Interested persons are invited to submit written comments on all aspects of this interim final rule. U.S. Customs and Border Protection (CBP) also invites comments on the economic, environmental or federalism effects of this rule. We urge commenters to reference a specific portion of the rule, explain the reason for any recommended change, and include data, information, or authorities that support such recommended change.

Section 702 of the Consolidated Natural Resources Act of 2008 (CNRA), Public Law 110-229, 122 Stat. 754, 854, subject to a transition period, extends the immigration laws of the United States to the Commonwealth of the Northern Mariana Islands (CNMI) and provides for a visa waiver program for travel to Guam and/or the CNMI. See sections 212 and 214 of the Immigration and Nationality Act (INA), as amended (8 U.S.C. 1182 and 1184). On January 16, 2009, the Department of Homeland Security (DHS), through CBP, issued an interim final rule in the Federal Register replacing the then-existing Guam Visa Waiver Program with the Guam-CNMI Visa Waiver Program and setting forth the requirements for nonimmigrant visitors seeking admission into Guam and/or the CNMI under the Guam-CNMI Visa Waiver Program. See 74 FR 2824.

The January 2009 rule provided that, beginning June 1, 2009, DHS would begin the administration and enforcement of the Guam-CNMI Visa Waiver Program. This program allows nonimmigrant visitors to seek admission for business or pleasure for entry into Guam and/or the CNMI without a visa for a period of authorized stay not to exceed forty-five days. On March 31, 2009, the Secretary of Homeland Security, after the necessary consultations, announced the delayed start of the transition period until November 28, 2009. On May 28, 2009, a technical amendment to the January 2009 rule was published, extending the implementation date of the Guam-CNMI Visa Waiver Program from June 1, 2009 to November 28, 2009. See 74 FR 25387.

The January 2009 rule lists the countries and geographic areas from which otherwise eligible individuals may travel to Guam and/or the CNMI under the Guam-CNMI Visa Waiver Program. Among those countries and geographic areas listed are Hong Kong and the United Kingdom. The January 2009 rule allows individuals possessing a Hong Kong Special Administrative Region (SAR) passport and Hong Kong identification card as a result of their connection to Hong Kong to travel under the Guam-CNMI Visa Waiver Program. The January 2009 rule does not address the eligibility of individuals holding British National (Overseas) (BN(O)) passports as a result of their connection to Hong Kong for travel to Guam and/or the CNMI under the Guam-CNMI Visa Waiver Program, and questions have arisen about their eligibility for travel under that program.

On July 1, 1997, sovereignty over Hong Kong reverted from the United Kingdom to the People's Republic of China, establishing Hong Kong as a Special Administrative Region of the People's Republic of China. In the years prior to the reversion, the United Kingdom created a new category of British nationality, British National (Overseas) (BN(O)). A person who was considered a British national by his or her connection with Hong Kong, as defined in the Hong Kong (British Nationality) Order 1986, was entitled to apply for BN(O) status, and to hold a passport in that status, by registration. BN(O) status is for life, but is not transferable, and registration ended in 1997. BN(O) passports, while British travel documents, do not confer the same rights as regular United Kingdom passports. BN(O) passports are issued to permanent residents of Hong Kong and do not confer the right of abode in the United Kingdom.

Under the Guam Visa Waiver Program, the predecessor to the current Guam-CNMI Visa Waiver Program, BN(O) passport holders were eligible to participate in the program as citizens of “the United Kingdom (including the citizens of the colony of Hong Kong).” 8 CFR 212.1(e)(3)(i). As a result of the reversion of sovereignty, Hong Kong and the United Kingdom are listed separately for the Guam-CNMI Visa Waiver Program. 8 CFR 212.1(q)(2)(ii).

In light of the questions that have arisen regarding whether BN(O) passport holders qualify under the Guam-CNMI Visa Waiver Program in the absence of a specific reference in the regulation to BN(O) passport holders, CBP believes it is appropriate to amend the regulations to clarify this issue. The amended regulation explicitly allows Hong Kong individuals holding BN(O) passports as a result of their connection to Hong Kong to travel to Guam and/or the CNMI under the Guam-CNMI Visa Waiver Program. This clarification is based on the political changes in Hong Kong, the idiosyncrasies of the law of the United Kingdom discussed above, and the status of BN(O) passport holders as permanent residents of Hong Kong. Like Hong Kong SAR passport holders, BN(O) passport holders must present a Hong Kong identification card to travel to Guam and/or the CNMI under the Guam-CNMI Visa Waiver Program.

In order to provide BN(O) passport holders sufficient time to become aware of and adjust to the Hong Kong identification card requirement for participation in the Guam-CNMI Visa Waiver Program, the effective date of the amended regulation is May 23, 2011.

In addition, to provide further clarity in the regulation, DHS is relocating the existing regulatory requirements applicable to travelers from Taiwan under the Guam-CNMI Visa Waiver Program, from a parenthetical regarding Taiwan within the country list at 8 CFR 212.1(q)(2)(ii) in place since the January 2009 rule, to a new paragraph, 8 CFR 212.1(q)(2)(ii)(B). This new paragraph contains substantively identical text to the parenthetical in the January 2009 rule. The regulation continues to require that in order to participate in the program as a result of a connection to Taiwan, an individual must be a resident of Taiwan who begins his or her travel in Taiwan and who travels on direct flights from Taiwan to Guam or the CNMI without an intermediate layover or stop, except that the flights may stop in a territory of the United States en route.

Section 702(b) of the CNRA directs that all regulations necessary to implement the Guam-CNMI Visa Waiver Program shall be considered a foreign affairs function for purposes of section 553(a) of the Administrative Procedure Act (APA). See section 212 of the INA, as amended (8 U.S.C. 1182(l)(3)). As was the case with the January 2009 rule that replaced the Guam Visa Waiver Program with the Guam-CNMI Visa Waiver Program, this interim final rule is exempt from the notice and comment and 30-day delayed effective date requirements of the APA. See 74 FR 2824. DHS is nevertheless providing the opportunity for public comments. Further, a 60-day delayed effective date is provided in order to allow BN(O) passport holders sufficient time to become aware of and adjust to the Hong Kong identification card requirement for participation in the Guam-CNMI Visa Waiver Program.

Section 3(d)(2) of Executive Order 12866 provides that the Executive Order does not apply to a regulation that involves a foreign affairs function of the United States, and thus it does not apply to this rule. Accordingly, the Office of Management and Budget has not reviewed this regulation under that Executive Order.

Because this rule is being issued as an interim final rule on the foreign affairs function of the United States, as set forth above, a regulatory flexibility analysis is not required under the Regulatory Flexibility Act (5 U.S.C. 601-612).

Part 212 of title 8 of the Code of Federal Regulations is amended as set forth below:

Commission regulations require that a contributor's redesignation of a contribution for another election be in writing and be signed by the contributor. 11 CFR 110.1(b)(5) and 110.2(b)(5). The Commission, however, recognizes that it should interpret the Federal Election Campaign Act of 1971, as amended, 2 U.S.C. 431 et seq. (“the Act”) and its regulations “consistent with contemporary technological innovations * * * where such technology would not compromise the intent of the Act and regulations.” Advisory Opinion 1999-09 (Bradley for President); see also Advisory Opinions 2007-30 (Dodd); 2007-17 (DSCC); 1999-36 (Campaign Advantage); 1999-03 (Microsoft PAC); 1995-09 (NewtWatch).

During the course of an audit, the Commission recently determined that a specific redesignation practice provided the same degree of assurance of the contributor's identity and the contributor's intent to redesignate the contribution as a handwritten signature. Accordingly, the Commission determined that the practice met the requirements of 11 CFR 110.1(b)(5). The Commission believes it is important to inform the public, including political committees and their treasurers, of this determination.

The specific method approved by the Commission worked in the following manner: The political committee informed contributors through postal mail, with a follow-up e-mail, that, by visiting a Web site printed in the letter or by clicking on a link in the e-mail message that directed contributors to the Web site, they could redesignate their contributions to the candidate's other authorized committee if they wished to do so. Contributors were also informed that if they did not redesignate their contributions, they would then receive refunds automatically. Contributors who visited the Web site were asked to fill out an electronic form affirmatively authorizing the redesignation and verifying their identity by entering their personal information, including first and last name, address, phone number, e-mail address, occupation, and name of employer. Upon completing the form, contributors received a “receipt record,” thanking them for their redesignation. The political committee also retained a record of each electronic redesignation in a database, including the personal information provided by each contributor making a redesignation, in a manner consistent with the recordkeeping requirements for signed written redesignations under 11 CFR 110.1(l). The Commission concluded that this process provided assurance of contributor identity and intent equivalent to a written signature.

Accordingly, the Commission construes the written signature requirements of 11 CFR 110.1(b)(5) and 110.2(b)(5) to encompass the method of electronic redesignation described above. Because the specific method approved by the Commission requires the contributor to provide personal information that can be verified against a committee's records, it provides a level of assurance as to the contributor's identity and intent comparable to that of a written signature. See Explanation and Justification for Final Rules on Contribution Limitations and Prohibitions, 67 FR 69928, 69934 (Nov. 19, 2002) (Commission declined to eliminate the written signature requirement for contributor redesignations).

The Commission encourages the use of innovations in technology to effectuate electronic redesignations. In that light, committees are advised that the Commission will consider other methods of electronic redesignation not explicitly addressed in this interpretive rule, provided that they offer a sufficient degree of assurance of the contributor's identity and the contributor's intent to redesignate. Unless and until the Commission initiates a rulemaking on this issue, such consideration may be provided on a case-by-case basis, including but not limited to the Commission's advisory opinion process or requests for Commission consideration of legal questions. See 2 U.S.C. 437f; 11 CFR part 112; Policy Statement Establishing a Pilot Program for Requesting Consideration of Legal Questions by the Commission, 75 FR 42088 (July 20, 2010). Committees are also advised that this interpretive rule does not alter or affect the timing or recordkeeping requirements of 11 CFR 110.1 or 110.2.

This Federal Register notice represents an interpretive rule announcing the general course of action that the Commission intends to follow. This interpretive rule does not constitute an agency rule requiring notice of proposed rulemaking, opportunities for public participation, prior publication, and delay in effective date under 5 U.S.C. 553 of the Administrative Procedure Act (“APA”). As such, it does not bind the Commission or any members of the general public, or create or remove any rights, duties, etc. The provisions of the Regulatory Flexibility Act, which apply when notice and comment are required by the APA or another statute, are not applicable. See 5 U.S.C. 603(a).

Background

1. Prompt Corrective Action. In 1998, the Credit Union Membership Access Act, Public Law 105-219, 112 Stat. 913, mandated a system of regulatory capital standards for “natural person” credit unions entitled “Prompt Corrective Action” (“PCA”), 12 U.S.C. 1790d et seq. The NCUA Board adopted a comprehensive system of PCA, primarily in Part 702, 1 that imposes minimum capital standards and corresponding remedies to improve a credit union's net worth. 12 CFR 702 et seq.

Under PCA, a “natural person” credit union's “net worth ratio” determines its classification among five statutory net worth categories. 12 U.S.C. 1790d(c); 12 CFR 702.102. As a credit union's “net worth ratio” declines, so does its classification among the five net worth categories, thus subjecting it to an expanding range of mandatory and discretionary supervisory actions. 12 U.S.C. 1790d(e), (f) and (g); 12 CFR 702.204(a)-(b). For a credit union that is subject to an additional Risk-Based Net Worth Requirement, id. § 702.103, its minimum required “net worth ratio” depends upon a risk-weighting applied to each of eight different portfolios of credit union assets. 2 Id. § 702.104.

2. NCUA Guaranteed Notes. Chief among the problems experienced by corporate credit unions (“CCUs”) during the Nation's recent economic downturn is the substantial devaluation of the mortgage-backed and asset-backed securities (“the distressed assets”) held in their investment portfolios. In five such cases, the realization of losses on these distressed assets has driven the CCU into insolvency, requiring NCUA to place the CCU into liquidation.

To monetize the distressed assets held by the liquidated CCUs, NCUA embarked on a program in 2010 to securitize and sell those assets in a series of public offerings of senior debt instruments denominated “NCUA Guaranteed Notes” (“NGNs”). Under the NGN program, the Asset Management Estate of each liquidated CCU sells its distressed assets to a trust established by NCUA, which then resecuritizes the distressed assets in the form of NGNs. The trust then passes through to the NGN-holders the monthly cash flows produced by the underlying distressed assets. The NGNs benefit from the credit enhancement provided by the overcollateralization and excess interest generated by the underlying distressed assets.

To reinforce investor confidence in the NGNs, NCUA, as an agency of the Executive Branch of the United States, fully and unconditionally guarantees to investors the timely payment of principal and interest (“the NCUA Guaranty”). The NCUA Guaranty is backed by the full faith and credit of the United States. As a result of the NCUA Guaranty, the NGNs are legally permissible investments for federal “natural person” and CCUs, 12 U.S.C. 1757(7)(B); 12 CFR 704.5(c)(1) (2011), and for state-chartered “natural person” credit unions to the extent permitted by state law at the time of purchase.

3. Risk-Weighting of “Low-Risk Assets”. Under PCA as it existed prior to this rulemaking, the NGNs held by a natural person credit union would fall within the “investments” risk portfolio. Id. § 702.104(c). The minimum risk-weighting applied to assets in that portfolio, based on their weighted average life, is 3 percent. Id. § 702.106(c)(1). The “investments” portfolio does not apply a risk-weighting of zero even when an investment carries no credit risk. The “Low-risk assets” risk portfolio, in contrast, does apply a risk-weighting of zero, but the NGNs did not fall within its scope. Id. § 702.106(d). Its scope was limited to “Cash on hand * * * and the NCUSIF deposit.” Id. § 702.104(d).

Recognizing that an obligation supported by the full faith and credit of the United States carries no credit risk, the four other federal financial institution regulators jointly permit their respective institutions to apply a zero percent risk-weighting to the NGNs those institutions purchase because of the unconditional NCUA Guaranty. 3 The purpose of this rulemaking is to accord the same zero percent risk-weighting to NGNs purchased by “natural person” credit unions. Otherwise, potential credit union investors in the NGNs would face a disincentive to invest: A minimum 3 percent risk-weighting—and the adverse effect on PCA net worth—even though the NGNs are free of credit risk.

4. Comments on Interim Final Rule. To accord the NGNs a risk-weighting of zero for regulatory capital purposes, the NCUA Board issued an “Interim final rule with request for comments,” expanding the definition “low risk assets” to include “debt instruments unconditionally guaranteed by the National Credit Union Administration,” and thus backed by the full faith and credit of the United States. 4 75 FR 66298 (October 28, 2010). NCUA received two comment letters in response to the Interim Final Rule, both from national credit union industry trade associations.

Both commenters supported the Interim Final Rule without reservation, addressing collateral matters as well. One commenter advocated a separate rulemaking to consider further broadening the definition of “low risk assets” to add other “similar low-risk assets such as credit union investments in Federal Home Loan Bank securities.” This final rule leaves open to the NCUA Board the option of adding debt instruments guaranteed by other Government entities to the “low risk assets” portfolio once NCUA has had an opportunity to assess its experience with the NGN offerings in retrospect (including whether the NCUA Guaranty was tapped), and to consider other risks associated with those instruments.

In regard to the NGN offerings, the other commenter encouraged maximum transparency and disclosure of information about the NGNs in order to help those credit unions that lack the expertise and resources to independently asses the NGNs and to make informed business decisions about whether to invest. To ensure comprehensive transparency and disclosure of information about each NGN offering, the offerings are being conducted for NCUA by a Wall Street investment banking firm that specializes in the issuance of structured debt products by governmental entities. Further, as reflected primarily in the Offering Memorandum for each NGN offering, NCUA is relying on the advice of two law firms that have substantial expertise in the legal disclosure requirements that apply to these transactions.

In view of the commenters' support of the Interim Final Rule, there is no reason to revise the amendatory language. Accordingly, the NCUA Board adopts in final the language of the Interim Final Rule without alteration.

The Regulatory Flexibility Act requires NCUA to prepare an analysis to describe any significant economic impact a rule may have on a substantial number of small entities (primarily those under ten million dollars in assets). This rule will not have a significant economic impact on a substantial number of small credit unions. Thus, a Regulatory Flexibility Analysis is not required.

NCUA has determined that this rule will not increase paperwork requirements under the Paperwork Reduction Act of 1995 and regulations of the Office of Management and Budget. Control number 3133-0129 has been issued for Part 702 and will be displayed at the table at 12 CFR part 795.

Executive Order 13132 encourages independent regulatory agencies to consider the impact of their regulatory actions on State and local interests. NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily adheres to the fundamental federalism principles addressed by the Executive Order. This rule 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. Accordingly, this rule does not constitute a policy that has federalism implications for purposes of the Executive Order.

NCUA has determined that the rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 (1998).

The Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121) (SBREFA) provides generally for congressional review of agency rules. A reporting requirement is triggered in instances where NCUA issues a final rule as defined by Section 551 of the APA. 5 U.S.C. 551. NCUA does not believe this rule is a “major rule” within the meaning of the relevant sections of SBREFA. The Office of Management and Budget has determined that the Interim Final Rule is not a “major rule” for purposes of SBREFA. As required by SBREFA, NCUA will file appropriate reports with Congress and the General Accountability Office so this rule may be reviewed.

Accordingly, the Interim Final Rule amending 12 CFR part 702, which was published at 75 FR 66298 on October 28, 2010, is adopted as a Final Rule without change.

In October 2010, NCUA published a comprehensive overhaul to its corporate credit union rule, 12 CFR part 704. 75 FR 64786 (Oct. 20, 2010). After publication, NCUA discovered that three technical corrections were necessary, and NCUA issued an interim final rule containing the corrections in December. 75 FR 47173 (Dec. 20, 2010). The technical corrections are as follows:

The final revisions to part 704 prohibited corporate credit unions (corporates) from purchasing certain overly complex or leveraged investments, including collateralized debt obligations (CDOs). 75 FR 64786, 64793 (October 20, 2010). These prohibitions were intended to protect the corporates from the potential for excessive investment losses. 74 FR 65210, 65237 (December 9, 2009) (preamble to proposed part 704 revisions). The definition of CDO, however, was overly broad, in that it inadvertently included particular investments that did not—when subject to the other credit risk and asset liability management limitations of part 704—present the risk of excessive losses. This final rule amends the CDO definition to ensure the following are not prohibited: Commercial mortgage backed securities; securities collateralized by Agency mortgage-backed securities (Agency MBS); and securities that are fully guaranteed as to principal and interest by the United States Government and its agencies and government sponsored enterprises.

Section 704.6 generally requires corporate investments meet certain single obligor concentration limits, sector concentration limits, and credit rating requirements. Paragraph 704.6(b) exempts certain investments, including investments generally issued by or guaranteed by the U.S. Government or its agencies or sponsored enterprises, from the requirements of § 704.6. As stated in the preamble to the recent corporate rule revisions, however, the Board did not intend for this exemption to apply to agency MBS in the context of sector limits. 75 FR 64786, 64806 (Oct. 20, 2010) (discussing paragraph 704.6(d)(1)(i)). As drafted, however, not only the sector limits apply to agency MBS, but the other requirements, including single obligor limits and credit rating requirements, inadvertently apply to agency MBS. This correction clarifies the list of exemptions in § 704.6(b) to make clear that Agency MBS are subject to the sector concentration limits in 704.6(d) but not the other requirements of § 704.6.

The rule as published included an incorrect date instruction on Model Form H in Appendix A. Id. at 64851. Model Form H included introductory text indicating that the form was for use before October 20, 2011. In fact, because Model Form H deals with perpetual contributed capital, the form should be used only on and after October 20, 2011. The correction replaces the phrase “before” with the phrase “on or after.”

NCUA issued an interim final rule with request for comment on November 24, 2010. As discussed in the preamble to the interim final rule, the Board issued the rule as an interim final rule because the changes were technical in nature and it was in the public interest to have these corrections become effective on the same date as the other revisions to the corporate rule. 75 FR 47173, 47174 (Oct. 20, 2010).

NCUA received two comments on the interim final rule, both from credit union trade associations. Neither commenter suggested changes to the rule text, but one of the commenters sought additional clarification regarding NCUA's treatment of commercial mortgage backed securities (CMBS) under the revised definition of CDO. The commenter requested that NCUA state its reasoning for the exclusion of CMBS from the definition of CDO and also state that if the structure of CMBS changes in a way that increases the corporates' risk of loss on these investments, NCUA will remove this exclusion.

This commenter appears to have misunderstood the effect of the change in the definition. The change operates to make CMBS a permissible investment for corporate credit unions—that is, securities collateralized by commercial mortgage loans. CDOs collateralized by mortgage securities, commercial or residential, remain prohibited under the definition of CDO. Investments in plain-vanilla CMBS, which are collateralized by loans, do not pose the same risk as investments in securities collateralized by other securities where an investor cannot as easily determine the quality of the underlying loans. Also, as the commenter correctly noted, corporate credit union investments in CMBS are subject to the sector concentration limits imposed under § 704.6(d). Finally, NCUA will continually monitor corporates' investments and make adjustments to the corporates' investment authorities where appropriate.

Section D of the Supplementary Information to the November 2010 interim final rule sets forth the Board's analyses under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Small Business Regulatory Enforcement Fairness Act (Pub. L. 104-121), Executive Order 13132, and the Treasury and General Government Appropriations Act (Pub. L. 105-277, 112 Stat. 2681 1998). See 75 FR 71527—71528. Because the final amendments are clarifications and do not alter the substance of the analyses and determinations accompanying that final rule, the Board continues to rely on those analyses and determinations for purposes of this rulemaking.

Accordingly, the interim final rule amending 12 CFR Part 704, which was published at 75 FR 71526 on November 24, 2010, is adopted as a final rule without change.

The FAA is responsible for the safety of flight in the United States (U.S.) and for the safety of U.S. civil operators, U.S.-registered aircraft, and U.S.-certificated airmen throughout the world. Also, the FAA is responsible for issuing rules affecting the safety of air commerce and national security. The FAA's authority to issue rules for aviation safety is found in Title 49 of the United States Code. Subtitle I, section 106(g), describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. Section 40101(d)(1) provides that the Administrator shall consider in the public interest, among other matters, assigning, maintaining, and enhancing safety and security as the highest priorities in air commerce. Section 40105(b)(1)(A) requires the Administrator to exercise his authority consistently with the obligations of the United States Government under international agreements. Furthermore, the FAA has broad authority under section 44701(a)(5) to prescribe regulations governing the practices, methods, and procedures the Administrator finds necessary for safety in air commerce and national security.

The FAA has safety and national security concerns regarding flight operations in the Tripoli FIR (HLLL). An armed conflict is ongoing in Libya and presents a potential hazard to civil aviation. The runways at Libya's international airports, including the main international airports serving Benghazi (HLLB) and Tripoli (HLLT) may be damaged or degraded. Air navigation services in the Tripoli (HLLL) FIR may also be unavailable or degraded. In addition, the proliferation of air defense weapons, including Man-Portable Air-Defense Systems (MANPADS), and the presence of military operations, including Libyan aerial bombardments and unplanned military flights entering and departing the Tripoli FIR (HLLL), pose a potential hazard to U.S. operators, U.S.-registered aircraft, and FAA-certificated airmen that might operate within the Tripoli FIR (HLLL).

On March 18, 2011, the UN Security Council adopted Resolution 1973. Paragraph 6 of that Resolution mandates a ban on all flights in the airspace of Libya, with certain exceptions detailed in Paragraph 7. Paragraph 7 also requires that any flights in Libya be coordinated with any mechanism established under Paragraph 8 of the Resolution.

Because the circumstances described herein warrant immediate action by the FAA, I find that notice and public comment under 5 U.S.C. 553(b)(3)(B) are impracticable and contrary to the public interest. Further, I find that good cause exists under 5 U.S.C. 553(d) for making this rule effective immediately upon issuance. I also find that this action is fully consistent with the obligations under 49 U.S.C. 40105 to ensure that I exercise my duties consistently with the obligations of the United States under international agreements.

If a department, agency, or instrumentality of the U.S. Government determines that it has a critical need to engage any person covered under SFAR No. 112, § 91.1603(a), including a U.S. air carrier or a U.S. commercial operator for a charter to transport civilian or military passengers or cargo, the U.S. Government department, agency, or instrumentality may request the FAA approve persons covered under SFAR No. 112, § 91.1603(a) to conduct such operations.

An approval request must be made in a letter signed by an appropriate senior official of the requesting department, agency, or instrumentality of the U.S. Government; the letter must be sent to the Associate Administrator for Aviation Safety (AVS-1), Federal Aviation Administration, 800 Independence Avenue, SW., Washington, DC 20591. Electronic submissions are acceptable, and the requesting agency may request an electronic copy of the FAA's response. Electronic submissions to the FAA should be sent to sfar112@faa.gov. A single letter may request approval from the FAA for multiple persons covered under SFAR No. 112, § 91.1603(a), and/or for multiple flight operations. To the extent known, the letter must identify the person(s) expected to be covered under the SFAR on whose behalf the U.S. Government department, agency, or instrumentality is seeking FAA approval, and it must describe—

• The proposed operation(s), including the nature of the mission being supported;

• The service to be provided by the person(s) covered by the SFAR;

• To the extent known, the specific locations within the Tripoli (HLLL) FIR where the proposed operation(s) will be conducted;

The request for approval must also include a list of operators, including subcontractors, with whom the U.S. Government department, agency, or instrumentality requesting FAA approval has a current contract(s), grant(s), or cooperative agreement(s) for specific flight operations in the Tripoli (HLLL) FIR. Additional contracted operators may be identified to the FAA at any time after the FAA approval is issued. Updated lists should be sent to sfar112@faa.gov.

If an approval request includes classified information, you may contact Aviation Safety Inspectors David Catey, William Gonzalez, or Steven Laurenzo for instructions on submitting it to the FAA. Their contact information is listed in the FOR FURTHER INFORMATION CONTACT section of this final rule.

FAA approval of the operation under SFAR No. 112, § 91.1603(c), does not relieve persons subject to the SFAR of their responsibility to comply with all applicable FAA rules and regulations. Operators of civil aircraft will have to comply with the conditions of their certificate and Operations Specifications (OpSpecs). In addition, operators will have to comply with all rules and regulations of other U.S. Government departments or agencies that may apply to the operation, including, but not limited to, the Transportation Security Regulations issued by the Transportation Security Administration, Department of Homeland Security.

When the FAA approves the request, the FAA's Aviation Safety Organization (AVS) will send a letter to the requesting department, agency, or instrumentality confirming that the FAA's approval is subject to the following conditions:

(1) The approval will stipulate those procedures and conditions that limit, to the greatest degree possible, the risk to the operator while still allowing the operator to achieve its operational objectives.

(2) Any approval will specify that the operation is not eligible for coverage under a premium war risk insurance policy issued by the FAA under section 44302 of chapter 443 of title 49, United States Code.

(3) If the operator is already covered by a premium war risk insurance policy issued by the FAA, 1 the FAA will issue an endorsement to the operator's premium war risk insurance policy that specifically excludes coverage for any operations in the Tripoli (HLLL) FIR, including operations under a flight plan that contemplates landing in or taking off from Libyan territory. The endorsement to the premium war risk insurance policy will take effect before the approval's effective date. The operator must further establish that it has obtained substitute war risk coverage for operations in the Tripoli FIR. Additionally, before any approval takes effect, the operator must submit to the FAA a written release of the U.S. Government from all claims and liabilities, and its agreement to indemnify the U.S. Government with respect to any and all third-party claims and liabilities relating to any event arising from or related to the approved operations in the Tripoli (HLLL) FIR. This waiver of claims does not preclude an operator from raising a claim under an effective non-premium war risk insurance policy issued by the FAA.

(4) Other conditions as determined by the FAA.

The FAA will issue OpSpecs to the certificate holder authorizing these operations. The FAA may impose additional conditions on operators through Operations Specifications or letters of authorization. The FAA will notify requesting departments or agencies of FAA approval of civil operations under agreement with a U.S. government agency of any additional conditions beyond those contained in the approval letter.

Any operations not conducted under the approval process discussed above must be conducted under an exemption to this SFAR. A request by any person covered under SFAR No. 112, § 91.1603(a) for an exemption must comply with 14 CFR part 11, and will require exceptional circumstances beyond those contemplated by the approval process set forth in this SFAR. Additionally, the endorsement of any premium war risk insurance policy and a waiver and indemnification agreement will also be required as a condition of any exemption issued under SFAR No. 112, § 91.1603(c). The FAA recognizes that there may be operations conducted by other States with the support of the U.S. government. These operations would not be permitted under the approval process; however, the FAA will process these exemption requests on an expedited basis and prior to any private exemption requests.

This rulemaking action is taken under an emergency situation within the meaning of Section 6(a)(3)(d) of Executive Order 12866, Regulatory Planning and Review. It also is considered an emergency regulation under Paragraph 11g of the Department of Transportation (DOT) Regulatory Policies and Procedures. In addition, it is a significant rule within the meaning of the Executive Order and DOT's policies and procedures. The FAA expects there will be some costs associated with this emergency rule, but is unable to quantify those costs at this time. However, the FAA also expects that few, if any, operators subject to this SFAR are actually operating in the Tripoli (HLLL) FIR given the current state of affairs. Accordingly, the costs of this SFAR would be minimal.

As the FAA Administrator I certify that this rule will not have a significant economic impact on a substantial number of small entities as defined in Regulatory Flexibility Act of 1980 (Pub. L. 96-354), as amended. Because the rule is being issued for aviation safety, it is not considered an unnecessary obstacle to international trade under the Trade Agreements Act of 1979 (Pub. L. 96-39) and does not create an unfunded mandate for any entity.

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 Federal Digital System at: http://www.gpo.gov/fdsys/.

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 amendment or docket number of this rulemaking.

The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996 requires FAA to comply with small entity requests for information or advice about compliance with statutes and regulations within its jurisdiction. If you are a small entity and you have a question regarding this document, you may contact your local FAA official, or the person listed under the FOR FURTHER INFORMATION CONTACT heading at the beginning of the preamble. You can find out more about SBREFA on the Internet at http://www.faa.gov/regulations_policies/rulemaking/sbre_act/.

In consideration of the foregoing, the Federal Aviation Administration amends Chapter I of Title 14, Code of Federal Regulations, as follows:

In 1996, the FAA granted an exemption from various requirements of part 91 and part 119 to an aviation museum/foundation allowing the exemption holder to operate a large, crew-served, piston-powered, multiengine, World War II (WWII) bomber carrying passengers for the purpose of preserving U.S. military aviation history. In return for donations, the contributors would receive a local flight in the restored bomber. Without these contributions, the petitioner asserted that the cost of operating and maintaining the airplane would be prohibitive.

The FAA determined that these airplanes were operated under a limited and experimental category airworthiness certificate. Without type certification under Title 14 Code of Federal Regulations (14 CFR) § 21.27, they are not eligible for standard airworthiness certificates. The high cost of type certification under § 21.27 makes this avenue impractical for operators providing living history flights. Comparable airplanes manufactured under a standard airworthiness certificate did not exist. Thus, the FAA determined that an exemption was an appropriate way to preserve aviation history and keep the airplanes operational. In granting the exemption, the FAA found there was an overwhelming public interest in preserving U.S. aviation history, just as the preservation of historic buildings, historic landmarks, and historic neighborhoods have been determined to be in the public interest. While aviation history can be represented in static displays in museums, in the same way historic landmarks could be represented in a museum, the public has shown support for and a desire to have these historic aircraft maintained and operated to allow them to experience flight in these aircraft.

A 2004 policy explicitly limited the scope of LHFE exemptions to WWII or earlier vintage airplanes. The reasons enumerated in the statement addressed both public interest ( e.g. the unique opportunity to experience flight in a B-17 or B-24 while such aircraft can still be safely maintained) and public safety ( i.e. older and slower multiengine airplanes allow time for appropriate corrective measures in the event of an in-flight emergency and such crews must meet FAA qualifications and training requirements). The FAA stated that the agency did not believe it prudent to grant exemptions from the FAA regulations to operators of supersonic jets.

