or more than 250 pounds of nitrogen tetroxide. 29 CFR 1910.119 App A. The process safety management requirements include design and operational procedure requirements, but do not impose explicit separation requirements. The employer must guarantee the mechanical integrity of the system, including the pressure vessels and storage tanks, piping systems, emergency shutdown systems, controls, and pumps. 29 CFR 1910.119(j). In the initial construction, the employer must ensure these systems are adequate for their functions and must maintain the components. 29 CFR 1910.119(j)(6). To some extent, the OSHA requirements protect the public as an ancillary benefit. See 29 CFR 1910.5(d) (clarifying that although a standard may on its face protect persons who are not employees, the standard only applies in the employment context).

Additionally, state and local codes use standards devised by organizations, such as the CGA, the International Code Council, the International Fire Code Institute, and NFPA. Several states where launch sites are located implement some form of the requirements recommended by these organizations. The exceptions are California, Florida and Texas.

The issue of overlapping requirements was first brought to light by the FAA's experience in regulating the East Kern Airport District (EKAD), the launch site operator of Mojave Air and Space Port. Before Mojave acquired launch customers, it operated as an airport. Consequently, it followed the FAA airport and local fire codes, including the requirements of NFPA. With the advent of reusable launch vehicles, EKAD confronted a host of siting issues, including the storing and handling of liquid oxygen, kerosene, and isopropyl alcohol.

In 2004, the FAA waived EKAD's compliance with § 420.67, which governs the storage and handling of liquid propellants, including liquid oxygen and kerosene, and permitted EKAD to comply with DOD 6055.9-STD instead. Commercial Space Transportation; Waiver of Liquid Propellant Storage and Handling Requirements for Operation of a Launch Site at the Mojave Airport in California, 69 FR 41327 (Jul. 8, 2004) (Waiver to Section 420.67 or Waiver Notice). As conditions for granting a waiver, the FAA required EKAD to follow positive measures used by OSHA and the NFPA for spill containment and control for isolated storage of energetic liquids. Id. at 41328, par. F. The FAA also required using OSHA or NFPA guidance referenced in the DDESB requirements for storing and handling conventional flammable energetic liquids and liquid oxidizers, where no significant blast and fragment hazards were expected. Id. Minimum blast and fragment distances apply, according to DOD 6055.9-STD, C9.5.6.1, to NFPA and OSHA Class I-III flammable and combustible liquids and to conventional oxidizers such as liquid oxygen.

In December 2007, in response to EKAD's request, the FAA again waived explosive siting storage requirements for EKAD by issuing new license terms and conditions. This time, the FAA stated that, for the storage of liquid oxygen, kerosene and isopropyl alcohol, EKAD had to comply with NFPA Standard No. 55 (2005 ed.) and No. 33 (2008 ed.) for separation distances and spill containment. EKAD License Order No. LSO 04-009A (Rev. 1) (Dec. 20, 2007).

Recently, the FAA waived storage requirements of part 420 for liquid oxygen and RP-1 for the Jacksonville Aviation Authority (JAA) for its operation of portions of Cecil Field as a launch site. JAA, License Order No. LSO 09-012 (Jan. 11, 2010). In its evaluation of the request for a waiver, the FAA noted that DDESB adopted NFPA standards for storing conventional liquid fuels and oxidizers such as liquid oxygen and RP-1. DoD 6055.9-STD (2004). A review of the accident and test data of a number of fuels, oxidizers, and monopropellants against NFPA Hazard Instability Rating system defined by NFPA 704 (1996) Standard System for the Identification of the Hazards of Materials for Emergency Response, led DDESB to consider alternative standards for storing liquid propellants, such as liquid oxygen and RP-1. DDESB concluded that the main hazard associated with hydrocarbon fuels such as RP-1 is fire. This means that when it is not co-located with an oxidizer, RP-1 does not pose a threat of a chemical explosion due to accidental mixing with that oxidizer. DDESB also considered an NFPA standard for liquid oxygen based on the NFPA 704 Standard for the Identification of the Fire Hazards of Materials for Emergency Response (1996). Although liquid oxygen is a strong oxidizer and may create a serious fire hazard when combined with combustible materials, liquid oxygen is not flammable when separated and on its own. Accordingly, DDESB found that even an unlimited quantity of liquid oxygen need only maintain a distance of 100 feet between the location of its storage and incompatible energetic liquids, and 50 feet to compatible energetic liquids. In this context, liquid oxygen and RP-1, on their own, did not pose an explosive hazard. Hence, JAA's deviation from the separation standards of tables E-4 and E-5 of appendix E, for liquid oxygen and RP-1 did not jeopardize public safety. The FAA granted the waiver.

The FAA has a number of reasons for proposing to dispense with separation distance requirements for storing liquid oxygen, nitrogen tetroxide, hydrogen peroxide in concentrations equal to or below 91 percent and RP-1. These energetic materials do not create explosive hazards when in isolation, that is, when not co-located on a launch vehicle as liquid propellants. Additionally, the FAA does not want its launch separation requirements to conflict with other federal requirements, which are more comprehensive in that they contain design and operational requirements as well as separation requirements. Achieving safety is more complicated than merely having adequate separation distances. As has long been the case, safety can be achieved by a combination of separation distances, safety design, operational control requirements, hazard communication, or other mechanism, such as process safety management, so that the risk of a catastrophic incident associated with storing and handling of hazardous materials occurring may be kept to a minimum. As discussed above, OSHA and the FAA's own requirements for airports under 14 CFR part 139 address many of the fire hazards of these energetic materials through these means. The states, as well, impose requirements. The FAA's history of issuing waivers demonstrates that its own separation requirements are not necessary for achieving safety.

The FAA's waivers were based on DDESB standards, which are now incorporating the NFPA standards. DDESB standards themselves do not apply to civilian commercial activities. Nonetheless, the federal regulations that do apply adequately address the FAA's concerns.

Part 420, Appendix E, table E-3, currently classifies by hazard group, the following energetic liquids: hydrogen peroxide, hydrazine, liquid hydrogen, liquid oxygen, nitrogen tetroxide, RP-1, unsymmetrical dimethylhydrazine (UDMH) and the combination of UDMH and hydrazine. Each group represents different levels of hazard. Group I, which consists of nitrogen tetroxide and RP-1, is a fire hazard. Group II, which consists of hydrogen peroxide and liquid oxygen, is a group of strong oxidizers that may exhibit vigorous oxidation or rapid combustion in contact with materials, such as organic matter, possibly resulting in serious fires. Group III, which consists of hydrazine, liquid hydrogen, UDMH, and the combination of hydrazine and UDMH, presents hazards from the pressure rupture of a storage container resulting in fire, deflagration, or vapor phase explosions. Either pressure rupture of a container or vapor phase explosion can cause a fragment hazard from the container and any protective structure. In accordance with the current DDESB and NFPA practice, the FAA proposes to dispense with these hazard groups because the more commonly used classification system is that of the NFPA. The NFPA classifies energetic liquids based on instability ratings, as noted above in section III B.

The FAA proposes clarifying changes to its requirements for the separation distances for handling divisions 1.1 and 1.3 explosives under § 420.65 and accompanying tables E-1 through E-4 of appendix E of this part. The FAA proposes to make editorial changes, abandon the use of linear interpolation, provide more increments for the quantities in its tables, and provide formulas for calculating acceptable distances between explosive hazard facilities. The FAA proposes a number of editorial and organizational changes to improve clarity. The FAA would no longer refer to the solid explosives governed by this section as solid propellants because, technically, the provision applies to more than just solid propellants. Currently, § 420.65 states that it applies to solid propellants, which are used in expendable launch vehicles (ELVs) for propulsion. Solid propellants are division 1.3 explosives. Explosives used in an ELV's flight termination system are division 1.1 explosives. Strictly speaking, the latter are not propellants, so the FAA proposes the title and the language of this section more precisely identify what it governs to avoid misunderstanding.

The FAA proposes to no longer permit the use of linear interpolation under § 420.65(d)(4) for any quantities because it was incorrect for divisions 1.1 and 1.3 explosives and, given the requirements of the provision, it is unclear when it applies. The lack of clarity is evident from the fact that, on the one hand, this section allows a launch site operator to use linear interpolation for the net explosive weight (NEW) quantities between entries in table E-1. On the other hand, the table itself either rigidly provides a distance of 1,250 feet for all NEW quantities of 30,000 pounds or less, 3 or it provides exponential formulas to calculate distances for quantities in excess of 30,000 pounds, thus apparently ruling out the use of linear interpolation for quantities of explosives above and below 30,000 pounds. This makes it unclear when to employ linear interpolation. Because the relationship between quantity and distance is, in fact, exponential rather than linear, the use of linear interpolation is incorrect, even if it were clear where it applied.

The FAA would also reorganize the tables that accompany this section for purposes of greater clarity. Currently, appendix E contains a single table, table E-1, for public area and intraline distances for divisions 1.1 and 1.3 explosives. The table identifies quantities in increments starting with zero to 1,000 pounds, and progresses through quantities between 1,000 and 5,000 pounds, and then advances in increments of 10,000 and 100,000 pounds up to 1,000,000 pounds.

The FAA proposes that table E-1 show the minimum separation distances to public areas and public traffic routes for quantities of division 1.1 explosives with a NEW for quantities less than or equal to 450 pounds. Currently, the minimum distance from an explosive hazard facility to a public area for quantities between zero and 30,000 pounds is 1,250 feet, regardless of whether the quantity is, for example, two pounds or 9,000 pounds. This greater level of precision would provide launch site operators greater flexibility while still maintaining appropriate distances to public areas and public traffic routes. The FAA would also provide formulas to calculate distances for quantities that fall between the entries in the table. The formulas would account for NEW of less than 100 pounds and for quantities between 100 and 450 pounds:

The FAA has allowed licensees to demonstrate an equivalent level of safety by using the formulas proposed here. The formulas account for the fact that fragments are the primary hazard associated with division 1.1 explosives for quantities of 450 pounds or less. Air blast can carry or propel fragments, but it is the fragments that cause the damage to persons. The proposed formula in table E-1 would account for the probability that one hazardous fragment would land within a 600 square feet area for a given quantity of division 1.1 explosive. The relationship is a natural logarithmic function when calculating distance based on NEW. When calculating permissible NEW from distance, the inverse function of the natural logarithmic function, or the exponential function, is used.

The relationship is based on data obtained from DDESB TP 16, rev. 2, 2005 Methodologies for Calculating Primary Fragment Characteristics. DDESB conducted tests that accounted for hazardous debris fragments based on a fragment that would cause a fatality, namely, one with a kinetic energy at impact of 58 foot-pounds. A kinetic energy of 58 foot-pounds equates to a one percent probability of a person approximately six feet tall and one foot wide being struck by that fragment at a given separation distance from a given NEW. For quantities between 450 and 30,000 pounds, the minimum separation distance of 1,250 feet remains unchanged. For quantities of 30,000 pounds or more, the hazards include blast, fragments, and debris. When public areas are protected from blast effect by a separation distance between 40 NEW 1/3 and 50 NEW 1/3 , persons in the open are not expected to experience serious injuries arising out of blast effects. DoD Standard 6055.9—STD C2.2.5.7.3 (2004). The FAA does not propose to change the methodology for calculating separation distances for quantities greater than 30,000 pounds.

Table E-2 would also contain the public traffic route distances for division 1.1 explosives. In § 420.65(d)(3), the FAA already permits a launch site operator to employ the more lenient public traffic route separation distance, but only for division 1.1 explosives. Although a public traffic route is a public area, this section permits a separation distance of 60 percent of the public area distance. Thus, for convenience, proposed table E-2 would show the distance currently permitted by § 420.65(d)(3).

Table E-2 would also contain a formula by which a launch site operator could determine the maximum NEW it could handle in an explosive hazard facility as would be permitted by the proposed § 420.65(e)(3). The proposed formulas reflect the inverse function of the equations provided by current table E-1. Publishing them would allow a launch site operator to calculate the maximum quantities it could have in an existing explosive hazard facility based on distances. This will increase the flexibility of launch site operators who already have constructed sites, but wish to expand their operations into serving as launch sites.

Proposed table E-3 would contain intraline distance formulas currently contained in table E-1 for division 1.1 solid explosives. For division 1.1 explosives, the FAA would decrease the increments between quantities for greater convenience. Also, the proposed table would provide a formula for calculating separation distances for quantities that fall between table entries.

For division 1.3 explosives, proposed table E-4 would contain minimum separation distances to public areas and public traffic routes, and intraline distances. The distances the FAA proposes reflect the exponential relationship, between the quantity of division 1.3 explosives and the necessary separation distances, rather than the inaccurate linear interpolation relationship currently expressed in the rules. Accordingly, the distances would be smaller than those currently required by table E-1.

Proposed § 420.65(d)(3) would require a launch site operator to separate each public area containing any member of the public in the open by a distance equal to −1133.9 + [389 * ln(NEW)] where the NEW is greater than 450 pounds and less than 600,000 pounds. Under current part 420, the FAA does not distinguish between public areas that are buildings, where people are sheltered, and those where people are out in the open. For a net explosive weight up to 30,000 pounds, fragments rather than blast can injure people in the open. DoD Standard 6055.9—STD C2.2.5.7.3 (2004). Even at 1,250 feet, the distance mandated by current § 420.65(c) and (d) and current table E-1, a person may be injured by fragments. Id. This proposed formula also applies to liquid propellants where explosive equivalent weights apply so that a launch site operator may employ proposed table E-2. This will result in greater distances for some public areas than are required under current rules, but should not result in increased distances for siting buildings. The proposed requirement would impose a constraint on operations more than on siting facilities.

This new requirement would not affect the siting of facilities in relationship to public traffic routes such as roads. The facility could still be sited at sixty percent of the distance to a public area. However, if there were people in the open on a public road during an operation involving division 1.1 explosives or liquid propellants, the members of the public would have to be kept at the distance mandated by the formula. Depending on the net explosive weight, the distance could be less than or greater than the public area or public traffic route distances. The FAA does not consider persons in moving vehicles to be in the open.

The FAA also proposes to permit launch site operators to determine permissible NEW or TNT equivalent weight for existing facilities under proposed paragraph (e). Not all launch sites are built from the ground up. As experience over the past few years demonstrates, airports may apply for a license to operate a launch site. On occasion, the operator will want to use existing facilities for handling of division 1.1 explosives or liquid propellants. The FAA would provide a formula for the operator to calculate the maximum quantity permitted. The formula provided in table E-1 is based on fragment hazard tests that DDESB conducted, which can be found in DDESB TP 16, rev. 2. The formula provided in table E-2 is based on current table E-1 for blast overpressure equations. The operator would have to measure the distance from the explosive hazard facility using the measuring requirements of proposed § 420.70.

Through proposed § 420.66, the FAA will continue to impose storage requirements for hydrazine, liquid hydrogen, and hydrogen peroxide in concentrations of greater than 91 percent because of concerns regarding a greater risk for a chemical explosion associated with these energetic liquids, but will not address quantities below 100 pounds for liquid hydrogen and hydrazine. Under current requirements, table E-3 shows that all three of these energetic liquids belong to Hazard Group III, which means that table E-4 applies. Under the proposed requirements, the distances would not change in proposed table E-8. The FAA recognizes that OSHA addresses liquid hydrogen and hydrazine, but the FAA is not going to rely on OSHA for quantities of liquid hydrogen above 100 pounds because OSHA requires no more than 100 feet for outdoor storage of quantities up to 30,000 gallons. Part 420 separation distances vary depending on quantity. Likewise, OSHA addresses hydrazine, but the separation distances for quantities in excess of 100 pounds remain of concern to the FAA for public safety purposes in that they pose a threat of catastrophic consequences. Even in storage, accidents can happen with these materials. NFPA standards, which are incorporated by other regulators as discussed above, address the storage of hydrogen peroxide in high concentrations, but the FAA will keep its requirements for this energetic liquid. The NFPA standards are silent regarding separation distances for quantities above 10,000 pounds.