In response to numerous requests to expand the scope of the exemptions, the FAA requested comments on a proposed policy in 2006, and subsequently published a new policy on October 9, 2007 (72 FR 57196).

The 2007 policy statement agreed to consider any request for exemption for passenger-carrying flights in non-standard category aircraft, especially former military turbine-engine-powered aircraft, on a case-by-case basis. For petitioners intending to operate experimental exhibition, surplus foreign or domestic aircraft, and/or turbojet or turbine-powered aircraft, it stated that the FAA would closely examine the proposed operation with respect to safety of flight, passenger safety considerations, and safety of the non-participating public during the operational period and within the operational area before approving a LHFE exemption. Other criteria included passenger/crew egress, emergency egress systems such as ejection seats, documentation or statistical make and model operational history, historical significance of the particular aircraft, maintenance history, operational failure modes, and aging aircraft factors. The 2007 policy also observed that some of the aircraft in question are complex in nature, requiring special skills to operate safely, and that military equipment such as ejection seat systems can pose additional risk to aircraft occupants, ground personnel, and non-participating bystanders on the ground.

Also in the 2007 statement, the FAA cautioned that those requesting an exemption from a particular standard or set of standards must demonstrate that (1) there is an overriding public interest in providing a financial means for a non-profit organization to continue to preserve and operate these historic aircraft, and (2) adequate measures (including all conditions and limitations stipulated in the exemption) will be taken to ensure safety. The FAA further stated that “operations authorized under these exemptions are specifically not air tour, sightseeing, or air carrier operations” and that the agency “in determining the public interest derived in any grant of exemption of this nature, will take into consideration the number of existing operational aircraft and petitioners available to provide the historic service to the public.”

Consistent with the 2007 policy statement, the FAA has accommodated several industry requests to allow operation of more modern-day military jet aircraft ( e.g., the McDonnell Douglas F-4 Phantom and the McDonnell-Douglas A-4 Skyhawk) under the LHFE policy. To ensure safety, there are over 45 conditions and limitations the exemption holder must comply with in order to operate under the provisions of the exemption. The FAA has found, however, that operators have sometimes misinterpreted these conditions and limitations as permitting operations that the FAA did not contemplate or intend.

The evolution of LHFE operations in the private sector, along with availability of newer and more capable former military aircraft, has raised public safety and public policy concerns that the FAA needs to assess. Accordingly, the FAA is placing a moratorium on the issuance of any new LHFE exemptions, including addition of new aircraft to current exemptions. Current LHFE exemption holders can continue to operate under their current exemption. If the exemption is due to expire during the moratorium, the FAA will accept and process petitions to extend current exemptions in accordance with the established regulatory exemption process. If a change is required ( i.e. removal of an aircraft) the FAA will accept these changes in accordance with the regulatory processes. Additionally, during the moratorium, as petitioners request extensions to their LHFE exemption, the FAA will add the following clarifying limitations to all LHFE exemptions to ensure consistent application of current LHFE policy: 1. Passengers are prohibited from manipulating the aircraft flight controls when the aircraft is operated under the LHFE exemption, and 2. No aerobatics may be performed in the aircraft while operating under the LHFE exemption. Finally, the FAA will begin its evaluation of the current LHFE exemption policies and practices, to include evaluation of safety to the paying members of the public who have an expectation of aircraft safety and who may not understand the inherent risks associated with such flight. The FAA expects to publish a new proposed LHFE policy for comment on or before September 30, 2012.

1. Under section 215 of the Federal Power Act (FPA), 1 the Federal Energy Regulatory Commission (Commission) approves three new Interconnection Reliability Operations and Coordination (IRO) Reliability Standards and seven revised Reliability Standards related to Emergency Preparedness and Operations (EOP), IRO, and Transmission Operations (TOP). The proposed Reliability Standards were submitted to the Commission for approval by the North American Electric Reliability Corporation (NERC), which the Commission has certified as the Electric Reliability Organization (ERO) responsible for developing and enforcing mandatory Reliability Standards. 2 These Reliability Standards were designed to prevent instability, uncontrolled separation, or cascading outages that adversely impact the reliability of the interconnection by ensuring that the reliability coordinator has the data necessary to assess its reliability coordinator area during the operations horizon and that it takes prompt action to prevent or mitigate instances of exceeding Interconnection Reliability Operating Limits (IROL). 3 The Commission also approves the addition of two new terms to the NERC Glossary of Terms (NERC Glossary). In addition, the Commission approves NERC's proposed revisions to Reliability Standards EOP-001-1, IRO-002-2, IRO-004-2, IRO-005-3, TOP-003-1, TOP-005-2, and TOP-006-2, which remove requirements for the reliability coordinator to monitor and analyze system operating limits (SOL)  4 other than IROLs.

2. In addition, the Commission asks the ERO to evaluate certain issues through ongoing standards development and working group projects and to develop appropriate revisions as necessary. These issues regard the scope of the reliability coordinator's responsibility under these and other IRO Reliability Standards. In particular, the Commission identifies, based on the comments received, certain issues regarding the delineation of the responsibility of the reliability coordinator to analyze, monitor and communicate to other operating entities the class of SOLs identified as “grid-impactive” SOLs by NERC.

3. Section 215 of the FPA requires a Commission-certified ERO to develop mandatory and enforceable Reliability Standards, which are subject to Commission review and approval. Once approved, the Reliability Standards are enforced by the ERO, subject to Commission oversight, or by the Commission independently.

4. On March 16, 2007, the Commission issued Order No. 693, approving 83 of the 107 initial Reliability Standards filed by NERC, including the currently-effective IRO Reliability Standards. 5 Under section 215(d)(5) of the FPA, the Commission directed NERC to develop modifications to the IRO Reliability Standards to address certain issues identified by the Commission.

5. With respect to IRO-001-1, the Commission directed the ERO to develop modifications to eliminate the regional reliability organization as an applicable entity. 6 The Commission also directed the ERO to modify IRO-002-1 to require a minimum set of capabilities that must be made available to the reliability coordinator to ensure that a reliability coordinator has the capabilities it needs to perform its functions. 7 With respect to IRO-003-2, the Commission directed the ERO to develop a modification to create criteria to define the term “critical facilities” in a reliability coordinator's area and its adjacent systems. 8 The Commission also directed the ERO to modify IRO-004-1 to require the next-day analysis to identify control actions that can be implemented and effective within 30 minutes after a contingency. In addition, the Commission directed the ERO to consider adding Measures and Levels of Non-Compliance to Reliability Standards IRO-004-1 and IRO-005-1 that are commensurate with the magnitude, duration, frequency and causes of the violations and whether these occur during normal or contingency conditions. 9

1. Under section 215(d)(2) of the Federal Power Act (FPA), the Commission approves regional Reliability Standard BAL-502-RFC-02 (Planning Resource Adequacy Analysis, Assessment and Documentation), developed by Reliability First Corporation (RFC) and submitted to the Commission by the North American Electric Reliability Corporation (NERC). The approved regional Reliability Standard requires planning coordinators within the RFC geographical footprint to analyze, assess and document resource adequacy for load in the RFC footprint annually, to utilize a “one day in ten years” loss of load criterion, and to document and post load and resource capability in each area or transmission-constrained sub-area identified. The Commission also approves four regional reliability definitions related to the approved regional Reliability Standard and the violation risk factors and violation severity levels assigned to the BAL-502-RFC-02 Requirements.

2. Section 215 of the FPA requires a Commission-certified Electric Reliability Organization (ERO) to develop mandatory and enforceable Reliability Standards, which are subject to Commission review and approval. Once approved, the Reliability Standards may be enforced by the ERO, subject to Commission oversight, or by the Commission independently. 1 In July 2006, the Commission certified NERC as the ERO. 2 Reliability Standards that the ERO proposes to the Commission may include Reliability Standards that are developed by a Regional Entity. 3 In Order No. 672, the Commission urged uniformity of Reliability Standards, but recognized a potential need for regional differences. 4 Accordingly, the Commission stated that:

3. On April 19, 2007, the Commission approved delegation agreements between NERC and eight Regional Entities. 6 In the Delegation Agreement Order, the Commission accepted RFC as a Regional Entity and accepted RFC's Standards Development Manual, which sets forth the process for RFC's development of regional Reliability Standards. 7 The RFC region is a less than interconnection-wide region that covers all or portions of 14 states and the District of Columbia.

4. On December 14, 2009, NERC submitted for Commission approval, in accordance with section 215(d)(1) of the FPA, 8 regional Reliability Standard BAL-502-RFC-02 and four associated new definitions. 9 NERC stated that the proposed regional Reliability Standard establishes requirements for planning coordinators in the RFC region regarding resource adequacy assessment, which subject matter is not currently addressed in NERC's continent-wide Reliability Standards. 10 The stated purpose of this regional Reliability Standard is to establish common criteria, based on “one day in ten years” loss of load expectation principles, for the analysis, assessment and documentation of resource adequacy for load in the RFC region. 11

5. Regional Reliability Standard BAL-502-RFC-02 contains the following two main requirements. Requirement R1 requires each planning coordinator in RFC's footprint  12 to perform and document an annual resource adequacy analysis. The sub-requirements of Requirement R1 set forth the criteria to be used for the resource adequacy analysis. Requirement R2 requires each planning coordinator to annually document the projected load and resource capability for each area and transmission constrained sub-area identified in the analysis. The sub-requirements of Requirement R2 set forth the specific documentation requirements. Each of the two main requirements is assigned a violation risk factor (VRF) and violation severity level (VSL). RFC did not assign VRFs or VSLs to the sub-requirements.

6. The NERC Petition also includes the following four new regional definitions related to regional Reliability Standard BAL-502-RFC-02. First, “Resource Adequacy,” which is defined as the ability of supply-side and demand-side resources to meet the aggregate electrical demand (including losses). Second, “Net Internal Demand,” which is defined as the total of all end-use customer demand and electric system losses within specified metered boundaries, less Direct Control Load Management and Interruptible Demand. Third, “Peak Period,” which is defined as a period consisting of two (2) or more calendar months but less than seven (7) calendar months, which includes the period during which the responsible entity's annual peak demand is expected to occur. Fourth, “Year One,” the planning year that begins with the upcoming annual Peak Period. These four defined terms would apply in the RFC region only.

7. On October 21, 2010, the Commission issued its Notice of Proposed Rulemaking (NOPR) proposing to approve regional Reliability Standard BAL-502-RFC-02, stating that the standard will improve the reliable operation of the Bulk-Power System by ensuring use in the RFC region of a common criterion, the “one day in ten years” principle, to assess resource adequacy during the planning horizon. 13 In the NOPR, the Commission proposed to direct RFC, at the time it conducts its scheduled five-year review of regional Reliability Standard BAL-502-RFC-02, to: (1) Add time horizons to the two main requirements, and (2) consider modifying the regional Reliability Standard to include a requirement that the planning coordinators identify any gap between the needed amount of planning reserves defined in Requirement R1.1 and the planning reserves determined from the resource adequacy analysis. The Commission also proposed to accept the four related definitions for inclusion in NERC's Glossary for use with RFC's regional Reliability Standards, 14 and proposed to defer ruling on the proposed VRFs and VSLs for the standard.

8. In addition, in the NOPR, the Commission sought clarification or comment on a few aspects of BAL-502-RFC-02. With respect to the regional Reliability Standard's resource adequacy analysis, the Commission sought comment on three issues: (1) The loss of load calculation; (2) consideration of the capacity benefit margin; and (3) evaluation of common mode outages. The Commission also sought comment on: (1) How planning coordinators, when conducting the resource adequacy analysis, will address load and resources outside of the RFC footprint; (2) whether planning coordinators should have a common process or procedure that addresses the planning reserves assessments; and (3) whether the planning coordinators have experienced problems collecting the data necessary to perform the resource adequacy analysis.

9. In response to the NOPR, comments were filed by 13 interested parties. These comments assisted us in the evaluation of BAL-502-RFC-02. In the discussion below, we address the issues raised by these comments. In addition, five entities filed motions to intervene and three state utility commissions filed notices of intervention. Appendix A to this Final Rule lists the entities that filed comments and interventions.

10. In this Final Rule, the Commission approves regional Reliability Standard BAL-502-RFC-02 as just, reasonable, not unduly discriminatory or preferential, and in the public interest. To that end, the Commission finds that BAL-502-RFC-02 satisfies the Order No. 672 factors on how the Commission determines whether a regional Reliability Standard is just and reasonable in that BAL-502-RFC-02: (1) Is clear and unambiguous regarding what is required and who is required to comply (planning coordinator); (2) has clear and objective measures for compliance and achieves a reliability goal (namely, providing a common framework for resource adequacy analysis, assessment, and documentation) using one effective methodology, and (3) is “more stringent” in that NERC's continent-wide standards currently do not address assessment of resource adequacy in the planning horizon.

11. The Commission also denies the requests made by NARUC, Ohio PUC, Borlick, and the Illinois Commerce Commission that the Commission hold a technical conference in this proceeding to “foster needed dialogue” by state regulatory commissions, economists, and stakeholders regarding the one in ten years criterion. First, the Commission finds that there is adequate information in the record in this proceeding to act on NERC's Petition. Second, the more appropriate venue to discuss technical details, such as the appropriateness of the one day in ten years criterion compared with other methodologies, is in the standards development process itself. The Commission's decision here does not preclude other entities, such as NERC, from holding technical conferences to foster further dialogue and to discuss improvements in criteria used for resource planning.

12. The following discussion addresses first, the two challenges to approval of BAL-502-RFC-02, the Commission's jurisdictional authority to approve a resource adequacy assessment standard and the propriety of using the one day in ten years criterion. As discussed below, on these two issues the Commission determines first, that it is within our authority to approve a resource adequacy assessment regional Reliability Standard and, second, that the one day in ten years criterion is a just and reasonable method to use to conduct resource adequacy assessments for purposes of BAL-502-RFC-02. Next, the Commission discusses the six issues on which we sought comment in the NOPR. Finally, the Commission discusses the following remaining issues related to BAL-502-RFC-02: (i) Missing time horizons, (ii) effective date, (iii) regional definitions, and (iv) VRFs and VSLs.

13. NERC, RFC and other commenters support approval of regional Reliability Standard BAL-502-RFC-02. NARUC and Ohio PUC raise concerns regarding the Commission's jurisdiction to approve this regional Reliability Standard. Commenters also raise concerns regarding the appropriateness of the one day in ten years criterion. These issues are discussed below.

14. NARUC and the Ohio PUC raise several jurisdictional arguments regarding the Commission's authority under section 215 of the FPA to approve regional Reliability Standard BAL-502-RFC-02. These comments are endorsed by the Illinois Commerce Commission. NARUC and the Ohio PUC argue that the Commission lacks jurisdiction under section 215 of the FPA to approve a regional Reliability Standard that pertains to resource adequacy, asserting that BAL-502-RFC-02 is, in reality, a capacity requirement that RFC has couched as a planning tool. The Ohio PUC quotes Order No. 672, in which the Commission stated: “The proposed Reliability Standard must address a reliability concern that falls within the requirements of section 215 of the FPA. That is, it must provide for the reliable operation of Bulk-Power System facilities. It may not extend beyond reliable operation of such facilities or apply to other facilities.”  15 The Ohio PUC and NARUC argue that BAL-502-RFC-02 fails this parameter as it does not provide for the reliable operation of Bulk-Power System facilities. Specifically, they point to the definitions of “Reliability Standard” and “Reliable Operation” set forth in section 215 of the FPA, which definitions they argue make clear that Congress did not intend for a resource adequacy planning criterion to be the subject of a FPA section 215 Reliability Standard. They claim that the statutory definition of “Reliability Standard,” specifically precludes the Commission from instituting any capacity requirements. 16 They next posit that the definition of “Reliable Operation” pertains to cascading outages, not the orderly shedding of load due to a capacity shortage. 17 The Ohio PUC argues that a lack of adequate resources to serve all “firm” load at current prices does not lead to “instability, uncontrolled separation, or cascading failures” in the Bulk-Power System. Thus, NARUC and Ohio PUC argue that BAL-502-RFC-02, which requires a resource adequacy assessment, does not address a reliability concern as resource adequacy issues are not relevant to the “Reliable Operation” of Bulk-Power System facilities as that term is defined in section 215 of the FPA.

15. NARUC and Ohio PUC also contend that resource adequacy is a traditional state concern that is outside of the Commission's domain. They argue that both capacity requirements and resource adequacy planning criteria involve economic and policy decisions that impact the reasonableness of rates, generation decisions and retail demand response programs, all of which are within the states' domain. The Ohio PUC states that a Commission-mandated resource adequacy Reliability Standard, such as BAL-502-RFC-02, infringes on a state's authority to balance need for capacity investments against the risk of curtailments. Following up on this point, the Ohio PUC states in a footnote that it is unreasonable for anyone to argue that planning coordinators would plan using one criterion and then use a different criterion to make the economic determination of what resources should be acquired as doing so would be a waste of the planning coordinator's time and resources.

16. NERC, RFC, and the PJM Power Providers respond to the jurisdictional questions raised by NARUC and Ohio PUC in their reply comments. In its Petition, NERC asserted that regional Reliability Standard BAL-502-RFC-02 does not adversely affect competition or cause restriction on the grid because it does not require entities to secure the needed resources as an outcome of the planning coordinators resource adequacy analysis. In their reply comments, NERC, RFC, and PJM Power Providers reiterate that BAL-502-RFC-02 is consistent with the provisions and stated goals of the Energy Policy Act of 2005.

17. NERC counters NARUC's and the Ohio PUC's comments, arguing that section 215(a)(3), which contains the definition of “Reliability Standard,” does not preclude NERC from including a resource adequacy planning criterion. NERC states that the key distinction is between NERC's ability to include resource adequacy planning criterion in a Reliability Standard, which is clearly allowed under section 215(a)(3) and prior Commission orders, and NERC's ability to require the building or acquisition of new generating capacity, which is prohibited by section 215(a)(3) of the FPA. To support this argument, NERC quotes Order No. 672 in which the Commission stated:

NERC asserts that the common criterion established in regional Reliability Standard BAL-502-RFC-02 to be used to complete a resource adequacy assessment serves a reliability purpose as the “common criterion is necessary so that recommendations can be made in the [RFC] Region regarding inadequate resource adequacy requirements that could negatively impact the reliability of the bulk power system.”  19

18. RFC argues that Reliability Standards are not simply engineering standards and that many Reliability Standards, like BAL-502-RFC-02, involve long horizons and are intended to prevent the Bulk-Power System from coming anywhere near “instability, uncontrolled separation, or cascading failures.” As an example, RFC cites to NERC Reliability Standard FAC-010, which requires planning authorities to identify system operating limits (SOLs) and interconnection reliability operating limits (IROLs) in the planning horizon. RFC also cites to NERC Reliability Standard TPL-001, which requires that the transmission system be able to supply projected customer demands over the range of forecast system demands under no contingency conditions for the planning horizon. With respect to proposed regional Reliability Standard BAL-502-RFC-02, RFC states that the resource adequacy data produced under the standard will be a “valuable reliability tool that can be used by registered entities in working to ensure, well in advance of any identified concerns, that `instability, uncontrolled separation, or cascading failures' never occur.”  20

19. With respect to NARUC and the Ohio PUC's arguments that a resource adequacy assessment standard will infringe on areas within a state's jurisdiction, RFC responds that BAL-502-RFC-02 does not encroach on the authority of the states to make the policy decisions that weigh resource adequacy against cost. RFC notes that states within the RFC region are free to use the data and documentation developed under BAL-502-RFC-02 in imposing resource adequacy obligations and making policy decisions regarding what level of service they are willing to pay to achieve. RFC further asserts that each state commission remains the ultimate arbiter of economic decisions regarding how to balance capacity investments against the risk of curtailment as no economic decisions of any kind are mandated by BAL-502-RFC-02. RFC reiterates that the only enforceable mandate under BAL-502-RFC-02 is the obligation to perform and document the resource adequacy analysis in a consistent way across the RFC region.

20. As explained herein, the Reliability Standard before us does not preclude or preempt any action by a state PUC with regard to resource adequacy. As the Commission has previously recognized, resource adequacy raises “complex jurisdictional concerns” which at times are at the “confluence of state-federal jurisdiction.”  21 As the Commission stated in the order in which the Commission certified NERC as the ERO, with respect to FPA section 215(g), “Reliability Reports”:  22

Although the Commission was addressing the interplay between the ERO's role with respect to resource adequacy assessments and states' resource adequacy programs in the context of section 215(g), this interplay is equally relevant to the ERO's role with respect to the development of Reliability Standards because the Commission is acknowledging that FPA section 215 establishes resource adequacy assessments as being relevant to reliability and, further, that the reliability aspect of resource adequacy assessments does not preempt state action.

21. The Commission, by approving BAL-502-RFC-02, is not usurping, intruding on, or preempting any authority exclusively within a state's jurisdiction because, as recognized in Order No. 672, the FPA does not reserve authority for the states over all matters related to or that flow from “resource adequacy.” Moreover, the “savings” provision in section 215, section 215(i)(3), is clear that nothing in section 215 shall be “construed to preempt any authority of any State to take action to ensure the safety, adequacy, and reliability of electric service within that State, as long as such [State] action is not inconsistent with any reliability standard.” As we have clarified in a prior order, the saving provision in section 215(i) is not a grant of new authority to the states, but merely preserves any authority states may have under state law “to take action to ensure the safety, adequacy, and reliability of electric service within that State, so long as such action is not inconsistent with any reliability standard * * * .”  24 Thus, we do not agree with NARUC or the Ohio PUC that the approval of BAL-502-RFC-02 will impinge on states' jurisdiction over matters related to resource adequacy. BAL-502-RFC-02 does not touch the establishment of specific resource adequacy requirements, and thus does not intrude on the state's decisional authority with respect to building or acquisition of assets or capacity to meet resource adequacy needs.

22. With respect to the Ohio PUC's argument that by approving a regional Reliability Standard mandating the use of a specific resource adequacy planning criterion (the one day in ten years criterion), the Commission is establishing that criterion as the de facto criterion to be used to set resource investment requirements, this argument appears to be borne out of the Ohio PUC's concern regarding preserving its authority to set resource adequacy standards. The standard does not impinge on Ohio PUC's authority to set or determine how to meet resource adequacy standards. Contrary to the Ohio PUC's concerns, the Commission believes that establishing a common criterion for resource planning will provide states with a uniform framework of information regarding resource adequacy. The information the reliability assessments provide would then be available to the states to use or could serve as a platform on which to layer additional factors, such as costs, as the states see fit.

23. The Commission also finds that the proposed resource adequacy analyses and documentation requirements in BAL-502-RFC-02 fall within the definition of “Reliability Standard” as that term is defined in section 215(a)(3) and pertain to the “Reliable Operation” of the Bulk-Power System as that term is defined in section 215(a)(4). Under section 215(a)(3), the only type of requirement that is explicitly precluded from being part of an enforceable Reliability Standard is a “requirement to enlarge [bulk-power system facilities] or to construct new transmission capacity or generation capacity.”  25 BAL-502-RFC-02 does not include any such requirement. Specifically, BAL-502-RFC-02 mandates planning, it does not require entities to secure any resources as an outcome of the resource adequacy assessment.

24. BAL-502-RFC-02 also falls within the definition of Reliability Standard, as it provides for the reliable operation of the Bulk-Power System because it serves to identify potential resource adequacy deficiencies in a planning horizon with time to mitigate projected resource adequacy problems before shortages of resources occur in the operating horizon. Shortages of resources in the operating horizon can lead to blackouts and even cascading outages. Under these conditions, operators may be continually challenged to balance load with energy to prevent major power or voltage swings across the grid that can lead to blackouts and cascading outages. Because the standard does not prescribe that action must be taken, entities with authority for planning and siting new resources, including demand response resources or any other resource type, can determine the appropriate course of action, if any, that should be taken, including performing additional resource adequacy studies. The standard therefore does not preclude or preempt any action by a state commission with regard to resource adequacy. The Ohio PUC argues that NERC and RFC “conflate[] resource adequacy with reliable operation of the Bulk-Power System,” stating that the definition of “Reliable Operation” cannot be enlarged and manipulated to include planning to build such capacity. 26 The Commission finds that the Ohio PUC, in making this argument, is reading into BAL-502-RFC-02 a requirement that registered entities within RFC build or acquire new generating capacity. Such a requirement simply does not exist in BAL-502-RFC-02.

Before Commissioners: Jon Wellinghoff, Chairman; Marc Spitzer, Philip D. Moeller, John R. Norris, and Cheryl A. LaFleur. I. Order on Rehearing Issued March 17, 2011. I. Introduction

1. On November 18, 2010, the Commission issued a Final Rule (Order No. 743)  1 directing the Electric Reliability Organization (ERO), through the ERO's Reliability Standards Development Process, to revise its definition of the term “bulk electric system” to address the Commission's technical and policy concerns, including inconsistency in application, lack of oversight and exclusion of facilities that are required for the Reliable Operation of the interconnected transmission network, and ensure that the definition encompasses all facilities necessary for operating an interconnected electric transmission network, pursuant to section 215 of the Federal Power Act (FPA). 2 The Commission stated that it believes the best way to accomplish these goals is to eliminate the regional discretion in the current definition, maintain a bright-line threshold that includes all facilities operated at or above 100 kV except defined radial facilities, and establish an exemption process and criteria for excluding facilities that are not necessary for operating the interconnected transmission network. However, the Final Rule allowed the ERO to develop an alternative proposal for addressing the Commission's concerns with the present definition with the understanding that any such alternative must be equally efficient and effective  3 as the Commission's suggested approach in addressing the identified technical and other concerns, and may not result in a reduction in reliability.

2. In this order, we deny requests for rehearing of the Final Rule. Further, we grant in part, and deny in part, requests for clarification of the Final Rule, as discussed below.

3. In Order No. 693, the Commission approved, with reservations, the current North American Electric Reliability Corporation (NERC) definition of the term “bulk electric system.”  4 That definition provides:

4. However, the Commission noted its concern that the current “bulk electric system” definition has the potential for gaps in coverage of facilities, and indicated that it would revisit the issue. 6 In Order No. 743, the Commission returned to the issue. The Commission identified several concerns with the current definition that may compromise reliability. The Commission indicated that Order No. 743's aim is to eliminate inconsistencies across regions, eliminate the ambiguity created by the current discretion in NERC's definition of bulk electric system, provide a backstop review to ensure that any variations do not compromise reliability, and ensure that facilities that could significantly affect reliability are subject to mandatory rules. 7 Thus, Order No. 743 directed the ERO to revise the definition of “bulk electric system” through the NERC Standards Development Process to address the Commission's concerns. 8 Order No. 743 also directed the ERO to develop an exemption process that includes clear, objective, transparent and uniformly applicable criteria for exempting facilities that are not necessary for operating the interconnected transmission grid. 9

5. The Commission stated that it believes the best way to address the identified concerns is to eliminate the Regional Entities' discretion to define “bulk electric system” without ERO or Commission review, maintain a bright-line threshold that includes all facilities operated at or above 100 kV except defined radial facilities, and adopt an exemption process and criteria for excluding facilities that are not necessary to operate an interconnected electric transmission network. However, the Commission specified that NERC may propose a different solution that is equally efficient and effective as the Commission's suggested approach in addressing the Commission's technical and other concerns so as to ensure that all necessary facilities are included within the scope of the definition. 10

6. The following entities have filed timely requests for rehearing or for clarification of Order No. 743: American Public Power Association (APPA); Consumers Energy Company (Consumers); Edison Electric Institute (EEI); Exelon Corporation (Exelon); National Rural Electric Cooperative Association (NRECA); New York State Public Service Commission (NYPSC); Portland General Electric Company (Portland General); Public Power Council; City of Redding, California (Redding); Public Utility District No. 1 of Snohomish County, Washington (Snohomish); Transmission Access Policy study Group (TAPS); Western Petitioners; 11 Wisconsin Electric Power Company (Wisconsin Electric); and Transmission Agency of Northern California (TANC). 12

7. Section 215(d)(5) of the FPA authorizes the Commission to direct the ERO to submit to the Commission a new or revised Reliability Standard that addresses a specific matter identified by the Commission. 13 In Order No. 743, the Commission explained that this authority also includes the authority to direct the ERO to revise the definition of a term used in a Reliability Standard.

8. Pursuant to this authority, the Commission directed the ERO to modify the definition of “bulk electric system” in order to address certain technical and policy concerns identified by the Commission. 14 Specifically, the Commission observed that Regional Entities currently have broad discretion to define the parameters of the bulk electric system in their regions, and that the exercise of this discretion has led to inconsistencies in how facilities are classified within and among regions, to the effect that some facilities necessary to reliably operate the interconnected transmission network have been excluded from the obligation to comply with mandatory Reliability Standards. The Commission stated that one means to address its concerns is to eliminate the regional discretion in the ERO's current definition, maintain the bright-line threshold that includes all facilities operated at or above 100 kV except defined radial facilities, and establish an exemption process and criteria for excluding facilities the ERO determines are not necessary for operating the interconnected transmission network. 15 However, the Final Rule made clear, the ERO may develop an alternative proposal for addressing the Commission's concerns with the current definition and any such alternate proposal must be equally efficient and effective as the Commission's suggested approach for addressing the identified concerns, may not result in a reduction in reliability, and must be supported with a technical analysis that demonstrates and explains, with a technical record sufficient for the Commission to make an informed decision, how it provides the same level of reliability as the Commission's suggested solution. 16

9. NRECA requests clarification, or in the alternative rehearing, that the Commission seeks to resolve a narrow concern that ambiguity in the bulk electric system definition and lack of backstop review at NERC has permitted inconsistencies across regions, and that the Northeast Power Coordinating Council (NPCC) in particular has not made all facilities that could significantly affect reliability subject to the Reliability Standards. NRECA expresses concern that the Final Rule states in several places that NERC must address the Commission's “technical and other concerns” without specifying those concerns. 17 NRECA asks that the Commission clarify the specific matter and present a clear list of technical and other concerns to assist NERC in developing appropriate and responsive solutions.

10. NRECA further seeks clarification whether NERC, in exercising its technical expertise, may choose to address the specific concerns identified by the Commission through an alternative other than an amendment to the definition of bulk electric system. NRECA points out that, while Order No. 743 sets out a “preferred solution,” it also allows the ERO to develop an alternative proposal for addressing the Commission's concerns. NRECA states that it is not clear from the Final Rule if the ERO has discretion whether and how it amends the definition of bulk electric system, or only how to amend the definition. NRECA seeks clarification, or in the alternative rehearing, that the ERO can comply with the Final Rule by filing an alternative approach that does not amend the definition, provided that the alternative addresses the Commission's concerns with inconsistency, lack of oversight and exclusion of facilities that are required for the reliable operation of the interconnected transmission network. According to NRECA, denying the ERO the ability to develop an alternative to amending the bulk electric system definition is tantamount to the Commission prescribing the text of a Reliability Standard and denies the ERO a full range of options in addressing the specific matter identified by the Commission.

11. We clarify that the specific issue the Commission directed the ERO to rectify is the discretion the Regional Entities have under the current bulk electric system definition to define the parameters of the bulk electric system in their regions without any oversight from the Commission or NERC. 18 As we explained in the Final Rule, NPCC's use of this discretion has resulted in an impact-based approach to defining the bulk electric system that allows significant subjectivity in application and thus creates anomalous results. 19 While NPCC's use of its discretion brought the problems with the current definition to our immediate attention, the Commission's concern is potentially broader because any region could use its discretion to define the bulk electric system in a way that leads to similar inconsistent and anomalous results.

12. We decline to provide the clarification NRECA requests regarding NERC's ability to address the specific matter through means other than revising the definition, and also deny rehearing on the issue. As noted above, our concern with the current bulk electric system definition is rooted in the unfettered discretion granted therein to Regional Entities to define the term. Contrary to NRECA's claim, it is well within our section 215(d)(5) authority to direct NERC to address the specific issue we have identified—the overly broad definition. We have not directed the ERO to revise the definition to incorporate a specified result; rather, we require that the change address our concerns.

13. NRECA requests clarification that the Commission is not imposing a higher standard of review in the Final Rule than permitted by section 215 of the FPA. NRECA explains that the Final Rule allows the ERO to develop an alternative to the Commission's suggested approach provided that it is “as effective as, or more effective than, the Commission's proposed approach” and must not “result in a reduction in reliability.”  20 NRECA contends that this standard of review is not in the statute and, rather, that the Commission should clarify that it will judge by the statutory provision that the proposal provides for an “adequate level of reliability.” NRECA contends that this phrase connotes a range of possible solutions. NRECA claims that the Commission's approach, which allows the Commission's suggested solution to serve as a benchmark for all subsequent proposals, suggests a different, higher standard than “adequate level of reliability.”

14. FPA section 215(d)(2) establishes the standard of review the Commission must apply to ERO submissions with respect to the content of Reliability Standards:

As the statute specifies, the standard of review the Commission must utilize is whether the proposed Reliability Standard or modification to a Reliability Standard is “just, reasonable, not unduly discriminatory or preferential, and in the public interest.”

15. We disagree with NRECA's assertion that section 215(c)(1) establishes a standard of review the Commission must apply to ERO submissions. Section 215(c) sets forth the criteria the Commission must consider in certifying an ERO, and section 215(c)(1) specifies that one of the considerations for certification is whether the ERO applicant “has the ability to develop and enforce * * * reliability standards that provide for an adequate level of reliability of the bulk-power system.”  22

16. Certainly, whether a proposed Reliability Standard provides for an adequate level of reliability is included in the factors used in determining whether the proposal is just and reasonable, but it is not the standard of review. 23 The Commission's statement that any alternative proposal must be “as effective as, or more effective than, the Commission's proposed approach” and must not “result in a reduction in reliability” provides guidance regarding the Commission's view of what is necessary to produce not only an adequate level of reliability but also a result that accords with the section 215(d)(2) review criterion. 24

17. Entities claim that the Commission over-stepped its jurisdiction in three ways. First, they contend that the Commission exceeded its authority by requiring a bright-line 100 kV threshold for determining which facilities are included in the bulk electric system. Second, entities argue that Order No. 743 fails to recognize the statutory exclusion of facilities used in local distribution of electric energy. Third, entities claim that the Commission fails to give due weight to the ERO's technical expertise. Several requests for rehearing, such as the NYPSC, Public Power Council and Snohomish, merge these arguments together in more global claims that the Final Rule is in error and should be withdrawn.

18. The NYPSC and Public Power Council argue that the Commission's decision to “direct the ERO to define the bulk electric system as all facilities operated at 100 kV and above” is arbitrary and capricious. 25 They state that section 215(a) of the FPA explicitly excludes facilities used in local distribution of electric energy. Thus, the NYPSC reasons, “by defining the bulk-power system as all facilities operating at above 100 kV, the Commission exceeded its jurisdiction by encompassing facilities that are clearly part of the non-bulk power system * * *”  26 The NYPSC contends that the Commission incorrectly assumes that a facility is considered part of the bulk electric system simply because it is operated at or above 100 kV. The NYPSC recites evidence, presented in its Notice of Proposed Rulemaking (NOPR) comments, that facilities in New York City do not serve a bulk system function due to the high concentration of load served by those lines. While noting that the Final Rule dismissed this evidence, the NYPSC contends that “it is invalid to conclude that all facilities rated at 100 kV and above support the bulk-power system based on a belief that ‘most’ of those facilities are not involved in local distribution.”  27 Similarly, Public Power Council and Snohomish contend that the Final Rule, by mandating a 100 kV bright-line test, will improperly classify many 115 kV distribution facilities in the Western Interconnection as bulk electric system facilities.

19. The NYPSC notes that the Final Rule explained that entities would have an opportunity to seek an exemption if they believe certain facilities should not be included in the bulk electric system. Based on this, the NYPSC claims that the Final Rule implicitly acknowledged that various non-jurisdictional facilities are included within the Commission's “redefinition” of bulk electric system. It also claims that this approach is inappropriate, i.e., the Commission cannot assume it has jurisdiction over facilities operated above 100 kV unless and until an entity demonstrates otherwise. The NYPSC claims that the Commission also conceded that the 100 kV threshold is overly broad because “several 115 and 138 kV facilities that some entities term as `distribution' may be needed to reliably operate the interconnected transmission system.”  28 According to the NYPSC, by stating that these facilities “may” be needed for reliability of the interconnected system, the Commission acknowledges that they may not be needed. Similarly, Portland General argues that the Commission cannot claim jurisdiction over any local distribution facilities and expresses concern that the above language from the Final Rule wrongly suggests that some local distribution facilities are jurisdictional under section 215.

20. At the outset, the Commission emphasizes that Order No. 743 did not mandate or direct NERC to adopt a 100 kV bright-line threshold. Order No. 743 directed NERC to undertake the process of revising the bulk electric system definition to address the Commission's concerns about the broad discretion the current definition grants to Regional Entities to modify the definition without Commission or ERO oversight, and provided a suggested solution. Specifically, the Order directed the ERO to revise the definition of bulk electric system “through the NERC Standards Development Process to address the Commission's concerns.”  29 The Commission stated its belief that one effective way to address those concerns would be to eliminate the regional discretion contained in the current definition, which allows Regional Entities to define the term without Commission or ERO oversight; maintain the threshold contained in the current definition, which includes all facilities operated at or above 100 kV except defined radial facilities; and adopt an exemption process and criteria for excluding facilities that the ERO determines are not necessary to operate an interconnected electric transmission network. The Final Rule, however, did not mandate this approach as it further provided that NERC “may propose a different solution that is as effective as, or superior to, the Commission's proposed approach.”  30

21. Order No. 743's approach is entirely within the Commission's statutory authority and properly allows the ERO to develop the revised bulk electric system definition using its technical expertise. We, therefore, reject the requests for rehearing arising from the inaccurate premise that the Commission mandated a 100 kV bright-line threshold. Beyond the concerns related to the Commission's authority, the substance of the arguments raised by the NYPSC, Public Power Council, Snohomish and Western Petitioners relate to the term “used in local distribution” and differentiating between local distribution and transmission, which we address below.

22. Further, we disagree with the NYPSC's claim that the Final Rule implicitly acknowledges that various non-jurisdictional facilities are included within the Commission's “redefinition” of bulk electric system. As we clarify herein, regardless of the 100 kV threshold, facilities that are determined to be local distribution will be excluded from the bulk electric system. Further, NERC has yet to develop a modified definition, so the NYPSC's claim is unfounded at this time.

23. Western Petitioners, Portland General, Snohomish, and Redding point out that section 215(a) of the FPA expressly exempts facilities “used in the local distribution of electric energy” and, in section 215(i), provides that the ERO “shall have authority to develop and enforce compliance with reliability standards for only the bulk-power system.” On this basis, Western Petitioners and Redding argue that the Final Rule errs by not clearly stating that the revised definition of bulk electric system must exclude all facilities that are used in local distribution. Western Petitioners suggest that the Final Rule, by emphasizing that the revised definition must include “all facilities necessary for operating an interconnected electric transmission network,” including lower voltage facilities operated in parallel and in support of higher voltage facilities, “could sweep in numerous local distribution facilities.”  31

24. Similarly, Portland General claims that the Commission erred by failing to clearly and consistently acknowledge the statutory exclusion of facilities used in local distribution of energy. Portland General argues that the failure to clearly delineate this exclusion is inconsistent with Detroit Edison Co. v. FERC, 334 F.3d 48 (DC Cir. 2003), where the court rejected the Commission's interpretation of the phrase “used in local distribution” in section 201 of the FPA as rewriting the statute to exclude from the Commission's jurisdiction only facilities used exclusively in local distribution.

25. We disagree that the Final Rule is at odds with commenters' view. In Order No. 743, the Commission acknowledged that “Congress has specifically exempted ‘facilities used in the local distribution of electric energy’ ” from the Bulk-Power System definition. 32 Since such facilities are exempted from the Bulk-Power System, they also are excluded from the bulk electric system. Therefore, the Commission agrees with Western Petitioners and others that facilities used in the local distribution of energy should be excluded from the revised bulk electric system definition.

26. As mentioned above, the NYPSC, Snohomish and Public Power Council characterize the Final Rule as mandating the ERO to develop a revised definition of bulk electric system that incorporates a nationally uniform, 100 kV bright-line test. Based on this understanding, they argue that the Final Rule's directive exceeds the Commission's authority under section 215(d)(5) of the FPA because it limits NERC's and the Western Electric Coordinating Council's (WECC) “substantial discretion” to develop Reliability Standards based upon their technical expertise. Public Power Council and Snohomish claim that the directive also denies the due weight to which the ERO or an Interconnection-wide Regional Entity is entitled pursuant to FPA sections 215(d)(2) and (3).

27. Public Power Council and Snohomish argue that the elimination of regional discretion directed in the Final Rule based on a desire for uniformity is unsupported. They also claim that this is inconsistent with the intent of Congress to allow for regional variation as evidenced by the provisions of section 215 that require the ERO to rebuttably presume that a WECC-developed Reliability Standard satisfies the statutory criteria for approval and that the Commission give due weight to WECC's expertise. Public Power Council and Snohomish also cite to the legislative history to support their claim that Congress recognized the need for regional differences and rejected a uniform, centralized approach. Further, they argue that “due weight” equates to “substantial deference” based on court precedent and statutory analysis. 33

28. The NYPSC, Snohomish and Public Power Council claim that, while the Commission has authority under section 215(d)(5) of the FPA to require the ERO to address a specific matter, the Commission went beyond its authority pursuant to that provision by prescribing the particular content of a Reliability Standard. They contend that the ERO, in the first instance, should decide how the Commission's specific concerns are best addressed. The NYPSC acknowledges that the Commission indicated that the ERO has discretion to develop an alternative that is as effective as, or superior to, the Commission's bright-line approach, but claims that the “narrowly tailored guidance” limits the ERO's discretion and, thus, the Commission acted beyond its statutory authority. For all these reasons, according to the NYPSC and Public Power Council, the Commission abused its discretion in imposing a 100 kV bright-line rule, thereby denying NERC and WECC the opportunity to develop a different threshold or methodology based on their expertise.

29. As indicated previously, Order No. 743 did not mandate a specific result. Rather, the Commission determined that NERC should use its technical expertise to develop a definition that addresses the Commission's concerns with regional discretion in the current definition. The present definition contains the 100 kV reference, and the Commission did not change it in Order No. 743, other than to suggest a solution that would remove “generally” from the current definition's reference to a 100 kV threshold and eliminate unchecked regional discretion. The Commission's suggestion of one way to address the enumerated concerns does not preclude NERC from proposing an alternate solution.

30. Public Power Council and Snohomish argue that there is no evidence supporting the Commission's decision to require NERC to develop a uniform national bulk electric system definition. However, uniformity, absent a showing that the alternative is more stringent or necessitated by a physical difference, has been a hallmark of the mandatory Reliability Standards construct since its inception. In establishing the framework for developing Reliability Standards, we adopted the principle that proposed Reliability Standards should “be designed to apply throughout the interconnected North American Bulk-Power System, to the maximum extent this is achievable with a single Reliability Standard.”  34 The same principle holds true for definitions contained within the Reliability Standards.

31. Moreover, we are not prohibiting the Interconnection-wide regional entities from arriving at their own regional differences. However, as we stated in Order No. 743, “[c]ommenters have not provided compelling evidence that the proposed definition should not apply to the United States portion of the Western Interconnection as a threshold matter.”  35 Conversely, the Commission does have a compelling concern that the subjectivity and lack of ERO and Commission oversight embodied in the current definition could result in the problems we identified in the NPCC region occurring in other regions, further supporting adoption of a uniform national definition. As Order No. 743 indicated, establishing such a uniform national definition does not preclude a region from proposing a regional difference that is more stringent than the continent-wide definition, including a regional difference that addresses matters that the continent-wide definition does not, or a regional definition that is necessitated by a physical difference in the Bulk-Power System. 36

32. The Commission finds that the arguments by Public Power Council and Snohomish that the Commission has failed to give due weight to NERC or an Interconnection-wide Regional Entity as required under sections 215(d)(2) and (3) are premature. Once NERC has developed a proposed bulk electric system definition, the Commission will evaluate the proposal and all supporting evidence and documentation under section 215(d)(2). Similarly, should one of the two Regional Entities organized on an Interconnection-wide basis develop a proposal for a regional bulk electric system definition, the ERO must evaluate the proposal according to requirements of section 215(d)(3).

33. The NYPSC, Public Power Council, and Snohomish request rehearing, claiming that the Commission erred in directing NERC to revise the bulk electric system definition to include facilities operated at 100 kV and above where the record lacks a technical justification for a bright-line test. The NYPSC contends that, because the bright-line 100 kV threshold adopted by the Commission was not based on whether those facilities are necessary for operating the interconnected network, the Commission's decision lacked a technical justification. The NYPSC claims that the Commission's approach results in a “superficial consistency” and that Order No. 743 contains no factual analysis as to why 100 kV is the appropriate threshold. It contends that the examples identified by the Commission “that are purported to support the 100 kV bright-line were all 115 kV or higher.”  37

34. Further, the NYPSC argues that the Commission incorrectly assumes that because a facility operates at 100 kV or above in one part of the country that all facilities operated at similar voltages across the country should be treated as part of the Bulk-Power System. It objects to the Commission's reliance on events on facilities in other regions as rationale for determining that similar facilities in the NPCC region are part of the bulk electric system. According to the NYPSC, “that logic does not hold true, since there are various facilities operated at the same voltages across the country that perform different functions and interact to different degrees with the bulk system, depending on the regional differences.”  38 The NYPSC reiterates that it presented evidence in its earlier comments that certain 138 kV facilities in New York City do not serve a bulk electric system function due to the high concentration of load served by those lines. The NYPSC contends that the Final Rule wrongfully dismissed this evidence by indicating that it does “not believe that most of these facilities are local distribution.”  39 The NYPSC argues that it is invalid to conclude that all facilities rated 100 kV or above support the bulk electric system based on a belief that “most” of these facilities are not involved in local distribution.

35. As noted previously, contrary to the commenters' assertions, the Commission did not direct or mandate that the bulk electric system definition include a bright-line 100 kV threshold. Instead, the Commission directed NERC to address the inconsistency, lack of oversight and exclusion of facilities that are required for the reliable operation of the interconnected transmission network, outlined by the Commission in Order No. 743 using the technical expertise available to NERC. The Commission suggested that one means to address its concerns would be to, among other things, maintain the 100 kV threshold and radial exclusion contained in the current definition, but left it to NERC's discretion and technical expertise to develop a revised definition. The Commission also supported its suggested solution. 40

36. Nonetheless, we will reiterate and expand on that discussion here. The Commission's suggested solution of a 100 kV threshold paired with an exemption process, in essence, merely clarifies the current NERC definition, which classifies facilities operating at 100 kV or above as part of the bulk electric system.

37. As discussed in Order No. 743, the NPCC material impact assessment has resulted in inconsistent classification of some facilities along and within Regional Entity borders. 41 Further, Order No. 743 pointed out the failure of the NPCC test to classify facilities associated with nuclear generation as part of the bulk electric system and thus subject to NERC Reliability Standards. 42 The suggested 100 kV threshold would maintain the current assumption, under NERC's current definition, that non-radial 100 kV transmission facilities (not local distribution) are part of the bulk electric system unless exempted through the process NERC develops.

38. The Commission disagrees with the characterization that its suggested approach will only achieve superficial consistency—our suggested approach will require that facilities needed for the reliable operation of interconnected electrical network comply with the NERC Reliability Standards. Regardless of whether NERC adopts our suggested solution in whole or in part, or develops another approach, the bulk electric system definition and related processes that NERC ultimately produces, and the Commission approves, will significantly reduce or eliminate reliability problems arising from incomplete Reliability Standard coverage resulting from ineffective material impact assessments and inconsistent classification of facilities. The Final Rule eliminates these problems by directing the ERO to revise the definition of bulk electric system in a way that addresses the concerns outlined in the Final Rule.

39. The NYPSC argues that the Commission did not provide any evidence supporting a 100 kV threshold since all three examples in Order No. 743 involved facilities 115 kV or higher. However, as indicated in Order No. 743, the current NERC bulk electric system definition contains a general 100 kV threshold. The Commission's suggested solution simply would eliminate regional discretion that is not subject to review by the ERO or the Commission in the application of the current threshold. Additionally, the NYPSC's argument presents a distinction without a difference, since nominal voltage levels are established in industry for use in power systems but no voltage classification exists at 100 kV. 43 Therefore, a 100 kV threshold will effectively capture the same facilities as a 115 kV threshold.

40. The Commission also disagrees with the NYPSC's characterization of the suggested 100 kV threshold as treating all facilities operated at similar voltages across the country as part of the bulk electric system. As we have explained, the Commission views the suggested threshold as a first step or proxy in determining which facilities are included and which are excluded or exempted from the bulk electric system. The Commission provided considerable support in the Final Rule for its belief that facilities operated at or above 100 kV are sufficiently similar throughout the continental United States to be able to use a 100 kV threshold as an initial line of demarcation, which the ERO would further refine using exclusions (such as for radial facilities serving only load with one transmission source) and exemptions. 44 Similarly, we are not persuaded by the NYPSC's contention that Order No. 743's reliance on events in several regions as support for taking action on a nationwide basis was misplaced. The facilities in the several regions are sufficiently similar to allow the Commission to draw technical justification for its actions from these events. The same configurations cited in the examples and the areas described in Order No. 743 can be found throughout the country. 45 Facilities operated at 100-200 kV, in parallel with extra high voltage facilities, connect areas with generation to distant hubs and load centers. 46 As discussed in Order No. 743, failure of 100-200 kV facilities has caused cascading outages that would have been minimized or prevented if entities were in compliance with the NERC Reliability Standards. 47 For the reasons discussed above, the Commission denies the requests for rehearing.

41. The NYPSC requests rehearing on the Commission's rejection of an impact-based test for identifying bulk electric system elements and asks that the Commission reconsider an impact-based test as a viable approach. The NYPSC asserts that “NERC and the NPCC have both determined that the NPCC's impact-based definition, coupled with its regionally tailored reliability criteria, effectively and efficiently ensures reliability.”  48 It contends that, because an impact-based test identifies “facilities and control system necessary for operating an interconnected electric energy transmission network,” that test is consistent with section 215 of the FPA and obviates the Commission's concern that a discrepancy in definitions could result in reliability gaps. 49 The NYPSC argues that the Commission dismissed the impact approach based on a single event and the stated need for a consistent and comprehensive test. In response, the NYPSC argues that Order No. 743 does not identify how inconsistencies have impacted or may impact the reliable operation of the bulk electric system. Finally, the NYPSC asserts that the Commission's concerns may be capable of being addressed through modifications to the existing impact tests and the Commission should consider the validity of such an approach.

42. Public Power Council also expresses concern that the Commission's discussion about material impact analysis leaves no room for a meaningful test to distinguish between facilities that are necessary for the operation of the bulk electric system and those that are not. Public Power Council criticizes the Commission's rationale, contending that if a material impact assessment indicates that the Bulk-Power System can function properly even if a fault or operational failure occurs on a particular facility, it is not clear why the Commission can claim that that facility is nonetheless “necessary” for bulk electric system operation.

43. In a related vein, NRECA seeks clarification, or in the alternative rehearing, that the Commission's determination regarding “material impact” does not intend for NERC to change the NERC Rules of Procedure (other than to establish a process for granting exemptions) or the NERC Statement of Compliance Registry Criteria. While NRECA acknowledges that the Final Rule does not discuss such changes to the NERC rules or Registry Criteria, NRECA explains that it raises the concern because it is unclear whether Order No. 743 only rejects the NPCC impact-based methodology or every functional impact methodology. NRECA points to various provisions of the NERC rules and Registry Criteria indicating that NERC's registry approach is based on identifying owner, operators and users of the Bulk-Power System that have a “material impact” on the Bulk-Power System. 50 Accordingly, NRECA seeks assurance that the Final Rule is not intended to “undermine the core concepts” of the NERC Rules and Registry Criteria.

44. Order No. 743 did not reject all material impact assessments but, instead, took issue with particular tests and outlined general problems with the material impact tests used to determine the extent of the bulk electric system that we have seen to date. The NYPSC incorrectly states that the Commission rejected NPCC's material impact assessment based on one event. Rather, as discussed extensively in the Final Rule and elsewhere herein, the Commission rejected NPCC's material impact assessment due to its subjective language and failure to identify facilities necessary to reliably operate the interconnected transmission system. 51 These flaws include use of the amorphous term “local area,” which was not consistently applied throughout the NPCC region. The NYPSC does not clarify application of this term in its request for rehearing, and instead merely states that the local area is defined by “the Council members.”  52 As Order No. 743 notes, the subjectivity of the “local area” definition, which ultimately determines whether or not a facility is classified as part of the bulk electric system, has led to varying results throughout the NPCC region. 53

45. The Commission does not agree that Order No. 743 did not address how inconsistencies in defining the facilities that are included in the bulk electric system may impact the operation of the interconnected transmission network. The Final Rule detailed several instances where the NERC Reliability Standards are less effective when they are not applied to all necessary facilities. 54

46. Public Power Council contends that it is not clear why the Commission can claim that a particular facility is nonetheless “necessary” for bulk electric system operation if a material impact assessment proves that the Bulk-Power System can function properly even if a fault or operational failure occurs on that facility. As we noted in Order No. 743, by this metric the facilities that caused the 2003 Blackout would not be viewed as critical since none of the individual facilities caused the outage. 55 In defining jurisdictional facilities, section 215(a)(1) focuses on whether facilities are necessary to operate the interconnected transmission system, not solely on the consequences of unreliable operation of those facilities. 56

47. The Commission clarifies that it was not our intent to disrupt the NERC Rules of Procedure or the Statement of Compliance Registry Criteria. Nor did the Commission intend to rule out using any form of a material impact test in the reliability context that can be shown to identify facilities needed for reliable operation. However, as Order No. 743 explained, the Commission has serious concerns about NPCC's Document A-10 methodology. The Commission stated that, as a threshold matter, the material impact tests proffered by commenters did not measure whether specific system elements were necessary for operating the system, but, rather, measure the impact of losing the element. 57 The Commission's extensive discussion of the NPCC test further noted that the NPCC methodology is unduly subjective, and results in an inconsistent process that excludes facilities necessary for operating the bulk electric system from the definition. Therefore, the Commission indicated, should NERC choose to define the bulk electric system using a method other than one employing the 100 kV bright line threshold the Commission suggested, such an alternative method must be consistent, repeatable and verifiable with supporting technical analysis. 58

48. In Order No. 743, the Commission rejected arguments that 100-199 kV facilities in the Western Interconnection should be treated differently than facilities in the Eastern Interconnection. 59 The Commission stated that commenters had not provided an adequate explanation, supported by data and analysis, why there is a physical difference that justifies different treatment of these facilities in the West.

49. Snohomish and Public Power Council contend that, because 115 kV facilities commonly are used in the West for distribution, the Commission's “inflexible” 100 kV threshold is “unworkable” in the West. Snohomish and Public Power Council claim that the Western Interconnection is materially different from the Eastern Interconnection because the long distances between load centers, and the vast areas commonly covered by distribution systems, result in a transmission system that is largely operated at voltages of 230 kV or above, and distribution systems that are commonly operated at voltages of 115 kV. They contend that this physical difference is documented in a study performed by WECC's Bulk Electric System Definition Task Force. 60 Snohomish contends that power flow base cases examined by the Bulk Electric System Definition Task Force support their assertion that facilities rated between 100 kV and 200 kV have a small impact on transmission in the West.

50. Further, Snohomish contends that Order No. 743, at most, demonstrates a problem in the NPCC region and does not provide justification for action in the West. Snohomish asserts that the Final Rule fails to identify a single reliability event in the Western Interconnection arising from the bulk electric system definition as currently applied. Snohomish argues that the Commission cannot use isolated and localized problems to justify nationwide action. 61 According to Snohomish, the three disturbances discussed in the Final Rule cannot justify nationwide action or demonstrate that all facilities operated in the 100-200 kV range are part of the interconnected transmission grid.

51. Snohomish also contends that the Commission implicitly accepted the evidence that most 115 kV facilities in the West operate as distribution by failing to assert that the evidence is flawed, but, instead, responding in the Final Rule that some facilities operating in the 100-200 kV range in the West are “operationally significant and needed for reliable operation as identified by certain WECC documents.”  62 According to Snohomish, this demonstrates the irrationality of Order No. 743's approach because it focuses on the operating voltage of electric facilities to the exclusion of more germane factors such as how those facilities are connected and interact with the grid. Snohomish claims that the threshold approach is inconsistent with previous statements from the Commission that acknowledge that the function of facilities and how they are interconnected determines their significance. Public Power Council explains that, currently, most Public Power Council members that operate 115 kV distribution facilities are not classified as transmission owners or operators. Thus, according to Snohomish and Public Power Council, by taking a superficial view of the matter, Order No. 743's 100 kV threshold would sweep in a large number of facilities, including hundreds or perhaps thousands of miles of local distribution facilities, in the West.

52. Snohomish additionally raises a concern that the Final Rule could be read in a manner that would require an end to the work of the WECC Bulk Electric System Definition Task Force. Snohomish states that the Bulk Electric System Definition Task Force, which was created in 2008 partly in response to Order No. 693, has been working on developing a bulk electric system definition that is appropriate to the unique facts of the Western Interconnection. 63 Snohomish argues that a Commission directive “to `eliminate the regional discretion in the ERO's current definition' of BES” would mean “that the work of the [Bulk Electric System Definition Task Force] must be terminated because it would result in a regional variation to the BES definition that FERC has forbidden.”  64 This result, according to Snohomish, would violate the FPA because “Section 215(d)(2) requires FERC to accord `due weight' to the `technical expertise' of both NERC and WECC, and Section 215(d)(3) requires NERC to `rebuttably presume' that reliability standards developed and approved by WECC are consistent with the FPA.”  65 Therefore, Snohomish requests clarification, or in the alternative rehearing, that the Commission's “findings concerning the material impact assessment methodology used in NPCC apply only to the NPCC” and do not apply to the Bulk Electric System Definition Task Force efforts currently under way. 66 Snohomish further seeks clarification, or in the alternative rehearing, that the bulk electric system definition currently being developed for application in WECC “may incorporate any voltage threshold or other method of assessing the impact of lower-voltage facilities,” that the WECC bulk electric system definition “ must exclude facilities used in the local distribution of electric energy,” and that the definition should distinguish between facilities that are or are not necessary for operating an interconnected energy transmission network. 67 Finally, Snohomish argues that the Commission should clarify that the Final Rule is not intended to stop NERC's review of the findings of the Ad Hoc Committee for Generator Requirements and the Transmission Interface (GOTO Task Force) because such an action would be arbitrary and capricious. 68

53. The Commission denies rehearing on these issues. As stated elsewhere, Order No. 743 did not mandate a 100 kV threshold. Rather, the Commission directed NERC to develop a revised definition that addresses our concerns with the current definition, including inconsistency, lack of oversight and exclusion of facilities that are required for the reliable operation of the interconnected transmission network. We suggested that one means to address our concerns would be to maintain the 100 kV threshold contained in the current definition, while eliminating the discretion that allows Regional Entities to interpret and apply the definition without ERO or Commission oversight.

54. Commenters contend that the majority of 115 kV facilities in the West are distribution facilities and therefore not significant to the transmission of power. First, as we have stated herein, to the extent any facility is a local distribution facility, it is exempted from the requirements of section 215. 69 However, the Commission observes that numerous 115 kV and 138 kV transmission lines in the Western Interconnection often are the only pathway available between various load centers and networked points. 70 Other network points are electrically and physically remote from each other and have the potential for parallel flows between two transmission paths, some at different voltage levels and others at the same voltage. Analyzing how the flows split during normal, outage and emergency conditions, as well as implications to system constraint, could lead to a conclusion that such facilities are improperly labeled as local distribution.

55. Snohomish argues that the Commission errs in focusing on voltage rather than the characteristics of the facilities. However, in the first instance, the Commission's suggested approach uses NERC's current definition, which includes a 100 kV threshold, as a baseline for determining which facilities are included in the bulk electric system. As discussed below, we view a voltage threshold as an initial proxy for determining where the line between local distribution and transmission lies. We agree with Snohomish that it is important to consider additional facility characteristics in order to make a final determination regarding which facilities are included in the bulk electric system.

56. The Commission notes that while the events cited in Order No. 743 occurred in the Eastern Interconnection, the underlying concerns are applicable to the nation as a whole. Currently, NERC and the Commission do not have oversight of regional bulk electric system classification decisions. If all facilities necessary for reliable operation are not subject to the Reliability Standards, the effectiveness of the Reliability Standards is undermined.

57. Snohomish's concern that Order No. 743 would put an end to the WECC Bulk Electric System Definition Task Force is unfounded. The Commission clarifies that our intent in requiring the ERO to “eliminate the regional discretion” from the current definition was to prevent the regions from modifying the regional bulk electric system definition without Commission or ERO oversight. As noted elsewhere, WECC may petition for a regional variation, if justified, through the process outlined in Order No. 672. 71

58. In response to Snohomish's question concerning local distribution, we reiterate that facilities used for local distribution are excluded from the Bulk-Power System definition under section 215, and thus are excluded from the bulk electric system. With respect to changing the 100 kV threshold in the approved definition, the Commission did not direct such a change.

59. Similarly, we reiterate that Order No. 743 does not affect the GOTO Task Force's activities; however, the task force members may submit their comments and report to NERC for its consideration as NERC develops an exemption process.

60. We understand from the Public Power Council's comments that most Public Power Council members owning or operating 115 kV facilities are not classified as transmission owners or operators due to the fact that their facilities are radial from one transmission supply and serving only load. Such facilities currently are excluded from registration and we believe would appropriately be excluded in an acceptable revised bulk electric system definition.

61. APPA and TANC request clarification that the Commission is not now making a determination as to whether the Bulk-Power System is broader than the bulk electric system and is preserving for future proceedings the rights of parties to challenge such a determination. According to APPA, the Final Rule appears to track the statutory definition of Bulk-Power System, i.e., “all facilities necessary to operate the interconnected transmission network,” in framing its directive to NERC to revise the definition of bulk electric system. APPA also points to language in Order No. 743 that it believes suggests that the Commission considers that the statutory definition of Bulk-Power System may be broader than the bulk electric system. 72 APPA states that, to preserve its legal rights on the matter, it seeks “limited clarification” that the Commission is not determining that the statutory Bulk-Power System definition extends beyond the bulk electric system definition as NERC is directed to revise it in this proceeding. In the alternative, if the Commission denies clarification, APPA seeks rehearing that “given the Final Rule's directions to NERC to define [bulk electric system] in a manner that tracks, virtually word-for-word, the statutory [Bulk-Power System] definition, the Commission's continued suggestion that the [Bulk-Power System] definition may reach further than the [bulk electric system] would be arbitrary and contrary to the express terms of the statute.” 73

62. Based on similar concerns, NRECA requests clarification, or in the alternative rehearing, that the statutory definition of Bulk-Power System and the definition of bulk electric system are synonymous. NRECA points to provisions of the NERC Rules of Procedure that reference the Bulk-Power System to demonstrate such convergence. NRECA also contends that the language of section 215 and the statute's legislative history, and prior usage of the two terms, supports its position.

63. The Commission grants APPA and TANC's requests for clarification. We do not see any useful purpose that would be served by defining the term Bulk-Power System in this proceeding, and decline to do so. Accordingly, we dismiss as premature NRECA's request for clarification, or in the alternative, rehearing.