The FAA proposes to create a new § 420.66 to govern the storage of these materials for greater clarity. Current § 420.67, which governs the storage and handling of liquid propellants, already contains most of these requirements. The FAA proposes to relocate the rules governing measurement to proposed § 420.70.

Proposed § 420.66 would apply to hydrogen peroxide in concentrations of greater than 91 percent, hydrazine, liquid hydrogen, or any energetic liquid that is incompatible with and is stored within an intraline distance of any of them. As with the current requirements, a launch site operator would first determine the total quantity of energetic liquids it would store on its launch site. As with the current rule, a launch site operator must convert each of the energetic liquid's quantity from gallons to pounds. The formula would remain unchanged, but we propose to add, in proposed table E-6, conversion factors for additional energetic liquids not currently addressed by table E-3 of the current rule. The FAA obtained the conversion factors for ethyl alcohol, 4 and red fuming nitric acid from the 2004 DDESB standard. The FAA will continue to require that a launch site operator determine distances for compatible energetic liquids in the same manner as the current rule, but would increase flexibility in siting with respect to those public areas that are public traffic routes. For co-located incompatible energetic liquids where explosive equivalents apply, under proposed § 420.67(c)(2), the FAA proposes to permit using a public traffic route distance for incompatible energetic liquids that are within an intraline distance of each other. This would provide incompatible energetic liquids the same treatment accorded to division 1.1 solid explosives. Section 420.65(d)(3) permits division 1.1 solid explosives to be separated from public traffic routes by a distance of 60 percent of the public area distance. In light of the fact that the explosion of incompatible energetic liquids can be expressed in an explosive equivalent of division 1.1 explosives, there appears to be no reason not to offer these energetic liquids the same opportunity to employ a shorter distance to public traffic routes.

Currently, table E-5 prescribes separation distances for hydrogen peroxide without specifying the concentration levels to which it applies. Proposed table E-7 would contain separation distances for high concentrations of hydrogen peroxide (greater than 91 percent) in quantities above 10,000 pounds. Because the current distances encompass hydrogen peroxide at lower concentrations, the distances proposed would be greater than those currently required. This reflects the 2004 DOD Standard. As noted in the section discussing storage requirements, OSHA imposes process safety management requirements in quantities greater than 7500 pounds and in concentrations of greater than 52 percent by weight.

Proposed table E-8 would contain the requirements of current table E-6 for hydrazine and liquid hydrogen. The FAA proposes to dispense with separation requirements for quantities of liquid hydrogen and hydrazine of less than 100 pounds because OSHA regulates these materials in quantities below 100 pounds. OSHA's regulation of liquid hydrogen includes separation distance, design, and operational procedure requirements. The requirements apply to storage of all liquid hydrogen except portable containers of less than 150 liters (39.63 gallons). 29 CFR 1910.103(a)(2)(ii). Requirements for separation distances may be found at 29 CFR 1910.103(c)(2)(ii)(b). Design requirements may be found at 29 CFR 1910.103(c)(1) and operational constraints at 29 CFR 1910.103(c)(4). OSHA regulates hydrazine with separation distance, design, and operational procedure requirements. OSHA provides separation distance requirements for outdoor containers of hydrazine. 29 CFR 1910.106(a)(27), (d)(6)(i) and (d)(6)(ii)(b). OSHA applies design and testing requirements. 29 CFR 1910.106(b)(7), 1910.106(c)(6), and 1910.106(d)(2)-(5). Operational procedure requirements may be found at 29 CFR 1910.106(b)(1)(iv)(a), 1910.106(b)(1)(v)(a), and 1910.106(b)(5)(vi). The FAA remains concerned about and will continue its regulation of the greater quantities because of their potential for catastrophic events.

Currently, § 420.67(b) requires a launch site operator to determine hazard and compatibility groups and separate liquid propellants from each other and from each public area using the distances identified in tables E-4 though E-7 of Appendix E of this part. The only substantive change the FAA now proposes to this paragraph arises out of the FAA's proposal to dispense with the hazard compatibility groups of table E-3. As noted in the discussion of the storage of liquid propellants, the FAA proposes to dispense with classifying certain liquid propellants as members of Hazard Groups I, II or III. Currently, table E-3 identifies what hazard group a material belongs to, and tables E-4, E-5 and E-6 impose separation distances for each of those hazard groups. These classifications would be unnecessary because the hazard groups only apply to storage distances, and, once we focus only on certain energetic liquids, we no longer would require these broad classifications.

At times, incompatible energetic liquids must be co-located and even mixed to fulfill their intended functions as liquid propellants. Most obviously, many launch vehicles' performance come from the propulsion power provided by liquid bipropellant systems consisting of a liquid fuel and oxidizer. Engine tests also require the handling of energetic liquids when in close enough proximity to create a hazard of an explosion occurring. Once liquid propellants are co-located for these or other operational purposes, different separation distances to the public apply than for the storage of energetic liquids. If incompatible energetic liquids are co-located, the handling distances of § 420.67 apply for determining intraline and public area distances. The FAA also notes that although it proposes to dispense with requirements for NFPA Class I-III flammable and combustible liquids for storage, it will still require that a launch site operator account for them when determining separation distances for combinations.

Section 420.67 would narrow in scope. Currently, it applies as written to liquid propellants at a launch site. In practice, this has meant that when a launch operator is located at an airport, requirements that were originally intended for launch vehicles and engine testing applied to jet fuels and other energetic liquids for which there were already requirements. Section 420.67(a) would limit its applicability to rocket engines. Specifically, it would apply where incompatible energetic liquids are co-located in a launch or reentry vehicle tank or other vessel, such as a propulsion unit, on the vehicle. This would include such obvious applications as a vehicle on a launch pad or runway. It would also include engine firing, for test or other purposes. In short, § 420.67 would apply to rocket engines at a launch site because the FAA wishes to confine its launch site regulations to energetic liquids used for space and not aviation applications.

For the reasons provided in the discussion of § 420.65, the FAA proposes to provide tables and formulas for quantities up to 450 pounds rather than requiring a distance of 1,250 feet for all quantities up to 30,000 pounds. As clarified in proposed § 420.67(d)(4), which would clarify and expand upon current § 420.67(b)(5), for explosive hazard facilities of a single customer, a launch site operator must use the greater intraline distance to separate the facilities from each other. 5 For example, a launch site operator may plan to have a customer who will use a launch pad and a runway for horizontal take-off of a launch vehicle. These two explosive hazard facilities need only be separated by an intraline distance, but it must be the distance that reflects the larger quantity. Thus, if an expendable launch vehicle at a launch pad required a distance of 1,250 feet, while a horizontal take-off vehicle required a distance of only 700 feet, the runway and the launch pad would have to be located 1,250 feet from each other.

Proposed § 420.67(d)(4) would also clarify that for explosive hazard facilities used by different customers, a launch site operator must use the greater public area distance to separate the explosive hazard facilities from each other. This is implicit in the current requirements because different launch operators are the public with respect to each other. Section 420.5 defines the public as persons not involved in supporting a launch, and includes any other launch operator and its personnel. Accordingly, under the existing rules, if the public area distance created by launch operator A's vehicle at one launch pad was 1250 feet and 700 feet for launch operator B's launch pad, the launch pads would have to be separated by the greater distance of 1,250 feet. An explicit requirement would increase clarity.

Under proposed § 420.67(c)(2), the FAA would permit a launch site operator to use the shorter distances of table E-1 for liquid propellants with explosive equivalencies in quantities below or equal to 450 pounds. In promulgating part 420, the FAA created table E-1 to show separation distance requirements for solid explosives. Table E-1 requires a separation distance of 1,250 feet to a public area for division 1.1 explosives in quantities between zero and 30,000 pounds. As discussed earlier, the FAA now proposes to achieve a higher level of fidelity so that for a site where liquid propellants are handled or co-located more accurate separation distances to public areas would be available for liquid as well as solid propellants. The FAA recognized the need for greater fidelity when it waived § 420.67 for XCOR Aerospace's operations on a runway at Mojave Air and Space Port, where it was fueling its vehicle with liquid oxygen and kerosene. Although the XCOR Aerospace waiver applied to the handling of liquid propellants, table E-1 applied because energetic liquids are translated into their “explosive equivalent” in TNT to determine their equivalence in explosive yield. As the FAA explained when it first proposed part 420, if fuels and oxidizers are located within close enough distances of each other, the distance to the public must account for the hazardous consequences of their potential combination. See Launch Site NPRM, 64 FR 34335. The combination is measured in terms of explosive equivalency, a measure of the blast effects from explosion of a given quantity of a fuel and oxidizer mixture expressed in terms of the weight of TNT that would produce the same blast effects when detonated. Id.

For launch vehicles that require strap-on solid rocket motors and are equipped with flight termination systems, liquid propellants are in close proximity to class 1.1 or class 1.3 explosives. Section 420.69 applies on those occasions.

The FAA proposes to revise its requirements for separation distances for co-located division 1.1 and 1.3 explosives and liquid propellants. The distances to public areas and public traffic routes will be shorter to correct the FAA's error in § 420.69(b). Current § 420.69 requires that a launch site operator determine the separation distances for solid propellant division 1.1 and 1.3 explosives and then determine the separation distances for a liquid propellant combination within an intraline distance. Having determined the separation distance for each, a launch site operator must add the two separation distances together to achieve a minimum distance to a public area. For example, if a launch pad contains 20 pounds of division 1.1 explosives, which generates a public area distance of 529 feet, and liquid oxygen and kerosene with an explosive equivalent of 45,000 pounds, which generates a public area distance of 1,423 feet, the resulting public area distance under current requirements must be the sum of the two distances, which is 1,952 feet.

As the FAA recognized in its discussion of the issue at the time it promulgated this section, a simultaneous explosion of both the solid and liquid propellants, although unlikely, is not improbable. Launch Site Rule, 65 FR 62821. Accordingly, the FAA decided the separation distance applicable to the liquid propellants had to be added to the separation distance applicable to the solid propellant under § 420.69(b) and (c). This was a mistake. As with the other approaches to determining correct separation distances, the weights of the various propellants, solid and liquid both, are added before determining the distances. Thus, using the example above, once a launch site operator determines that the total NEW of the solid propellants is 20 pounds and the explosive equivalent of the liquid propellants is 45,000 pounds, the total NEW of 45,020 pounds yields a distance of 1,423 feet rather than the 1,952 feet of current § 420.69. The proposed methodology would apply to both division 1.1 and 1.3 explosives.

The FAA proposes a new § 420.70 to contain all the measuring requirements for calculating the distances by which explosive hazard facilities must be separated from each other and from the public. Separation distance requirements are currently spread from §§ 420.65 through 420.69. Consolidating those requirements into a single section, § 420.70, would ensure that a launch site operator would need to look in only one place to find the measuring requirements it must meet. The majority of these requirements are already in part 420. They include the requirements for measuring separation distances for solid propellants, currently located in § 420.65(d)(5), and energetic liquids, currently located in § 420.67(b)(1). New measurement requirements would include requiring a launch site operator to employ straight lines, as would be required by proposed § 420.70(b) measuring from taxiways and runways as required by proposed § 420.70(c), and measuring to a public traffic route by using its nearest side as required by proposed § 420.70(c)(2). The FAA is proposing the new requirements because there has been confusion over which points to use as starting points for measurements. These requirements would reduce any such confusion and ensure the FAA treats all launch site operators' measurements the same.

The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires that the FAA consider the impact of paperwork and other information collection burdens imposed on the public. According to the 1995 amendments to the Paperwork Reduction Act (5 CFR 1320.8(b)(2)(vi)), an agency may not collect or sponsor the collection of information, nor may it impose an information collection requirement unless it displays a currently valid Office of Management and Budget (OMB) control number.

The FAA has determined that there would be no new information collection associated with the proposed requirement to collect data required for performing launch site location analysis. Approval to collect such information previously was approved by the Office of Management and Budget (OMB) under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) and was assigned OMB Control Number 2120-0644.

In keeping with U.S. obligations under the Convention on International Civil Aviation, it is FAA policy to conform to International Civil Aviation Organization (ICAO) Standards and Recommended Practices to the maximum extent practicable. This is not an aviation rulemaking, and the FAA has determined that there are no ICAO Standards and Recommended Practices that correspond to these proposed regulations.

Changes to Federal regulations must undergo several economic analyses. First, Executive Order 12866 directs that each Federal agency shall propose or adopt a regulation only upon a reasoned determination the benefits of the intended regulation justify its costs. Second, the Regulatory Flexibility Act of 1980 (Pub. L. 96-354) requires agencies to analyze the economic impact of regulatory changes on small entities. Third, the Trade Agreements Act (Pub. L. 96-39) prohibits agencies from setting standards that create unnecessary obstacles to the foreign commerce of the United States. In developing U.S. standards, the Trade Act requires agencies to consider international standards and, where appropriate, that they be the basis of U.S. standards. Fourth, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more annually (adjusted for inflation with base year of 1995). This portion of the preamble summarizes the FAA's analysis of the economic impacts of this proposed rule.

Department of Transportation Order DOT 2100.5 prescribes policies and procedures for simplification, analysis, and review of regulations. If the expected cost impact is so minimal that a proposed or final rule does not warrant a full evaluation, this order permits that a statement to that effect and the basis for it be included in the preamble if a full regulatory evaluation of the cost and benefits is not prepared. Such a determination has been made for this proposed rule. The reasoning for this determination follows.

The FAA proposes to dispense with separation distance requirements for storing liquid oxidizers and Class I, II and III flammable and combustible liquids because they are unnecessarily conservative as explained earlier. The FAA proposes to dispense with the hazard groups of tables E-4 through E-6 of appendix E of part 420 as a means of classification. This would allow for closer siting of explosives without degrading safety. Safety would not be degraded because of the operational controls and design requirements of other standards. In addition, the FAA proposes to identify the minimum separation distances to public areas and public traffic routes for quantities between less than half a pound and 450 pounds of division 1.1 explosives and liquid propellants with TNT equivalency.

Because of these changes launch sites might be able to use the infrastructure of existing airport facilities and, therefore, the proposed rule would be cost relieving. The proposed rule would also allow for the development of more launch sites where the more conservative siting requirements of the current regulation might constrain their development.

Certain proposed changes would add clarity to the current regulations and result in reduced ambiguity and confusion. For instance, clarifying the meaning of explosive hazard facility to state that it can be a location as well as a facility avoids the possibility of misinterpreting the current definition to apply only to buildings or storage sites. The proposed rule would remove ambiguities over the labeling of materials to different users of the same material. The rule would also clarify that the FAA intended to permit alternative means of demonstrating an equivalent level of safety to what part 420 addressed as well as to what part 420 did not address. These changes are expected to be cost neutral.

The proposed rule would add a requirement to § 420.63 that the explosive site map be at a scale sufficient to determine compliance with part 420. The FAA is proposing this to avoid a reiterative process to obtain a map at an appropriate scale. Situations have arisen where the FAA has received maps that were difficult to read. As a result, considerable time was expended determining distances between elements on the map. In this respect, the proposal can be cost relieving. The rule could require some operators to redraw existing maps. However, we expect that with programs like AutoCAD and Geographic Information System (GIS) software, the cost to change the scale will be minimal. We don't believe that anyone would be required to redraw an existing map by hand due to this requirement. The FAA calls for comments regarding whether this provision will be cost relieving, and if not, provide sufficient documentation such that we can provide an accurate cost estimate.