64. In Order No. 743, the Commission recognized that the ERO would need to establish whether a particular facility is local distribution or transmission, and directed the ERO to develop a means to make such a determination. 74

65. Consumers Energy, Exelon and Portland General request clarification that NERC's evaluation of how to classify facilities should consider prior distribution classifications. Consumers Energy and Portland General seek clarification on the role of the Order No. 888 Seven Factor Test in determining whether facilities are classified as “local distribution facilities” and the impact of a prior Seven Factor Test determination. 75 Consumers seeks clarification whether facilities in excess of 100 kV that have explicitly been found by the Commission to be local distribution under the Seven Factor Test will automatically be excluded from the bulk electric system or will they need to go through the exemption process. Consumers Energy further asks whether, if the owner of such facilities must apply for an exemption, the earlier Seven Factor finding provides a presumption that the facility should be excluded. Exelon insists that a facility can be classified as either local distribution or bulk transmission—but not both.

66. EEI and Portland General request clarification that the term “used in local distribution” does not have different meanings under sections 201(b) 76 and 215 of the FPA and that the Final Rule does not affect other determinations of what facilities are considered “used in local distribution” and thus outside of the Commission's jurisdiction. EEI argues that since Congress used the same terminology in defining the Commission's jurisdiction in both sections 201 and 215, it must have intended the words to have the same meaning. EEI seeks clarification that previous or future regulatory decisions regarding local distribution facilities can serve as an exemption criterion, and states that such clarification will better align jurisdictional determinations under the FPA. Portland General argues that the Commission does not have the flexibility to interpret “facilities used in local distribution” to mean two different things in two different parts of the FPA. Specifically, Portland General argues that the Commission “must acknowledge and give effect to established FPA Section 201(b) precedent regarding the identification of `local distribution' facilities, and must recognize that Congress intended the same `local distribution' facilities to be exempt from Commission jurisdiction under Sections 201(b) and 215(a) of the FPA.” 77

67. Although local distribution facilities are excluded from the definition, it still is necessary to determine which facilities are local distribution, and which are transmission. Whether facilities are used in local distribution will in certain instances raise a question of fact, which the Commission has jurisdiction to determine. 78 The Commission envisioned that the process of identifying which facilities are local distribution and which are transmission likely would require more than one step. Under the methodology the Commission proffered, the 100 kV bright-line threshold would serve as the initial proxy for determining which facilities are local distribution, and which are transmission. The Final Rule provides ample support for the reasonableness of a 100 kV threshold, not the least of which is that the ERO's definition of bulk electric system currently utilizes a general 100 kV threshold. 79 The Commission recognized, however, that it would be necessary to identify any local distribution that is improperly included, and conversely to identify any transmission that is improperly excluded, by the proxy.

68. The Commission clarifies that the statement in Order No. 743, “determining where the line between `transmission' and `local distribution' lies * * * should be part of the exemption process the ERO develops” 80 was intended to grant discretion to the ERO, as the entity with technical expertise, to develop criteria to determine how to differentiate between local distribution and transmission facilities in an objective, consistent, and transparent manner. This mechanism will allow the ERO to maintain an inventory of the transmission facilities subject to the mandatory Reliability Standards, and to exclude local distribution facilities from the bulk electric system definition by applying the criteria. Once NERC develops and submits its proposal to the Commission, the Commission will, as part of its evaluation of the proposal, determine whether the process developed adequately differentiates between local distribution and transmission.

69. We agree with Consumers Energy, Portland General and others that the Seven Factor Test could be relevant and possibly is a logical starting point for determining which facilities are local distribution for reliability purposes, while also allowing NERC flexibility in applying the test or developing an alternative approach as it deems necessary.

70. With respect to Consumers Energy's request for clarification regarding prior Seven Factor Test determinations qualifying for automatic exclusion, the Commission reiterates that we have granted NERC discretion to develop a means to differentiate between local distribution and transmission facilities, which NERC will submit to the Commission for review and approval. Consequently, we leave to NERC in the first instance questions about if and how the Seven Factor Test should be considered in differentiating between local distribution and transmission facilities.

71. Our purpose in moving away from the proposal in the NOPR was to provide NERC with the greatest amount of flexibility to utilize its technical expertise and processes in developing an appropriate exemption process to complement a revised definition of “bulk electric system.” Considerations regarding the Seven Factor Test and its usefulness in a NERC-designed exemption process are initially for NERC to decide in response to our directive in Order No. 743. As we said in Order No. 743, “allowing the ERO to develop an appropriate exemption process should provide interested stakeholders an opportunity to participate in the development of the process.” 81 Consumers Energy, Portland General and others can raise any concerns with respect to use of the Seven Factor Test or any other concern during the development of the exemption process. Under the exemption process the Commission ultimately approves, once a facility is classified as local distribution, the facility will be excluded from the bulk electric system unless changes to the system warrant a review of the determination.

72. We decline to provide the clarification EEI and Portland General request regarding the use of the term “used in local distribution” in FPA sections 201(b) and 215, as we find the request premature. Order No. 743 tasked NERC, as the entity with technical expertise, with developing a process for differentiating between local distribution and transmission facilities to apply in the reliability context. Once NERC develops and submits a proposed methodology, we will evaluate whether the proposal results in any conflicts with the statutory language.

73. Order No. 743 directed NERC to develop a process for exempting facilities operated at or above 100 kV that are not necessary for operating the transmission grid. The Final Rule declined to dictate the substance of the exemption process, leaving this task to the ERO. This would provide interested stakeholders an opportunity to participate in developing the process. The Final Rule did identify several matters or concerns to be addressed in an acceptable exemption process. The Commission asked the ERO to develop an exemption process that includes clear, objective, transparent, and uniformly applicable criteria for exemption of facilities that are not necessary for operating the grid and any related changes to its Rules of Procedures that may be required to implement the exemption process. Numerous petitioners seek rehearing and clarification regarding the exemption process discussed in the Final Rule. 82

74. Western Petitioners and Portland General seek rehearing that the exemption process developed by the ERO should not apply to facilities used in local distribution. Western Petitioners and Portland General state that facilities used in local distribution are not subject to section 215. Thus, they argue that the ERO lacks authority to subject local distribution facilities to an exemption process. According to Western Petitioners, subjecting such facilities to an exemption process developed by the ERO, and allowing the ERO to determine “jurisdictional exemptions” for facilities not subject to section 215 would “eviscerate state jurisdiction over numerous local facilities, in direct contravention of Congress' intent.” 83 For its part, Portland General argues that, by directing NERC to review facilities over 100 kV currently designated as local distribution under the Seven Factor Test and “by pushing the ERO to recognize a bright-line presumption threshold that was expressly rejected in Order No. 888, the Commission is clearly departing from its existing precedent, under which these same facilities have been determined to be `local distribution' facilities exempt from regulation under Section 215.” 84

75. As the Commission explained above, we agree that local distribution facilities are not subject to FPA section 215. However, we disagree with Western Petitioners and Portland General that it is outside our jurisdiction to determine which facilities are local distribution and therefore excluded from the bulk electric system. We have in the first instance the authority to determine the scope of our jurisdiction. 85

76. The Commission notes some confusion regarding “exclusions” versus “exemptions.” We understand that a facility that is excluded would not have to go through any process at NERC to determine applicability. On the other hand, where an entity applies to NERC to seek to exempt its facility from the bulk electric system, NERC would follow an exemption process. With that understanding, we clarify that, as discussed herein, we envision that the process for determining which facilities will be included under the bulk electric system will involve several steps. NERC will develop criteria for determining whether a facility that falls under the definition of bulk electric system may qualify for exclusion. If, for example, the application of the criteria clearly indicates that a facility is local distribution, the facility is excluded, and no process before the ERO is required. If application of the NERC criteria does not lead to a definitive result, the entity could apply for an exemption, invoking a factual inquiry before the ERO to determine the proper categorization of facilities.

77. Similarly, Western Petitioners challenge the suggestion in the Final Rule that the ERO maintain a list of excluded facilities, including local distribution facilities, arguing that the establishment of a rule to maintain such a list is beyond NERC's statutory authority. They argue that nothing in FPA section 215 vests the ERO with oversight of facilities used in distribution, even for the purpose of maintaining a list of exempt facilities.

78. The Commission agrees with Western Petitioners that section 215 does not grant the ERO oversight of facilities used in local distribution. However, as the Commission has explained, we have jurisdiction to determine which facilities are local distribution, and which are transmission. In order to exercise such oversight, including the appropriate application of the ERO's exemption determinations, it is important to have an inventory of facilities. 86

79. Once the ERO develops the inventory of facilities by applying the process the Commission ultimately approves, the Commission has authority, in its ERO oversight role, to review the determinations to ensure consistent application of the process and the accuracy of the resulting inventory. Such a review necessarily includes reviewing not only the inventory of facilities ultimately classified as transmission, but also those excluded as local distribution, particularly in instances where the decision was a close call. In performing such a review, the Commission is not inappropriately overseeing local distribution facilities but, rather, is reviewing the ERO's application of the process for drawing the line between local distribution and transmission, which is within our authority under section 215 of the FPA.

80. In Order No. 743, the Commission reiterated that we do not seek to modify the second part of the current NERC bulk electric system definition, which states that “[r]adial transmission facilities serving only load with one transmission source are generally not included in this definition.”  87 The Commission also suggested that the ERO could also track exemptions for radial facilities. 88

81. APPA, TANC, NRECA and TAPS request clarification that radial transmission facilities serving only load, i.e., radials to load, with one transmission source may be excluded from the bulk electric system definition and entities with such facilities need not go through an exemption process. TAPS and APPA state that exclusion of radials to load, rather than inclusion subject to exemption, is consistent with section 215 of the FPA. TAPS argues that the Final Rule makes no attempt to demonstrate that radials to load are among the “facilities necessary to operate an interconnected network” that the Commission directed NERC to include in the bulk electric system definition. APPA explains that a 20 MW distribution utility that owns a 115 kV radial to load is likely not to have any contact with NERC since the utility's load is radial and below the threshold for NERC registration. APPA expresses concern that, pursuant to the Final Rule, such a utility could now have to incur the time and resources necessary to demonstrate that it falls within an exemption. TAPS and APPA contend that subjecting currently-excluded “radial to load” to an exemption process would create an unnecessary burden on industry, particularly small entities, as well as NERC and the Regional Entities. Likewise, NRECA seeks clarification that the Commission did not intend that the owner of every currently-excluded facility operated at above 100 kV re-apply for an exclusion or exemption and that the ERO conduct a de novo review of such facilities. NRECA contends that such an approach would unreasonably burden the resources of utilities, create a huge backlog that slows the exemption process, and denies the ERO the ability to exercise its judgment in the matter.

82. For the same reasons, TAPS also seeks clarification that the Commission, in suggesting that the ERO establish a mechanism for reporting and tracking exempted radial facilities, did not intend to include excluded radial to load. TAPS contends that the Final Rule does not support the need for such reporting and tracking, and that the burden to industry and the ERO is not justified. TAPS states that it agrees that radial facilities outside the current bulk electric system definition, i.e., those that are not “radial transmission facilities serving only load with one transmission source,” that still warrant exclusion, would be appropriate for an exemption process and the suggested tracking.

83. Consumers Energy, noting that the current definition of bulk electric system excludes “radial transmission facilities serving only load with one transmission source,” requests clarification whether the exclusion applies to a radial line with only one transmission source that is designed to serve load, but also serves “incidental small generation.” According to Consumers, such situations are becoming more common with the interconnection of small distributed renewable generation. Consumers Energy asks how much incidental generation a line could serve and continue to meet the bulk electric system radial line exclusion.

84. In Order No. 743, the Commission directed the ERO to develop an exemption process and made clear that “we will not dictate the substance or content of the exemption process * * *.”  89 Thus, while the Commission stated that the ERO should develop an exemption process that includes “clear, objective, transparent, and uniformly applicable criteria” for determining exemptions, the Commission otherwise left it to the ERO's discretion to develop an appropriate exemption process, which the Commission will review. Any exemption of radial facilities is not based on a statutory requirement, unlike exclusion of local distribution. However, the Commission believes that certain categories of radial facilities may lend themselves to an “exclusion” process as described above ( i.e., once identified as belonging in a certain radial category, the facilities could be excluded without further review). For example, should the revised bulk electric system definition maintain the exclusion of radial facilities serving only load from one transmission source, these types of facilities easily could be excluded without further analysis.

85. We believe that, in general, the decision whether, and in what circumstances, to apply an exemption versus exclusion process for radial to load facilities is largely a matter of balancing between, on the one hand, administrative ease, e.g., NERC having to review thousands of exemptions for facilities outside the NPCC region that previously were excluded as radial and, on the other hand, assuring that facilities necessary for operation of an interconnected grid are not inadvertently excluded. That being said, we believe that the ERO should balance these matters when developing an appropriate process. Likewise, with regard to NRECA's request to clarify that the Commission does not seek to require NERC or the regions to conduct a de novo review of all exemptions granted to date, we did not require a de novo review and leave an appropriate review process to the ERO.

86. The Commission clarifies that Order No. 743 granted NERC discretion to make a determination regarding whether to exclude or exempt radial facilities. One consideration in this regard is whether an exclusion process will avoid NERC having to review thousands of exemptions for facilities outside the NPCC region that previously were excluded as radial.

87. Additionally, as the Commission noted, commenters have many ideas about what types of facilities should be considered “radial.”  90 NERC can consider whether these facilities should be candidates for exemption. 91 Any expansion of the definition of radial facilities beyond the approved definition must be supported with a technical analysis.

88. With respect to Consumers' request for clarification regarding how much incidental generation a line could serve and continue to meet the bulk electric system radial line exclusion, this is an issue that should be raised with NERC as it develops criteria for determining what is considered radial.

89. While agreeing with the Commission's directive that NERC develop revisions to the bulk electric system definition through NERC's Reliability Standards Development Process, NRECA requests clarification, or in the alternative rehearing, that NERC also must develop criteria for exemptions through the Standards Development Process. NRECA maintains that exemptions from the bulk electric system are as much a part of the Reliability Standards as the definition itself, as both determine the Standards' scope and applicability. According to NRECA, the purely procedural aspects of an exemption process can be developed by NERC and included in the Rules of Procedure. However, NRECA contends that the development of exemption criteria is a “core” technical task that requires use of the Reliability Standards Development Process.

90. Given that the decision as to how to proceed in response to Order No. 743 rests first with NERC, we decline to provide the clarification requested by NRECA at this time. We explained in Order No. 743 that the NERC Glossary (which includes the definition of bulk electric system) is part of the Reliability Standards, and thus changes to the Glossary should be developed through the Reliability Standards Development Process. 92 However, although the exemption process certainly will play a role in determining which facilities are included in the bulk electric system, the process is not part of the definition, nor part of any Reliability Standard. Accordingly, the Commission leaves the decision as to how to proceed in response to its directive to NERC in the first instance. The Commission expects, as indicated in Order No. 743, that NERC will provide ample opportunity for stakeholder input into the exemption process regardless of whether NERC determines to proceed using the Reliability Standard Development Process or by amending the Rules of Procedure. Accordingly, the Commission denies NRECA's rehearing request on this matter.

91. NRECA seeks clarification that currently unregistered entities that may be required to seek an exemption for facilities under the revised bulk electric system definition will not be required to register and thereafter comply with Reliability Standards until a final decision is made to deny the application for exemption. NRECA, noting that the Commission indicated that it did not expect the Final Rule to result in many additional facilities outside of the NPCC region becoming subject to Reliability Standards, 93 states that this observation is particularly true for currently-exempt facilities in the other seven regions. NRECA contends that it is unreasonable to require an entity to expend the financial and staff resources needed to develop a compliance program when the ERO may ultimately determine that the facilities are exempt.

92. In a related vein, NRECA requests clarification that the ERO should have the flexibility to propose a transition process that it deems feasible and appropriate, not necessarily a hard deadline of 18 months after Commission approval.

93. As the Commission indicated in the Final Rule, the transition period is intended to allow a reasonable period of time for the affected entities to achieve compliance with respect to facilities that are subject to the mandatory Reliability Standards for the first time. 94 We agree with NRECA that affected entities should not be required to take costly steps to comply with the Reliability Standards prior to the ERO's initial determination on an exemption request. However, as indicated in Order No. 743, “we expect that the transition periods will be long enough for exemption requests to be processed and to allow entities to bring newly-included facilities into compliance prior to the mandatory enforcement date.”  95 We reiterate that we do not anticipate a large number of exemption requests arising outside NPCC. 96 Thus, our expectation remains that NERC should be able to process any exemption requests in a timely manner, allowing any entity denied an exemption to come into compliance with the relevant Reliability Standards within the transition period.

94. With respect to the length of the transition period, as discussed in the Final Rule, we based our determination to establish an 18-month transition period on ReliabilityFirst's prior experience in adopting a revised bulk electric system definition in that region, and continue to believe it is a reasonable transition period. 97 Additionally, we noted that the ERO may request a longer transition period based on a specific justification. This provides sufficient flexibility should the ERO determine that the 18-month transition period is insufficient.

95. The Final Rule, in response to a ReliabilityFirst request for clarification that facilities that operate at 100 kV or above should be considered bulk electric system facilities, even if, for example, one transformer winding operates below 100 kV, stated that “we agree with [ReliabilityFirst's] developed delineation point with regard to `step-down' transformers, but note that these kinds of refinements can and should be addressed as part of the NERC exemption process.”  98

96. EEI, Consumers and Wisconsin Electric request clarification that this statement concerning the treatment of step-down transformers was offered to provide guidance and not intended to prejudge the exemption criteria to be developed by the ERO. EEI claims that many state commissions treat step-down transformers with a low-side winding below 100 kV as under state rate jurisdiction. Wisconsin Electric contends that, while the suggested approach would simplify auditing, it would impose burdens on registered entities without a commensurate enhancement to reliability.

97. Consumers Energy suggests that the characteristics of the “low side” of a facility be considered when determining whether an entire facility is considered part of the bulk electric system. Consumers states that it has facilities with a 138 kV high side voltage and a low side ranging from 46 kV to 2.5 kV, and contends that the low side provides service only for local distribution.

98. Order No. 743 directed the ERO to develop an exemption process, and specifically declined to “dictate the substance or content of the exemption process.”  99 However, we provided guidance, stating that the process should include clear, objective, transparent and uniformly applicable criteria for exemption of facilities that are not necessary for operating the interconnected transmission system. Accordingly, the Commission grants EEI's, Consumers Energy's and Wisconsin Electric's requests for clarification that the discussion regarding which facilities should or should not be included in the bulk electric system definition was intended to provide guidance, not to prejudge what should be included in the exemption criteria. Therefore, the Commission declines to provide the specific clarifications requested regarding treatment of various types of step down transformers.

99. In the rulemaking, ERCOT commented that facilities operated below 100 kV generally are not considered part of the bulk electric system, but can be included if identified as a critical facility by a Regional Entity. ERCOT suggested that, similar to the development of an exemption process to consider applications for exemption of facilities above 100 kV, the Commission should consider imposing a process for inclusion of critical facilities below 100 kV. In Order No. 743, the Commission responded that it agrees with ERCOT's suggestion and “it would be worthwhile for NERC to consider formalizing the criteria for inclusion of critical facilities operated below 100 kV in developing the exemption process.”  100

100. Western Petitioners state that the Commission should clarify that all local distribution facilities, including those operated at below 100 kV which may be deemed “critical” by a Regional Entity, are expressly excluded under section 215 of the FPA.

101. APPA and TANC request clarification that, in suggesting that NERC formalize the criteria for including critical facilities operated below 100 kV in developing the exemption process, the Commission was not seeking to alter NERC's Statement of Registry Criteria (Registry Criteria) or shift the evidentiary burdens. APPA notes that the current Registry Criteria include a provision that allows the registry of entities that own critical facilities below the 100 kV threshold. 101 APPA expresses concern that a parallel process developed in conjunction with the exemption process might be construed as a departure from the Registry Criteria, which places the burden on NERC and the Regional Entities to demonstrate the need to include facilities operated at below 100 kV as part of the bulk electric system. APPA supports a process that enhances consistency among Regional Entity determinations and ensures better due process to would-be registered entities with potentially critical facilities operated at below 100 kV facilities, and seeks clarification that this understanding of the Commission's statement is correct.

102. The Commission clarifies that Order No. 743 did not intend to alter the Registry Criteria, shift the evidentiary burden for registration, or otherwise address matters involving the Registry Criteria. Indeed, the Statement of Compliance Registry Criteria currently provides that the Regional Entities may propose registration of entities that do not meet the registry criteria if the Regional Entity believes and can reasonably demonstrate that the organization is a bulk power system owner, or operates, or uses bulk power system assets, and is material to the reliability of the bulk power system. 102 However, we note that while the Registry Criteria will not change, it is possible that additional facilities may come under the revised definition and some entities may be required to register for the first time.

103. The Commission agrees with APPA that underlying our suggestion that NERC consider an inclusion process for critical facilities operated below 100 kV was a concern that Regional Entities make such determinations in an appropriate and consistent manner, according to developed criteria, which should better ensure due process.

104. We agree with Western Petitioners that, as stated elsewhere herein, the Commission does not have jurisdiction over facilities that are determined to be local distribution through the process NERC develops and we approve.

105. In Order No. 743, the Commission stated that the Final Rule will not have a significant economic impact on a substantial number of small entities since most transmission owners, transmission operators and transmission service providers do not fall within the definition of small entities. Further, the Commission suggested that the ERO create an appropriate exemption process and that this process will further ensure that the Final Rule minimally affects small entities. As we noted in the NOPR, the Commission estimated that approximately four of the 33 transmission owners, transmission operators and transmission services providers identified in the U.S. portion of the NPCC region may fall within the definition of small entities.

106. APPA and NRECA request that the Commission clarify that it will perform a revised Regulatory Flexibility Act analysis once the exemption process has been developed by NERC and approved by the Commission in order to determine whether the Commission's finding that the Final Rule will not have a significant economic impact on a substantial number of small entities is arbitrary. In particular, APPA and NRECA assert that the Commission erred by certifying that the Final Rule will not have a significant economic impact on a substantial number of small entities, particularly in light of the uncertainties of an as-yet-to-be-developed exemption process to mitigate the impact of the Final Rule on small entities. APPA and NRECA argue that the Commission's reliance on the exemption process to be established by NERC to support its Regulatory Flexibility Act certification is not justified. They assert that the ability of the exemption process to minimize the impact on small entities cannot be assessed until the exemption process is developed by NERC and approved by the Commission.

107. TANC requests clarification that the Commission has not yet finalized its Regulatory Flexibility Act analysis and will not do so until NERC has submitted a proposed exemption process.

108. Public Power Council, NYPSC and Snohomish argue that implementing the 100-kV threshold will be enormously costly. Public Power Council, for its part, argues that the Commission's rejection of evidence of such increased compliance costs was arbitrary and capricious since, inter alia, Public Power Council did provide specific assertions as to how the Final Rule will have a significant economic impact on small entities. The NYPSC requests rehearing on whether the Commission's decision to direct NERC to revise the bulk electric system definition to include facilities operated at 100 kV and above where the Commission failed to determine sufficient benefits in relation to the costs, resulting in the imposition of unnecessary costs without reliability benefits, was arbitrary, capricious, and an abuse of discretion. Snohomish states that it and many other entities operating in the Western Interconnection provided evidence demonstrating that imposition of the 100-kV threshold in the Western Interconnection will result of enormous compliance costs with no benefit to reliability since the 115-kV systems operated by these entities generally are used only for local distribution and their operation therefore has little or no effect on the interconnected bulk system.

109. The Commission does not agree with commenters that its Regulatory Flexibility Act analysis was deficient, and we continue to believe that our suggested approach in Order No. 743 will not have a significant economic impact on a substantial number of small entities. 103 With respect to comments that we did not adequately consider the costs of implementing a 100 kV threshold, we note that the current bulk electric system definition contains a general 100 kV threshold. Thus, the burden of our suggested proposal to eliminate the regional discretion in the current definition and maintain a bright-line 100 kV threshold should be minimal in all regions except NPCC. Even within the U.S. portion of the NPCC region, the Commission estimated in the Final Rule that only four of the 33 transmission owners, transmission operators and transmission service providers may fall within the definition of small entities. We also believe that the exemption process will further ensure that the Final Rule minimally affects small entities. Finally, we have clarified on rehearing that NERC may develop criteria to identify local distribution facilities and certain categories of radial facilities that qualify for exclusion from the definition of the bulk electric system and therefore do not need to apply for exemption. For these reasons the Commission rejects the comments objecting to the Commission's determinations regarding the cost of implementing a 100 kV threshold.

110. However, the Commission will grant APPA's and NRECA's request for clarification in part. The Commission clarifies that it will perform a new Regulatory Flexibility Act analysis to determine whether the revised bulk electric system definition will have a significant economic impact on small entities when NERC submits its proposed definition, criteria for exclusion and the exemption process. 104 We believe that the revisions NERC will propose will be sufficiently different from the initial NOPR proposal to warrant additional review to ensure that small entities are not unduly burdened.

111. In addition to publishing the full text of this document in the Federal Register , the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the Internet through FERC's Home Page ( http://www.ferc.gov ) and in FERC's Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426.

112. From FERC's Home Page on the Internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in eLibrary, type the docket number excluding the last three digits of this document in the docket number field.

113. User assistance is available for eLibrary and the FERC's Web site during normal business hours from FERC Online Support at 202-502-6652 (toll free at 1-866-208-3676) or e-mail at ferconlinesupport@ferc.gov , or the Public Reference Room at (202) 502-8371, TTY (202) 502-8659. E-mail the Public Reference Room at public.referenceroom@ferc.gov .

1. Under section 215 of the Federal Power Act (FPA), 1 the Commission approves three Emergency Operations and Preparedness (EOP) Reliability Standards, EOP-001-1 (Emergency Operations Planning), EOP-005-2 (System Restoration from Blackstart Resources), and EOP-006-2 (System Restoration Coordination) as well as the definition of the term “Blackstart Resource” submitted to the Commission for approval by the North American Electric Reliability Corporation (NERC), the Electric Reliability Organization (ERO) certified by the Commission. The approved Reliability Standards require transmission operators, generation operators, and certain transmission owners and distribution providers to ensure that plans, facilities, and personnel are prepared to enable system restoration from Blackstart Resources and require reliability coordinators to establish plans and prepare personnel to enable effective coordination of the system restoration process. The Commission also approves NERC's proposal to retire four existing EOP Reliability Standards and the defined term “Blackstart Capability Plan” concurrent with the effectiveness of the Standards and the term Blackstart Resource approved in this Final Rule. In those jurisdictions where regulatory approval is required, Reliability Standard EOP-001-1 will not become effective until the first day of the first calendar quarter three months after regulatory approval is obtained, and EOP-005-2 and EOP-006-2 approved in this Final Rule will not become effective until 24 months after the first day of the first quarter after applicable regulatory approval.

2. “Blackstart” capability refers to the ability of a generating unit or station to start operating and delivering electric power without assistance from the electric system. Blackstart units are essential to restart generation and restore power to the grid in the event of an outage. As discussed below, NERC proposes to define “Blackstart Resource” as “a generating unit(s) and its associated set of equipment which has the ability to be started without support from the System or is designed to remain energized without connection to the remainder of the System, with the ability to energize a bus. * * *”

3. In Order No. 693, the Commission determined that it would not take action on certain proposed Reliability Standards that required supplemental information from a Regional Entity. Such Reliability Standards refer to regional criteria or procedures that had not been submitted to the Commission for approval and, as such, are referred to as “fill-in-the-blank” standards. 2 Pending Reliability Standard EOP-007-0 is one such fill-in-the-blank standard. The Reliability Standards approved herein provide a standardized, national approach to address the Commission's concerns regarding pending EOP-007-0, as set forth in Order No. 693. Thus, in addition to the retirement of certain currently effective EOP Reliability Standards, we also approve the withdrawal of pending Reliability Standard EOP-007-0.

4. On March 16, 2007, the Commission issued Order No. 693, approving 83 of the 107 Reliability Standards filed by NERC, 3 including the Reliability Standards: EOP-001-0, EOP-005-1, EOP-006-1, and EOP-009-0. 4 The Commission neither approved nor remanded EOP-007-0 because it applied only to regional reliability organizations, but Order No. 693 did provide guidance for the ERO's further consideration of the Reliability Standard. 5 In addition, under section 215(d)(5) of the FPA, the Commission directed NERC to develop modifications to the EOP Reliability Standards to address certain issues identified by the Commission. At issue in the immediate proceeding are two new EOP standards, EOP-005-2 and EOP-006-2 that would replace the currently effective Reliability Standards EOP-005-1, EOP-006-1, and EOP-009-0, pending Standard EOP-007-0, and necessitate a conforming change in EOP-001-0.

5. Currently effective Reliability Standard EOP-005-1 requires transmission operators, balancing authorities, and reliability coordinators to have a restoration plan, test the plan, train operating personnel in the restoration plan, and have the ability to restore the Interconnection using the plans following a blackout. In Order No. 693, the Commission directed the ERO to develop, through the Reliability Standard development process, a modification to EOP-005-1 that identifies time frames for training and review of restoration plan requirements to simulate contingencies and prepare operators for anticipated and unforeseen events. 6 The Commission also directed the ERO to consider various commenters' suggestions in future revisions of the Reliability Standard. 7

6. In Order No. 693, the Commission also approved Reliability Standard EOP-006-1 addressing reliability coordination and system restoration. The Reliability Standard sets requirements for reliability coordinators during system restoration and requires that they have a coordinating role to ensure reliability is maintained during system restoration. Under section 215 of the FPA, the Commission directed the ERO to develop a modification to EOP-006-1 to ensure that the reliability coordinator is involved in the development and approval of system restoration plans. 8

7. Pending Reliability Standard EOP-007-0 deals with establishing, maintaining and documenting regional blackstart capability plans. In Order No. 693, the Commission did not act on EOP-007-0 pending NERC's providing additional information. 9 The Commission, however, directed the ERO to consider various commenters' suggestions relating to assigning compliance obligations directly to the entities that provide the pertinent data rather than to the Regional Entity, placing responsibility for the regional blackstart plan with the reliability coordinator, recognizing that nuclear units have no blackstart capability, revising the definition of a blackstart unit, and committing arrangements for coordinating blackstart capability to contracts. 10

8. Currently effective Reliability Standard EOP-009-0 deals with implementing and documenting testing of blackstart generating units. In Order No. 693, the Commission directed the ERO to consider suggestions for improvements raised during the comment period. One commenter stated the Reliability Standard should provide details on what constitutes a blackstart test and another stated that NERC should consolidate the Reliability Standard with EOP-007-0. 11

9. In a December 31, 2009 filing (NERC Petition), 12 NERC requests Commission approval of its proposed definition of the term “Blackstart Resource” and proposed Reliability Standards EOP-001-1 (Emergency Operating Planning), 13 EOP-005-2 (System Restoration from Blackstart Resources), and EOP-006-2 (System Restoration Coordination). NERC also seeks to concurrently retire four currently effective Reliability Standards: EOP-001-0, EOP-005-1, EOP-006-1, and EOP-009-0 as well as the definition of “Blackstart Capability Plan” and withdraw pending Reliability Standard EOP-007-0.

10. NERC states that the proposed Reliability Standards “represent significant revision and improvement from the current set of enforceable standards” and address the Commission's directives in Order No. 693 related to the EOP standards. 14 NERC explains that, among other enhancements, “[t]he proposed revisions now clearly delineate the responsibilities of the Reliability Coordinator and Transmission Operator in the restoration process and restoration planning.”  15 NERC describes the proposed Reliability Standards as providing “specific requirements for what must be in a restoration plan, how and when it needs to be updated and approved, what needs to be provided to operators and what training is necessary for personnel involved in restoration processes.”  16

11. NERC requests approval of the term “Blackstart Resource” and the concurrent retirement of the term “Blackstart Capability Plan.” The proposed definition of “Blackstart Resource” is:

The term “Blackstart Capacity Plan” is currently used solely in EOP-007-0 and EOP-009-0, both of which are replaced with proposed Reliability Standards EOP-005-2 and EOP-006-2.

12. Proposed Reliability Standard EOP-001-1 contains seven requirements for the stated purpose of requiring each transmission operator and balancing authority to develop, maintain, and implement a set of plans to mitigate operating emergencies and to coordinate these plans with other transmission operators, balancing authorities, and the reliability coordinator. 17 It modifies EOP-001-0 by deleting Requirement R3.4, which requires transmission operators and balancing authorities to develop, maintain and implement restoration plans, because proposed Reliability Standards EOP-005-2 and EOP-006-2 incorporate and expand upon this Requirement.

13. Proposed Reliability Standard EOP-005-2 contains eighteen requirements for the stated purpose of ensuring that plans, facilities, and personnel are prepared to enable system restoration from Blackstart Resources, and to ensure reliability is maintained during restoration and priority is placed on restoring the Interconnection. 18 The proposed Reliability Standard applies to transmission operators, generation operators, and transmission owners and distribution providers identified in the transmission operator's restoration plan. Requirement R1 requires each transmission operator to have a reliability coordinator-approved restoration plan utilizing Blackstart Resources and details the scope and elements of such a plan. Requirement R2 instructs each transmission operator to provide entities that have a role in the restoration plan with a description of their roles and tasks. Requirements R3 through R6 address annual plan reviews, updating practices, location of plans and plan verification. Following a disturbance, Requirements R7 and R8 provide guidance on following the plan or making needed adjustments and coordinating when re-synchronizing two systems together. Requirement R9 describes testing information the transmission operator must have to verify the Blackstart Resources meet required expectations. Requirements R10 through R12 cover system restoration training requirements for system operators and field switching personnel. Blackstart Resource agreements between the transmission operator and generator operator, or mutually agreed upon procedures or protocols are addressed in Requirement R13. Duties of a generator owner with a Blackstart Resource are provided in Requirements R14 through R18, which address operating procedures, change notification, testing for each Blackstart Resource and training of operating personnel on Blackstart Resources. Proposed Reliability Standard EOP-005-2 is intended to supersede all of currently effective Reliability Standard EOP-005-1.

14. Proposed Reliability Standard EOP-006-2 contains ten requirements with the stated purpose of ensuring that the reliability coordinator establishes plans and prepares personnel to enable effective coordination of the system restoration process, to maintain reliability during restoration, and to place priority on restoring the Interconnection. 19 Requirement R1 requires reliability coordinators to have restoration plans that utilize Blackstart Resources and specifies the scope and elements of such plans. Requirement R2 covers distribution of the reliability coordinator's restoration plan. Requirements R3 through R5 provide for review of the reliability coordinator's restoration plan and the plans of each neighboring reliability coordinator and each transmission operator located in the reliability coordinator's area. Any conflicts between neighboring reliability coordinators' plans are to be resolved within thirty days, and transmission operators' plans shall be approved or disapproved, with stated reasons, within thirty days of receipt by the reliability coordinator. Requirement R6 requires that the reliability coordinator must maintain copies of restoration plans in its primary and backup control rooms. Requirements R7 and R8 describe the roles of reliability coordinators to coordinate restoration efforts and authorize re-synchronization of “island” areas. Requirements R9 and R10 address training and participation in annual drills, exercises and simulations. Proposed Reliability Standard EOP-006-2 is intended to supersede all of currently effective Reliability Standard EOP-006-1.

15. On November 17, 2010, the Commission issued its Notice of Proposed Rulemaking (NOPR) proposing to approve the three proposed EOP Reliability Standards, EOP-001-1, EOP-005-2, and EOP-006-2 and defined term Blackstart Resource (and the retirement of the four superseded standards, EOP-001-0, EOP-005-1, EOP-006-1, and EOP-009-0, the definition of “Blackstart Capability Plan,” and the ERO's withdrawal of EOP-007-0). 20 With respect to proposed Reliability Standard EOP-005-2, the NOPR proposed to direct NERC to modify the Standard to address the Commission's concern regarding the periodic testing of telecommunication facilities needed to implement restoration plans. In addition, the Commission sought comment on: (i) What is intended by the term “unique tasks” as used in the context of proposed Requirement R11 of EOP-005-2; (ii) whether guidance should be provided regarding the term, and if so, how it should be provided; and (iii) whether those tasks should be indentified in each transmission operator's restoration plan. With respect to proposed Reliability Standard EOP-006-2, the NOPR sought comment as to why the Standard does not require reliability coordinators to maintain a database of Blackstart Resources as is required of Regional Entities under currently effective EOP-007-0 and whether such a requirement would be beneficial. The NOPR also sought comment on: (i) Whether reliability coordinators should be required to verify their restoration planning through actual events, steady state and dynamic simulations or testing; and (ii) how a transmission operator should proceed when its restoration plan is rejected by a reliability coordinator. Lastly, the NOPR proposed that the ERO collect data on the performance of system restoration exercises conducted by transmission operators and reliability coordinators to assist the ERO and Commission in identifying the effectiveness of restoration plans, establishing best practices, and determining the effects on personnel performance.

16. In response to the NOPR, comments were filed by nine interested parties. 21 These comments assisted us in the evaluation of the NERC's proposal. In the discussion below, we address the issues raised by these comments.

17. In the NOPR, the Commission proposed to approve the three EOP Reliability Standards and the glossary term filed by NERC in this proceeding. None of the nine interested parties filing comments to the NOPR objects to such an approval. For the reasons described below, the Commission adopts the NOPR proposal and approves Reliability Standards EOP-001-1, EOP-005-2, and EOP-006-2 as well as the proposed glossary term “Blackstart Resource” as just, reasonable, not unduly discriminatory or preferential, and in the public interest. 22 EOP-005-2 and EOP-006-2 clarify the responsibilities of the reliability coordinator and transmission operator in the restoration process and restoration planning and address the Commission's directives in Order No. 693 related to the EOP Standards. By enhancing the rigor of the restoration planning process, the Reliability Standards represent an improvement from the current Standards and will improve the reliability of the Bulk-Power System. The Commission is not directing any modifications to the three new Reliability Standards. Nevertheless, as discussed below, commenters raised several issues for consideration, at the time these standards are next revisited, which we believe could improve these new Reliability Standards. The Commission also approves NERC retiring the four currently effective Reliability Standards, EOP-001-0, EOP-005-1, EOP-006-1, and EOP-009-0 as well as the definition of “Blackstart Capability Plan” and withdrawing pending Reliability Standard EOP-007-0 concurrent with the effectiveness of the EOP-001-1, EOP-005-2, and EOP-006-2 and the definition of the term “Blackstart Resource.”

18. Requirement R11 of EOP-005-2 requires that a minimum of two hours of system restoration training be provided every two years to field switching personnel performing “unique tasks” associated with the transmission operator's restoration plan. In the NOPR, the Commission expressed concern that the applicable entities may not understand what the term “unique tasks” means. We requested comment on what is intended by that term and on whether guidance should be provided to the transmission operators, transmission owners, and distribution providers who are responsible for providing training. In addition, the NOPR sought comment as to whether the unique tasks should be identified in each transmission operator's restoration plan.

19. NERC comments that the term “unique tasks” is not intended to have any meaning beyond the dictionary definition of the words. Everyday tasks of field switching personnel are not considered unique, but tasks not included in the person's normal duties ( e.g., operation of a synchroscope) would be considered unique. NERC and APPA do not perceive a reliability benefit in requiring identification of unique tasks in restoration plans. NERC acknowledges that it could promote the development of guidance to aid entities in complying with Requirement R11.

20. EEI comments that while it would be difficult to define “unique tasks” in a manner that could be broadly applied to affected entities, the standards drafting team believed that the term was clearly understood as a practical matter. Companies should be afforded discretion to determine how the term is defined within their restoration plans, but, to the extent that compliance issues arise, EEI would encourage NERC to consider developing compliance guidance as needed. IRC also believes the term is generally understood by the applicable entities and that it is appropriate for each transmission operator's restoration plan to identify the particular tasks for which training is required.

21. APPA states that the diversity of entities and their specific approaches to system restoration prevented the standard drafting team from developing guidance on the term but agrees that registered entities could benefit from a best practices document that provides examples of unique tasks.

22. Santa Clara comments that a one-size-fits-all definition would not be helpful, and the affected entities should define unique tasks on a case-by-case basis. It agrees that unique tasks should be included within the transmission operator's restoration plan. Pacificorp comments that training should be provided to field switching personnel performing any restoration tasks associated with implementing the transmission operator's restoration plan. Addressing each sub-Requirement of Requirement R1 would provide an appropriate framework for a system restoration training program. Pacificorp and NorthWestern oppose additional guidance or requirements in the Standard. BPA, on the other hand, is unsure what is intended by the term “unique tasks” and supports a specific definition to avoid any ambiguity.

23. Based on NERC's comment that the term “unique tasks” is to be understood in accordance with the normal meaning of the words and the majority of the commenters' assertions that the variety of approaches to system restoration precludes greater specificity, we find that the term conveys as much precision as circumstances allow. To the extent that it would be helpful to the affected entities to specify in a transmission operator's restoration plan which tasks are deemed unique, the entities are encouraged to do so, but the Commission does not require such specificity at this time.

24. Both EEI and APPA recognize potential benefit in the development of further guidance as to the term “unique tasks,” and BPA is uncertain as to the meaning of the term and consequently unsure as to how to demonstrate compliance with its training obligation. NERC, in its comments about the term, states that it “could promote the development of a guideline to aid registered entities in complying with Requirement R11.” 23 The Commission notes that this Reliability Standard will not become effective for at least 24 months, during which time ambiguities in language or differences of opinion among affected entities may be resolved in practical ways. Once the Standard is effective, if industry determines that ambiguity with the term arises, it would be appropriate for NERC to consider its proposal to develop a guideline to aid entities in their compliance obligations.

25. Requirement R5 of Reliability Standard EOP-005-1 provides for periodic testing of telecommunication facilities needed to implement restoration plans, but this Requirement has no counterpart in EOP-005-2. In the NOPR, the Commission proposed requiring the ERO to develop a modification to EOP-005-2 to address the Commission's concern that entities involved in system restoration ensure restoration-specific telecommunications equipment, phone lists, and protocols are tested as part of ongoing restoration preparedness. The Commission further stated its concern that, in light of the importance of communication to the restoration process, testing should be done more frequently than during annual drills, exercises or simulations as is required under Reliability Standard EOP-005-1.

26. Each of the commenters opposes adding a telecommunications requirement to EOP-005-2 on the basis that such a requirement would be redundant given Communications Reliability Standard COM-001-1.1, which requires testing of routine communication facilities on an on-going basis. Several comments noted that duplicative requirements can lead to potential confusion.

27. Reliability Standard COM-001-1 does not apply to generation operators or distribution providers. 24 Further, we do not accept that each entity whose telecommunications facilities will be needed during the system restoration process is currently subject to COM-001-1.1 Requirement R2 which provides that “[e]ach Reliability Coordinator, Transmission Operator and Balancing Authority shall manage, alarm, test and/or actively monitor vital telecommunications facilities. Special attention shall be given to emergency telecommunications facilities and equipment not used for routine communications.”

28. NERC notes in its comments that the Reliability Coordination Standard Drafting Team is currently working on Project 2006-06 to develop a set of revisions to Reliability Standard COM-001-1.1 to tighten requirements relating to communication capabilities. The Commission believes the objectives of this project in managing, alarming, testing and/or actively monitoring vital primary and emergency telecommunication facilities will close this gap in the Reliability Standard after it is completed and approved. Accordingly, consistent with NERC's comments on its current project and concerns not to create redundancy in development of Reliability Standards, NERC should close the gap in the applicability of the draft COM-001-2 so it addresses generation operators and distribution providers.

29. Reliability Standard EOP-005-2 requires each transmission operator to identify each blackstart resource and its characteristics, but this requirement has no counterpart for reliability coordinators in EOP-006-2. The Commission expressed concern and invited comment in the NOPR on whether the absence of a required list of its Blackstart Resources could deny the reliability coordinator a potentially useful tool in maintaining reliability.

30. NERC notes that the transmission operator, not the reliability coordinator, maintains direct contact with the blackstart resources, and reliability coordinators have sufficient authority to request information needed to identify blackstart resources should such information be required. NERC, EEI, IRC, and APPA do not believe a requirement to maintain a database of blackstart resources would improve reliability. Santa Clara, however, requests that the Commission direct NERC to revise Requirement R2 of Reliability Standard EOP-005-2 to specify that transmission operators provide copies of their restoration plans to those entities included in the plan within 60 days of the plan's approval by the appropriate reliability coordinator to ensure that resources identified in the plan are capable of complying with the plan.

31. Since a reliability coordinator obtains copies of all its constituent transmission operators' restoration plans and has the ability to obtain information regarding the identity and characteristics of blackstart resources from its transmission operators, we agree there is no reliability need for it to maintain a duplicative database. With regard to Santa Clara's request, we believe that the determination whether resources in a restoration plan are capable of complying with the plan is made during the transmission operator's development of its plan as required by Requirement R1, not once the plan is approved by the reliability coordinator. For this reason, we do not see a need to direct the modification to Requirement R2 that Santa Clara requests.

32. Reliability Standard EOP-005-2 requires each transmission operator to verify that its restoration plan achieves its intended function. There is no similar requirement in EOP-006-2 regarding the reliability coordinator's restoration plan. The Commission sought comment on whether the same or a similar requirement should apply to reliability coordinators. In addition, the Standard also requires reliability coordinators to approve, or disapprove with written reasons, the restoration plans of each of their constituent transmission operators. The Commission invited comment as to how a transmission operator should proceed when its restoration plan is rejected by a reliability coordinator.

33. NERC, EEI, and IRC comment that a reliability coordinator's restoration plan is essentially a compilation of the restoration plans of its constituent transmission operators. Given that EOP-005-2 requires transmission operators to verify their restoration plans and that EOP-006-2 requires reliability coordinators to conduct system restoration drills with their constituent transmission operators and generation owners, requiring further verification of the same plans by the reliability coordinator would be duplicative and not provide additional reliability benefit.

34. With respect to how a transmission operator should proceed when its reliability coordinator rejects its restoration plan, NERC states that when a restoration plan is rejected by a reliability coordinator, the reliability coordinator is required to supply one or more reasons for its rejection, and the transmission operator should then be able to re-submit a revised plan. NERC does not believe it is necessary to document this process in additional requirements since the dialogue between the two entities is no different than the routine coordination that normally occurs between the transmission operator and its reliability coordinator. EEI, APPA, and IRC agree that there is no need for additional procedures to be spelled out.

35. IRC, BPA, and Santa Clara all comment that the reliability coordinator should be the final authority to resolve conflicts. Santa Clara nevertheless states that if the transmission operator and reliability coordinator cannot resolve their differences because the transmission operator believes compliance with the reliability coordinator's decision is infeasible, the transmission operator should be allowed to appeal either to the Regional Entity or, in the case of the Western Interconnect, the dispute should be brought to NERC.

36. EEI observes that the two-year implementation period for these Standards will likely provide sufficient time to resolve any differences in order for a reliability coordinator to approve a transmission operator's initial restoration plan. Any subsequent rejection of a revised restoration plan will not result in a reliability gap since the initial plan will remain in place. EEI further notes that any rejection of a restoration plan by a reliability coordinator will necessarily be based on generic reliability engineering criteria readily understood by the transmission operator. Pacificorp, on the other hand, notes that the requirement that the reliability coordinator give stated reasons for any disapproval of a submitted restoration plan does not ensure the reasons will specify the circumstances under which a transmission operator should revise its plan. Pacificorp states that a reliability coordinator must have formal criteria for reviewing, approving and disapproving restoration plans and standard procedures for those plans to be revised and resubmitted for review. Pacificorp also suggest a modification to Requirement R5 to provide that a transmission operator's submitted restoration plan shall be deemed approved if the reliability coordinator fails to approve or disapprove the plan within the required 30 days.

37. We accept the commenters' position that requiring verification of the reliability coordinators' restoration plan through a requirement in EOP-006-2 would be largely duplicative. As commenters point out, Reliability Standard EOP-006-2 requires reliability coordinators to conduct system restoration drills including their constituent transmission operators and generation owners. Such drills, exercises or simulations, together with the verifications carried out by the transmission operators of their restoration plans and approval of their plans by the reliability coordinators under EOP-005-2, serve as verification of the reliability coordinators' plans and as such, should serve to identify difficulties in a reliability coordinator's restoration plan.

38. We agree with EEI that the basis on which a reliability coordinator rejects a restoration plan will necessarily be based on generic engineering criteria easily understood by the transmission operator. We also agree with those commenters who reaffirm that the ultimate arbiter of coordination and compatibility of transmission operators' restoration plans is the reliability coordinator. For these reasons, we do not see a need to direct modifications as Pacificorp and Santa Clara suggest that could circumvent the reliability coordinator's authority concerning the approval or disapproval of a restoration plan. However, we agree with Pacificorp that Reliability Standard EOP-006-2, which establishes requirements to enable coordinated system restoration and ensure reliability is maintained during system restoration, is not the appropriate place to include any specific criteria or procedures for the review and revision of transmission operators' restoration plans. We recognize that documenting such criteria and procedures may have utility in facilitating the settlement of disagreements when a reliability coordinator rejects a transmission operator's restoration plan. Nonetheless, we leave it to the ERO Reliability Standard development process to determine whether the merit is sufficient to compel the development of such criteria or procedures.

39. Given the importance of effective blackstart and restoration plans and well-trained personnel, the NOPR proposed that the ERO collect data on the performance of system restoration exercises and make such data available to transmission operators, reliability coordinators and the Commission. This data could then be used to identify the effectiveness of restoration plans and help identify improvements to enhance restoration. The Commission sought comment on the proposed data collection.

40. NERC notes that formal debriefings are held after each required drill and is unclear whether there would be any additional reliability benefit arising from the data collection contemplated in the NOPR. EEI proposes that companies should be allowed to gather experience on the new requirements before undertaking data collection efforts and points out that the North American Transmission Forum (NATF) would be an appropriate venue for discussions on the efficacy of various training experiences. BPA and NorthWestern also cite NATF as an appropriate venue to share best practices. BPA views its restoration information as extremely sensitive and perceives risk that such information could fall into the wrong hands.

41. NERC, EEI, APPA, Pacificorp, and NorthWestern question the reliability benefit of creating such a database compared to the burden it would impose on the industry. NERC asks whether developing such a database would direct industry resources where they can best serve reliability. IRC does not see the value of the proposed data gathering, but notes section 1600—Requests for Data or Information of NERC's Rules of Procedure  25 could be an appropriate means of collecting data without creating an ongoing requirement.

42. The Commission agrees with NERC that the formal debriefing of system restoration drills, exercises and simulations can capture lessons learned and identify best practices. But lessons learned in such debriefings are not necessarily communicated to all who might benefit from them. In addition, the Commission understands that NATF may be an appropriate forum to discuss industry activity and best practices, but we continue to believe that there would be a reliability benefit in the ERO aggregating and disseminating lessons learned derived from restoration drills, exercises and simulations. Nevertheless, we will allow the industry to develop some experience with the new Reliability Standards and then review whether or not to pursue this matter under section 39.2(d) of the Commission's regulations and the use of Requests for Data or Information under section 1600 of NERC's Rules of Procedure or through some other means.

43. In the NOPR, the Commission proposed deferring action on the proposed violation risk factors (VRF) and violation severity levels (VSL) for the proposed Reliability Standards until the Commission acts on NERC's pending petition in Docket No. RR08-4-005, in which NERC proposes a “roll-up” approach for VRF and VSL assignments by which NERC would only assign VRF and VSL to the main requirements and not to sub-Requirements. 26 Subsequent to the NOPR, on December 1, 2010, NERC made a compliance filing to the Commission in Docket No. RR08-04-006 submitting new VSL to supersede those presented in the NERC Petition.

44. No comments were received regarding this matter. Accordingly, the Commission will defer discussion on the proposed violation risk factors and violation severity levels assigned to EOP-005-2 and EOP-006-2 until after the Commission issues a final order acting on NERC's petition in Docket No. RR08-4-005 and Docket No. RR08-4-006.

45. The following collections of information contained in this Reliability Standard have been submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the Paperwork Reduction Act of 1955. 27 OMB's regulations require OMB to approve certain information collection requirements imposed by agency rule. 28

46. The Commission solicited comments on the need for and the purpose of the information contained in these three Emergency Operations and Performance Reliability Standards and the corresponding burden to implement them. The commission received comments on its proposed data reporting requirement regarding the performance of system restoration exercises which we address in this Final Rule. The Commission has not directed any modifications to the Requirements in the three Reliability Standards being approved. As a result of this Final Rule the annual burden will increase by an estimated 47,472 hours. This is a reduction from the burden estimates provided in the NOPR, with respect to reporting data to NERC; however, we have not similarly reduced the estimated time expended by reliability coordinators on recordkeeping in order to better reflect their enhanced involvement in the planning process.

47. Burden Estimate: The estimated burden and for the requirements in this Final Rule follow:

The Delaware River Basin Commission is a federal-state regional agency charged with managing the water resources of the Delaware River Basin without regard to political boundaries. Its members are the governors of the four basin states—Delaware, New Jersey, New York, and Pennsylvania—and the North Atlantic Division Commander of the U.S. Army Corps of Engineers, representing the Federal government.

Notice of the proposed amendments appeared in the Federal Register (75 FR 41106) on July 15, 2010 as well as in the Delaware Register of Regulations (14 DE Reg. 70-83 (08/01/2010)) on August 1, 2010, the New Jersey Register (42 N.J.R. 1701(a)) on August 4, 2010, the New York State Register (p. 6) on July 21, 2010 and the Pennsylvania Bulletin (40 Pa. B. 4208) on July 31, 2010. A public hearing was held on September 23, 2010 and written comments were accepted through October 1, 2010. The commission received two written submissions and no oral testimony on the proposed changes. The Commission made minor revisions to the proposed amendments in response to the comments received. A comment and response document setting forth the Commission's responses and revisions in detail was approved by the Commission simultaneously with adoption of the final rule.

Resolution No. 2010-13, the text of the final rule, a copy of the comment and response document, and a basis and background document published simultaneously with the proposed rule are available on the Commission's Web site, at http://www.state.nj.us/drbc/toxics_info.htm.

For the reasons set forth in the preamble, the Delaware River Basin Commission amends part 410 of title 18 of the Code of Federal Regulations as follows:

FDA published a notice in the Federal Register of July 22, 2002 (67 FR 47823), announcing the filing of food additive petition, FAP 2A4738, by Intralytix Inc., to amend the food additive regulations by providing for the safe use of a mixture of bacteriophages as an antimicrobial agent against L. monocytogenes on foods, including fresh meat products, fresh poultry, and poultry products. On December 18, 2003, the petitioner amended the petition to limit the petitioned use only to RTE meat and poultry products. In response to this petition, FDA issued a final rule in the Federal Register of August 18, 2006 (71 FR 47729), approving the use of the bacteriophage preparation on RTE meat and poultry products. This rule will be referred to in this document as the “bacteriophage final rule.” The preamble to the final rule advised that objections to the final rule and requests for a hearing were due within 30 days of the publication date ( i.e., by September 18, 2006).

Section 409(f) of the Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 348(f)) provides that, within 30 days after publication of an order relating to a food additive regulation, any person adversely affected by such order may file objections, specifying with particularity the provisions of the order “* * * deemed objectionable, stating reasonable grounds therefor, and requesting a public hearing upon such objections * * *.” FDA may deny a hearing request if the objections to the regulation do not raise genuine and substantial issues of fact that can be resolved at a hearing ( Community Nutrition Institute v. Young, 773 F.2d 1356, 1364 (DC Cir. 1985), cert. denied, 475 U.S. 1123 (1986)).

Under the food additive regulations at 21 CFR 171.110, objections and requests for a hearing are governed by part 12 (21 CFR part 12) of FDA's regulations. Under § 12.22(a), each objection must meet the following conditions: (1) Must be submitted on or before the 30th day after the date of publication of the final rule; (2) must be separately numbered; (3) must specify with particularity the provision of the regulation or proposed order objected to; (4) must specifically state each objection on which a hearing is requested; failure to request a hearing on an objection constitutes a waiver of the right to a hearing on that objection; and (5) must include a detailed description and analysis of the factual information to be presented in support of the objection if a hearing is requested; failure to include a description and analysis for an objection constitutes a waiver of the right to a hearing on that objection.

Following publication of the bacteriophage final rule, FDA received more than 70 objections within the 30-day objection period. All but one of these submissions expressed general opposition to the use of the bacteriophage preparation on RTE meat and poultry products; however, no evidence was submitted in support of these objections. As stated previously, under section 409(f)(1) of the FD&C Act, objections must “[specify] with particularity the provisions of the order deemed objectionable, stating reasonable grounds therefor * * *.” These submissions did not provide reasonable grounds and identified no substantive issue to which the Agency can respond. Therefore, these submissions are denied and will not be considered further. The submission raising specific objections was a letter from Food & Water Watch (FWW) with six objections. The FWW letter sought a revocation of the bacteriophage final rule and requested a hearing on the issues raised by each objection. The letter also requested that the regulation be stayed pending a public hearing of the scientific issues. These objections are addressed in section IV of this document.

Specific criteria for deciding whether to grant or deny a request for a hearing are set out in § 12.24(b). Under that regulation, a hearing will be granted if the material submitted by the requester shows, among other things, the following: (1) There is a genuine and substantial factual issue for resolution at a hearing; a hearing will not be granted on issues of policy or law; (2) the factual issue can be resolved by available and specifically identified reliable evidence; a hearing will not be granted on the basis of mere allegations or denials or general descriptions of positions and contentions; (3) the data and information submitted, if established at a hearing, would be adequate to justify resolution of the factual issue in the way sought by the requester; a hearing will be denied if the data and information submitted are insufficient to justify the factual determination urged, even if accurate; (4) resolution of the factual issue in the way sought by the person is adequate to justify the action requested; a hearing will not be granted on factual issues that are not determinative with respect to the action requested ( e.g., if the action would be the same even if the factual issue were resolved in the way sought); (5) the action requested is not inconsistent with any provision in the FD&C Act or any FDA regulation; and (6) the requirements in other applicable regulations, e.g., 21 CFR 10.20 and §§ 12.21 and 12.22, and in the notice issuing the final regulation or the notice of opportunity for hearing are met.

A party seeking a hearing is required to meet a “threshold burden of tendering evidence suggesting the need for a hearing” ( Costle v. Pacific Legal Foundation, 445 U.S. 198, 214-215 (1980), reh. denied, 446 U.S. 947 (1980), citing Weinberger v. Hynson, Westcott & Dunning, Inc., 412 U.S. 609, 620-621 (1973)). An allegation that a hearing is necessary to “sharpen the issues” or to “fully develop the facts” does not meet this test ( Georgia Pacific Corp. v. U.S. Environmental Protection Agency, 671 F.2d 1235, 1241 (9th Cir. 1982)). If a hearing request fails to identify any factual evidence that would be the subject of a hearing, there is no point in holding one. In judicial proceedings, a court is authorized to issue summary judgment without an evidentiary hearing whenever it finds that there are no genuine issues of material fact in dispute and a party is entitled to judgment as a matter of law. ( See Rule 56, Federal Rules of Civil Procedure.) The same principle applies in administrative proceedings. ( See § 12.28.)

A hearing request must not only contain evidence, but that evidence should raise a material issue of fact concerning which a meaningful hearing might be held ( Pineapple Growers Association v. FDA, 673 F.2d 1083, 1085 (9th Cir. 1982)). Where the issues raised in the objection are, even if true, legally insufficient to alter the decision, the Agency need not grant a hearing ( see Dyestuffs & Chemicals, Inc. v. Flemming, 271 F.2d 281, 286 (8th Cir. 1959), cert. denied, 362 U.S. 911 (1960)). A hearing is justified only if the objections are made in good faith and if they “draw in question in a material way the underpinnings of the regulation at issue” ( Pactra Industries v. Consumer Product Safety Commission, 555 F.2d 677, 684 (9th Cir. 1977)). A hearing need not be held to resolve questions of law or policy ( see Citizens for Allegan County, Inc. v. Federal Power Commission, 414 F.2d 1125, 1128-29 and n.5 (D.C. Cir. 1969); Sun Oil Co. v. Federal Power Commission, 256 F.2d 233, 240-41 (5th Cir.), cert. denied, 358 U.S. 872 (1958)).

Even if the objections raise material issues of fact, FDA need not grant a hearing if those same issues were adequately raised and considered in an earlier proceeding. Once an issue has been so raised and considered, a party cannot raise that same issue in a later proceeding without new evidence. The various judicial doctrines dealing with finality can be validly applied to the administrative process. In explaining why these principles “self evidently” ought to apply to an Agency proceeding, the U.S. Court of Appeals for the District of Columbia Circuit wrote: “The underlying concept is as simple as this: Justice requires that a party have a fair chance to present his position. But overall interests of administration do not require or generally contemplate that he will be given more than one fair opportunity.” Retail Clerks Union, Local 1401 v. National Labor Relations Board, 463 F.2d 316, 322 (DC Cir. 1972). ( See Costle v. Pacific Legal Foundation, supra at 215-220. See also Pacific Seafarers, Inc. v. Pacific Far East Line, Inc., 404 F.2d 804 (DC Cir. 1968), cert. denied, 393 U.S. 1093 (1969).)

In summary, a hearing request must present sufficient credible evidence to raise a material issue of fact and the evidence must be adequate to resolve the issue as requested and to justify the action requested.

The FWW submission raises six objections based on issues that they believe to be factual and requests a hearing based on these objections. FDA addresses each of the objections in the following paragraphs, as well as the evidence and information filed in support of each, comparing each objection and the information submitted in support of it to the standards for granting a hearing in § 12.24.

FWW claims that FDA failed to follow its own guidelines for assessing the safety of food additives. Specifically, FWW states that FDA did not “certify” that it followed the procedures stated in current publications of the National Academy of Sciences/National Research Council (NAS/NRC) when reviewing the bacteriophage petition, or if different procedures were used, FDA did not “certify” that they are as reliable as the NAS/NRC procedures, as FWW states is required by § 170.20 (21 CFR 170.20). FWW also contends that FDA did not comply with the testing set forth in its own guidance entitled “Toxicological Principles for the Safety Assessment of Food Ingredients,” otherwise known as FDA's Redbook, or establish a 100-fold safety factor for the additive as set forth in 21 CFR 170.22. If a different safety factor was used, FWW asserts that FDA did not provide evidence to justify a different safety factor. FWW also questions the relevance and applicability of the various studies relied on by the petitioner to show safety because of either: (1) Deficiencies with how the studies were conducted, (2) the studies investigated efficacy rather than safety, or (3) the substance tested is not the same bacteriophage that is the subject of the petition.

Contrary to what FWW appears to assert, FDA notes that the Agency does not “certify” that the procedures used in evaluating a food additive petition either followed the current NAS/NRC procedures or were as reliable as those procedures. Section 170.20 sets forth the general scientific principles that FDA uses in evaluating a food additive petition and cites the principles and procedures stated in current publications of the NAS/NRC as a guide that the Agency uses in its safety evaluations of food additives. Nevertheless, FDA has consistently taken the position that many scientifically valid types of data may properly support a finding that the proposed use of a food additive will cause “no harm” to consumers. Moreover, § 170.20(a) specifically states that “A petition will not be denied, however, by reason of the petitioner's having followed procedures other than those outlined in the publications of the National Academy of Sciences-National Research Council if, from available evidence, the Commissioner finds that the procedures used give results as reliable as, or more reliable than, those reasonably to be expected from the use of the outlined procedures.” Similarly, NAS/NRC acknowledges in the conclusions of its document regarding procedures for evaluating the safety of food chemicals that the document's purpose is to “guide and stimulate—not replace—informed professional and administrative judgment” (Ref. 1).

FDA did not request the petitioner to carry out studies recommended in NAS/NRC guidelines because the bacteriophages that are the active component of the food additive infect L. monocytogenes exclusively, and not mammalian cells. ( See discussion at 71 FR 47729 at 47730). As such, traditional animal testing of the additive as recommended by NAS/NRC for food chemicals, is neither necessary nor helpful to demonstrate that the petitioned use of the additive is safe.