Under current part 420, the FAA does not distinguish between public areas that are buildings, where people are sheltered, and those where people are out in the open. This proposal would result in greater distances for some public areas than are required under current rules, but should not result in increased distances for siting buildings. The operational constraints themselves should not increase costs because a launch site operator currently must ensure under § 420.55 that its customers schedule their hazardous operations so as not to harm members of the public. A site operator may incur minimal costs in performing these new calculations and updating its procedures to reflect any changes in distances. The FAA calls for comments on whether this new requirement will impose costs.

By dispensing with the current separation distance requirements for certain energetic liquids and reducing separation distance requirements for divisions 1.1 and 1.3 explosives and liquid propellants the rule would be cost relieving. The FAA proposes this 1) for energetic liquids that are fire hazards rather than explosive hazards because when sufficiently isolated from each other, these liquids do not pose a chemical explosion hazard; and 2) for liquids that are already addressed by other federal requirements.

Because this proposed rule would relieve launch sites from storage requirements for most energetic liquids and reduce the separation distances requirements for divisions 1.1 and 1.3 explosives and liquid propellants, the expected outcome would be reduced cost. The possible benefits would be the proposal might encourage the development of more launch sites. By encouraging existing launch sites to more effectively use their infrastructure and by allowing colocation of launch sites with some existing airports, the proposed rule would provide benefits and be cost relieving. There might also be cost savings if the FAA issues fewer waivers as a result of this rule.

The FAA has, therefore, determined this proposed rule is not a “significant regulatory action” as defined in section 3(f) of Executive Order 12866, and is not “significant” as defined in DOT's Regulatory Policies and Procedures.

The Regulatory Flexibility Act of 1980 (Pub. L. 96-354) (RFA) establishes “as a principle of regulatory issuance that agencies shall endeavor, consistent with the objectives of the rule and of applicable statutes, to fit regulatory and informational requirements to the scale of the businesses, organizations, and governmental jurisdictions subject to regulation. To achieve this principle, agencies are required to solicit and consider flexible regulatory proposals and to explain the rationale for their actions to assure that such proposals are given serious consideration.” The RFA covers a wide-range of small entities, including small businesses, not-for-profit organizations, and small governmental jurisdictions.

Agencies must perform a review to determine whether a rule will have a significant economic impact on a substantial number of small entities. If the agency determines that it will, the agency must prepare a regulatory flexibility analysis as described in the RFA.

However, if an agency determines that a rule is not expected to have a significant economic impact on a substantial number of small entities, section 605(b) of the RFA provides that the head of the agency may so certify and a regulatory flexibility analysis is not required. The certification must include a statement providing the factual basis for this determination, and the reasoning should be clear.

The proposed rule does not impose costs on industry because it provides options to launch sites with regards to explosive siting but does not require launch site operators to increase the distances around where they have sited explosives and because other requirements are consistent with industry practice. Consequently, the FAA certifies that the rule will not have a significant economic impact on a substantial number of small entities.

The Trade Agreements Act of 1979 (Pub. L. 96-39), as amended by the Uruguay Round Agreements Act (Pub. L. 103-465), prohibits Federal agencies from establishing standards or engaging in related activities that create unnecessary obstacles to the foreign commerce of the United States. Pursuant to these Acts, the establishment of standards is not considered an unnecessary obstacle to the foreign commerce of the United States, so long as the standard has a legitimate domestic objective, such the protection of safety, and does not operate in a manner that excludes imports that meet this objective. The statute also requires consideration of international standards and, where appropriate, that they be the basis for U.S. standards. This rule would have only a domestic impact.

Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed or final agency rule that may result in an expenditure of $100 million or more (in 1995 dollars) in any one year by State, local, and tribal governments, in the aggregate, or by the private sector; such a mandate is deemed to be a “significant regulatory action.” The FAA currently uses an inflation-adjusted value of $143.1 million in lieu of $100 million.

This proposed rule does not contain such a mandate; therefore the requirements of Title II do not apply.

The FAA has analyzed this proposed rule under the principles and criteria of Executive Order 13132, Federalism. We determined that this action would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government, and, therefore, would not have federalism implications.

FAA Order 1050.1E identifies FAA actions that are categorically excluded from preparation of an environmental assessment or environmental impact statement under the National Environmental Policy Act in the absence of extraordinary circumstances. The FAA has determined this proposed rulemaking action qualifies for the categorical exclusion identified in paragraph 310f and involves no extraordinary circumstances.

The FAA has analyzed this NPRM under Executive Order 13211, Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use (May 18, 2001). We have determined that it is not a “significant energy action” under the executive order, because it is not a “significant regulatory action” under Executive Order 12866 and DOT's Regulatory Policies and Procedures, and it is not likely to have a significant adverse effect on the supply, distribution, or use of energy.

The FAA invites interested persons to participate in this rulemaking by submitting written comments, data, or views. We also invite comments relating to the economic, environmental, energy, or federalism impacts that might result from adopting the proposals in this document. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, please send only one copy of written comments, or if you are filing comments electronically, please submit your comments only one time.

We will file in the docket all comments we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning this proposed rulemaking. Before acting on this proposal, we will consider all comments we receive on or before the closing date for comments. We will consider comments filed after the comment period has closed if it is possible to do so without incurring expense or delay. We may change this proposal in light of the comments we receive.

Do not file in the docket information that you consider to be proprietary or confidential business information. Send or deliver this information directly to the person identified in the FOR FURTHER INFORMATION CONTACT section of this document. You must mark the information that you consider proprietary or confidential. If you send the information on a disk or CD ROM, mark the outside of the disk or CD ROM and also identify electronically within the disk or CD ROM the specific information that is proprietary or confidential.

Under 14 CFR 11.35(b), when we are aware of proprietary information filed with a comment, we do not place it in the docket. We hold it in a separate file to which the public does not have access, and we place a note in the docket that we have received it. If we receive a request to examine or copy this information, we treat it as any other request under the Freedom of Information Act (5 U.S.C. 552). We process such a request under the DOT procedures found in 49 CFR part 7.

You can get an electronic copy of rulemaking documents using the Internet by—

1. Searching the Federal eRulemaking Portal ( http://www.regulations.gov );

2. Visiting the FAA's Regulations and Policies web page at http://www.faa.gov/regulations_policies or

3. Accessing the Government Printing Office's web page at http://www.gpoaccess.gov/fr/index.html .

You can also get a copy by sending a request to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue, SW., Washington, DC 20591, or by calling (202) 267-9680. Make sure to identify the docket or notice number of this rulemaking.

You may access all documents the FAA considered in developing this proposed rule, including economic analyses and technical reports, from the internet through the Federal eRulemaking Portal referenced in paragraph (1).

In consideration of the foregoing, the Federal Aviation Administration proposes to amend Chapter III of Title 14, Code of Federal Regulations, as follows:

On January 18, 2011, President Obama issued Executive Order 13563, which outlined a plan to improve regulation and regulatory review (76 FR 3821, 1/21/11). Executive Order 13563 reaffirms and builds upon governing principles of contemporary regulatory review, including Executive Order 12866, “Regulatory Planning and Review,” (58 FR 51735, 10/4/1993), by requiring Federal agencies to design cost-effective, evidence-based regulations that are compatible with economic growth, job creation, and competitiveness. The President's plan recognizes that these principles should not only guide the Federal government's approach to new regulation, but to existing ones as well. To that end, Executive Order 13563 requires agencies to review existing significant rules to determine if they are outmoded, ineffective, insufficient, or excessively burdensome.

To facilitate this review, Executive Order 13563 requires each agency to develop and submit to the Office of Management and Budget's Office of Information and Regulatory Affairs a preliminary plan for retrospectively analyzing existing rules. Specifically, the Department must provide a plan for periodically reviewing existing significant regulations to determine whether any such regulations should be modified, streamlined, expanded, or repealed so as to make the Department's regulatory program more effective or less burdensome in achieving the Department's regulatory objectives.

As Executive Order 13563 reaffirms, the regulatory process must be transparent and provide opportunities for public participation. The Department particularly believes, given its broad regulatory responsibility, this participation should extend to the Department's obligations under the Executive Order to conduct a retrospective review of existing regulations. This review will be more meaningful if it involves input from those affected by the Department's regulations.

The mission of the Department is to serve the United States by ensuring a safe, fast, efficient, accessible, and convenient transportation system that meets our vital national interests and enhances the quality of life of the American people, today and into the future. The Department carries out its mission through the Office of the Secretary (OST) and the following operating administrations (OAs): Federal Aviation Administration (FAA); Federal Highway Administration (FHWA); Federal Motor Carrier Safety Administration (FMCSA); Federal Railroad Administration (FRA); Federal Transit Administration (FTA); Maritime Administration (MARAD); National Highway Traffic Safety Administration (NHTSA); Pipeline and Hazardous Materials Safety Administration (PHMSA); Research and Innovative Technology Administration (RITA); and St. Lawrence Seaway Development Corporation (SLSDC). Although the Surface Transportation Board (STB) is a component of DOT, it is organizationally independent and, as a result, the Department does not have responsibility for the STB's regulatory agenda.

DOT has statutory responsibility for a wide range of regulations. For example, DOT regulates safety in the aviation, motor carrier, railroad, motor vehicle, commercial space, and pipeline transportation areas. DOT regulates aviation consumer and economic issues, and provides financial assistance and writes the necessary implementing rules for programs involving highways, airports, mass transit, the maritime industry, railroads, and motor transportation and vehicle safety. It writes regulations carrying out such disparate statutes as the Americans with Disabilities Act and the Uniform Time Act. Finally, DOT has responsibility for developing policies that implement a wide range of regulations that govern programs such as acquisition and grants management, access for people with disabilities, environmental protection, energy conservation, information technology, occupational safety and health, property asset management, seismic safety, security, and the use of aircraft and vehicles.

The Department has long recognized that there should be no more regulations than necessary and those that are issued should be simple, comprehensible, and impose as little burden as necessary. Likewise, the Department understands that review and revision of existing regulations is essential to ensure that they continue to meet the needs for which they originally were designed and remain cost-effective and cost-justified. The Department regularly makes a conscientious effort to review its rules in accordance with the Department's 1979 Regulatory Policies and Procedures (44 FR 11034, 2/26/1979), Executive Order 12866, and section 610 of the Regulatory Flexibility Act.

The Department follows a repeating 10-year plan for the review of our existing regulations, which is set forth in our semi-annual Regulatory Agenda published in the Federal Register ( see Appendix D to “Department Regulatory Agenda; Semiannual Summary” published on December 20, 2010 (75 FR 79812)). The reviews conducted under this plan comply with section 610 of the Regulatory Flexibility Act. OST and most OAs have also elected to use this repeating 10-year plan to comply with the review requirements of the Department's Regulatory Policies and Procedures and Executive Order 12866. Generally, the agencies have divided their rules into 10 different groups and analyze one group each year, then start over again. We regularly invite public participation in those reviews and seek general suggestions on rules that should be revised or revoked. In the fall Regulatory Agenda, we publish information on the results of the examinations completed during the previous year. We are now engaged in our second 10-year review.

The FAA, in addition to following a 10-year review plan in accordance with section 610 of the Regulatory Flexibility Act, has established a triennial process to comply with other review requirements. The FAA's latest notice was published November 15, 2007 (72 FR 64170). NHTSA conducts an evaluation of both the costs and benefits of each of its significant rules approximately 4 years after the effective date on which 100 percent of the annual production of all types of vehicles subject to the rule must comply with the rule. This interval is necessary to ensure that sufficient crash data are available for the agency to determine whether a statistically significant reduction in crashes, injuries, and fatalities has occurred. Other OAs also conduct periodic public reviews to focus on specific issues or to obtain comments on rulemaking priorities. Moreover, under 49 CFR part 5, anyone may petition the Department for rulemaking or for an amendment or exemption to a rule.

As part of implementing Executive Order 13563, we will assess our current processes for reviewing rules and examine whether our approach should be modified going forward. While the Department may use these existing processes as significant inputs into its preliminary plan, the Department strongly encourages all parties affected by DOT regulations to comment on opportunities to improve our current review processes in a manner that best addresses the principles outlined in Executive Order 13563.

DOT is an active regulatory agency with broad regulatory responsibilities. A robust regulatory program being essential to our mission, it is all the more important that we maintain a consistent culture of retrospective review and analysis. Thus, to implement Executive Order 13563, the Department solicits the views of the public on the following matters.

The public is first asked to comment on how the Department should devise a preliminary plan, with a defined method and schedule, for identifying certain significant rules that may be obsolete, unnecessary, unjustified, excessively burdensome, or counterproductive. Comments might address how best to evaluate and analyze regulations in order to expand on those that work and to modify, improve, or rescind those that do not. Comments might usefully address how the Department can best obtain and consider accurate, objective information and data about the costs, burdens, and benefits of existing regulations and whether there are existing sources of data that the Department can use to evaluate the post-promulgation effects of regulations over time. The Department is particularly interested in the public's views about how well its current processes for reviewing regulations function and how those processes might be expanded or otherwise adapted to meet the objectives of Executive Order 13563. The Department is further interested in comments about factors that the Department should consider in setting priorities and selecting rules for review. Our initial selection criteria for these rules are currently based on the factors listed below, on which we seek public comment.

The Department intends for its preliminary plan to include an initial list of candidate rules for review. The Department solicits suggestions for specific rules that should be on that list. In nominating candidate rules for this list, commenters might usefully address, among other things, opportunities to use the Department's review process to achieve the following objectives: (1) Promote economic growth, innovation, competitiveness, and job creation; (2) eliminate outdated regulations; (3) lessen the burdens imposed on those directly or indirectly affected by our regulations, increase the benefits provided to the public by our regulations, and improve the cost-benefit balance of our regulations; (4) lessen burdens imposed on small entities; (5) eliminate duplicative or overlapping regulations; (6) reduce paperwork by eliminating duplication, lessening frequency, allowing electronic submission, standardizing forms, exempting small entities, or other means; (7) eliminate conflicts and inconsistencies in the Department's regulations and those of its own agencies or other Federal agencies or state, local, or tribal governmental bodies; (8) simplify or clarify language in regulations; (9) revise regulations to address changes in technology, economic conditions, or other factors; (10) determine if matters in an existing regulation could be better handled fully by the states without Federal regulations; (11) reduce burdens by incorporating international or industry consensus standards into regulations; (12) reconsider regulations that were based on scientific or other information that has been discredited or superseded; and (13) expand regulations that are insufficient to address their intended objectives or to obtain additional benefits.

Comments should focus on regulations that have demonstrated deficiencies. Comments that rehash debates over recently issued rules will be less useful. Particularly where comments relate to a rule's costs or benefits, comments will be most useful if there are data and experience under the rule available to ascertain the rule's actual impact. For that reason, we encourage the public to emphasize those rules that have been in effect for a sufficient amount of time to warrant a fair evaluation. Furthermore, the public should focus on rule changes that will achieve a broad public impact, rather than an individual personal or corporate benefit. Where feasible, comments should reference a specific regulation, by Code of Federal Regulations (CFR) cite, and provide the Department information on what needs fixing and why. Comments do not necessarily need to address how to fix the perceived problem, though such comments are welcome. Lastly, we also want to stress that this review is for existing rules; the public should not use this process to submit comments on proposed rules.