Regarding the use of safety factors, the use of a safety factor is intended to account for the uncertainty of extrapolating animal toxicity data to humans. Because bacteriophages do not infect mammals, the use of a safety factor is unnecessary to provide adequate assurance of safety.

Similarly, due to the nature of this food additive, there is no need to assign a concern level as set forth in the Redbook. FDA's Redbook provides guidance that represents the Agency's current thinking on the information needed for the safety assessment of food ingredients. As with any Agency guidance, the Redbook does not bind the petitioner or the Agency to follow specific procedures that are recommended. Alternative approaches are permissible if such approaches satisfy the requirement of the applicable statute and regulations. Importantly, the statute does not prescribe the safety tests to be performed but leaves that determination to the discretion and scientific expertise of FDA. Not all food additives require the same amount or type of testing. The testing and data necessary to establish the safety of an additive will vary depending on the type and characteristics of a particular additive and its intended use. Concern levels are used to determine the recommended toxicity tests for an additive. It was unnecessary to assign a concern level in the present case, because FDA's primary concern about the subject additive was the safety of potential residual components from the host organism, L. monocytogenes, and not the bacteriophages themselves.

One such residue of concern was Listeriolysin O (LLO), an exotoxin produced by the host organism. To address this concern, the petitioner analyzed the bacteriophage preparation for LLO and was unable to detect it using a method sensitive to 5 hemolytic units per milliliter (HU/ml). Even when the food additive was concentrated 10-fold, the petitioner still did not detect any hemolytic activity. Although LLO was not detected in the bacteriophage preparation, FDA established a specification of 5 HU/ml for the maximum amount of LLO permitted in the bacteriophage preparation as a condition of safe use, which is the limit of detection for the method provided by the petitioner. FDA concluded that the potential residues of LLO that may be found in the food additive are negligible ( i.e., 5 HU/ml or less) and do not pose a safety concern for the use of the food additive as an antimicrobial agent on RTE meat and poultry products. Furthermore, as discussed in the bacteriophage final rule, the presence of any small amount of LLO in the bacteriophage preparation may be mitigated by the following factors: Inactivation of LLO by cholesterol that is present in RTE meat and poultry products; inactivation of LLO by the low stomach pH; and inactivation of orally consumed LLO by human defense mechanisms ( e.g., normal intestinal microflora and cell-mediated immunity reactions) and degradation by proteolytic enzymes in the diet or in the stomach. FDA concluded that reliable alternative methods from NRC/NAS procedures were used to establish the safety of the bacteriophage preparation for its use on RTE meat and poultry products, and that the data considered for this regulation, when evaluated in its entirety, are sufficient to support the safety of the bacteriophage preparation for that use.

FWW's submission provides no evidence that FDA failed to follow its own guidelines for assessing the safety of food additives. The FWW submission does not raise a genuine and substantial issue of fact and does not provide any specifically identified reliable evidence that, if established at a hearing, would be adequate to demonstrate that FDA acted in violation of its governing statutes and regulations. Thus, a hearing is not justified based on this objection (§ 12.24(b)(1), (b)(2), and (b)(3)).

FWW contends that FDA relies on conjecture in concluding that foods treated with a bacteriophage preparation are safe for human consumption. Specifically, FWW asserts that FDA's conclusion that any residual LLO will be inactivated by factors such as cholesterol in the meat or poultry, acidity within the stomach, and proteolytic enzymes present in the food or in the stomach is based on unsupported assumptions and not experimental data. Regarding the inactivation of LLO by cholesterol, FWW's asserts that FDA's conclusion about mitigation of LLO by cholesterol was not based on any data on the levels of cholesterol in meat necessary to inactivate LLO, and that the mechanism for the inactivation of LLO by cholesterol is “not yet fully understood by researchers.” FWW also states that there is a need for a more thorough study to investigate the reaction of certain sensitive population groups to this bacteriophage preparation.

As stated in the bacteriophage final rule, the toxicity of LLO has been shown to be significantly reduced—by as much as 200- to 2,000-fold—following pre-incubation of LLO with added cholesterol in vitro, based on results of a study conducted by Jacobs et al (Ref. 2). The results showed that there is almost no hemolytic if LLO is pretreated with cholesterol at 1 milligram/100 grams (mg/100g). It is well established that there are relatively high concentrations of cholesterol in RTE meat and poultry products (approximately 38 to 156 mg/100 g (Ref. 3)). Therefore, since the bacteriophage preparation is to be used on RTE meat and poultry products, and these products contain significant amounts of cholesterol, the findings from Jacobs et al. directly support FDA's conclusion about inactivation of LLO by cholesterol in RTE meat and poultry products. While the mechanism by which added cholesterol inhibits LLO may not be fully understood, that does not undermine the evidence that supports the Agency's conclusion.

Regarding inactivation of LLO by acidity, the data considered by FDA in its review of the petition indicate that LLO has activity only within a pH range between 4.9 and 8 while losing activity at a pH outside this range, especially in very acidic (low pH) or very alkaline (high pH) environments. Since the pH inside the stomach is normally between 1.0 and 3.5 (Ref. 4), the acidic environment in the stomach would be a defense against any residual LLO from the use of the additive. No data were submitted by FWW to the contrary, nor was any information provided that would justify the need for studies to investigate the reaction of certain sensitive population groups to the bacteriophage preparation. Because FWW provided no evidence to support these contentions, FDA is denying the request for a hearing on these issues; a hearing will not be granted on the basis of mere allegations or denials or general positions and contentions (§ 12.24(b)(2)).

FWW contends that the results of the efficacy studies for the bacteriophage preparation submitted by the petitioner are inadequate to show that the preparation will sufficiently control L. monocytogenes in RTE meat and poultry products. In addition, FWW points out that some other methods for killing bacteria achieve a greater log reduction of bacteria than the bacteriophage preparation.

During its evaluation of FAP 2A4738, FDA consulted with the Food Safety and Inspection Service (FSIS) of the U.S. Department of Agriculture (USDA), consistent with 21 CFR 171.1(n) and with a memorandum of understanding (MOU) between the two Agencies for reviewing the safety of substances used in the production of meat and poultry products. Under the MOU, FDA is responsible for reviewing an ingredient's safety, and USDA/FSIS is responsible for evaluating its suitability. (MOU 225-00-2000; see also 65 FR 51758 at 51759, August 25, 2000). Suitability relates to the effectiveness of the ingredient in performing the intended purpose of use and the assurance that the conditions of use will not result in an adulterated product or one that misleads consumers. As we stated in the bacteriophage final rule, “FDA recognizes that there may be meat or poultry products considered RTE for which use of the additive may not be suitable within the meaning of those statutes. This regulation addresses only the safety standard under section 409 of the Federal Food, Drug, and Cosmetic Act and does not address requirements for suitability administered by the USDA.” (71 FR 47729 at 47731). FSIS concurred with the issuance of FDA's final rule.

FDA is denying the request for a hearing on this point because a hearing will not be granted unless there is a genuine and substantial factual issue to be resolved (§ 12.24(b)(1)), and resolution of the factual issue in the way sought is adequate to justify the action requested (§ 12.24(b)(4)).

FWW asserts that key research submitted by the petitioner in support of their additive was not published in peer-reviewed journals, which they claim is required under § 170.31(i) (21 CFR 170.3(i)). Specifically, FWW is referring to the definition of safe or safety which is defined in § 170.3(i) as “* * * a reasonable certainty in the minds of competent scientists that the substance is not harmful under the intended conditions of use. * * *”

FWW has misinterpreted § 170.3(i). This regulation does not require that in order to establish safety, the research submitted by a petitioner in support of a food additive must be published in a peer-reviewed journal. This regulation states that “Safety may be determined by scientific procedures or by general recognition of safety.” Importantly, scientific procedures are defined under § 170.3(h) as “ * * * human, animal, analytical, and other scientific studies, whether published or unpublished, appropriate to establish the safety of a substance.” Therefore, FDA does not require the key research submitted by a petitioner in support of a food additive be published in a peer-reviewed journal to establish safety. This objection does not raise a genuine and substantial issue of fact for resolution at a hearing. FDA is denying the request for a hearing on this point because a hearing will not be granted if there is no genuine and substantial factual issue to be resolved (§ 12.24(b)(1)).

FWW contends that the Agency did not follow the requirements in § 171.1(h) (21 CFR 171.1(h)) for making information publicly available. They cite § 171.1(h)(1), which states: “The following data and information in a food additive petition are available for public disclosure, unless extraordinary circumstances are shown, after the notice of filing of the petition is published in the Federal Register * * *.” FWW states that FDA did not publicly disclose the releasable information from FAP 2A4738 after the notice of filing of the petition published in the Federal Register as required under § 171(h)(1). FWW also states “as of the submission of these objections, FDA has still not made much of this information, including much of this petition, available.”

FWW misinterprets § 171.1(h)(1). That paragraph does not mean that the releasable data and information in a petition are publicly disclosed when the notice of filing publishes, but merely that the information in the petition is available for public disclosure. Before the information in a petition is actually disclosed, the Agency has to purge all data and information that are protected from disclosure. Because this is a labor intensive process, FDA does not preemptively disclose the information in a petition at this time, but rather releases it in response to requests made under the Freedom of Information Act (FOIA). To disclose the information in a petition before a request is received would not be an efficient use of Agency resources.

In the case of FAP 2A4738, the notice of filing was published in the Federal Register of July 22, 2002, at which time the releasable information in the petition was available for public disclosure through the Agency's FOIA process. The final rule for this petition published in the Federal Register of August 18, 2006, and the period for submitting objections to this rule ended on September 18, 2006. Prior to the beginning of the objection period, FDA had not processed any FOIA requests for this information. The petition therefore had not been previously redacted.

On September 7, 2006, arrangements were made for FWW to go to FDA's offices to review the petition, including specific sections in which the organization had expressed a particular interest. On September 8, 2006, FWW came to FDA's offices and reviewed releasable parts of the petition. At the end of their visit, FWW left with approximately 250 pages of documents. In addition, an FOIA request from Wenonah Hauter of FWW (dated August 31, 2006 and received and logged by FDA's Freedom of Information Staff on September 5, 2006) was processed, and the information sent to FWW on February 9, 2007.

The objection provides no evidence to support the contention that FDA did not follow § 171.1(h) regarding releasable information from FAP 2A4738. FDA is denying the request for a hearing on this point because a hearing will not be granted if there is no genuine and substantial factual issue to be resolved (§ 12.24(b)(1)).

FWW contends that FDA did not provide timely notice of the standards it used for evaluating the petition and how the data justifies the Agency's conclusion. Specifically, FWW contends that FDA made available the memoranda referenced in the bacteriophage final rule and select portions of the petition only after much pleading on the 13th and 21st day, respectively, after the start of the statutorily required 30-day objection period.

On August 17, 2006, the date the bacteriophage final rule was placed on public display and 1 day before the rule published in the Federal Register , the four references cited in the final rule were also placed on public display in the petition docket. However, after realizing that some of the references contained confidential information, FDA immediately removed them from the docket to redact any confidential information. The redacted references were placed back in the docket on August 31, 2006.

The Agency was first contacted by FWW on August 18, 2006, about the unavailability of the four references listed in the bacteriophage final rule. FWW was informed that the review memos had been taken off the Agency's Web site to be purged of confidential information. While the 4 references cited in the bacteriophage final rule were unavailable to FWW for 13 days after the publication of the final rule, FWW did obtain them with more than half the 30-day period for objection still left.

With respect to the select portions of the petition that FWW objects to having received 21 days after the start of the 30-day objection period, we understand this objection to refer to the portions of the petition that FWW examined in FDA's offices on September 8, 2006. These portions of the petition were not among the four references cited in the bacteriophage final rule and placed on public display as part of the petition docket. As is discussed previously, it would not be an efficient use of Agency resources to prepare the entire petition for release in advance of any requests to view the petition. However, FDA was nonetheless able to redact significant portions of the petition in an expedited manner and provide them for FWW's review on September 8, 2006.

FDA is denying the request for a hearing on this point because a hearing will not be granted unless there is a genuine and substantial factual issue to be resolved (§ 12.24(b)(1)), and resolution of the factual issue in the way sought is adequate to justify the action requested (§ 12.24(b)(4)). Furthermore, a hearing is justified only if the objections “draw in question in a material way the underpinnings of the regulation at issue” ( Pactra Industries v. Consumer Product Safety Commission, 555 F.2d at 684), which is not the case with this objection.

Section 409 of the FD&C Act requires that a food additive be shown to be safe prior to marketing. Under § 170.3(i), a food additive is “safe” if “* * * there is a reasonable certainty in the minds of competent scientists that the substance is not harmful under the intended conditions of use.* * *” In the final rule approving the use of a Listeria -specific bacteriophage preparation for treating RTE meat and poultry products, FDA concluded that the data presented by the petitioner to establish safety of the additive demonstrate that the use of the bacteriophage preparation is safe under the conditions of use stated in the regulation. The petitioner has the burden to demonstrate the safety of the additive in order to gain FDA approval. ( See, e.g., Silverman v. Foreman, 631 F.2d 969, 972 (DC Cir. 1980).) Once FDA makes a finding of safety, the burden shifts to an objector, who must come forward with evidence that calls into question FDA's conclusion. ( See section 409(f)(1) of the FD&C Act.)

None of the objections received contained evidence to present a genuine and substantial issue of fact. Nor has the objector established that the Agency overlooked significant information in reaching its conclusion. Therefore, the Agency has determined that the objections that requested a hearing do not raise any substantial issue of fact that would justify an evidentiary hearing (§ 12.24(b)). Accordingly, FDA is not making any changes in response to the objections and is denying the requests for a hearing. In addition, FWW's request for a stay of the effectiveness of the August 18, 2006, regulation until a hearing is held is moot because FDA is denying the hearing request. FDA is confirming August 18, 2006, as the effective date of the regulation.

The following references have been placed on display in the Division of Dockets Management ( see ADDRESSES ) and may be seen by interested persons between 9 a.m. and 4 p.m. Monday through Friday.

1. “Evaluating the Safety of Food Chemicals,” National Research Council, National Academy of Sciences, Washington DC, p. 55.

2. Jacobs, T., A. Darji, N. Frahm, et al., “Listeriolysin O: Cholesterol Inhibits Cytolysis But Not Binding to Cellular Membranes,” Molecular Microbiology, 28:1081-1089, 1998.

3. U.S. Department of Agriculture Nutritive Value of Foods, Home and Garden Bulletin Number 72, USDA, Agricultural Research Service.

4. Guyton, A.C., J.E. Hall, Textbook of Medical Physiology (9th ed.) Philadelphia: W.B. Saunders Co., p. 817, 1996.

Section 512(i) of the Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 360b(i)) (21 CFR 514.105(a)) directs FDA to establish tolerances by regulation, as necessary, when a new animal drug is approved for use in food-producing animals. However, section 512(i) of the FD&C Act (21 CFR 514.115(e)) also obligates FDA to revoke such tolerance regulations upon the withdrawal of approval of the related NADA.

FDA has noticed that the animal drug regulations contain tolerances for residues of substances in food that were established by approval of FAPs for animal drug products prior to the Animal Drug Amendments of 1968 or by NADA for which an underlying application for use in a food-producing species is not currently approved. Following codification of the tolerance, the underlying FAP may have been withdrawn, or an NADA for the same drug product was not filed or was withdrawn, either voluntarily or for cause. When regulations for these products were removed or omitted from various redesignation rules, the appropriate conforming amendments to remove the revoked tolerances from part 556 (21 CFR part 556) were not made. The following chemical substances and new animal drugs have codified tolerances for which FDA finds no applications with corresponding approved conditions of use in food-producing animals:

1. 2-Acetylamino-5-nitrothiazole (§ 556.20). In 1979, FDA acknowledged the voluntary withdrawal of approval of NADA 9-424 for use of 2-acetylamino-5-nitrothiazole for use in turkey feed and revoked 21 CFR 558.25 (44 FR 40888, July 13, 1979), but did not amend part 556 to remove the associated tolerances.

2. Chlorobutanol (§ 556.140). In 1963, FDA established a tolerance for chlorobutanol in milk of dairy animals at § 121.1131 (21 CFR 121.1131) incidental to the approval of an FAP for a combination drug, antibiotic/steroid intramammary infusion (28 FR 4948, May 17, 1963). Section 121.1131 was redesignated as 21 CFR 135g.31 (35 FR 15372 at 15376, October 2, 1970) and as § 556.140 (40 FR 13802 at 13947, March 27, 1975).

3. Estradiol and progesterone in edible tissues of lambs (§§ 556.240 and 556.540). In 1973, FDA acknowledged the voluntary withdrawal of approval of a subcutaneous implant for use in lambs containing estradiol benzoate and progesterone under NADA 9-442 (38 FR 7481, March 22, 1973). Subsequently, FDA removed the approved conditions of use in 21 CFR 522.1940 (44 FR 6707 at 6708, February 2, 1979), but did not amend part 556 to remove the associated tolerances in uncooked edible tissues of lambs.

4. Ethylenediamine (§ 556.270). In 1965, FDA established a tolerance for ethylenediamine in milk of dairy animals at § 121.1184 (21 CFR 121.1184) incidental to the approval of an FAP for a combination drug, antibiotic intramammary infusion (30 FR 11952 at 11954, September 18, 1965). Section 121.1184 was redesignated as 21 CFR 135g.48 (35 FR 15372 at 15378) and as § 556.270 (40 FR 13802 at 13950).

5. Furazolidone (§ 556.290). In 1963, FDA established a tolerance for furazolidone in uncooked edible tissues of swine at § 121.2582 (21 CFR 121.2582) incidental to the approval of an FAP for use in medicated swine feed (28 FR 12664 at 12665, November 28, 1963). Section 121.2582 was redesignated as 21 CFR 121.1145 (30 FR 15845 at 15917, December 23, 1965), as 21 CFR 135g.36 (35 FR 15372 at 15376), and as § 556.290 (40 FR 13802 at 13950). In 1971, FDA proposed to withdraw approval of NADAs for use of furazolidone in food-producing animals on grounds that the drug, when administered to laboratory animals, was shown to produce tumors (36 FR 5927, March 31, 1971) and in 1991 withdrew approval after a full evidentiary hearing (56 FR 41902, August 23, 1991). Currently, there is no approved application for use of furazolidone in a food-producing species. A 1996 order codified a prohibition of extralabel use of furazolidone in food-producing animals (61 FR 57732 at 57743, November 7, 1996 as amended 67 FR 5470 at 5471, February 6, 2002). See 21 CFR 530.41(a)(7).

6. Hydrocortisone (§ 556.320). In 1970, FDA established a tolerance for hydrocortisone in milk of dairy animals at § 135g.3 (21 CFR 135g.3) incidental to the approval of an FAP for a combination drug, antibiotic/steroid intramammary infusion (35 FR 12332 at 12333, August 1, 1970). Section 135g.3 was redesignated as § 556.320 (40 FR 13802 at 13950).

7. Methylparaben (§ 556.390). In 1964, FDA established a tolerance for methylparaben in milk of dairy animals at § 121.1158 (21 CFR 121.1158) incidental to the approval of an FAP for a combination drug, antibiotic intramammary infusion (29 FR 14624, October 27, 1964). Section 121.1158 was redesignated as 21 CFR 135g.41 (35 FR 15372 at 15376) and as § 556.390 (40 FR 13802 at 13956).

8. Methylprednisolone (§ 556.400). In 1970, FDA established a tolerance for methylprednisolone in milk of dairy animals at § 135g.67 (21 CFR 135g.67) incidental to the approval of an FAP for a combination drug, antibiotic/steroid intramammary infusion (35 FR 12332 at 12333). Section 135g.67 was redesignated as § 556.400 (40 FR 13802 at 13956).

9. Prednisolone (§ 556.520). In 1964, FDA established a tolerance for prednisolone in milk of dairy animals at § 121.1147 (21 CFR 121.1147) incidental to the approval of an FAP for a combination drug, antibiotic intramammary infusion (29 FR 3393, March 14, 1964). Section 121.1147 was redesignated as 21 CFR 135g.37 (35 FR 15372 at 15376) and as § 556.520 (40 FR 13802 at 13956).

10. Prednisone (§ 556.530). In 1964, FDA established a tolerance for prednisone in milk of dairy animals at § 121.1157 (21 CFR 121.1157) incidental to the approval of an FAP for a combination drug, antibiotic intramammary infusion (29 FR 14624). Section 121.1157 was redesignated as 21 CFR 135g.40 (35 FR 15372 at 15376) and as § 556.530 (40 FR 13802 at 13956).

11. Propylparaben (§ 556.550). In 1964, FDA established a tolerance for propylparaben in milk of dairy animals at § 121.1159 incidental to the approval of an FAP for a combination drug, antibiotic intramammary infusion (29 FR 14624). Section 121.1159 was redesignated as 21 CFR 135g.42 (35 FR 15372 at 15376) and as § 556.550 (40 FR 13802 at 13956).

12. Salicylic acid (§ 556.590). In 2005, FDA acknowledged the voluntary withdrawal of approval of salicylic acid for use in cattle under NADA 010-481 and revoked 21 CFR 529.2090 (70 FR 50181, August 26, 2005), but did not remove the associated tolerance.

At this time, FDA is revoking the tolerances for 2-acetylamino-5-nitrothiazole, buquinolate, chlorobutanol, estradiol in lamb, ethylenediamine, furazolidone, hydrocortisone, methylparaben, methylprednisolone, prednisolone, prednisone, progesterone in lamb, propylparaben, and salicylic acid. Accordingly, §§ 556.20, 556.140, 556.270, 556.290, 556.320, 556.390, 556.400, 556.520, 556.530, 556.550, and 556.590 are being removed, and §§ 556.240 and 556.540 are being amended to reflect the revoked tolerances.

Also, FDA is amending the animal drug regulations in §§ 556.283 and 556.286 to cross reference an approved combination drug injectable solution containing florfenicol and flunixin (75 FR 1274, January 11, 2010). FDA is further amending § 556.286 to reflect the marker residue in milk for residues of flunixin meglumine. This action is being taken to comply with section. 512(i) of the FD&C Act and to improve the accuracy of the regulations.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs and redelegated to the Center for Veterinary Medicine, 21 CFR part 556 is amended as follows:

The Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 301 et seq. ), as amended by the Medical Device Amendments of 1976 (the 1976 amendments) (Pub. L. 94-295), the Safe Medical Devices Act of 1990 (the SMDA) (Pub. L. 101-629), and the Food and Drug Administration Modernization Act (the FDAMA) (Pub. L. 107-250) established a comprehensive system for the regulation of medical devices intended for human use. Section 513 of the FD&C Act (21 U.S.C. 360c) established three categories (classes) of devices, depending on the regulatory controls needed to provide reasonable assurance of their safety and effectiveness. The three categories of devices are class I (general controls), class II (special controls), and class III (premarket approval).

FDA refers to devices that were not in commercial distribution before May 28, 1976 (the date of enactment of the 1976 amendments), as postamendments devices. Postamendments devices are classified automatically by statute (section 513(f) of the FD&C Act into class III without any FDA rulemaking process. These devices remain in class III and require premarket approval, unless: (1) FDA reclassifies the device into class I or II; (2) FDA issues an order classifying the device into class I or class II in accordance with section 513(f)(2) of the FD&C Act; or (3) FDA issues an order finding the device to be substantially equivalent, under section 513(i), to a predicate device that does not require premarket approval. The Agency determines whether new devices are substantially equivalent to predicate devices by means of premarket notification procedures in section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 of the regulations (21 CFR part 807).

A person may market a preamendments device that has been classified into class III through premarket notification procedures, without submission of a premarket approval application (PMA) until FDA issues a final regulation under section 515(b) of the FD&C Act (21 U.S.C. 360e(b)) requiring premarket approval.

Reclassification of postamendments devices is governed by section 513(f)(3) of the FD&C Act, formerly section 513(f)(2). This section provides that FDA may initiate the reclassification of a device classified into class III under section 513(f)(1) of the FD&C Act, or the manufacturer or importer of a device may petition the Secretary for the issuance of an order classifying the device in class I or class II. FDA's regulations in 21 CFR 860.134 set forth the procedures for the filing and review of a petition for reclassification of such class III devices. In order to change the classification of the device, it is necessary that the proposed new class have sufficient regulatory controls to provide reasonable assurance of the safety and effectiveness of the device for its intended use.

FDAMA added section 513(f)(2) to the FD&C Act which addresses classification of postamendments devices. Section 513(f)(2) of the FD&C Act provides that, upon receipt of a “not substantially equivalent” determination, a 510(k) applicant may request FDA to classify a postamendments device into class I or class II. Within 60 days from the date of such a written request, FDA must classify the device by written order. If FDA classifies the device into class I or II, the applicant has then received clearance to market the device and it can be used as a predicate device for other 510(k)s. It is expected that this process will be used for low risk devices. This process does not apply to devices that have been classified by regulation into class III—i.e., preamendments class III devices, or class III devices for which a PMA is appropriate.

In accordance with section 513(f)(1) of the FD&C Act, FDA issued an order on July 16, 2009, classifying the Vermillion, Inc. OVA1 TM Test into class III, because it was not substantially equivalent to a device that was introduced or delivered for introduction into interstate commerce for commercial distribution before May 28, 1976, or a device that was subsequently reclassified into class I or class II. On July 22, 2009, Vermillion, Inc., submitted a petition requesting classification of the OVA1 TM Test under section 513(f)(2) of the FD&C Act. The manufacturer recommended that the device be classified into class II (Ref. 1).

In accordance with section 513(f)(2) of the FD&C Act, FDA reviewed the petition in order to classify the device under the criteria for classification set forth in section 513(a)(1). FDA classifies devices into class II if general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls to provide reasonable assurance of the safety and effectiveness of the device for its intended use. After review of the information submitted in the petition, the FDA determined that the device can be classified into class II with the establishment of special controls. FDA believes these special controls will provide reasonable assurance of the safety and effectiveness of the device.

The device is assigned the generic name ovarian adnexal mass assessment score test system, and it is identified as a device that measures one or more proteins in serum or plasma. It yields a single result for the likelihood that an adnexal pelvic mass in a woman, for whom surgery is planned, is malignant. The test is for adjunctive use, in the context of a negative primary clinical and radiological evaluation, to augment the identification of patients whose gynecologic surgery requires oncology expertise and resources.

FDA has identified the risks to health associated with this type of device as a false negative result, a false positive result, and off-label use as a screening test, stand-alone diagnostic test, or as a test to determine whether or not to proceed with surgery. Failure of the system to perform as indicated could lead to inaccurate risk assessment and improper management of patients with ovarian malignancies. Specifically, a falsely low ovarian adnexal mass score could result in a determination that the patient may not have ovarian malignancy, which could lead to less than optimal surgical expertise and resources. A falsely high ovarian adnexal mass score could result in a determination that the patient may have ovarian malignancy which could lead to inappropriate surgical decisions and unnecessary patient anxiety. Off-label use of the test, including use of test results as a stand-alone diagnostic without consideration of other diagnostic testing and clinical assessment, could also pose a risk for morbidity and mortality due to non-referral for oncologic evaluation and treatment.

FDA believes that the special controls guidance document, in addition to general controls, addresses the risks to health identified above and provides reasonable assurance of the safety and effectiveness of the device. Therefore, on September 11, 2009, FDA issued an order to the petitioner classifying the device into class II. FDA is codifying this device by adding § 866.6050.

Following the effective date of this final classification rule, any firm submitting a 510(k) premarket notification for ovarian adnexal mass assessment score test system will need to address the issues covered in the special controls guidance. However, the firm need only show that its device meets the recommendations of the guidance or in some other way provides equivalent assurance of safety and effectiveness.

Section 510(m) of the FD&C Act provides that FDA may exempt a class II device from the premarket notification requirements under section 510(k), if FDA determines that premarket notification is not necessary to provide reasonable assurance of the safety and effectiveness of the device. For this type of device, FDA has determined because of the risks of false positives and negatives and off label use that premarket notification is necessary to provide reasonable assurance of the safety and effectiveness of the device and, therefore, this type of device is not exempt from premarket notification requirements. Persons who intend to market this type of device must submit to FDA a premarket notification, prior to marketing the device, which contains information about the ovarian adnexal mass assessment score test system they intend to market.

The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

FDA has examined the impacts of the final rule under Executive Order 12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Order 12866 directs Agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Agency believes that this final rule is not a significant regulatory action under the Executive order.

The Regulatory Flexibility Act requires Agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. Because this rule is deregulatory and imposes no new burdens, the Agency certifies that the final rule will not have a significant economic impact on a substantial number of small entities.

Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that Agencies prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $135 million, using the most current (2009) Implicit Price Deflator for the Gross Domestic Product. FDA does not expect this final rule to result in any 1-year expenditure that would meet or exceed this amount.

An ovarian adnexal mass assessment test system is a device that measures one or more proteins in serum or plasma to yield a single result for the likelihood that an adnexal pelvic mass in a woman for whom surgery is planned is malignant. Such a test would identify women who would benefit from referral to a gynecological oncologist, despite negative results from other clinical and radiographic tests for ovarian cancer.

The ovarian adnexal mass assessment test system device is currently classified into class III, the highest level of regulatory oversight. The device was initially placed in this classification automatically because there was no predicate device to which it could be found substantially equivalent. Manufacturers of ovarian adnexal mass assessment test systems, as makers of class III devices, bear all costs associated with premarket approval, including the cost of submitting the premarket approval application (PMA) and payment of user fees. The costs associated with the submission of the PMA are substantial, potentially reaching $1,000,000.

We are aware of a single manufacturer producing a single product affected by this device classification. The manufacturer submitted a request for Evaluation of Automatic Class III Designation, recommending classification into class II. Placing this device in a classification with less burdensome regulatory requirements affects the current manufacturer and potentially affects others, encouraging future entry into this market.

In response to the manufacturer request, FDA is classifying ovarian adnexal mass assessment test system devices into class II. Based on the experience of FDA reviewers, the Agency concludes that the ovarian adnexal mass assessment test system device would not be safe and effective under general controls. FDA has therefore chosen special controls to address the specific risks of false positives, false negatives, and off-label use. These special controls in addition to the application of general controls would be consistent with the principle of applying the least degree of regulatory control necessary to provide reasonable assurance of safety and effectiveness. The application of this intermediate level of regulatory oversight would be consistent with the treatment of other devices with similar risk profiles.

The special controls recommend a black box warning to reduce the risks of off-label use. The Agency is separately proposing to require the application of the black box warning to labeling and advertising through notice and comment rulemaking. For the purposes of this analysis, we assume that this final rule will establish special controls with a reference to a black box warning regarding off-label use, but the analysis of the impact of the addition of the warning to the product label will be included in a separate rulemaking.

This final rule is deregulatory. Device manufacturers currently subject to class III requirements will be subject to the less burdensome requirements for makers of class II devices. Through this classification, manufacturers of ovarian adnexal mass assessment test system devices will be relieved of the obligation to submit a PMA prior to marketing. The cost of submitting a PMA can reach $1,000,000, plus user fees of an additional $217,787 in FY 2010, increasing to $256,384 in 2012. This device classification will substantially reduce an existing burden on manufacturers of ovarian adnexal mass assessment test system devices. Considering the cost of submitting a PMA plus the relevant user fees, the reduction could be $1,000,000 per device.

The Regulatory Flexibility Act requires Agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. Classification of the affected device into class II after it had automatically been placed in class III will relieve manufacturers of the cost of complying with the premarket approval requirements of section 515 of the FD&C Act. Because of the reduced burden, the Agency does not believe that this final rule will have a significant economic impact on a substantial number of small entities.

FDA has analyzed this final rule in accordance with the principles set forth in Executive Order 13132. Section 4(a) of the Executive Order requires Agencies to “construe * * * a Federal statute to preempt State law only where the statute contains an express preemption provision or there is some other clear evidence that the Congress intended preemption of State law, or where the exercise of State authority conflicts with the exercise of Federal authority under the Federal statute.” Federal law includes an express preemption provision that preempts certain state requirements “different or in addition to” certain federal requirements applicable to devices. 21 U.S.C. 360k; See Medtronic v. Lohr, 518 U.S. 470 (1996); Riegel v. Medtronic, Inc., 552 U.S. 312 (2008). The special controls established by this rulemaking create “requirements” to address each identified risk to health presented by these specific medical devices under 21 U.S.C. 360k, even though product sponsors may have flexibility in how they meet those requirements. Cf. Papike v. Tambrands, Inc., 107 F.3d 737, 740-42 (9th Cir. 1997).