The public meeting will begin with a discussion of and taking comments on the Department's preliminary plan for regulatory review required by Executive Order 13563. After that, we plan to allow for comments on candidate rules for review. The Department's General Counsel will preside over the meeting. Other senior officials from the Department and its OAs will also attend. It is our intent that the public meeting will provide an opportunity for these officials to interact with individuals or stakeholder representatives. To enable them to effectively participate in the public meeting, they will need some information in advance. As a result, we are establishing the following process.

1. Suggestions for Discussion at Public Meeting:

a. By March 3, 2011, the Department requests that commenters submit their suggestions for discussion at the public meeting and indicate whether they want time allocated to them at the public meeting. Commenters are welcome to indicate how much time they would like to be allocated, but the Department reserves the right to allocate time as necessary to ensure that as many commenters as possible may participate in the public meeting in a meaningful manner.

b. The initial comments from those intending to participate in the public meeting should contain enough details to permit DOT officials to sufficiently prepare and ask questions.

c. The initial comments may be augmented anytime before the end of the full comment period.

d. Anyone who needs auxiliary aids and services, such as sign language interpreters, to effectively participate in the meeting should contact the Department via the “ FOR FURTHER INFORMATION CONTACT ” information provided above.

2. Public Meeting:

a. After receiving this initial round of public comment, the Department will organize those suggestions by topic and OA for discussion during the public meeting.

b. By having the public meeting after receiving initial public comment and by organizing the discussion around topics and OAs, the Department will be better positioned to discuss issues regarding a particular rule, broad category of rules, or affected group or industry, rather than merely recording public comment for later review.

c. The Department will hold its public meeting beginning at 9:30 a.m. ET on March 14, 2011 at the Department of Transportation, West Building, Ground Floor, DOT Conference Center, Oklahoma Room, 1200 New Jersey Avenue, SE., Washington, DC. We will make a meeting outline available on http://regs.dot.gov in advance of the meeting. Furthermore, we are exploring the use of technology to enable remote participation in the meeting. We will update http://regs.dot.gov with information about opportunities for the public to participate remotely.

3. Other Written Comments:

The Department will continue to accept written comments through April 1, 2011. Those who do not wish to attend the public meeting may, of course, submit comments at any time during the comment period.

4. Follow-up Action by DOT:

a. We will place a transcript or summary of the public meeting in our public docket ( http://www.regulations.gov ) as soon as possible after the end of the meeting. We note that because the docket is Internet accessible, it should allow those with Internet access to review those proceedings as well as other comments. We hope this will further improve the interchange of ideas.

b. This review will provide meaningful and significant input to the Secretary, the General Counsel, OA Administrators, and other DOT senior officials. As soon as possible, depending on the number of comments we receive and the issues raised, the Department will publish a report providing at least a brief response to the comments we have received, including a description of any further action we intend to take.

Privacy Act: Anyone may search the electronic form of comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.) You may review DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78) or you may visit http://www.gpoaccess.gov/fr/browse.html and browse under 2000 for April 11, looking under Department of Transportation.

The Poison Prevention Packaging Act of 1970 (“PPPA”), 15 U.S.C. 1471-1476, gives the Commission authority to establish standards for the “special packaging” of household substances, such as drugs, when child-resistant (“CR”) packaging is necessary to protect children from serious personal injury or illness due to the substance and the special packaging is technically feasible, practicable, and appropriate for such substance. Accordingly, CPSC regulations require that oral prescription drugs be in CR packaging. 16 CFR 1700.14(a)(10). The powder forms of cholestyramine and colestipol, two drugs that are chemically similar to colesevelam hydrochloride and sevelamer carbonate, currently are exempt from CR packaging. Id. 1700.14(a)(10)(v) and (xv).

CPSC regulations allow companies to petition the Commission for exemption from CR requirements. 16 CFR part 1702. Among the possible grounds for granting an exemption are that the degree or nature of the hazard that the substance poses to children is such that special packaging is not required to protect children against serious personal injury or serious illness (16 CFR 1702.17).

On February 24, 2009, Daiichi Sankyo, Inc. (“Daiichi”) petitioned the Commission to exempt the powdered form of colesevelam hydrochloride, which it markets as Welchol®, from the special packaging requirements for oral prescription drugs. The petitioner stated that the exemption is justified because of lack of toxicity and lack of adverse human experience with the drug. Welchol® has been marketed in tablet form and dispensed in CR packaging. On October 2, 2009, the U.S. Food and Drug Administration (“FDA”) approved a new powder formulation of the drug. The petition requested an exemption only for the powder dosage form of Welchol®. Tablets would continue to be in CR packaging.

Welchol® (colesevelam hydrochloride) is a bile acid sequestrant indicated as an adjunct to: (1) Reduce elevated low-density lipoprotein cholesterol (LDL-C) levels; and (2) improve glycemic control in adults with type 2 diabetes mellitus. The new dosage form of Welchol® provides 1.875 g or 3.75 g of the powdered drug in unit dose packages to be mixed with water and taken orally as a suspension. (A unit dose package of Welchol® or Renvela® is a pouch that contains an individual dose.)

On March 6, 2009, Genzyme Corporation (“Genzyme”) petitioned the Commission to exempt the powdered form of sevelamer carbonate, which it markets as Renvela®, from the special packaging requirements for oral prescription drugs. The petitioner stated that the exemption is justified because of lack of toxicity and lack of adverse human experience with the drug.

Renvela,® sevelamer carbonate, is a phosphate binder indicated for the control of serum phosphorus in patients with chronic kidney disease on dialysis. The tablets are marketed with a pill crusher for patients who have trouble swallowing the tablets. The company reformulated Renvela® as a powder to be taken as an oral suspension and received approval from FDA for this powder formulation on August 12, 2009. The new dosage form of Renvela® provides either 0.8 g or 2.4 g of Renvela® powder in unit dose packages to be mixed with 2 ounces of water.

Welchol® and Renvela® have similar chemical structures, biological properties, and powder formulations. Therefore, we are considering the two petitions together, and staff reviewed related toxicity data together. CPSC staff found that colesevelam hydrochloride and sevelamer carbonate are not absorbed from the gastrointestinal tract. This limits the systemic toxicity of the drugs.

No data indicate that either drug is acutely toxic, which is the type of toxicity of concern when considering whether CR packaging is appropriate. Even in patients taking these drugs chronically, the adverse effects are mostly minor, such as diarrhea, nausea, constipation, flatulence, and dyspepsia.

Generally, chronic studies are not useful in determining whether a drug should be in CR packaging (because CR packaging is intended to protect against the child's access and likely one-time use of the drug). Nevertheless, staff reviewed such data. Animal studies involving 3 to 6 month administration of Welchol® and Renvela,® respectively, resulted in hemorrhage. However, this result was not related directly to the mechanism of action of the drugs, but rather to a side effect involving the inhibition of vitamin K absorption. Chronic administration of Welchol® and Renvela® can cause an alteration in the absorption of vitamins A, D, E, and K. Vitamin K is required by the liver to produce functional blood clotting factors. When vitamin K levels are low, nonfunctional blood clotting factors are produced, which can lead to hemorrhage. This can occur following the chronic administration of a drug that inhibits vitamin K, but not after the acute administration of such a drug. Daiichi Sankyo's submission mentions one 4-year-old girl who was prescribed Welchol® off-label to treat a skin irritation secondary to liver disease. She died from an intracranial hemorrhage. There are confounding factors in this case, and the death occurred after chronic, not acute, exposure. Because of the confounding factors, the death cannot be attributed solely to Welchol®. A trial of Renvela® in a limited number of pediatric patients (18) for eight weeks resulted in primarily minor GI effects. (Pieper A.K., Haffner D., Hoppe B., Dittrich K., Offner G., Bonzel K.E., John U., Frund S., Klaus G., Stubinger A., Duker G. and Querfeld U. (2006).) Other effects, such as metabolic acidosis, can be attributed to the underlying chronic kidney disease in these children. These effects would occur after chronic, but not acute, exposure.

If a child were to ingest accidentally colesevelam hydrochloride (Welchol®) or sevelamer carbonate (Renvela®), the potential for the occurrence of mild to moderate GI discomfort, such as indigestion, constipation, nausea, and vomiting does exist. However, a review of relevant data indicates that an acute ingestion of these drugs would not result in serious toxicity. Any serious toxicity would result only after chronic administration.

As noted, the CPSC's CR packaging regulations exempt cholestyramine and colestipol in powder form, two bile acid sequestrants that are similar chemically to Welchol® and Renvela®. CPSC staff has not found any articles in the medical literature describing toxic effects following the acute ingestion of either cholestyramine or colestipol from 1975 through 2010.

CPSC staff searched the following databases for incidents related to Welchol® and Renvela® occurring between 2000 and 2009: the Injury and Potential Injury Incident database (“IPII”), the National Electronic Injury Surveillance System database (“NEISS”), and the Death Certificates database (“DTHS”). Staff found one incident involving Welchol® in the NEISS database. In that incident, 11-month-old twin boys were taken to the emergency room after they had been playing with their grandmother's prescription medications. It is not clear how many, if any, pills the boys ingested, but the children were treated and released from the hospital. CPSC staff also searched Poisindex®, Pub Med, and Google for Welchol®, Renvela®, Colestipol, and Cholestyramine, and found no incidents of acute poisoning in humans.

CPSC staff also analyzed Medwatch reports obtained from the FDA. Medwatch is the FDA's program for reporting a serious adverse event, product quality problem, product use error, or therapeutic inequivalence/failure that may be associated with the use of an FDA-regulated drug, biologic, medical device, dietary supplement, or cosmetic. ( See http://www.fda.gov/Safety/MedWatch/HowToReport/default.htm .) There may be adverse events that have occurred and are not reported in the Medwatch database. Also, the existence of a report in the database does not mean necessarily that the product actually caused the adverse event.

The FDA provided CPSC staff with 151 distinct incidents of adverse events associated with colesevelam hydrochloride (Welchol®) reported through the Medwatch system. CPSC staff excluded incidents where other medications may have caused the adverse event reported, resulting in 22 adverse events. Most adverse events reported to Medwatch were gastrointestinal or involved muscle pain, which is to be expected considering the adverse effects reported from clinical trials of Welchol®.

CPSC staff also received reports from the FDA of 40 distinct incidents of adverse events associated with sevelamer carbonate (Renvela®). CPSC staff excluded incidents where other medications may have caused the adverse event reported, resulting in five in-scope incidents. Two of the five incidents were deaths, which most likely were related to the underlying disease and not sevelamer carbonate (Renvela®) treatment. One of the five incidents involved intestinal obstruction and perforation, which the patient's physician thought were related to the patient's treatment with sevelamer carbonate (Renvela®). In the two remaining incidents, one patient experienced gastroenteritis, and the other (who had asthma and chronic obstructive pulmonary disease) suffered severe breathing problems while on Renvela®. Neither of these two results likely was related to sevelamer carbonate (Renvela®).

CPSC staff also evaluated the likelihood of children younger than 5 years old ingesting powdered substances. The powdered form of these substances makes them more difficult to ingest than medicines in other forms and therefore, likely will keep children from ingesting significant quantities. CPSC staff believes that it would be difficult for children under 5 years old to eat large amounts of powder quickly without aspirating or coughing. It would also be difficult for children to mix powder thoroughly in a liquid, and the resulting lumpy quality may be unappealing to children who try to drink it. Although children are likely to be able to tear open the non-child-resistant packets used for Welchol® and Renvela,® they are likely to spill much of the contents; therefore, they would have to open a number of packages to access a significant quantity of the drug. Most unintentional poisonings among children occur during short lapses in direct visual supervision. The difficulty posed by ingestion of powder introduces a delay in the poisoning scenario, and supervision is likely to resume before a child can take in a significant quantity.

The packages used with the powder formulations of Welchol® and Renvela® also reduce the likelihood of child poisoning. Both drugs are provided in small foil-lined packages containing individual doses. The Renvela® package is easy to tear only at the notch. Because the package must be opened at a precise location, it is less accessible, especially to young children. The Welchol® package does not have a notch and has uniform resistance to tearing, which makes it more difficult to open than Renvela®. Although both packages tear easily enough to be opened by children under 5 years of age, the fine motor skills of this age group of children are still developing, and children age 2 and younger are likely to spill most of the powder.

After considering the information provided by the petitioner and other available toxicity and human experience data, the Commission concluded preliminarily that the degree and nature of the hazard to children presented by the availability of powder formulations of colesevelam hydrochloride (currently marketed as Welchol®) and sevelamer carbonate (currently marketed as Renvela®) do not require special packaging to protect children from serious personal injury or serious illness resulting from handling, using, or ingesting the substance. Therefore, the Commission voted to grant the petition and begin a rulemaking proceeding to exempt powder formulations of colesevelam hydrochloride containing not more than 3.75 grams per package and sevelamer carbonate containing not more than 2.4 grams per package from the special packaging requirements for oral prescription drugs.

Under the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., an agency that engages in rulemaking generally must prepare initial and final regulatory flexibility analyses describing the impact of the rule on small businesses and other small entities. Section 605 of the Act provides that an agency is not required to prepare a regulatory flexibility analysis if the head of an agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.

The Commission's Directorate for Economic Analysis prepared a preliminary assessment of the impact of a rule to exempt powder formulations of colesevelam hydrochloride (currently marketed as Welchol®) and sevelamer carbonate (currently marketed as Renvela®) from special packaging requirements.

Daiichi Sankyo, Inc., a subsidiary of the Japanese firm Daiichi Sankyo Co, Ltd, the company that markets colesevelam hydrochloride under the trade name of Welchol®, employs approximately 1,500 people in the United States. Net sales of Welchol® were approximately $243.1 million in 2008. Genzyme Corporation, the company that markets sevelamer carbonate under the trade name of Renvela®, is a U.S. firm headquartered in Cambridge, Mass., with more than 12,000 employees worldwide. Annual revenue for 2008 was $4.6 billion. Given that both firms that would be affected by a CR packaging exemption for these drugs are large, the exemption would not have a significant economic effect on a substantial number of small entities. Moreover, because the action at issue is an exemption from special packaging requirements, it would allow companies to avoid the costs associated with CR packaging.

Based on this assessment, we preliminarily conclude that the proposed amendment exempting powder formulations of colesevelam hydrochloride (currently marketed as Welchol®) and sevelamer carbonate (currently marketed as Renvela®) from special packaging requirements would not have a significant impact on a substantial number of small businesses or other small entities.

Pursuant to the National Environmental Policy Act, and in accordance with the Council on Environmental Quality regulations and CPSC procedures for environmental review, we have assessed the possible environmental effects associated with the proposed PPPA amendment.

CPSC regulations state that rules requiring special packaging for consumer products normally have little or no potential for affecting the human environment. 16 CFR 1021.5(c)(3). Nothing in this proposed rule alters that expectation. Therefore, because the rule would have no adverse effect on the environment, neither an environmental assessment nor an environmental impact statement is required.

According to Executive Order 12988 (February 5, 1996), agencies must state in clear language the preemptive effect, if any, of new regulations.