This final rule establishes as special controls a guidance document that refers to previously approved collections of information found in other FDA regulations. These collections of information are subject to review by the Office of Management and Budget under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). Elsewhere in this issue of the Federal Register , FDA is publishing a notice announcing the availability of the guidance document entitled “Guidance for Industry and FDA Staff; Class II Special Controls Guidance Document: Ovarian Adnexal Mass Assessment Score Test System.” The notice contains an analysis of the paperwork burden for the guidance.

The following reference has been placed on display in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday.

1. Petition from Vermillion, Inc., for reclassification of the OVA1 TM Test submitted July 22, 2009.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 866 is amended as follows:

The Coast Guard is issuing this final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because the drawbridge requiring draw operations in 33 CFR 117.955(b), was removed and replaced with a fixed span bridge in 1991. The bridge operator and those transiting in the vicinity of this bridge have not been governed by the draw operations since the bridge was removed and replaced. Therefore, the regulation is no longer applicable and should be removed from publication.

Under 5 U.S.C. 553(d)(1), a rule that relieves a restriction is not required to provide the 30 day notice period before its effective date. This rule removes the draw operations requirements under 33 CFR 117.955(b), thus removing a regulatory restriction on the public. Additionally, under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective in less than 30 days after publication in the Federal Register . The bridge has been a fixed bridge for 20 years and this rule only requires an administrative change to the Federal Register , omitting a regulatory requirement that is no longer applicable or necessary.

The drawbridge across Buffalo Bayou, mile 4.3, was removed and replaced with a fixed bridge in 1991. The elimination of this drawbridge necessitates the removal of the drawbridge operation regulation pertaining to this drawbridge.

The regulation governing the operation of the bridge is found in 33 CFR 117.955(b). The purpose of this rule is to remove the section of 33 CFR 117.955 (b) that refers to the bridge at mile 4.3, from the Code of Federal Regulations since it governs a bridge that is no longer able to be opened.

The Coast Guard is changing the regulation in 33 CFR 117 by removing restrictions and the regulatory burden related to the draw operations for this bridge that is no longer in existence without publishing an NPRM. The change removes the section of the regulation governing the bridge since the bridge has been replaced with a fixed bridge. This change does not affect vessel operators using the waterway. Thus, it is not necessary to publish an NPRM.

We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on 13 of these statutes or executive orders.

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

The Coast Guard does not consider this rule to be “significant” under that Order because it is an administrative change and does not affect the way vessels operate on the waterway.

Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), the Coast Guard considers whether this final rule will have a significant economic impact on a substantial number of small entities. “Small entities” include (1) small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and (2) governmental jurisdictions with populations of less than 50,000.

Since the drawbridge across the Buffalo Bayou, mile 4.3 at Houston, Texas, has been removed and replaced with a fixed bridge, the regulation governing draw operations for this bridge is no longer needed. There is no new restriction or regulation being imposed by this rule; therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that this final rule will not have a significant economic impact on a substantial number of small entities.

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

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

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

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

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

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

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

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

The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies.

This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that this action is one of a category of actions which do not individually or cumulatively have a significant effect on the human environment. This rule is categorically excluded, under figure 2-1, paragraph (32)(e), of the Instruction.

Under figure 2-1, paragraph (32)(e), of the Instruction, an environmental analysis checklist and a categorical exclusion determination are not required for this rule.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 117 as follows:

The Maryland State Highway Administration (SHA), who owns and operates this single leaf bascule drawbridge, has requested a temporary deviation from the current operating schedule to facilitate the cleaning and painting of the structure. Under the regular operating schedule, the bridge opens on signal as required by 33 CFR 117.569(c) if at least five hours advance notice is given.

The S12 Bridge across Pocomoke River, mile 29.9 at Snow Hill MD, has a vertical clearance in the closed position of two feet above mean high water and five feet above mean low water. Under this temporary deviation, the contractor has requested to maintain the bridge in the closed position to vessels from 7 a.m. on March 15, 2011 through 11:59 p.m. on May 30, 2011, to allow for the potential delays caused by anticipated seasonal weather patterns that will interfere with environmental conditions required for sandblasting and painting of the bridge.

Bridge opening data supplied by SHA and reviewed by the Coast Guard revealed vessel openings of the draw span from March 2010 through May 2010. Specifically, the drawbridge opened for vessels a total of 23, 13, and 25 times during the months of March 2010 through May 2010, respectively. We also contacted a nearby canoe shop owner who indicated that he can work around the restrictions.

The Coast Guard has coordinated the restrictions with the local users of the waterway and will inform other users through our Local and Broadcast Notices to Mariners of the closure periods for the bridge so that vessels can arrange their transits to minimize any impact caused by the temporary deviation. There are no alternate routes for vessels transiting this section of the Pocomoke River and the drawbridge will be able to open in the event of an emergency.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period.

This deviation from the operating regulations is authorized under 33 CFR 117.35.

The California Department of Transportation requested a temporary change to the operation of the Commodore Schuyler F. Heim Drawbridge, mile 4.9, over Cerritos Channel, at Long Beach, CA. The drawbridge navigation span provides a vertical clearance of 37 feet above Mean High Water in the closed-to-navigation position and 163 feet in the full open to navigation position. As required by 33 CFR 117.147, the draw shall open on signal; except that, from 6:30 a.m. to 8 a.m. and 3:30 p.m. to 6 p.m., Monday through Friday except Federal holidays, the draw need not be opened for the passage of vessels. Navigation on the waterway is commercial, recreational, search and rescue, and law enforcement.

The drawspan will be secured in the closed-to-navigation position from 7 a.m. through 7 p.m. on March 26, 2011 to perform critical repair and replacement of electrical components for drawspan operation. The alternative path around Terminal Island will be available for routine and emergency navigation. This temporary deviation has been coordinated with commercial and recreational waterway users. No objections to the proposed temporary deviation were raised.

Vessels that can transit the bridge, while in the closed-to-navigation position, may continue to do so at any time.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. Potentially affected entities may include, but are not limited to:

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

You may access a frequently updated electronic version of 40 CFR part 180 through the Government Printing Office's e-CFR site at http://www.gpoaccess.gov/ecfr.

Under FFDCA section 408(g), 21 U.S.C. 346a(g), any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2010-0101 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before May 23, 2011. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing that does not contain any CBI for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit a copy of your non-CBI objection or hearing request, identified by docket ID number EPA-HQ-OPP-2010-0101, by one of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the on-line instructions for submitting comments.

• Mail: OPP Regulatory Public Docket (7502P), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001.

• Delivery: OPP Regulatory Public Docket (7502P), Environmental Protection Agency, Rm. S-4400, One Potomac Yard (South Bldg.), 2777 S. Crystal Dr., Arlington, VA. Deliveries are only accepted during the Docket Facility's normal hours of operation (8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays). Special arrangements should be made for deliveries of boxed information. The Docket Facility telephone number is (703) 305-5805.

In the Federal Register of March 3, 2010 (75 FR 9596) (FRL-8811-2), EPA issued a notice pursuant to section 408(d)(3) of FFDCA, 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide tolerance petition (PP 9E7662) by the Arizona Cotton Research and Protection Council, 3721 East Wier Ave., Phoenix, AZ 85040-2933. The petition requested that 40 CFR 180.1206 be amended by establishing an exemption from the requirement of a tolerance for residues of Aspergillus flavus AF36 in or on corn food and feed commodities. This notice referenced a summary of the petition prepared on behalf of the petitioner, Arizona Cotton Research and Protection Council, which is available in the docket, http://www.regulations.gov. Comments were received on the notice of filing. EPA's response to these comments is discussed in Unit VII.C.

Section 408(c)(2)(A)(i) of FFDCA allows EPA to establish an exemption from the requirement for a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the exemption is “safe.” Section 408(c)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings but does not include occupational exposure. Pursuant to section 408(c)(2)(B) of FFDCA, in establishing or maintaining in effect an exemption from the requirement of a tolerance, EPA must take into account the factors set forth in section 408(b)(2)(C) of FFDCA, which require EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. * * *” Additionally, section 408(b)(2)(D) of FFDCA requires that EPA consider “available information concerning the cumulative effects of [a particular pesticide's] residues and other substances that have a common mechanism of toxicity.”

EPA performs a number of analyses to determine the risks from aggregate exposure to pesticide residues. First, EPA determines the toxicity of pesticides. Second, EPA examines exposure to the pesticide through food, drinking water, and through other exposures that occur as a result of pesticide use in residential settings.

Consistent with section 408(b)(2)(D) of FFDCA, EPA has reviewed the available scientific data and other relevant information in support of this action and considered its validity, completeness, and reliability, and the relationship of this information to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children.

The nature and toxicological profile of Aspergillus flavus AF36 was previously described in the Federal Register of July 14, 2003 (68 FR 41541) (FRL-7311-6). Those health effects data were the basis for establishing the tolerance exemption for Aspergillus flavus AF36, a non-aflatoxin-producing strain of Aspergillus flavus, in or on cotton and its food/feed commodities in 40 CFR 180.1206 and also for temporary tolerance exemptions for experimental use of Aspergillus flavus AF36 on pistachio (72 FR 28871, May 23, 2007) (FRL-8129-4) and on corn (72 FR 72965, Dec. 26, 2007) (FRL-8342-1). EPA has reviewed the available data in support of this action.

Aspergillus flavus AF36 is neither toxic nor infective via the oral and pulmonary routes. It was placed in Toxicity Category IV for acute oral effects. The Toxicity Category III designation for acute inhalation effects is based on the granular nature of the pesticide and the submitted pulmonary studies. This microbial pesticide has been used for more than a decade in experimental laboratory and field trials and in agricultural practice on cotton in Arizona, California, and Texas without any reports of adverse dermal irritation or hypersensitivity effects. Data and information from the public literature indicate that there will not be any incremental harm from the use of Aspergillus flavus AF36 for reduction of aflatoxin. No further toxicological data are required to support this exemption from the requirement of a tolerance for Aspergillus flavus AF36 in or on the food and feed commodities of corn.

In examining aggregate exposure, section 408 of FFDCA directs EPA to consider available information concerning exposures from the pesticide residue in food and all other non-occupational exposures, including drinking water from ground water or surface water and exposure through pesticide use in gardens, lawns, or buildings (residential and other indoor uses).

1. Food. Current uses of Aspergillus flavus AF36 include use on cotton, pistachios, and corn. EPA does not expect these uses to result in any exposure that is greater than background levels of Aspergillus flavus. As a microbial pesticide for use on corn, Aspergillus flavus AF36 is labeled for application from the V7 growth stage (i.e., approximately 21-25 days after plant emergence) until silking ( i.e., approximately 55-66 days after plant emergence). Once applied to corn and after exposure to moisture, Aspergillus flavus AF36 germinates, using the carrier upon which it is placed as a nutrient source, and effectively displaces aflatoxin-producing strains of Aspergillus flavus without increasing levels of cyclopiazonic acid (Ref. 1). Further, multiple-year studies, which monitored air and soil populations of Aspergillus flavus, including strain AF36, in cotton fields, demonstrated replacement of toxigenic (aflatoxin-producing) fungi with atoxic fungi without an increase in the overall quantity of Aspergillus flavus beyond normal background levels (Refs. 2 and 3). Although residues from the use of pesticides containing Aspergillus flavus AF36 will likely be present on corn at the time of harvest (although likely not at higher levels than background), much like other microbial pest control agents, commodity-processing procedures ( e.g., peeling, shucking, washing, and cooking) should further reduce levels of Aspergillus flavus AF36 below typical background levels (Ref. 4). Finally, even with the potential for negligible exposure to Aspergillus flavus AF36 on edible corn commodities, a previously reviewed and described acute oral toxicity and pathogenicity study ( see Unit III. of the Federal Register of July 14, 2003 (68 FR 41541) (FRL-7311-6)) showed no toxicity or infectivity in animals exposed to high levels of this active ingredient.

2. Drinking water exposure. Exposure to Aspergillus flavus AF36 via drinking water from all uses of Aspergillus flavus AF36 is not likely to be greater than current/existing exposures to Aspergillus flavus strains, which are already present in the environment. Potential risks via exposure to drinking water or runoff may be mitigated by, among other things, percolation through soil. Thus, EPA expects exposure via drinking water from the proposed use of this non-aflatoxin-producing strain of Aspergillus flavus to be low, or at least not greater than existing background levels. In any event, any drinking water exposure is not likely to pose any incremental risk to adult humans, infants and children because of the lack of toxicity or infectivity of this substance. In fact, displacement of the toxigenic strains of Aspergillus flavus by AF36 may decrease exposure and risk to the toxigenic strains of Aspergillus flavus in the environment.

Dermal and inhalation non-occupational exposure are expected to be minimal to non-existent for the proposed use of Aspergillus flavus AF36 in or on corn. Aspergillus flavus AF36 is to be applied to agricultural sites not in the proximity of residential areas, schools, nursing homes, or daycares. Additionally, the Aspergillus flavus AF36 product to be applied to corn is in a granular form, thereby minimizing spray drift even for application methods (e.g., aerial) that may be more likely to result in pesticide movement offsite.

Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, EPA consider “available information concerning the cumulative effects of [a particular pesticide's] residues and other substances that have a common mechanism of toxicity.”

EPA has not found Aspergillus flavus AF36 to share a common mechanism of toxicity with any other substances, and Aspergillus flavus AF36 does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that Aspergillus flavus AF36 does not have a common mechanism of toxicity with other substances. Following from this, therefore, EPA concludes that there are no cumulative effects associated with Aspergillus flavus AF36 that need to be considered. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see EPA's Web site at http://www.epa.gov/pesticides/cumulative.

There is reasonable certainty that no harm will result from aggregate exposures to residues of Aspergillus flavus AF36, in its use as an antifungal agent, to the U. S. population, including infants and children. This includes all anticipated dietary exposures and all other exposures for which there is reliable information. As discussed previously, there appears to be no potential for harm from this fungus in its use as an antifungal agent via dietary exposure since the organism is non-toxic and non-pathogenic to animals and humans. EPA has arrived at this conclusion based on the very low levels of mammalian toxicity for acute oral and pulmonary effects with no toxicity or infectivity at the doses tested ( See Unit III. above).

FFDCA section 408(b)(2)(C) provides that EPA shall apply an additional ten-fold margin of exposure (safety) for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the data base unless EPA determines that a different margin of exposure (safety) will be safe for infants and children. Margins of exposure (safety) are often referred to as uncertainty (safety) factors. In this instance, based on all the available information, EPA concludes that the fungus, Aspergillus flavus AF36, is non-toxic to mammals, including infants and children. Because there are no threshold effects of concern to infants, children and adults when Aspergillus flavus AF36 is used as labeled, the provision requiring an additional margin of safety does not apply. As a result, EPA has not used a margin of exposure (safety) approach to assess the safety of Aspergillus flavus AF36.

An analytical method is not required for enforcement purposes since EPA is establishing an exemption from the requirement of a tolerance without any numerical limitation.

In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. In this context, EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint U.N. Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level.

The Codex has not established a MRL for Aspergillus flavus AF36.

In total, four comments were received in response to the Federal Register notice published by EPA to announce receipt of the Arizona Cotton Research and Protection Council's petition. Three comments expressed support for the petition, while the other comment was filed in opposition.

The one substantive, negative comment indicated overall support for Aspergillus flavus NRRL 21882, another microbial pesticide intended for aflatoxin reduction. Primarily, this commenter articulated concern about the possible expression of cyclopiazonic acid (CPA) by the Aspergillus flavus 36 atoxigenic strain. That is, the commenter asserted that, while reduction of aflatoxin is an admirable goal, the substitution of one mycotoxin, aflatoxin, for another, CPA (albeit a less toxic one), was not acceptable. The commenter claimed that CPA could only be observed in field trials and was not directly observed by analysis of the active ingredient.

Field trial data presented by the petitioner to EPA demonstrated that there was no increase in CPA levels above background in treated corn. In addition, the use of Aspergillus flavus AF36 reduced aflatoxin levels in the treated fields compared to untreated plots. Given this new information (See Ref. 1), as well as previously reviewed data on Aspergillus flavus AF36, EPA has concluded there is a reasonable certainty that no harm will result to the U.S. population, including infants and children, from aggregate exposure to residues of Aspergillus flavus AF36 in or on the food and feed commodities of corn, when applied/used as an antifungal agent. Thus, under the standard in FFDCA section 408(c)(2), a tolerance exemption is appropriate.

EPA concludes that there is a reasonable certainty that no harm will result to the U.S. population, including infants and children, from aggregate exposure to residues of Aspergillus flavus AF36. Therefore, an exemption is established for residues of Aspergillus flavus AF36 in or on corn, field, forage; corn, field, grain; corn, field, stover; corn, field, aspirated grain fractions; corn, sweet, kernel plus cob with husk removed; corn, sweet, forage; corn, sweet, stover; corn, pop, grain; and corn, pop, stover, when applied/used as an antifungal agent.

This final rule establishes an exemption from the requirement of a tolerance under section 408(d) of FFDCA in response to a petition submitted to EPA. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled Regulatory Planning and Review (58 FR 51735, October 4, 1993). Because this final rule has been exempted from review under Executive Order 12866, this final rule is not subject to Executive Order 13211, entitled Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use (66 FR 28355, May 22, 2001), or Executive Order 13045, entitled Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997). This final rule does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq., nor does it require any special considerations under Executive Order 12898, entitled Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations (59 FR 7629, February 16, 1994).

Since tolerances and exemptions that are established on the basis of a petition under section 408(d) of FFDCA, such as the tolerance exemption in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ) do not apply.

This final rule directly regulates growers, food processors, food handlers, and food retailers, not States or tribes. As a result, this action does not alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of section 408(n)(4) of FFDCA. As such, EPA has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, EPA has determined that Executive Order 13132, entitled Federalism (64 FR 43255, August 10, 1999), and Executive Order 13175, entitled Consultation and Coordination with Indian Tribal Governments (65 FR 67249, November 9, 2000), do not apply to this final rule. In addition, this final rule does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4).

This action does not involve any technical standards that would require EPA consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note).

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

Therefore, 40 CFR chapter I is amended as follows:

I. General Information A. Does this action apply to me?

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. Potentially affected entities may include, but are not limited to those engaged in the following activities:

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

This listing is not intended to be exhaustive, but rather to provide a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

You may access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's e-CFR site at http://www.gpoaccess.gov/ecfr.

Under section 408(g) of FFDCA, 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2007-0099 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before May 23, 2011. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing that does not contain any CBI for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit a copy of your non-CBI objection or hearing request, identified by docket ID number EPA-HQ-OPP-2007-0099, by one of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the on-line instructions for submitting comments.

• Mail: Office of Pesticide Programs (OPP) Regulatory Public Docket (7502P), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001.

• Delivery: OPP Regulatory Public Docket (7502P), Environmental Protection Agency, Rm. S-4400, One Potomac Yard (South Bldg.), 2777 S. Crystal Dr., Arlington, VA. Deliveries are only accepted during the Docket Facility's normal hours of operation (8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays). Special arrangements should be made for deliveries of boxed information. The Docket Facility telephone number is (703) 305-5805.

In the Federal Register of June 8, 2010 (75 FR 32464 and 32465) (FRL-8827-5), EPA issued a notice pursuant to section 408(d)(3) of FFDCA, 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 0F7685) by Bayer CropScience LP in c/o Nichino America, Inc. (U.S. subsidiary of Nihon Nohyaku Co., Ltd.), P.O. Box 12014, Research Triangle Park, NC 27709-2014. The petition requested that 40 CFR 180.639 be amended by establishing and/or amending tolerances for residues of flubendiamide N   2 -[1,1-dimethyl-2-(methylsulfonyl)ethyl]-3-iodo- N   1 -[2-methyl-4-[1,2,2,2-tetrafluoro-1-(trifluoromethyl)ethyl]phenyl]-1,2-benzenedicarboxamide in or on artichoke, globe, flower head at 1.6 parts per million (ppm); hog, fat at 0.15 ppm; hog, kidney at 0.06 ppm; hog, liver at 0.06 ppm; hog, muscle at 0.02 ppm; low growing berry subgroup (crop sub-group 13-07G), except cranberry at 1.5 ppm; peanut, hay at 60 ppm; peanut, meal at 0.032 ppm; peanut, nutmeat at 0.02 ppm; peanut, refined oil at 0.04 ppm; pistachio at 0.06 ppm; safflower, seed at 4.5 ppm; small fruit vine climbing subgroup except fuzzy kiwifruit (crop sub-group 13-07F) at 1.4 ppm; sorghum, grain, forage at 13 ppm; sorghum, grain, grain at 5.0 ppm; sorghum, grain, stover at 18 ppm; sugarcane, cane at 0.30 ppm; sunflower, seed at 4.5 ppm; and turnip, greens at 25 ppm and by revising existing tolerances for residues of flubendiamide in or on alfalfa, forage from 0.15 ppm (rotational crop) to 25 ppm; alfalfa, hay from 0.04 ppm (rotational crop) to 65 ppm; brassica, head and stem subgroup 5A from 0.60 ppm to 4.0 ppm; brassica, leafy greens subgroup 5B from 5.0 ppm to 25 ppm; cattle, fat from 0.60 ppm to 0.8 ppm; cattle, kidney from 0.60 ppm to 0.4 ppm; cattle, liver from 0.60 ppm to 0.4 ppm; cattle, muscle from 0.07 ppm to 0.1 ppm; eggs from 0.03 ppm to 0.7 ppm; goat, fat from 0.60 ppm to 0.8 ppm; goat, kidney from 0.60 ppm to 0.4 ppm; goat, liver from 0.60 ppm to 0.4 ppm; goat, muscle from 0.07 ppm to 0.1 ppm; grain, aspirated fractions from 103 ppm to 215 ppm; horse, fat from 0.60 ppm to 0.8 ppm; horse, kidney from 0.60 ppm to 0.4 ppm; horse, liver from 0.60 ppm to 0.4 ppm; horse, muscle from 0.07 ppm to 0.1 ppm; milk, fat from 0.80 ppm to 1.0 ppm; poultry, fat from 0.15 ppm to 3.0 ppm; poultry, liver from 0.03 ppm to 0.8 ppm; poultry, muscle from 0.01 ppm to 0.1 ppm; sheep, fat from 0.60 ppm to 0.8 ppm; sheep, kidney from 0.60 ppm to 0.4 ppm; sheep, liver from 0.60 ppm to 0.4 ppm; and sheep, muscle from 0.07 ppm to 0.1 ppm. That notice referenced a summary of the petition prepared by Bayer CropScience LP in c/o Nichino America, Inc. (U.S. subsidiary of Nihon Nohyaku Co., Ltd.), the registrant, which is available in the docket at http://www.regulations.gov. There were no substantive comments received in response to the notice of filing.

Based upon review of the data supporting the referenced petition, EPA has revised the numerical level for several of the petitioned-for tolerances for flubendiamide, and is also revoking several now superseded tolerances. The reasons for these changes are explained in Unit IV.C.

Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue.* * *”

Consistent with section 408(b)(2)(D) of FFDCA, and the factors specified in section 408(b)(2)(D) of FFDCA, EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for flubendiamide including exposure resulting from the tolerances established by this action. EPA's assessment of exposures and risks associated with flubendiamide follows.

EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. The first human health risk assessment for flubendiamide (April 3, 2008) was conducted for uses on corn, cotton, tobacco, tree fruit, tree nuts, vine crops, and vegetable crops. Since that time, no new toxicology data has been submitted to the Agency. The following summary represents all the salient features regarding hazard characterization and endpoint selection for flubendiamide.

Flubendiamide has a low acute toxicity via the oral, dermal and inhalation routes of exposure. Though it is a slight irritant to the eye, flubendiamide is not a skin irritant and it is not a skin sensitizer under the conditions of the guinea pig maximization test.

In the mammalian toxicology database, the primary target organ of flubendiamide exposure is the liver, with secondary effects reported in the thyroid and kidney at equivalent or higher doses; no-observed-adverse-effect-levels (NOAELs) established to protect for liver toxicity are protective of effects seen in the thyroid and kidney. Adverse adrenal effects were also noted in the dog.

Buphthalmia (eye enlargement), opacity, and exophthalmus with hemorrhage appearing only in infancy, were observed in rat offspring in the reproductive and developmental neurotoxicity (DNT) studies. There was no clear dose-response relationship for this effect but ocular toxicity was noted in three rat studies and accompanied by histopathological findings of synechia, hemorrhage, keratitis, iritis, and cataracts. Therefore, bupthalmos is considered an effect of treatment. No evidence of cancer was seen for flubendiamide in cancer bioassays in mice and rats. Flubendiamide was also negative in mutagenicity testing. Accordingly, flubendiamide was classified as “Not Likely To Be Carcinogenic to Humans.”

More detailed information on the studies received and the nature of the adverse effects caused by flubendiamide as well as the NOAEL and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies can be found in the document entitled, “Flubendiamide: Human Health Risk Assessment for Proposed Uses on Corn, Cotton, Tobacco, Tree Fruit, Tree Nuts, Vine crops and Vegetable Crops,” dated April 3, 2008, by going to http://www.regulations.gov. The referenced document is available in the docket established by this action, which is described under ADDRESSES . Locate and click on the hyperlink for docket ID number EPA-HQ-OPP-2007-0099. Double-click on the document to view the referenced information on pages 65-70 of 105.

Once a pesticide's toxicological profile is determined, EPA identifies toxicological points of departure (POD) and levels of concern (LOC) to use in evaluating the risk posed by human exposure to the pesticide. For hazards that have a threshold below which there is no appreciable risk, the toxicological POD is used as the basis for derivation of reference values for risk assessment. PODs are developed based on a careful analysis of the doses in each toxicological study to determine the dose at which the NOAEL and the lowest dose at which adverse effects of concern are identified (the LOAEL). Uncertainty/safety factors are used in conjunction with the POD to calculate a safe exposure level—generally referred to as a population-adjusted dose (PAD) (a = acute, c = chronic) or a reference dose (RfD)—and a safe margin of exposure (MOE). For non-threshold risks, the Agency assumes that any amount of exposure will lead to some degree of risk. Thus, the Agency estimates risk in terms of the probability of an occurrence of the adverse effect expected in a lifetime. For more information on the general principles EPA uses in risk characterization and a complete description of the risk assessment process, see http://www.epa.gov/pesticides/factsheets/riskassess.htm.

A summary of toxicological endpoints for flubendiamide used for human risk assessment is shown in Table 1 of this unit.

A summary of the toxicological endpoints for flubendiamide used for human risk assessment can be found in the document entitled, “Flubendiamide: Human Health Risk Assessment for Proposed Uses on Corn, Cotton, Tobacco, Tree fruit, Tree nuts, Vine crops and Vegetable crops,” dated April 3, 2008, by going to http://www.regulations.gov. The referenced document is available in the docket established by this action, which is described under ADDRESSES . Locate and click on the hyperlink for docket ID number EPA-HQ-OPP-2007-0099. Double-click on the document to view the referenced information on pages 37-38 of 105.

1. Dietary exposure from food and feed uses. In evaluating dietary exposure to flubendiamide, EPA considered exposure under the petitioned-for tolerances as well as all existing flubendiamide tolerances in 40 CFR 180.639. Acute and chronic dietary (food and drinking water) exposure assessments were conducted using the Dietary Exposure Evaluation Model, Version 2.03—Food Commodity Intake Database (DEEM-FCID TM ) which uses food consumption information from the United States Department of Agriculture's (USDA) 1994-1996 and 1998 Nationwide Continuing Surveys of Food Intake by Individuals (CSFII). EPA assessed dietary exposures from flubendiamide in food for the proposed new uses as follows:

i. Acute exposure. Quantitative acute dietary exposure and risk assessments are performed for a food-use pesticide, if a toxicological study has indicated the possibility of an effect of concern occurring as a result of a 1-day or single exposure. Such effects were identified for flubendiamide. In estimating acute dietary exposure, EPA used DEEM-FCID TM along with food consumption information from the USDA 1994-1996 and 1998 CSFII. As to residue levels in food, for the acute assessment, the modeled exposure estimates are based on tolerance level residues, assuming 100% of crops were treated. In addition, experimental processing (where available) factors were assumed for both registered and requested crop uses.

ii. Chronic exposure. In conducting the chronic dietary exposure assessment EPA used DEEM-FCID TM along with the food consumption data from the USDA 1994-1996 and 1998 CSFII. As to residue levels in food, EPA assumed a subset of the currently registered crops contain residues at the average residue levels found in the crop field trials. For the newly proposed crops, livestock commodities, and the remaining currently registered crops, EPA assumed tolerance level residues. In addition, experimental processing factors were used where available. Finally, EPA assumed 100% of crops were treated.

iii. Cancer. Based on the data summarized in Unit III.A., EPA has concluded that flubendiamide should be classified as “Not Likely To Be Carcinogenic to Humans.” As a result, a cancer dietary exposure assessment for the purpose of assessing cancer risk is unnecessary for flubendiamide, and was not conducted.

iv. Anticipated residue information. Section 408(b)(2)(E) of FFDCA authorizes EPA to use available data and information on the anticipated residue levels of pesticide residues in food and the actual levels of pesticide residues that have been measured in food. If EPA relies on such information, EPA must require pursuant to FFDCA section 408(f)(1) that data be provided 5 years after the tolerance is established, modified, or left in effect, demonstrating that the levels in food are not above the levels anticipated. For the present action, EPA will issue such data call-ins as are required by FFDCA section 408(b)(2)(E) and authorized under FFDCA section 408(f)(1). Data will be required to be submitted no later than 5 years from the date of issuance of these tolerances.

2. Dietary exposure from drinking water. The Agency used Tier II screening level water exposure models in the dietary exposure analysis and risk assessment for flubendiamide in drinking water. These simulation models take into account data on the physical, chemical and fate/transport characteristics of flubendiamide. Further information regarding EPA drinking water models used in pesticide exposure assessment can be found at http://www.epa.gov/oppefed1/models/water/index.htm.

Flubendiamide is persistent and potentially mobile in terrestrial and aquatic environments. These fate properties suggest that it has a potential to move into surface water and ground water. The Agency has completed a drinking water assessment for flubendiamide using screening level water exposure models that were based on the existing and proposed uses. For the 1-in-10-year peak, the highest Tier 2 Pesticide Root Zone Model/Exposure Analysis Modeling System (PRZM/EXAMS) Estimated Drinking Water Concentrations (EDWC) for flubendiamide was 24.57 parts per billion (ppb), based on application to corn. For the 1-in-10-year annual average, the highest PRZM/EXAMS EDWC was 11.46 ppb, also based on application to corn.

A summary of the dietary exposure from drinking water for flubendiamide used for human risk assessment can be found in the documents entitled, “Flubendiamide: Human Health Risk Assessment for Proposed Uses on Alfalfa, Globe Artichokes, the Low Growing Berry Subgroup 13-07G (except Cranberry), Peanuts, Pistachios, the Small Fruit Vine Climbing (except Fuzzy Kiwifruit) Subgroup 13-07F, Safflower, Sorghum, Sugarcane, Sunflower, and Turnip Greens, and an Increased Application Rate for Brassica (Cole) Leafy Vegetables,” dated November 30, 2010, by going to http://www.regulations.gov. The referenced document is available in the docket established by this action, which is described under ADDRESSES . Locate and click on the hyperlink for docket ID number EPA-HQ-OPP-2007-0099. Double-click on the document to view the referenced information on page 27 of 62.

3. From non-dietary exposure. The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure ( e.g., for lawn and garden pest control, indoor pest control, termiticides, and flea and tick control on pets). Flubendiamide is not registered for any specific use patterns that would result in residential exposure.

4. Cumulative effects from substances with a common mechanism of toxicity. Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.”