The PPPA provides that, generally, when a special packaging standard issued under the PPPA is in effect, “no State or political subdivision thereof shall have any authority either to establish or continue in effect, with respect to such household substance, any standard for special packaging (and any exemption therefrom and requirement related thereto) which is not identical to the [PPPA] standard.” 15 U.S.C. 1476(a). A state or local standard may be excepted from this preemptive effect if: (1) the state or local standard provides a higher degree of protection from the risk of injury or illness than the PPPA standard; and (2) the state or political subdivision applies to the Commission for an exemption from the PPPA's preemption clause and the Commission grants the exemption through a process specified at 16 CFR Part 1061. 15 U.S.C. 1476(c)(1). In addition, the federal government, or a state or local government, may establish and continue in effect a nonidentical special packaging requirement that provides a higher degree of protection than the PPPA requirement for a household substance for the federal, state or local government's own use. 15 U.S.C. 1476(b).

Thus, with the exceptions noted above, the proposed rule exempting powder formulations of colesevelam hydrochloride (currently marketed as Welchol®) and sevelamer carbonate (currently marketed as Renvela®) from special packaging requirements, if finalized, would preempt nonidentical state or local special packaging standards for the substance.

For the reasons given above, the Commission proposes to amend 16 CFR part 1700 as follows:

We are proposing amendments to rules and forms under the Securities Act of 1933 (Securities Act), 1 and the Securities Exchange Act of 1934 (Exchange Act). 2 Under the Securities Act, we are proposing to amend Rules 134, 3 138, 4 139, 5 168, 6 Form S-3, 7 Form S-4, 8 Form F-3, 9 and Form F-4. 10 We are further proposing to rescind Form F-9 11 and amend the Securities Act and Exchange Act forms and rules that refer to Form F-9 to eliminate those references. 12 We are also proposing to amend Schedule 14A  13 under the Exchange Act.

We are proposing today to remove references to credit ratings in rules and forms promulgated under the Securities Act and the Exchange Act. We proposed similar changes in 2008 but did not act on those proposals. 14 We are reconsidering the proposals at this time in light of the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). 15 Section 939A of the Dodd-Frank Act requires that we “review any regulation issued by [us] that requires the use of an assessment of the credit-worthiness of a security or money market instrument and any references to or requirements in such regulations regarding credit ratings.” Once we have completed that review, the statute provides that we modify any regulations identified in our review to “remove any reference to or requirement of reliance on credit ratings and to substitute in such regulations such standard of credit-worthiness” as we determine to be appropriate. 16

The amendments we are proposing today are substantially similar to those proposed in 2008. 17 Through both the 2008 comment period and the 2009 comment period, we received 49 comment letters. As discussed in more detail below, most of the commentators were opposed to the proposal to amend Form S-3 and other related forms and rules. 18 However, because the Dodd-Frank Act now provides that we remove references to credit ratings from our regulations, we are re-proposing these amendments to solicit comment on whether the proposed approach is appropriate, what the impact on issuers and other market participants would be and whether there are alternatives that we should consider. We expect that we may receive additional and different comments now that the modifications to our rules and forms to remove references to credit ratings are set forth pursuant to statute.

We have considered the role of credit ratings in our rules under the Securities Act on several occasions. 19 While we recognize that credit ratings play a significant role in the investment decision of many investors, we want to avoid using credit ratings in a manner that suggests in any way a “seal of approval” on the quality of any particular credit rating or nationally recognized statistical rating organization (“NRSRO”). Similarly, the legislative history indicates that Congress, in adopting Section 939A, intended to “reduce reliance on credit ratings.”  20 In today's proposals, we seek to reduce our reliance on credit ratings for regulatory purposes while also preserving the use of Form S-3 (and similar forms) for issuers that we believe are widely followed in the market. Nevertheless, our proposal would cause some issuers that have relied or that could rely upon the investment-grade criteria to lose eligibility for Form S-3 or Form F-3. To the extent the proposals may result in loss of Form S-3 or Form F-3 eligibility for issuers currently eligible to use the form, we are also requesting comment on other or additional eligibility criteria that may be appropriate to retain eligibility for these issuers.

Forms S-3 and F-3 are the “short forms” used by eligible issuers to register securities offerings under the Securities Act. These forms allow eligible issuers to rely on reports they have filed under the Exchange Act to satisfy many of the disclosure requirements under the Securities Act. Form S-3 and Form F-3 eligibility for primary offerings also enables form eligible issuers to conduct primary offerings “off the shelf” under Securities Act Rule 415. 21 Rule 415 provides considerable flexibility in accessing the public securities markets in response to changes in the market and other factors. Issuers that are eligible to register these primary “shelf” offerings under Rule 415 are permitted to register securities offerings prior to planning any specific offering and, once the registration statement is effective, offer securities in one or more tranches without waiting for further Commission action. To be eligible to use Form S-3 or F-3, an issuer must meet the form's eligibility requirements as to registrants, which generally pertain to reporting history under the Exchange Act, 22 and at least one of the form's transaction requirements. 23 One such transaction requirement permits registrants to register primary offerings of non-convertible securities if they are rated investment grade by at least one NRSRO. 24 Instruction I.B.2. provides that a security is “investment grade” if, at the time of sale, at least one NRSRO has rated the security in one of its generic rating categories, typically the four highest, which signifies investment grade.

The Form S-3 investment grade requirement was originally proposed in 1981. 25 In 1954, the Commission adopted a short form registration statement on Form S-9, which permitted the registration of issuances of certain high quality debt securities. 26 The criteria for use of Form S-9 related primarily to the quality of the issuer. 27 While these eligibility criteria set forth the type of issuer of high quality debt for which Form S-9 was intended, the Commission believed that certain of its requirements may have overly restricted the availability of the form. 28 At that time, the Commission believed that credit ratings were a more appropriate standard on which to base Form S-3 eligibility than specified quality of the issuer criteria, citing letters from commentators indicating that short form prospectuses are appropriate for investment grade debt because such securities are generally purchased on the basis of interest rates and security ratings. 29

When the Commission adopted Form S-3, it included a provision that a primary offering of non-convertible debt securities may be eligible for registration on the form if rated investment grade. 30 This provision provided issuers of debt securities whose public float did not reach the required threshold, or that did not have a public float, with an alternate means of becoming eligible to register offerings on Form S-3. 31 Consistent with Form S-3, the Commission adopted a provision in Form F-3 providing for the eligibility of a primary offering of investment grade non-convertible debt securities by eligible foreign private issuers. 32

Since the adoption of those rules relating to security ratings and Form S-3 and Form F-3, other Commission forms and rules relating to securities offerings or issuer disclosures have included requirements that likewise rely on securities ratings. 33 Among them are Form F-9, 34 Forms S-4 and F-4, 35 and Exchange Act Schedule 14A. 36

As discussed in more detail below, we are proposing today to revise Instruction I.B.2. of Form S-3 and Form F-3 to provide that an offering of non-convertible securities is eligible to be registered on Form S-3 and Form F-3 if the issuer has issued at least $1 billion of non-convertible securities in transactions registered under the Securities Act, other than equity securities, for cash during the past three years (as measured from a date within 60 days of the filing of the registration statement) and satisfies the other relevant requirements of Form S-3 or Form F-3.

In 2008, we proposed to replace the investment grade criterion in Instruction I.B.2. in Form S-3 (and the corresponding provision in Form F-3) with the requirement that the issuer has issued at least $1 billion of non-convertible securities in transactions registered under the Securities Act, other than equity securities, for cash during the past three years (as measured from a date within 60 days of the filing of the registration statement) and satisfied the other relevant requirements of Form S-3 or Form F-3. As noted above, we received 49 comment letters regarding the 2008 Proposing Release. Most commentators opposed the proposal to modify Form S-3 and Form F-3 to remove references to credit ratings. 37 When the 2008 Proposing Release was published (and when we sought additional comment in 2009), however, we were not subject to Section 939A of the Dodd-Frank Act.

In addition to the commentators who were generally opposed to amending Form S-3 and Form F-3, several commentators were opposed to replacing the reference to credit ratings with a requirement that in order to be eligible to use Form S-3 and Form F-3, companies would have to have issued at least $1 billion of non-convertible securities in offerings registered under the Securities Act, other than equity securities, for cash during the previous three years. 38 Two commentators believed the proposal would make Form S-3 less available to high quality investment grade issuers, weakening their ability to efficiently raise funds in the public market while potentially opening up short form registration to non-investment grade issuers. 39 One commentator believed that the amount of its outstanding debt securities is not relevant to its market following and that increasing the amount of debt issued would not increase its market following. 40 Some commentators thought the $1 billion threshold should be lower. 41 One commentator suggested that a range of $300 to $500 million would be more consistent with the threshold for equity issuers. 42 Several commentators objected to the three year look-back period. 43 Some of these commentators thought that the amount of outstanding debt (as opposed to the amount of debt issued over a three-year period) of an issuer provides a more reliable measure of market interest for debt securities than public float provides for investors in equity securities. 44

Commentators also disputed our preliminary belief that few issuers who are currently eligible to use Form S-3 and Form F-3 would not be eligible to use Form S-3 and Form F-3 if the proposal were adopted. 45 One commentator estimated that 25-30 electric utilities would be adversely affected by the proposal. 46 We received specific comments from utility companies, real estate investment trusts (REITs) and commentators representing issuers of insurance contracts stating that the proposal would no longer allow them to use Form S-3 and the shelf offering process. 47 Some commentators also believed that if the proposal were adopted these companies would conduct more private and offshore offerings. 48 Some of these commentators also believed that if the proposals were adopted raising funds in the private markets would increase the cost of capital. 49

As discussed in more detail below, the 2008 Proposing Release also included proposed changes to other Securities Act and Exchange Act rules and forms similar to those proposed today, although we did not receive significant feedback on those proposed changes.

Today we are proposing to revise the transaction eligibility criteria for registering primary offerings of non-convertible securities on Forms S-3 and F-3. Notwithstanding the comments we received on the 2008 Proposing Release, we preliminarily believe that the proposal discussed below is the most workable alternative for determining whether an issuer is widely followed in the marketplace so that Form S-3 and Form F-3 eligibility and access to the shelf offering process is appropriate. Nevertheless, as discussed in section (ii) below, we also recognize that this proposal would cause some issuers that have used or that could rely upon the investment-grade criteria to lose Form S-3 or Form F-3 (and thereby shelf) eligibility. The legislative history does not indicate that Congress intended to change the types of issuers and offerings that could rely on the Commission's forms. Accordingly, we have considered several mechanisms to avoid this consequence, including attempting to replace the investment grade criteria with other criteria intended to replicate key characteristics of investment-grade securities, identifying certain classes or characteristics of issuers that are most likely to rely solely upon the investment grade criteria for Form S-3 or Form F-3 eligibility in order to craft special eligibility criteria for these issuers, or providing for “grandfathering” in the application of new rules removing the investment-grade criteria in order to allow issuers that have recently offered securities on Form S-3 or Form F-3 in reliance on the investment grade criteria to retain Form S-3 or Form F-3 eligibility. Each of these mechanisms is a means to provide consistency in the treatment of these issuers for purposes of establishing eligibility for Form S-3 or Form F-3. We have included extensive requests for comment regarding potential mechanisms that might allow more consistent treatment of these issuers to the greatest extent possible.

As proposed, the instructions to Forms S-3 and F-3 would no longer refer to security ratings by an NRSRO as a transaction requirement to permit issuers to register primary offerings of non-convertible securities for cash. Instead, these forms would be available to register primary offerings of non-convertible securities if the issuer has issued (as of a date within 60 days prior to the filing of the registration statement) for cash at least $1 billion in non-convertible securities in offerings registered under the Securities Act, other than common equity, over the prior three years. 50

We are proposing to revise the form eligibility criteria using the same method and threshold by which the Commission defined an issuer of non-convertible securities, other than common equity, that does not meet the public equity float test as a “well-known seasoned issuer” (WKSI). 51 Similar to our approach with WKSIs, we believe that having issued $1 billion of registered non-convertible securities over the prior three years would generally correspond with a wide following in the marketplace. These issuers generally have their Exchange Act filings broadly followed and scrutinized by investors and the markets. 52 We believe that a wide following in the marketplace makes Form S-3 and Form F-3 appropriate for these issuers because information about them is generally readily available. As a result, we believe replacing the investment grade criterion with a standard based on the definition of WKSIs is appropriate. This approach is designed to identify those issuers that are followed by the markets such that it is appropriate to allow incorporation by reference of subsequently filed Exchange Act reports into the Securities Act registration statement and delayed offerings off of the shelf. We realize, however, that some offerings by issuers of lower credit quality may be registered for sale on Form S-3 and Form F-3 if our proposal is adopted. We solicit comment on whether our proposal would result in companies for whom Form S-3 and Form F-3 would not be appropriate now being able to register offerings on Form S-3 or Form F-3. 53

In determining compliance with the proposed $1 billion threshold, we would use the same standards that are used in determining whether an issuer is a WKSI. 54 Specifically:

• Issuers would be permitted to aggregate the amount of non-convertible securities, other than common equity, issued in registered primary offerings during the prior three years;

• Issuers would be permitted to include only such non-convertible securities that were issued in registered primary offerings for cash—they would not be permitted to include registered exchange offers;  55 and

• Parent company issuers only would be permitted to include in their calculation the principal amount of their full and unconditional guarantees, within the meaning of Rule 3-10 of Regulation S-X, 56 of non-convertible securities, other than common equity, of their majority-owned subsidiaries issued in registered primary offerings for cash during the three-year period.

Although the proposed standard and the WKSI standard are both based on a $1 billion minimum offering history, issuers seeking to rely on the new standard would not be required to qualify as a WKSI. Specifically, unlike WKSIs, the new Form S-3 and Form F-3 eligibility test could be met by issuers that are “ineligible issuers” as defined in Rule 405.

We preliminarily anticipate that under the proposed threshold some high yield debt issuers that are not currently eligible to use Form S-3 would become eligible. On the other hand, the proposed changes would result in some issuers currently eligible to use Form S-3 and Form F-3 becoming ineligible. Based on a review of non-convertible securities issued in the U.S. from January 1, 2006 through August 15, 2008, we estimate that approximately 45 issuers who were previously eligible to use Form S-3 (and who had made an offering during the review period) would no longer be able to use Form S-3 for offerings of non-convertible securities other than equity securities. 58 As noted below, the data does not measure the effect of the proposed rules on issuers who were previously eligible to use Form S-3 but did not make a public offering during the review period. We further estimate that approximately eight issuers who were previously ineligible to use Form S-3 or Form F-3 would be eligible to use those forms if the proposals are adopted.

We request comment on all aspects of the proposal. We have included specific questions below in order to facilitate responses from interested parties. In particular, in light of comments received on the 2008 Proposal, we have included requests for comment related to provisions of the proposals that may have a significant effect on utility companies, issuers of insurance contracts and REITs. We also seek comment from other categories of issuers who would be similarly affected by our proposals.

1. We recognize that the proposals, if adopted, could change the number and types of issuers currently eligible to use Form S-3 or Form F-3. Should Section 939A of the Act be read as simply requiring the removal of references to credit ratings but otherwise have no effect on the number and type of issuers eligible to use our forms? If so, should the new eligibility criteria be designed to replicate, as closely as possible, the existing pool of eligible issuers? What would be the advantages and disadvantages of such an approach?

2. Is the cumulative registered offering amount for the most recent three-year period the appropriate threshold at which to differentiate issuers? If so, is $1 billion appropriate? If not, should the threshold be higher ( e.g., $1.25 billion) or lower ( e.g., $500 or $750 million), and, if so, at what level should it be set? Please explain your reasoning for a different threshold. We estimate, based on our staff's review of non-convertible offerings, that a threshold of $750 million would result in approximately four of the companies excluded under the $1 billion threshold being eligible to use Form S-3, and that a threshold of $500 million would result in approximately 11 of the issuers excluded under the $1 billion threshold being eligible to use Form S-3.

3. Are there any transactions that currently meet the requirements of current General Instruction I.B.2. that would not be eligible to use the form under the proposed revision? Are there any transactions that do not meet the current Form S-3 or Form F-3 eligibility requirements for investment grade securities, but now would be eligible under the proposed revision, that should not be eligible? If practicable, provide information on the frequency with which such offerings are made.

4. We understand based on comments received on the 2008 Proposing Release and our staff's review of offerings of non-convertible securities that wholly owned, state-regulated operating subsidiaries of utility companies currently are eligible to register offerings in reliance on Instruction I.B.2. of Form S-3 and would no longer be eligible to use Form S-3 if the proposals are adopted because they would not be able to satisfy the $1 billion threshold. 59 Should we include a provision in Forms S-3 and F-3 that would allow these companies to continue to register offerings of non-convertible securities on Form S-3 or Form F-3 even if they do not satisfy the $1 billion threshold? Would the regulation by state utility commissions indicate that Form S-3 and Form F-3 are appropriate for these issuers?  60 Should we condition such eligibility on the issuer's parent also being eligible to register a primary offering on Form S-3 or F-3? Are there other conditions we should consider? Are there reasons these companies should not be able to file on Form S- 3 or F-3? Would such a provision result in issuers who are not currently eligible to use Form S-3 or F-3 becoming eligible? If so, would this result be appropriate? If such a provision would result in issuers who are not currently eligible to use Form S-3 or F-3 becoming eligible, what would be the impact on the substance of information available to investors and its accessibility? If it should be limited, how could the provision be tailored so that it would be limited to issuers currently eligible to file on Form S-3 or F-3? Should a provision for Form S-3 eligibility have different conditions than a provision for Form F-3 eligibility?

5. We understand based on comments received on the 2008 Proposing Release and our staff's review of offerings of non-convertible securities that issuers of certain insurance contracts ( e.g., contracts with so-called “market value adjustment” features  61 and contracts that provide guaranteed benefits in connection with assets held in an investor's mutual fund, brokerage, or investment advisory account) currently eligible to register offerings in reliance on Instruction I.B.2. of Form S-3 would no longer be eligible to use Form S-3 if the proposals are adopted because they would not be able to satisfy the $1 billion threshold. 62 Should we include a provision in Forms S-3 and F-3 that would allow these companies to continue to register offerings of such contracts on Form S-3 or Form F-3 even if they do not satisfy the $1 billion threshold? Should such a provision be limited to companies that are subject to the supervision of the insurance commissioner, bank commissioner, or any agency or officer performing like functions, of a state or territory of the United States or the District of Columbia? Should we also limit eligibility to an issuer that files an annual statement of its financial condition with, and is supervised and its financial condition examined periodically by, the insurance commissioner, bank commissioner, or any agency or officer performing like functions of the issuer's domiciliary jurisdiction? Should we condition eligibility for such a provision on the issuer's capital adequacy as assessed with reference to risk-based capital standards under the insurance laws of the issuer's state of domicile or other relevant jurisdiction? If so, what level of risk-based capital should be required? Should we condition eligibility for such a provision on the issuer's parent being eligible to register a primary offering on Form S-3 or F-3? Should we also require that the securities offered not constitute an equity interest in the issuer and be subject to regulation under the insurance laws of the domiciliary jurisdiction of the issuer? Should we also provide that the value of the securities to be offered does not vary according to the investment experience of a separate account? Are there other conditions we should consider?

6. Would a provision like that described in the preceding question result in issuers of insurance contracts who are not currently eligible to use Form S-3 or F-3 becoming eligible? If so, would this result be appropriate? If such a provision would result in issuers who are not currently eligible to use Form S-3 or F-3 becoming eligible, what would be the impact on the substance of information available to investors and its accessibility? How could the provision be tailored so that it would be limited to issuers of insurance contracts that are currently eligible to file on Form S-3 or F-3? Should a provision for Form S-3 eligibility have different conditions than a provision for Form F-3 eligibility?

7. We understand based on comments received on the 2008 Proposing Release and our staff's review of offerings of non-convertible securities that wholly-owned operating partnerships of exchange-listed REITS currently are eligible to register offerings in reliance on Instruction I.B.2. of Form S-3 and would no longer be eligible to use Form S-3 if the proposals are adopted because they would not be able to satisfy the $1 billion threshold. 63 Should we include a provision in Forms S-3 and F-3 that would allow these companies to continue to register offerings of non-convertible securities on Form S-3 or F-3 even if they do not satisfy the $1 billion threshold? Should we condition such eligibility on the issuer's parent also being eligible to register a primary offering on Form S-3 or F-3? Are there other conditions we should consider? Are there reasons these companies should not be able to file on Form S-3 or F-3? Would such a provision result in issuers who are not currently eligible to use Form S-3 or F-3 to become eligible? If so, would this result be appropriate? If such a provision would result in issuers who are not currently eligible to use Form S-3 or F-3 becoming eligible, what would be the impact on the substance of information available to investors and its accessibility? If it should be limited, how could the provision be tailored so that it would be limited to issuers currently eligible to file on Form S-3 or F-3? Should a provision for Form S-3 eligibility have different conditions than a provision for Form F-3 eligibility?

8. Assuming there are issuers currently eligible to use Form S-3 or Form F-3 that would not be eligible to use those forms if the proposals are adopted, should such issuers be eligible under the new rules? If so, should we provide for their continued eligibility through “grandfathering?” If we were to adopt rules that have the effect of “grandfathering” currently eligible issuers, how should such a provision be crafted? Should issuers' eligibility be measured from the date of the enactment of the Dodd-Frank Act, the date of this proposal, or some other date? Why? How would we determine the population of issuers eligible for any “grandfathering?” Would these issuers have an investment grade “issuer rating,” or would ratings typically used to meet the current From S-3 and Form F-3 eligibility requirements be issued for each security on an offering by offering basis? If the ratings are issued in connection with each offering of a security, then how could we determine whether such an issuer is eligible under a “grandfathering provision?” Should we provide that issuers that have relied on the investment grade eligibility criterion in the past may continue to use Form S-3 or Form F-3 for offerings of non-convertible securities if the issuers are otherwise eligible to use the forms? Would that approach be consistent with Section 939A of the Dodd-Frank Act? If so, should there be a timing requirement, such as requiring that an issuer have conducted an offering under current Instruction I.B.2. within the past three years? Should there be other conditions? Should there be a time limit going forward, such as allowing these “grandfathered” issuers to use Form S-3 and Form F-3 for three years from the effective date of the proposed amendments? Are there other ways these issuers could remain eligible to use Form S-3 or Form F-3? Are there specific characteristics that should be required to be met that would enable these issuers to retain Form S-3 or Form F-3 eligibility? Assuming there are issuers currently ineligible to use Form S-3 and Form F-3 that would become eligible if the proposals are adopted, should we condition their eligibility on any specific characteristics?

9. Is there a reason that this Form S-3 and Form F-3 eligibility requirement should not mirror the registered offering amount requirement for the debt-only WKSI definition?

10. Should the measurement time period for a dollar-volume issuance threshold (whether set at $1 billion, as proposed, or at some other level) be longer or shorter than three years ( e.g., four or five years or one or two years)? If so, why? Would it be more appropriate for the threshold to include non-convertible securities, other than common equity, outstanding rather than issued in registered transactions over the prior three years?

11. In determining compliance with the dollar-volume threshold, should issuers be permitted to include only securities issued in registered primary offerings for cash, as proposed? Should issuers be permitted to include registered exchange offers or private offerings?

12. Is there a better alternative for Form S-3 and Form F-3 eligibility for non-convertible securities? By what metrics could one measure the market following for debt issuers? Is there an alternative definition of “investment grade debt securities” that does not rely on NRSRO ratings and adequately meets the objective of relating short-form registration to the existence of widespread following in the marketplace?

13. Does the proposed eligibility based on the amount of prior registered non-convertible securities issued serve as an adequate replacement of the investment grade eligibility condition?

14. Is having a wide following in the market an appropriate basis for determining Form S-3 and Form F-3 eligibility criteria? Are there other criteria on which such eligibility should be based? What characteristics should an issuer eligible to use Form S-3 and Form F-3 have? What standard could we use in Form S-3 and Form F-3 to ensure those characteristics are present? If having a wide following in the market is an appropriate standard, would the alternatives on which we have requested comment ( e.g., “grandfathering” certain issuers) result in issuers with a wide following in the market being eligible to use Form S-3 and Form F-3?

15. Should there be an eligibility requirement based on a minimum number of holders of non-convertible securities issued pursuant to registered offerings? If so, should this threshold be limited to securities issued for cash, or should securities issued pursuant to registered exchange offerings also be included? Should the number of holders be 300 or 500, by analogy to our registration and deregistration rules relating to equity securities or some other number?  64 Would linking the eligibility requirement to the number of holders help to assure market following? If the number of holders would be an appropriate alternative, how should that number be determined? For example, if debt securities are registered in the name of the record holder, is there a reliable and workable method for determining the number of beneficial holders?

16. Transactions in most non-asset backed debt securities are currently required to be reported by broker/dealers who are members of the Financial Industry Regulatory Authority (FINRA). Such transactions are reported through the Trade Reporting and Compliance Engine (TRACE) which is administered by FINRA. Instead of, or in addition to, the proposed $1 billion threshold we have proposed, should we base Form S-3 and Form F-3 eligibility on the average daily volume of trading as reported in TRACE over a specified period of time ( e.g., six months or 12 months)? Would issuers be able to manipulate such a standard? Would allowing Form S-3 and F-3 eligibility for companies with an average daily volume of trading as reported in TRACE of all of the securities of a non-ABS issuer that were offered and sold pursuant to a registration statement for the six or 12 months prior to the filing of the registration statement be appropriate? Would using such a standard result in companies' Form S-3 and Form F-3 eligibility changing too frequently? Is this volatility problematic, and are there ways we could mitigate it? How would the number and types of issuers eligible to use Form S-3 and Form F-3 under a TRACE volume standard compare to the number and issuers eligible to use Form S-3 and Form F-3 currently? Would using volume of transactions reported in TRACE instead of the $1 billion standard result in a different set of companies being Form S-3 or Form F-3 eligible or would it result in roughly the same companies being Form S-3 or Form F-3 eligible? Are there particular companies who would be eligible to use Form S-3 or Form F-3 under the $1 billion standard but not under a TRACE volume standard? Are there particular companies that would be eligible to use Form S-3 or Form F-3 under the TRACE volume standard but not under the $1 billion standard?

17. Should there be a different standard for eligibility of foreign private issuers to use Form F-3? If so, explain why and what a more appropriate criteria would be.

18. Does the $1 billion threshold of registered offerings in the prior three years present any issues that are unique to foreign private issuers, especially those that may undertake U.S. registered public offerings as only a portion of their overall plan of financing, and how might these problems be addressed? Would it be appropriate to provide a longer time period for measurement, or to include unregistered, public offerings of securities for cash outside the United States?

19. Should we include a Form S-3 eligibility category for any issuer that is subject to substantive state or federal regulation such as broker/dealers that must satisfy net capital requirements? What types of issuers would be able to use Form S-3 under such a provision? Would it result in a significant number of new issuers being eligible to use Form S-3? Is state or federal regulation, or a particular kind of state or federal regulation ( e.g., approval of capital transactions), an appropriate measure for determining Form S-3 eligibility? Why or why not? Should such an approach be even broader and allow for Form S-3 eligibility of issuers that control entities subject to substantive state or federal regulation such as bank holding companies that control banks subject to federal or state regulation? Is there a comparable approach that would be appropriate for foreign private issuers?

20. Should we base Form S-3 and Form F-3 eligibility on the metrics used by NRSROs in determining a rating? Are there certain key metrics such as debt, revenue, profit margin, cash flow to debt ratios, interest coverage ratios and return on assets that we should include? How could we account for differences in industry to make the metrics appropriate for all companies without undue complexity? Would these metrics (or other appropriate metrics) be easy for companies to calculate for purposes of determining Form S-3 and Form F-3 eligibility?

21. Should we base Form S-3 and Form F-3 eligibility on the presence of certain covenants in the indenture? Are there covenants or other provisions that would indicate that an offering was appropriate for Form S-3 and Form F-3 eligibility?  65 What would those covenants be, and how would they serve as an indicator that Form S-3 and Form F-3 eligibility was appropriate?

22. Are there elements from the proposed rules and the alternatives on which we have requested comment that could be combined into an appropriate standard for determining Form S-3 and Form F-3 eligibility? If so, what would such a standard include?

Form F-9 allows certain Canadian issuers  66 to register investment grade debt or investment grade preferred securities that are offered for cash or in connection with an exchange offer, and which are either non-convertible or not convertible for a period of at least one year from the date of issuance. 67 Under the form's requirements, a security is rated “investment grade” if it has been rated investment grade by at least one NRSRO, or at least one Approved Rating Organization, as defined in National Policy Statement No. 45 of the Canadian Securities Administrators (“CSA”). 68 This eligibility requirement was adopted as part of a 1993 revision to the MJDS originally adopted by the Commission in 1991 in coordination with the CSA. 69

In the 2008 Proposing Release, we proposed to eliminate the requirement in Form F-9 that allows Canadian issuers to register certain debt securities if they were rated investment grade by an NRSRO. We did not propose to change the eligibility requirement in Form F-9 that allows Canadian issuers to register certain debt securities if they are rated investment grade by an Approved Rating Organization (as defined under Canadian regulations). We did not receive significant comment on this proposal.

We have considered modifying this 2008 proposal to further revise Form F-9 in order to comply with Section 939A of the Dodd-Frank Act. However, after further analysis, rather than further revising the form, we are instead proposing to rescind Form F-9. Due to Canadian regulatory developments since the publishing of the 2008 Proposing Release, we no longer believe that keeping Form F-9 as a distinct form would serve a useful purpose. Under Form F-9, an eligible issuer has been able to register investment grade securities using audited financial statements prepared pursuant to Canadian generally accepted accounting principles (Canadian GAAP) without having to include a U.S. GAAP reconciliation. In contrast, a MJDS filer must reconcile its home jurisdiction financial statements to U.S. GAAP when registering securities on a Form F-10. 70 However, the CSA has recently adopted rules that will require Canadian reporting companies to prepare their financial statements pursuant to International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) beginning in 2011. 71 Foreign private issuers that prepare their financial statements in accordance with IFRS are not required to prepare a U.S. GAAP reconciliation. 72 Since a Canadian issuer will not have to perform a U.S. GAAP reconciliation under IFRS, the primary difference between Form F-9 and Form F-10 will be eliminated. Once the Canadian IFRS-related amendments become effective, 73 the disclosure requirements for an investment grade securities offering registered on Form F-10 will be the same as the disclosure requirements for one registered on Form F-9, resulting in Form F-9 becoming dispensable.

In addition, MJDS filers have infrequently used Form F-9. Since January 1, 2007, only 21 issuers have filed Form F-9 for fewer than 40 registration statements. In light of its infrequent use and dispensability, we propose to eliminate Form F-9 in its entirety. 74

23. The Commission requests comment on whether we should rescind Form F-9, as proposed. Is there a reason that we should retain that form despite the pending effectiveness of the CSA IFRS-related amendments and the infrequency of Form F-9's use?

24. Instead of rescinding the form, should we amend Form F-9 to eliminate references to credit ratings by an NRSRO in order to comply with Section 939A of the Dodd-Frank Act by replacing those references with a requirement that an issuer has issued (as of a date within 60 days prior to the filing of the registration statement) for cash at least $1 billion in non-convertible securities, other than equity securities, through registered primary offerings over the prior three years?

25. As noted above, in 2008 the Commission's proposal did not change a Canadian issuer's ability to use Form F-9 to register debt or preferred securities meeting the requirements of current General Instruction I.A. if the securities are rated “investment grade” by at least one Approved Rating Organization (as defined in National Policy Statement No. 45 of the Canadian Securities Administrators). If we retain Form F-9, should we, in addition to eliminating the criterion related to securities rated investment grade by an NRSRO, also eliminate the criterion related to securities rated investment grade by an Approved Rating Organization? In light of Section 939A of the Dodd-Frank Act, would it be appropriate to eliminate the reference to an Approved Rating Organization even though it ultimately refers to Canadian law?

Proposals relating to Form S-4, F-4 and Schedule 14A were also included in the 2008 Proposing Release. We did not receive significant separate comment on these proposals and are re-proposing them as they were proposed in the 2008 Proposing Release. Forms S-4 and F-4 essentially include the Form S-3 and Form F-3 eligibility criteria by allowing registrants that meet the registrant eligibility requirements of Form S-3 or F-3 and are offering investment grade securities to incorporate by reference certain information. 75 Similarly, Schedule 14A permits a registrant to incorporate by reference if the Form S-3 registrant requirements in Instruction I.A. are met and action is to be taken as described in Items 11, 12 and 14  76 of Schedule 14A, which concerns non-convertible debt or preferred securities that are “investment grade securities” as defined in General Instruction I.B.2. of Form S-3. 77 In addition, Item 13 of Schedule 14A allows financial information to be incorporated into a proxy statement if the requirements of Form S-3 (as described in Note E to Schedule 14A) are met. Because the Commission proposes to change the eligibility requirements in Forms S-3 and F-3 to remove references to ratings by an NRSRO, the Commission believes the same standard should apply to the disclosure options in Forms S-4 and F-4 based on Form S-3 or F-3 eligibility. That is, a registrant will be eligible to use incorporation by reference in order to satisfy certain disclosure requirements of Forms S-4 and F-4 to register non-convertible debt or preferred securities if the issuer has issued (as of a date within 60 days prior to the filing of the registration statement) for cash at least $1 billion in non-convertible securities, other than common equity, through registered primary offerings over the prior three years. Similarly, we propose to amend Schedule 14A to refer simply to the requirements of General Instruction I.B.2. of Form S-3, rather than to “investment grade securities.” As a result, an issuer would be permitted to incorporate by reference into a proxy statement if the issuer satisfied the requirements of Instruction I.A. of Form S-3, the matter to be acted upon related to non-convertible securities and was described in Item 11, 12 or 14 of Schedule 14A and the issuer had issued (as of a date within 60 days of the date the definitive proxy is first sent to security holders) for cash at least $1 billion in non-convertible securities, other than common equity, through registered primary offerings over the prior three years.

26. Are the amendments we have proposed for Forms S-4 and F-4 appropriate?

27. Are the proposed amendments to Schedule 14A appropriate? Would there be a significant impact on the way proxy filings are made as a result of the new criteria?

Other Securities Act rules also rely on credit ratings. Rules 138, 139, and 168 under the Securities Act provide that certain communications are deemed not to be an offer for sale or offer to sell a security within the meaning of Sections 2(a)(10)  78 and 5(c)  79 of the Securities Act when the communications relate to an offering of non-convertible investment grade securities. These communications include the following:

• Under Securities Act Rule 138, a broker's or dealer's publication about securities of a foreign private issuer that meets F-3 eligibility requirements (other than the reporting history requirements) and is issuing non-convertible investment grade securities;

• Under Securities Act Rule 139, a broker's or dealer's publication or distribution of a research report about an issuer or its securities where the issuer meets Form S-3 or F-3 registrant requirements and is or will be offering investment grade securities pursuant to General Instruction I.B.2. of Form S-3 or F-3, or where the issuer meets Form F-3 eligibility requirements (other than the reporting history requirements) and is issuing non-convertible investment grade securities; and

• Under Securities Act Rule 168, the regular release and dissemination by or on behalf of an issuer of communications containing factual business information or forward-looking information where the issuer meets Form F-3 eligibility requirements (other than the reporting history requirements) and is issuing non-convertible investment grade securities.

The Commission proposes to revise Rules 138, 139, and 168 to be consistent with the proposed revisions to the eligibility requirements in Forms S-3 and F-3 since in order to rely on these rules the issuer must either satisfy the public float threshold of Form S-3 or F-3, or issue non-convertible investment grade securities as defined in the instructions to Form S-3 or F-3 as proposed to be revised. We included the same proposal in the 2008 Proposing Release and did not receive significant comment separate from the comment on the revised eligibility in Forms S-3 and F-3.

28. Should the Commission revise Rules 138, 139, and 168 as proposed?

Securities Act Rule 134(a)(17)  80 permits the disclosure of security ratings issued or expected to be issued by NRSROs in certain communications deemed not to be a prospectus or free writing prospectus. In the 2008 Proposing Release, we proposed to revise the rule to allow for disclosure of ratings assigned by any credit rating agency, not just NRSROs. We received little comment on this proposal. One commentator was opposed to the proposal because it would allow unregulated credit rating agencies to publicly disclose ratings “without having published its track record, rating procedures and methodologies” and other information required to be disclosed by NRSROs. 81 We are proposing today to remove Rule 134(a)(17) in order to remove the safe harbor for disclosure of credit ratings assigned by NRSROs, since we believe providing a safe harbor that explicitly permits the presence of a credit rating assigned by an NRSRO is not consistent with the purposes of Section 939A. Although we considered continuing the safe harbor for any disclosure regarding credit ratings, similar to what we proposed in 2008, at this point, we preliminarily believe that such an approach without any limiting principle would not be consistent with the otherwise limited disclosures covered by Rule 134. We note that removing the safe harbor for this type of information would not necessarily result in a communication that included this information being deemed to be a prospectus or a free writing prospectus. The proposal would simply result in there no longer being a safe harbor for a communication that included this information. Instead, the determination as to whether such information constitutes a prospectus would be made in light of all of the circumstances of the communication.

29. Should we continue to provide a safe harbor for communications that include disclosure of ratings information? Would it be appropriate to allow such communication regarding a security rating assigned by any credit rating agency and not limit the safe harbor to NRSRO ratings? If the credit rating agency is not an NRSRO, is it appropriate to require additional disclosure to that effect? Do issuers include credit ratings in Rule 134 communications?

We request and encourage any interested person to submit comments regarding:

• The proposed amendments that are the subject of this release;

• Additional or different changes; or

• Other matters that may have an effect on the proposals contained in this release.

In addition, we request comment on the following:

30. Should the Commission include a phase-in for issuers beyond the effective date to accommodate pending offerings or effective shelf registration statements on Form S-3 or Form F-3? If so, should a phase-in apply only to particular rules, such as Form S-3 and Form F-3 eligibility? As proposed, compliance with the new standards would begin on the effective date of the new rules. Will a significant number of issuers have their offerings limited by the proposed rules without a phase-in? If a phase-in is appropriate, should it be for a certain period of time ( e.g., six months or 12 months) or only for the term of an effective registration statement?

31. What impact on competition should the Commission expect were it to adopt the proposed non-convertible debt eligibility requirements? Would any issuers that currently take advantage, or are eligible to take advantage of the investment grade condition and are planning to do so, be adversely affected? Is the ability to offer debt off the shelf a significant competitive advantage that the Commission should be concerned about limiting only to large debt issuers?

32. How can we balance any competitive issues with limiting shelf eligibility to widely followed issuers?

Certain provisions of the proposed rule amendments contain a “collection of information” within the meaning of the Paperwork Reduction Act of 1995 (PRA). 82 The Commission is submitting these proposed amendments and proposed rules to the Office of Management and Budget (OMB) for review in accordance with the PRA. 83 An agency may not conduct or sponsor, and a person is not required to comply with, a collection of information unless it displays a currently valid control number. The titles for the collections of information are:

“Form S-1” (OMB Control No. 3235-0065);

“Form S-3” (OMB Control No. 3235-0073);

“Form F-1” (OMB Control No. 3235-0258);

“Form F-3” (OMB Control No. 3235-0256);

“Form F-9” (OMB Control No. 3235-0377); and

“Form F-10” (OMB Control No. 3235-0380).

We adopted all of the existing regulations and forms pursuant to the Securities Act or the Exchange Act. These regulations and forms set forth the disclosure requirements for registration statements and proxy statements that are prepared by issuers to provide investors with information. Our proposed amendments to existing forms and regulations are intended to replace rule and form requirements of the Securities Act and the Exchange Act that rely on security ratings with alternative requirements.

The hours and costs associated with preparing disclosure, filing forms, and retaining records constitute reporting and cost burdens imposed by the collection of information. There is no mandatory retention period for the information disclosed, and the information disclosed would be made publicly available on the EDGAR filing system.

The threshold we are proposing for issuers of non-convertible securities who are otherwise ineligible to use Form S-3 or Form F-3 to conduct primary offerings because they do not meet the aggregate market value requirement is designed to capture those issuers with a wide market following. The Commission expects that under the proposed threshold, the number of companies in a 12-month period eligible to register on Form S-3 or Form F-3 for primary offerings of non-convertible securities for cash will decrease by approximately 14 issuers for Form S-3 and one issuer for Form F-3. 84 We expect that the issuers filing on Form S-1 and F-1 will increase by the same amounts.

In addition, because these proposed amendments relate to eligibility requirements, rather than disclosure requirements, the Commission does not expect that the proposed revisions will impose any new material recordkeeping or information collection requirements. Issuers may be required to ascertain the aggregate principal amount of non-convertible securities issued in registered primary offerings for cash, but the Commission believes that this information should be readily available and easily calculable.

We are also proposing to rescind Form F-9, which is the form used by qualified Canadian issuers to register investment grade securities. Because of recent Canadian regulatory developments, we no longer believe that keeping Form F-9 as a distinct form would serve a useful purpose. In addition, Canadian issuers have infrequently used Form F-9. As a result of the proposal to eliminate Form F-9, we believe there would be an additional five filers on Form F-10. 85 We do not believe that the burden of preparing Form F-10 will change because the information required by Form F-10 is the same as that required by Form F-9.

For purposes of the Paperwork Reduction Act, we estimate that there will be no annual incremental increase in the paperwork burden for issuers to comply with our proposed collection of information requirements. We do estimate, however, that the number of respondents on Forms S-1, F-1 and F-10 will increase as a result of the proposals. As a result, the aggregate burden hour and professional cost numbers will increase for those forms due to the additional number of respondents. We also expect that the number of respondents will decrease for Forms S-3 and F-3, which will reduce the aggregate burden hour and professional costs for those forms. 86 These estimates represent the average burden for all companies, both large and small. For each estimate, we calculate that a portion of the burden will be carried by the company internally, and the other portion will be carried by outside professionals retained by the company. The portion of the burden carried by the company internally is reflected in hours, while the portion of the burden carried by outside professionals retained by the company is reflected as a cost. We estimate these costs to be $400 per hour. A summary of the proposed changes is included in the table below.

We request comments in order to evaluate: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information would have practical utility; (2) the accuracy of our estimate of the burden of the proposed collection of information; (3) whether there are ways to enhance the quality, utility, and clarity of the information to be collected; and (4) whether there are ways to minimize the burden of the collection of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology. 87

Any member of the public may direct to us any comments concerning the accuracy of these burden estimates and any suggestions for reducing these burdens. Persons submitting comments on the collection of information requirements should direct the comments to the Office of Management and Budget, Attention: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and should send a copy to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090, with reference to File No. S7-18-08. Requests for materials submitted to OMB by the Commission with regard to these collections of information should be in writing, refer to File No. S7-18-08, and be submitted to the Securities and Exchange Commission, Office of Investor Education and Advocacy, 100 F Street, NE., Washington, DC 20549-0213. OMB is required to make a decision concerning the collection of information between 30 and 60 days after publication of this release. Consequently, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication.

As discussed above, we are proposing rule amendments pursuant to Section 939A of the Dodd-Frank Act to eliminate references to credit ratings in our rules in order to reduce reliance on credit ratings. 88 Today's proposals seek to replace rule and form requirements of the Securities Act and the Exchange Act that rely on security ratings by NRSROs with alternative requirements that do not rely on ratings.

The Commission is proposing to revise the transaction eligibility requirements of Forms S-3 and F-3 and other rules and forms that refer to these eligibility requirements. Currently, these forms allow issuers who do not meet the forms' other transaction eligibility requirements to register primary offerings of non-convertible securities for cash if such securities are rated investment grade by an NRSRO. The proposed rules would replace this transaction eligibility requirement with a requirement that, for primary offerings of non-convertible securities for cash, an issuer must have issued in the previous three years (as of a date within 60 days prior to the filing of the registration statement) at least $1 billion aggregate principal amount of non-convertible securities, other than common equity, in registered primary offerings for cash. We are also proposing to remove Rule 134(a)(17) so that disclosure of credit ratings information is no longer covered by the safe harbor that deems certain communications not to be a prospectus or a free writing prospectus. Finally, we are proposing to rescind Form F-9.

We are sensitive to the costs and benefits imposed by our rules. The discussion below focuses on the costs and benefits of the proposals we are making to implement the Dodd-Frank Act within our discretion under that Act, rather than the costs and benefits of the Dodd-Frank Act itself. The two types of costs and benefits may not be entirely separable to the extent that our discretion is exercised to realize the benefits intended by the Dodd-Frank Act.

The proposed amendments would prescribe a different standard for determining which issuers are eligible to register offerings on Form S-3 or Form F-3. To the extent that some of these issuers were previously unable to avail themselves of the shelf offering process and forward incorporation by reference, they will now have faster access to capital markets and incur lower transaction costs. 89 In addition, the new Form S-3 and Form F-3 eligibility requirement of at least $1 billion of debt issued in registered offerings over the last three years is easily calculable, which will benefit issuers by facilitating their compliance with the requirement.

We believe the benefits of rescinding Form F-9 would be to reduce redundancy by having multiple forms with the same requirements which would streamline the registration process for Canadian issuers.

To the extent that the $1 billion eligibility threshold results in issuers who were previously eligible to use Forms S-3 and F-3 to register primary offerings of non-convertible securities to register on Form S-1, 90 this would result in increased costs of preparing and filing registration statements. 91 This would result in additional time spent in the offering process, and issuers would incur costs associated with preparing and filing post-effective amendments to the registration statement. In addition, the resulting loss of the ability to conduct a delayed offering “off the shelf” pursuant to Rule 415 under the Securities Act would result in costs due to the uncertainty an issuer might face regarding the ability to conduct offerings quickly at advantageous times.

We believe that the proposed amendments could result in some issuers who are currently required to file on Form S-1 or Form F-1 becoming eligible to use Form S-3 or Form F-3. This could result in a cost to investors as there would be less information present in the prospectuses for these companies than there was previously. As a result, investors would have to seek out the Exchange Act reports (for example, by accessing the SEC Web site) of these issuers for company information which would no longer appear in the prospectus. However, we believe these costs would be mitigated to the extent that the proposed $1 billion eligibility threshold captures issuers with a wide market following for whom incorporation by reference of Exchange Act reports is more appropriate.

We do not expect the elimination of Form F-9 to result in any costs because issuers that would register debt on Form F-9 will be able to register debt on Form F-10. Form F-10's disclosure requirements will be the same as those under Form F-9 once the CSA IFRS-related amendments become effective in 2011.

If the proposed amendment to remove Rule 134(a)(17) is adopted, there could be a cost to investors if ratings information is less available to them, to the extent such ratings information is useful to investors. In addition, to the extent that issuers decide to continue to include ratings information in communications that previously were made in reliance on the Rule 134 safe harbor, they may incur costs in order to ascertain whether including such information would require compliance with prospectus filing requirements.

We request comment on all aspects of this cost-benefit analysis, including identification and assessment of any costs and benefits not discussed herein. We seek comment and data on the value of the benefits identified. We also welcome comments on the accuracy of the cost estimates in each section of this analysis, and request that commentators provide data that may be relevant to these cost estimates. In addition, we seek estimates and views regarding these costs and benefits for particular covered institutions, including small institutions, as well as any other costs or benefits that may result from the adoption of these proposed amendments.

Specifically, we ask the following:

• Would there be any significant transition costs imposed on issuers as a result of the proposals, if adopted? Please be detailed and provide quantitative data or support, as practicable.

Section 23(a) of the Exchange Act  92 requires the Commission, when making rules and regulations under the Exchange Act, to consider the impact a new rule would have on competition. Section 23(a)(2)prohibits the Commission from adopting any rule which would impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. Section 2(b) of the Securities Act  93 and Section 3(f) of the Exchange Act  94 require the Commission, when engaging in rulemaking that requires it to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action would promote efficiency, competition, and capital formation.

Our preliminary analysis indicates that the proposed amendments will have two distinct effects. First, some issuers currently eligible to register primary offerings of non-convertible securities on Forms S-3 and F-3 and to use the shelf offering process would lose their eligibility. Second, some issuers will become newly eligible to use Forms S-3 and F-3 and the shelf offering process. We believe that the proposed rules will likely result in a net decrease in eligible issuers, which is why the proposed rules may reduce efficiency and hamper capital formation. Issuers who are no longer eligible to register offerings on Form S-3 and Form F-3 ( e.g., investment grade debt issuers who do not meet the proposed $1 billion eligibility threshold) and avail themselves of the shelf offering process may now face relatively higher issuance costs, which would negatively affect efficiency and capital formation of those issuers. As noted throughout this release, we anticipate that the number of such issuers would be small, and we have requested comment on whether other provisions should be adopted that would further reduce the number of affected issuers.

The Commission believes that the proposal to rescind Form F-9 could reduce confusion regarding the appropriate form to use for the registration of securities by Canadian issuers, which could result in increased market efficiency.

The Commission solicits comment on whether the proposed amendments changing the Forms S-3 and F-3 eligibility requirements for registering primary offerings of non-convertible securities, and rescinding Form F-9 and Rule 134(a)(17), if adopted, would promote or burden efficiency, competition, and capital formation. The Commission also requests comment on whether the proposed amendments would have harmful effects on investors or on issuers who could use Form S-3 and Form F-3 for primary offerings of non-convertible securities, or on issuers of investment grade securities that would otherwise use Form F-9 and what options would best minimize those effects. Finally, the Commission requests comment on the anticipated effect of disclosure requirements on competition in the market for credit rating agencies. The Commission requests commentators to provide empirical data and other factual support for their views, if possible.

The Commission hereby certifies, pursuant to 5 U.S.C. 605(b), that the amendments contained in this release, if adopted, would not have a significant economic impact on a substantial number of small entities. The proposed amendments would:

• Amend the Securities Act Form S-3 and Form F-3 eligibility requirements for primary offerings of non-convertible securities if the issuer has issued (as of a date within 60 days prior to the filing of the registration statement) for cash at least $1 billion in non-convertible securities, other than common stock, through registered primary offerings, within the prior three years;

• Amend Forms S-4 and F-4 and Schedule 14A to conform with the proposed Form S-3/F-3 eligibility requirements;

• Amend Securities Act Rules 138, 139, and Rules 168 to be consistent with the proposed Form S-3/F-3 eligibility requirements;

• Remove Rule 134(a)(17); and

• Remove Form F-9 and all references to that form in our forms and rules.

For these reasons, the proposed amendments would not have a significant economic impact on a substantial number of small entities.

For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996, 95 a rule is “major” if it has resulted, or is likely to result in:

• An annual effect on the U.S. economy of $100 million or more;

• A major increase in costs or prices for consumers or individual industries; or

• Significant adverse effects on competition, investment, or innovation.

• The potential effect on the U.S. economy on an annual basis;

• Any potential increase in costs or prices for consumers or individual industries; and

• Any potential effect on competition, investment, or innovation.

We are proposing the amendments contained in this document under the authority set forth in Sections 6, 7, 10, 19(a) of the Securities Act and Sections 14 and 23(a) of the Exchange Act.

For the reasons set out in the preamble, Title 17, Chapter II of the Code of Federal Regulations is proposed to be amended as follows:

Currently, USAID implements the statutory procurement directives in Section 604(a) of the Foreign Assistance Act of 1961 (FAA), as amended, through the creation and application of “principal geographic codes” found at 22 CFR 228.03 and the related concepts of “source,” “origin” and “nationality” as defined or described in 22 CFR 228. Geographic codes set forth at USAID's Automated Directives System (ADS) Chapter 260 identify geographic entities—countries, territories, organizations, regions, and sub-regions—and program activities associated with geographic entities. They are established and used by USAID for administrative purposes, including determining the source, origin, and nationality of commodities and services financed by USAID. Section 604(a) of the FAA allows for procurement of program-funded goods and services only in the United States, the recipient country, or developing countries (excluding advanced developing countries); however, no single geographic code reflects this statutory directive. USAID employees as well as USAID-funded contractors and grantees, spend a substantial amount of time and resources interpreting, applying, and when necessary and appropriate, seeking waivers from the application of the current codes and related rules. This extensive process results in significant use of resources, and at times, uncertainty across USAID in application of 22 CFR Part 228. In light of these issues, USAID is inquiring whether or not geographic codes developed before the current era of globalized manufacturing processes and which usually limit procurements to one country are still relevant and effective in today's globalized economy. In addition, USAID is concerned with the cost of compliance with the current geographic code requirements. Anecdotal evidence suggests that the current system of authorizing a specific geographic code for particular procurements creates delays in implementation of sometimes urgently needed assistance. In situations where procurement from the one designated geographic code may not be possible, a waiver may be required to implement the project effectively, adding to the cost and detracting from the effectiveness of implementation. For example, one USAID contractor estimates the average time to process a waiver request for its programs at 55 days. Because the cost of the resources expended in these efforts means fewer resources available for project implementation and foreign assistance, USAID is considering revising the S/O/N regulation to simplify it, to be more consistent with the underlying statutory requirements of Section 604(a) of the FAA, and to streamline the related implementation procedures.

Any issues in this rulemaking that relate to cargo preference will be covered by the comprehensive rulemaking that is being developed to govern the Maritime Administration's cargo preference program.

USAID invites comments and suggestions on the existing source, origin, and nationality rules in 22 CFR Part 228. In particular:

■ What, if any, sections of 22 CFR Part 228 lead to inefficiencies and ineffectiveness in implementing USAID development assistance activities and programs? What are the efficiency impacts to contractors and grantees from provisions reflecting the concept of “origin” and “source” (essentially, the country where a commodity is produced and the country from which a commodity is shipped to the cooperating country, respectively, see 22 CFR 228.01), given the difficulty of determining with specificity the origin and source of many commodities in an increasingly globalized economy?

■ Should the regulatory guidance concerning “nationality” (the place of incorporation, ownership, citizenship, residence, etc. of suppliers of USAID-funded goods and services) be modified, and if so, in what manner to improve efficacy of the rule, particularly as applied to suppliers of services and goods in the recipient country?

■ Should USAID modify the “special source rules,” FAA 604(b), (c), (e), (f), and (g), and reflected in 22 CFR 228.13, for procurement of agricultural commodities, vehicles or pharmaceuticals within limitations set forth in the FAA; and, if so, in what manner?

■ Should references in 22 CFR part 228 to other statutory requirements, such as the Fly America Act (49 U.S.C 40118) be removed or changed? Specifically is it useful for USAID to include Agency-specific policy and procedures in 22 CFR Part 228, when separate statutes and prevailing regulatory systems are already in place and publicly available from other sources?

■ What difficulties do contractors and grantees encounter when requesting a waiver to procure in any country other than those in the approved geographic code for each USAID-funded agreement (contract or grant?) How can the USAID's waiver guidance be modified or improved for more clear and cost effective application of the statutory and regulatory waiver requirements?

If commenters suggest modification, USAID requests specific proposals for what elements of 22 CFR Part 228 should be modified. USAID requests commenters to provide information and supporting data related to:

• The potential costs of modifying the existing regulatory language noted above.

• The potential quantifiable efficiency benefits of modifying the regulatory language noted above.

Revisions to this regulation will have an impact on related provisions in the 48 CFR 7 Agency for International Development Acquisition Regulation (AIDAR) and various chapters in USAID's Automated Directives System (ADS), including but not limited to ADS chapters 303, 310, and 311 (the ADS is accessible at http://www.usaid.gov/policy/ads/ ).

BOEMRE originally published the proposed revision for comment as a direct final rule in the Federal Register on November 26, 2010. That document stated that if BOEMRE received a significant adverse comment concerning the rulemaking, it would withdraw the direct final rule and publish a notice of proposed rulemaking. BOEMRE did receive significant adverse comment on the direct final rulemaking and on January 25, 2011, published in the Federal Register a notice of withdrawal and statement of intent to reinitiate rulemaking by publishing this proposed rule.

The regulations at 30 CFR part 285 govern renewable energy leasing and alternate uses of existing facilities on the OCS. This proposed rule would revise the regulations at §§ 285.231 and 285.232. The regulations at § 285.231 address unsolicited requests for noncompetitive leases. The regulations at § 285.232 address the acquisition of noncompetitive leases in response to a Request for Interest (RFI) or a Call for Information and Nomination (Call). The process for awarding leases noncompetitively outlined in these two sections is currently inconsistent.

As currently written, § 285.231 allows the award of a noncompetitive lease after BOEMRE receives an unsolicited request for a noncompetitive lease, provided that BOEMRE determines that there is no competitive interest after publishing a single notice of a request for interest relating to the unsolicited request for a noncompetitive lease.

As currently written, § 285.232 provides that, after BOEMRE publishes an RFI or Call, if a respondent indicates interest in leasing an area for which no other party has indicated interest, BOEMRE may offer a lease through a noncompetitive process. However, the regulations require the publication of a second RFI notice to confirm the absence of competition before proceeding with the noncompetitive process. We believe that this requirement for a second notice is redundant and is at odds with the noncompetitive process prescribed for cases in which a party submits an unsolicited request for an OCS renewable energy lease, where BOEMRE is required to publish only a single notice. Eliminating this discrepancy and requiring only one RFI notice would make BOEMRE's leasing processes more streamlined and efficient while maintaining BOEMRE's obligation to notify the public of areas that may be leased, solicit public input regarding those areas, and determine whether competitive interest exists in acquiring such leases in the proposed area(s).

Accordingly, BOEMRE proposes to revise § 285.231(d)(1) to state that we will publish in the Federal Register a notice that there is no competitive interest. We would also revise § 285.232(c) to refer back to § 285.231(d) through (i) instead of referring back to § 285.231(b) through (i).

BOEMRE received a total of eight comments in response to the direct final rulemaking published on November 26, 2010. All of the comments objected to the rulemaking, characterizing its effect as improper rushing by BOEMRE to allow offshore renewable energy leasing and development. Four comments took issue specifically with the direct final rulemaking process itself and called for a proposed rule and comment procedure. Five of the comments stated that the current wording of 30 CFR 285.231 and 232 should be retained. A majority of the commenters appeared to misunderstand the effect of the proposed revision, evidencing a belief that it would remove the requirement for public notice to determine competitive interest altogether. However, one comment, which appeared to accurately understand the effect of the rulemaking, recommended retention of the current wording, stating that, “[t]he current regulations provide an added level of protection by ensuring that the public has adequate notice of any requests for interest relating to proposals to construct offshore alternative energy projects, giving competitive interests the chance to participate and submit alternative bids and the public an opportunity to express concerns and make comments.”

BOEMRE has determined that it received significant adverse comment on the direct final rule, which was defined in the November 26 notice as “a comment where the commenter explains why the rule would be inappropriate, including challenges to the rule's underlying premise or approach or would be ineffective and unacceptable without a change.” It is therefore publishing this proposed rule for public comment.

However, BOEMRE believes that the intent and effect of the proposed regulatory revision were largely misunderstood by most of the commenters. This proposed rule would maintain adequate public notice of leasing proposals and would be sufficient for the purpose of determining whether competitive interest existed, while eliminating unnecessary, inconsistent, and inefficient repetition in the renewable energy leasing process when it is initiated by BOEMRE. BOEMRE will consider the eight comments already received as they relate to this proposed rulemaking unless they are withdrawn by the commenters, and those commenters are welcome to submit additional comments.

This proposed rule would not be a significant rule as determined by the Office of Management and Budget (OMB) and is not subject to review under E.O. 12866.

(1) This proposed rule would not have an annual effect of $100 million or more on the economy. It would not adversely affect in a material way the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.

(2) This proposed rule would not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency. The proposed rule is intended to eliminate redundancy and inefficiency.

(3) This proposed rule would not alter the budgetary effects of entitlements, grants, user fees, or loan programs or the rights or obligations of their recipients.

(4) This proposed rule would not raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in E.O. 12866.

The Department of the Interior certifies that this proposed rule would not have a significant economic effect on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). The Department prepared a regulatory flexibility analysis for 30 CFR part 285, and concluded that the regulations will impact a substantial number of small entities, but will not have a significant economic impact on the small entities in comparison to the impacts on large entities. That analysis was discussed in detail in the Notice of Proposed Rulemaking for 30 CFR part 285 published in the Federal Register on July 9, 2008 (73 FR 39376).

The North American Industry Classification System (NAICS) code for the industries affected by this rule is 221119 (Other Electric Power Generation). The definition for this code is:

It is possible that this proposed rule could eventually affect entities that produce hydrogen and fall under NAICS Code 325120 (Industrial Gas Manufacturing). The definition for this code is:

Given the original findings of the regulatory flexibility analysis done for 30 CFR part 285, as well as the minor adjustment to the renewable energy leasing process that is contemplated, the proposed rule would not have a significant effect on a substantial number of small entities.

Your comments are important. The Small Business and Agriculture Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were established to receive comments from small businesses about Federal agency enforcement actions. The Ombudsman will annually evaluate the enforcement activities and rate each Agency's responsiveness to small business. If you wish to comment on the actions of BOEMRE, call 1-888-734-3247. You may comment to the Small Business Administration without fear of retaliation. Allegations of discrimination/retaliation filed with the Small Business Administration will be investigated for appropriate action.

This proposed rule is not a major rule under the Small Business Regulatory Enforcement Fairness Act (5 U.S.C. 801 et seq. ). This proposed rule:

a. Would not have an annual effect on the economy of $100 million or more.

b. Would not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions.

c. Would not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. The requirements would apply indiscriminately to entities intending to acquire a renewable energy lease on the OCS pursuant to 30 CFR part 285.

This proposed rule would not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year. The proposed rule would not have a significant or unique effect on State, local, or tribal governments or the private sector. A statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1501 et seq. ) is not required.

Under the criteria in E.O. 12630, this proposed rule does not have significant takings implications. The proposed rule is not a governmental action capable of interference with constitutionally protected property rights. A Takings Implication Assessment is not required.