EPA has not found flubendiamide to share a common mechanism of toxicity with any other substances, and flubendiamide does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that flubendiamide does not have a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see EPA's Web site at http://www.epa.gov/pesticides/cumulative.

1. In general. Section 408(b)(2)(C) of FFDCA provides that EPA shall apply an additional tenfold (10x) margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database on toxicity and exposure unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. This additional margin of safety is commonly referred to as the FQPA SF. In applying this provision, EPA either retains the default value of 10x, or uses a different additional safety factor when reliable data available to EPA support the choice of a different factor.

2. Prenatal and postnatal sensitivity. While both the rat and rabbit developmental studies did not identify teratogenic effects and showed no evidence of increased pre-natal susceptibility, adverse eye effects (eye enlargement) were noted in post-natal rat pups older than 14 days in multiple studies (the 2-generation reproduction and 1-generation supplemental studies). Additionally, the DNT study reported eye effects appearing in some offspring between lactation days 14 and 42, even though exposure stopped at lactation day 21, indicating a possible delay (a latent response) from the time of last exposure to onset of bupthalmos. These eye effects did not occur in adult rats. Since the iris and chamber angle are differentiating and specializing into definite structures during post-natal days 5 to 20, neonatal rats appear to have an increased susceptibility to flubendiamide exposure as compared to adults.

In addition to the reported eye effects in the DNT study, there was also a balano-preputial separation (separation of the prepuce (foreskin) from the glans penis ( balanus )) delay. While this effect is generally considered adverse per se, it is not assumed to be a developmental effect from in utero exposure. Here, delayed balano-preputial separation is considered secondary to reduced postnatal pup body weight as a result of post-natal exposure. Furthermore, it was resolved within the appropriate age range of puberty and no effects on reproductive function were observed in the multigeneration study in rats. Delayed balanopreputial separation was seen only at doses causing maternal toxicity and is not more severe than the maternal effects of hepatotoxicity seen at the common pup/maternal LOAEL of the DNT study. Accordingly, the delayed balanopreputial separation seen in the DNT study does not cause concern for increased sensitivity to the young for flubendiamide.

Human microsomes have been shown to be capable of approximately 4 times higher hydroxylation rates of flubendiamide as compared to female mouse microsomes and may be able to efficiently metabolize and excrete flubendiamide, preventing accumulation of the parent compound. It remains unclear whether the ability to metabolize and clear the parent compound is the only requirement to avoid ocular toxicity. Due to the potential ocular toxicity, this perinatal ocular effect is considered in the human health risk assessment for flubendiamide.

3. Conclusion. EPA evaluated the quality of the toxicity and exposure data and, based on these data, has determined that the safety of infants and children would be adequately protected if the FQPA SF were reduced to 1x. That decision is based on the following findings:

i. The toxicology database for flubendiamide is complete with the exception of a subchronic neurotoxicity study which is now a new data requirement under 40 CFR part 158; however, the existing data are sufficient for endpoint selection for exposure/risk assessment scenarios, and for evaluation of the requirements under the FQPA. Flubendiamide is not a neurotoxic chemical based on neurotoxicity assessments conducted acutely, developmentally and incorporated within the chronic rat study. In several short-term studies in rats (subacute and subchronic feeding, plaque-forming cell assay, one-generation pilot, developmental toxicity) no neurobehavioral signs were observed at doses up to and exceeding the limit dose; therefore, an additional database uncertainty factor is not needed to account for potential neurotoxicity.

ii. There are no treatment-related neurotoxic findings in the acute neurotoxicity and DNT studies in rats; although eye effects were observed in the DNT study. As noted in Unit III.B., the PODs employed in the risk assessment are protective of this effect.

iii. Although susceptibility was identified in the toxicological database (eye effects), the selected regulatory PODs (which are based on clear NOAELs) are protective of these effects; therefore, the human health risk assessment is protective.

iv. There are no residual uncertainties identified in the exposure databases and the exposure assessment is protective. The acute dietary food exposure assessment utilizes tolerance-level residues, the chronic dietary food exposure assessment utilizes average residue levels found in the crop field trials/livestock commodities and both assume 100% of crops with requested uses of flubendiamide are treated. The drinking water assessment generated EDWCs using models and associated modeling parameters which are designed to provide conservative, health protective, high-end estimates of water concentrations. The highest relevant EDWCs were used in the dietary (food and drinking water) exposure assessment. By using these screening-level exposure assessments in the acute and chronic dietary (food and drinking water) assessments, risk is not underestimated for flubendiamide.

EPA determines whether acute and chronic dietary pesticide exposures are safe by comparing aggregate exposure estimates to the aPAD and cPAD. For linear cancer risks, EPA calculates the lifetime probability of acquiring cancer given the estimated aggregate exposure. Short-, intermediate-, and chronic-term risks are evaluated by comparing the estimated aggregate food, water, and residential exposure to the appropriate PODs to ensure that an adequate MOE exists.

For this action, there is potential exposure to flubendiamide from food and drinking water, but not from residential use sites (as there are no proposed or existing residential uses for flubendiamide). Since hazard was identified via the oral route over both the acute and chronic duration, the aggregate risk assessments considers exposures from food and drinking water consumed over the acute and chronic durations.

1. Acute risk. Using the exposure assumptions discussed in this unit for acute exposure, EPA has concluded that acute dietary exposure from food and water to flubendiamide will utilize 3.1% of the aPAD for the general U.S. population and 5% of the aPAD for the most highly exposed population subgroup, children aged 1 to 2 years old.

2. Chronic risk. Using the exposure assumptions described in this unit for chronic exposure, EPA has concluded that chronic dietary exposure to flubendiamide from food and water will utilize 20% of the cPAD for the general U.S. population and 58% of the cPAD for the most highly exposed population subgroup, children aged 1 to 2 years old. There are no proposed or existing residential uses for flubendiamide. Based on the explanation in Unit III.C.3., regarding residential use patterns, chronic residential exposure to residues of flubendiamide is not expected.

3. Aggregate cancer risk for U.S. population. Based on the data summarized and referenced in Unit III.A., flubendiamide has been classified as “Not Likely to be Carcinogenic to Humans,” and is not expected to pose a cancer risk.

4. Determination of safety. Based on these risk assessments, EPA concludes that there is a reasonable certainty that no harm will result to the general U.S. population or to infants and children from aggregate exposure to flubendiamide residues.

Adequate enforcement methodology Liquid Chromatography with tandem Mass Spectrometry detection ((LC/MS/MS), Methods 00816/M002 and 00912) is available to enforce the tolerance expression. The method may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Road, Fort Meade, MD 20755-5350; telephone number: (410) 305-2905; e-mail address: residuemethods@epa.gov.

In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by section 408(b)(4) of FFDCA. The Codex Alimentarius is a joint U.N. Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, section 408(b)(4) of FFDCA requires that EPA explain the reasons for departing from the Codex level. There are currently no MRLs established by Codex, Canada, or Mexico for flubendiamide.

The Agency's Guidance for Setting Pesticide Tolerances Based on Field Trial Data was utilized for determining appropriate tolerance levels for many raw agricultural commodities (RACs) which showed quantifiable residues in or on samples that were treated according to the proposed use patterns. The following revisions to tolerance levels were made:

Based upon review of the data supporting PP 0F7685, recalculated beef and dairy cattle, swine, and poultry dietary burdens, and re-evaluation of previously submitted animal feeding studies, EPA has determined that the established tolerances for residues of flubendiamide for milk fat, and the meat and fat of cattle, goat, horse and sheep should be increased to 1.0 ppm, 0.08 ppm and 0.70 ppm, respectively. For swine (hog), EPA has determined that the proposed tolerances for hog, fat at 0.15 ppm; hog, kidney at 0.06 ppm; hog, liver at 0.06 ppm; and hog, muscle at 0.02 ppm should be established as permanent tolerances for residues of flubendiamide in or on hog, fat at 0.15 ppm, and the proposed tolerances for hog, kidney; hog, liver; and hog, muscle should be increased and established as permanent tolerances for residues of flubendiamide in or on hog, meat and hog, meat byproducts; at 0.15 ppm and 0.03 ppm, respectively. For poultry, EPA has determined that the established tolerances for eggs, fat, liver and meat should be increased to 0.40 ppm, 3.0 ppm, 0.60 ppm and 0.10 ppm, respectively.

As part of this regulation, permanent tolerances for residues of flubendiamide in or on alfalfa, forage (25 ppm) and alfalfa, hay (65 ppm) resulting from direct application to the primary crop are being established. These tolerances supersede the currently listed tolerances for indirect or inadvertent residues of flubendiamide in or on alfalfa, forage (0.15 ppm) and alfalfa, hay (0.04 ppm), and; therefore, the indirect/inadvertent residue tolerances are being revoked from 40 CFR 180.639(d).

Therefore, new tolerances are being established for residues of flubendiamide [ N 2 -[1,1-dimethyl-2-(methylsulfonyl)ethyl]-3-iodo- N 1 -[2-methyl-4-[1,2,2,2-tetrafluoro-1-(trifluoromethyl)ethyl]phenyl]-1,2-benzenedicarboxamide], in or on artichoke, globe at 1.6 parts per million (ppm); berry, low growing, subgroup 13-07G, except cranberry at 1.5 ppm; fruit, small vine climbing except fuzzy kiwifruit, subgroup 13-07F at 1.4 ppm; hog, fat at 0.15 ppm; hog, meat byproducts at 0.15 ppm; hog, meat at 0.03 ppm; peanut, hay at 60 ppm; peanut, meal at 0.03 ppm; peanut, nutmeat at 0.02 ppm; peanut, refined oil at 0.03 ppm; pistachio at 0.06 ppm; safflower, seed at 5.0 ppm; sorghum, grain, forage at 12 ppm; sorghum, grain, grain at 5.0 ppm; sorghum, grain, stover at 14 ppm; sugarcane, cane at 0.30 ppm; sunflower, seed at 5.0 ppm; and turnip, greens at 25 ppm.

The established tolerances for residues of flubendiamide for milk fat, and the meat and fat of cattle, goat, horse and sheep are being increased to 1.0 ppm, 0.08 ppm and 0.70 ppm, respectively. For poultry, the established tolerances for eggs, fat, liver and meat are being increased to 0.40 ppm, 3.0 ppm, 0.60 ppm and 0.10 ppm, respectively.

The established tolerances for residues of flubendiamide for brassica, head and stem, subgroup 5A; brassica, leafy greens, subgroup 5B; and grain, aspirated grain fractions are being increased to 3.0 ppm, 25 ppm, and 153 ppm, respectively.

The established tolerances for indirect or inadvertent residues of flubendiamide in or on alfalfa, forage (0.15 ppm) and alfalfa, hay (0.04 ppm) are being revoked from 40 CFR 180.639(d), and established as permanent tolerances, in 40 CFR 180.639(a)(2), for residues of flubendiamide in or on alfalfa, forage at 25 ppm; and alfalfa, hay at 65 ppm.

This final rule establishes tolerances under section 408(d) of FFDCA in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled Regulatory Planning and Review (58 FR 51735, October 4, 1993). Because this final rule has been exempted from review under Executive Order 12866, this final rule is not subject to Executive Order 13211, entitled Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997). This final rule does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq., nor does it require any special considerations under Executive Order 12898, entitled Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations (59 FR 7629, February 16, 1994).

Since tolerances and exemptions that are established on the basis of a petition under section 408(d) of FFDCA, such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ) do not apply.

This final rule directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of section 408(n)(4) of FFDCA. As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled Federalism (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled Consultation and Coordination with Indian Tribal Governments (65 FR 67249, November 9, 2000) do not apply to this final rule. In addition, this final rule does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4).

This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note).

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

Therefore, 40 CFR chapter I is amended as follows:

I. General Information A. Does this action apply to me?

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. Potentially affected entities may include, but are not limited to those engaged in the following activities:

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

This listing is not intended to be exhaustive, but rather to provide a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

You may access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's e-CFR site at http://www.gpoaccess.gov/ecfr.

Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2005-0477 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before May 23, 2011. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing that does not contain any CBI for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit a copy of your non-CBI objection or hearing request, identified by docket ID number EPA-HQ-OPP-2005-0477, by one of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the on-line instructions for submitting comments.

• Mail: Office of Pesticide Programs (OPP) Regulatory Public Docket (7502P), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001.

• Delivery: OPP Regulatory Public Docket (7502P), Environmental Protection Agency, Rm. S-4400, One Potomac Yard (South Bldg.), 2777 S. Crystal Dr., Arlington, VA. Deliveries are only accepted during the Docket Facility's normal hours of operation (8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays). Special arrangements should be made for deliveries of boxed information. The Docket Facility telephone number is (703) 305-5805.

In the Federal Register of December 22, 2010 (75 FR 80489) (FRL-8857-8), EPA issued a notice pursuant to section 408(d)(3) of FFDCA, 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 9E7517) by Dow AgroSciences, 9330 Zionsville Rd., Indianapolis, IN 46268. The petition requested that 40 CFR part 180 be amended by establishing permanent tolerances for residues of the herbicide safener dichlormid, N,N-diallyl-2,2-dichloroacetamide, in or on corn, field, forage; corn, field, grain; corn, field, stover; corn, pop, grain; corn, pop, stover; corn, sweet, forage; corn, sweet, kernel plus cob with husks removed; and corn, sweet, stover at 0.05 parts per million (ppm). That notice referenced a summary of the petition prepared by Dow AgroSciences, the registrant, which is available in the docket, http://www.regulations.gov. Comments were received on the notice of filing. EPA's response to these comments is discussed in Unit IV.C.

Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue.”

Consistent with section 408(b)(2)(D) of FFDCA, and the factors specified in section 408(b)(2)(D) of FFDCA, EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for dichlormid including exposure resulting from the tolerances established by this action. EPA's assessment of exposures and risks associated with dichlormid follows.

In the Federal Register of March 27, 2000 (65 FR 16143) (FRL-6498-7), EPA published a final rule establishing time-limited tolerances for residues of the herbicide safener dichlormid in or on field corn forage, grain and stover; and pop corn grain and stover at 0.05 ppm. In the Federal Register of September 30, 2004 (69 FR 58285) (FRL-7680-8), EPA published a final rule establishing time-limited tolerances for residues of dichlormid in or on sweet corn forage, kernel plus cob with husks removed, and stover at 0.05 ppm. EPA has extended the expiration date of the time-limited tolerances on several occasions, most recently in the Federal Register of July 29, 2009 (74 FR 37621) (FRL-8422-2). The tolerances expired on December 31, 2010.

The corn tolerances were time-limited due to an incomplete database for dichlormid. Data gaps included several chemistry and toxicology studies, as identified in the March 27, 2000 and September 30, 2004 final rules. In addition, in December, 2007, EPA began requiring functional immunotoxicity testing of all food and non-food use pesticides (40 CFR part 158, subpart F), including safeners, such as dichlormid. The outstanding chemistry and toxicology data (including immunotoxicity testing) have all been submitted and reviewed, so that the database for dichlormid is now considered complete. No changes in tolerance levels or toxicological endpoints and doses used in the human health risk assessment for dichlormid are needed as a result of the new data. Copies of EPA's reviews of these data may be found in docket ID number EPA-HQ-OPP-2005-0477.

The risk assessments that EPA relied on in establishing and extending the time-limited tolerances for dichlormid were highly conservative. Due to the nature and number of data gaps and qualitative evidence of increased susceptibility of in utero rabbits in a prenatal developmental toxicity study, the FQPA safety factor (SF) was retained at 10X for the acute dietary risk assessment and increased to 30X for the chronic dietary risk assessment. Since the data gaps have been filled, uncertainty factors associated with database deficiencies may be removed. In addition, EPA used tolerance level residues, 100 percent crop treated, and default processing factors in the dietary food exposure assessments and made conservative (protective) assumptions in the modeling used to assess exposure to dichlormid in drinking water. Using these highly conservative assumptions and SFs, acute dietary exposure to dichlormid in food was estimated to be less than or equal to 7.5% of the acute population adjusted dose (aPAD) for all population subgroups; chronic dietary exposure to dichlormid in food was estimated to be less than or equal to 15% of the chronic population adjusted dose (cPAD) for all populations subgroups.

Because this prior risk assessment showed dichlormid risks to be acceptable and the effect of submission of the required data on the assessment of dichlormid risk will be to lower estimated risks (due to the removal of additional safety factors), EPA is relying on that prior risk assessment and the findings in the prior dichlormid FR notices, subject to one modification, to demonstrate the safety of the tolerances established in this action. The one modification of the prior risk assessment and FR notices is to update how exposure to dichlormid in drinking water is factored into the risk assessment.

Previously, EPA assessed aggregate exposure (food and drinking water) to dichlormid using the DWLOC (drinking water level of comparison) approach. The DWLOC is the concentration of a chemical in drinking water that would be acceptable as an upper limit considering total aggregate exposure to that chemical from food, water, and residential sources. In this case, there are no residential uses of dichlormid. Acute and chronic aggregate risks from dichlormid exposure were assessed by comparing the calculated DWLOCs to the estimated environmental concentrations (EECs) of dichlormid in surface water and groundwater. Since the EECs (< 1 ppm in both surface and groundwater) were well below the calculated DWLOCs for acute exposure (73 parts per billion (ppb)) and chronic exposure (20 ppb), acute and chronic aggregate risks were determined to be below the Agency's level of concern. Details of the risk assessment for dichlormid may be found in the document “Human Health Risk Assessment for Dichlormid-Request for Establishing Permanent Tolerances for Dichlormid on Corn,” which is available in docket ID number EPA-HQ-OPP-2005-0477.

The Agency no longer uses the DWLOC approach for assessing aggregate exposure to pesticides. Rather, estimated drinking water concentrations (EDWCs) are directly entered into the dietary exposure model to assess the contribution of drinking water exposure to aggregate exposure. EPA then determines whether acute and chronic dietary pesticide exposures are safe by comparing aggregate exposure estimates to the aPAD and cPAD. Using this approach, together with the conservative assumptions and SFs discussed earlier in this unit, EPA has concluded that acute and chronic exposure to dichlormid from food and water will utilize 56% of the aPAD and 34% of the cPAD for infants, less than one year old, the population group receiving the greatest exposure.

Based on the prior and updated risk assessments as well as the findings in the prior dichlormid FR notices, EPA concludes that there is a reasonable certainty that no harm will result to the general population, or to infants and children from aggregate exposure to dichlormid residues.

Adequate enforcement methodology (gas chromatography with nitrogen selective thermionic detection) is available to enforce the tolerance expression. The method may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD 20755-5350; telephone number: (410) 305-2905; e-mail address: residuemethods@epa.gov.

In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint U.N. Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level.

The Codex has not established a MRL for dichlormid in or on corn commodities.

An anonymous comment was received objecting to the presence of any pesticide residue on food. The Agency understands the commenter's concerns and recognizes that some individuals believe that pesticides should be banned completely. However, the existing legal framework provided by section 408 of the FFDCA contemplates that tolerances greater than zero may be set when persons seeking such tolerances or exemptions have demonstrated that the pesticide meets the safety standard imposed by that statute. This citizen's comment appears to be directed at the underlying statute and not EPA's implementation of it; the citizen has made no contention that EPA has acted in violation of the statutory framework.

EPA is revising the requested tolerance expression to clarify the chemical moieties that are covered by the tolerances and specify how compliance with the tolerances is to be measured. The revised tolerance expression makes clear that the tolerances cover residues of the herbicide safener dichlormid, including its metabolites and degradates, but that compliance with the tolerances is to be determined by measuring only dichlormid (2,2-dichloro- N,N -di-2-propenylacetamide). EPA has determined that it is reasonable to make this change final without prior proposal and opportunity for comment, because public comment is not necessary, in that the change has no substantive effect on the tolerance, but rather is merely intended to clarify the existing tolerance expression.

Therefore, tolerances are established for residues of dichlormid, including its metabolites and degradates, in or on corn, field, forage; corn, field, grain; corn, field, stover; corn, pop, grain; corn, pop, stover; corn, sweet, forage; corn, sweet, kernel plus cob with husks removed; and corn, sweet, stover at 0.05 ppm. Compliance with the tolerances is to be determined by measuring only dichlormid (2,2-dichloro- N,N -di-2-propenylacetamide).

This final rule establishes tolerances under section 408(d) of FFDCA in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled Regulatory Planning and Review (58 FR 51735, October 4, 1993). Because this final rule has been exempted from review under Executive Order 12866, this final rule is not subject to Executive Order 13211, entitled Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997). This final rule does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq., nor does it require any special considerations under Executive Order 12898, entitled Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations (59 FR 7629, February 16, 1994).

Since tolerances and exemptions that are established on the basis of a petition under section 408(d) of FFDCA, such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ) do not apply.

This final rule directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of section 408(n)(4) of FFDCA. As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled Federalism (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled Consultation and Coordination with Indian Tribal Governments (65 FR 67249, November 9, 2000) do not apply to this final rule. In addition, this final rule does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4).

This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note).

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

Therefore, 40 CFR chapter I is amended as follows:

Background

Sections 101(a)(5)(A) and (D) of the MMPA (16 U.S.C. 1361 et seq. ) direct the Secretary of Commerce to allow, upon request, the incidental, but not intentional, taking of small numbers of marine mammals by U.S. citizens who engage in a specified activity (other than commercial fishing) within a specified geographical region if certain findings are made and either regulations are issued or, if the taking is limited to harassment, a notice of a proposed authorization is provided to the public for review.

Authorization for incidental takings shall be granted if NMFS finds that the taking will have a negligible impact on the identified species or stock(s), will not have an unmitigable adverse impact on the availability of the species or stock(s) for subsistence uses (where relevant), and if the permissible methods of taking and requirements pertaining to the mitigation, monitoring and reporting of such takings are set forth in the regulations. NMFS has defined “negligible impact” in 50 CFR 216.103 as “ * * * an impact resulting from the specified activity that cannot be reasonably expected to, and is not reasonably likely to, adversely affect the species or stock through effects on annual rates of recruitment or survival.”

Except with respect to certain activities not pertinent here, the MMPA (16 U.S.C. 1362(18)(A)) defines “harassment” as:

On June 4, 2010, NMFS received a complete application for regulations from AAC for the taking of small numbers of marine mammals incidental to launching space launch vehicles, long-range ballistic target missiles, and other smaller missile systems at the KLC. A proposed rule was published on December 23, 2010 (75 FR 80773). NMFS received 12 comments on the proposed rule from eight private citizens, the Kodiak Chamber of Commerce, the Kodiak Island Borough Mayor, the City of Kodiak Mayor, and the Marine Mammal Commission (Commission). The majority of the comments supported the proposed rule. These regulations will allow NMFS to issue Letters of Authorization (LOAs) to the AAC over a 5-year period. A full description of the operations is contained in the AAC's application which is available upon request ( see ADDRESSES ) or at: http://www.nmfs.noaa.gov/pr/permits/incidental.htm#applications.

The AAC conducts space vehicle and missile launches from the KLC, a commercial spaceport that supports civilian and Federal launch customers. The facility occupies 3,717 acres of State-owned lands on the Narrow Cape Peninsula on the eastern side of Kodiak Island, Alaska. The KLC primarily supports launches of small to medium space launch vehicles—which are those used to boost satellites to orbit—ranging in size from the small space-launch Castor 120 motor (used in the Athena, Minotaur IV, Minotaur V, and Taurus I systems) to the under-development medium-lift Taurus II. The KLC is also configured to support launch of the Minuteman I-derived Minotaur I Space Launch System, and to support the launch of long-range ballistic systems such as the Polaris derived A-3 STARS, the Minuteman-derived Minotaur II and III, and the C-4. Launch operations are authorized under license from the Federal Aviation Administration (FAA), Office of the Associate Administrator for Space Transportation, in accordance with the facility's Environmental Assessment (EA), stipulations in the EA's Finding of No Significant Impact, and in subsequent licenses.

The AAC anticipates that the KLC can accommodate up to 45 launches, in total, for the effective period of the regulations. Annually, an average of nine but maximum of 12 launches may occur. Most of these vehicles are expected to be of the Minotaur I through V class, including civil versions of the Castor 120 known as the Athena and Taurus I, or smaller target vehicles. The AAC estimates that of the 45 estimated launches from KLC over the 5-year period in consideration, 32 will be of small space-launch and target vehicles of the Castor 120 or smaller size, 10 will be of THAAD or smaller size, and three will be of the medium-lift Taurus II. A summarized description of each class of space launch and smaller launch vehicles was published in the Federal Register (75 FR 80774, December 23, 2010) and a full description can be found online ( http://www.nmfs.noaa.gov/pr/permits/incidental.htm#applications ) within the AAC's application.

Launch operations are a major source of noise on Kodiak Island, as the operation of launch vehicle engines produce substantial sound pressures. In air, all pressures are referenced to 20 micoPascals; therefore all dB levels in this notice are provided re: 20 MicroPa, unless otherwise noted. Generally, four types of noise occur during a launch: (1) Combustion noise; (2) jet noise from interaction of combustion exhaust gases with the atmosphere; (3) combustion noise proper; and (4) sonic booms. Sonic booms are not a concern for pinnipeds on Ugak Island, as sonic booms created by ascending rockets launched from KLC reach the Earth's surface over deep ocean, well past the edge of the Outer Continental Shelf (OCS) (FAA 1996). Spent first-stage motors from space lift missions ( i.e., those going to orbit) fall to Earth at least 11, and possibly more than 300, miles down range (well past the edge of the OCS), depending on launch vehicle (U.S. FAA 1996). A complete description of launch noise measured from Ugak Island, including previously launched and recorded space vehicles, can be found in the proposed rule (75 FR 80775, December 23, 2010).

Another component of the AAC's launches includes security overflights. In the days preceding the launch, these occur approximately 3 times per day based on the long-term average. Flights associated with the launch will not approach occupied pinniped haulouts on Ugak Island by closer than 0.25 mile (0.4 km), and will maintain a vertical distance of 1,000 ft (305 m) from the haulouts when within 0.5 miles (0.8 km), unless indications of human presence or activity warrant closer inspection of the area to assure that national security interests are protected in accordance with law. Over the operational history of these flights, aircraft have been operated within the 0.25-mile limit on two occasions; both involved direct overflight of the Steller sea lion haulout spit, which was unoccupied each time the incursions occurred.

The AAC's current MMPA regulations (71 FR 4297, January 26, 2006), which are set to expire February 28, 2011, require aerial surveys be conducted before and after each launch to monitor for presence and abundance of marine mammals within the designated 6-mile action area. In compliance with these conditions, the AAC has completed these surveys since 2006. Aerial survey data indicate that Steller sea lions, harbor seals, gray whales ( Eschrichtius robustus ), humpback whales ( Megaptera novaeangliae ), and sea otters ( Enhydra lutris ) occur within the action area. Although potentially present, cetaceans within the action area are not expected to be taken during the specified activities. Airborne noise is generally reflected at the sea surface outside of a 26° cone extending downward from the ascending rocket (Richardson et al., 1995); therefore, little sound energy passes into the sea across the air-water boundary. Submerged animals would have to be directly underneath the rocket to hear it, and given the hypersonic velocity of launch vehicles in the atmosphere, the duration of sounds reaching any cetacean would be discountable. In addition, all spent rocket motors will fall into the open ocean over deep water. Given the very short time a cetacean is at the surface, direct impact from spent motors can be discounted as can any noise related impacts. Based on these reasons, NMFS does not anticipate take of cetaceans incidental to the specified activity; hence, they will not be discussed further. Sea otters are managed by the U.S. Fish and Wildlife Service; therefore no take of sea otters is included in the proposed regulations. As such, this species is not discussed further in this final rule.

Steller sea lions are designated into two stocks by NMFS. Those west of 144° longitude, which includes the KLC area, are listed as endangered under the ESA. Historically, mature and sub-adult males have used a spit on the northwestern side of Ugak Island as a post-breeding haulout. This spit is located 3.5 miles from the launch pad complex ( see figure 4 and 5 in the application). The historic occupancy period ranges from June to September (post breeding), with peak reported numbers in the hundreds (Sease 1997; ENRI 1995-1998). However, use has declined in recent times in keeping with general declines seen in the species as a whole. The spit is designated a long-term trend count site by NMFS and has been surveyed once yearly, with June as the target, since the 1990s. Counts since 2000 have generally been zero ( e.g., NMFS, 2009; Fritz and Stinchcomb, 2005), which is in line with the counts from all other long-term trend count sites in the Kodiak Archipelago over the same time period. All of these other long-term trend sites are far removed from the 6-mile radius anticipated impact area up range from KLC ( i.e., areas opposite to the flight path), in areas not exposed to launch noise. Hence, Steller sea lion abundance has declined throughout the region, not just the area affected by launches, and the losses are likely not a result of or connected with the launches or use of KLC.

Data from AAC's aerial surveys over the past four years also support low use of the haulout. Since 1999, five launches have occurred during the Steller sea lion season. The spit haulout has not been used by Steller sea lions during launch-monitoring surveys since 1999 (ENRI, 2000, R&M, 2007a,b, 2008); however, during recent launch surveys one to several Stellar sea lions have been observed from time-to-time utilizing a supratidal rock on eastern Ugak Island (termed East Ugak Rock) as a haulout. Tables 2 and 4 in the application provide a breakdown of survey results per day. In summary, two to eight sea lions were observed per day on East Ugak Rock during surveys for the FTG-02 launch (R&M, 2006b), and one to five (per day) were observed during the FTX-03 launch (R&M, 2008). In addition, during one aerial survey that was completed outside the June to September timeframe (during the FTG-05 campaign in December 2008), a single Stellar sea lion was observed on East Ugak Rock. East Ugak Rock is located farther east and to the south of the KLC than Ugak Island; therefore, one can assume launch generated sound levels here are less than those at Ugak Island.

Harbor seals are the most abundant marine mammal species found within the action area. Harbor seals are not listed as threatened or endangered under the ESA or as depleted under the MMPA. Based on the AAC's aerial survey counts from launch monitoring reports conducted since January 2006, approximately 97% of all observed harbor seals are found on the eastern shore of Ugak Island, approximately 5 miles from the launch pad complex. The eastern shore is backed by high steep cliffs that reach up to 1,000 feet above sea level. These cliffs form a visual and acoustic barrier to rocket operations, and alleviate effects on the species. This conclusion is based on review of sound pressure recordings made at the haulout spit found on the island's northwestern shore, which showed surf and wind-generated sound pressures at sea level were generally in the >70 dBA (SEL) range on the clearest days (Cuccarese et al., 1999, 2000). During inclement weather periods ambient sound pressures at sea level can exceed 100 dBA (SEL). The island's eastern shore is windward to prevailing winds and surf noise is routinely high. Harbor seals located on Ugak Island's northern shore are not as protected from launch noise, and therefore may be harassed incidental to the AAC's specified activity. However, harbor seal abundance on the northern shores is limited due to the lack of suitable habitat ( i.e., few beaches). During 30 aerial surveys conducted by the AAC during six rocket launches from 2006 to 2008, no seals were observed on North Ugak Island on 19 occasions. During surveys when seals were present, average abundance was 25 with a single day count of 125 individuals.

Because physical access to Ugak Island harbor seal haulouts is difficult and dangerous, the only abundance and behavior data of these seals have been derived from aerial surveys conducted by the AAC. Harbor seals generally breed and molt where they haul out, so it is assumed that both of these activities take place on Ugak Island, and young seals have routinely been seen there during launch-related aerial surveys. Pupping in Alaska takes place generally in the May to June time frame; molting occurs generally from June to October. Both periods contain peaks in haulout attendance. Total counts on Ugak Island have increased steadily since the 1990s from several hundred (ENRI 1995-1998) up to a peak of about 1,500 today (R&M 2007a, 2007b, 2008, 2009).

As discussed above, launch operations are a major source of noise on Kodiak Island and can reach Steller sea lion and harbor seal haulouts and rookeries on Ugak Island. Marine mammals produce sounds in various contexts and use sound for various biological functions including, but not limited to: (1) Social interactions; (2) foraging; (3) orientation; and (4) predator detection. Interference with producing or receiving these sounds may result in adverse impacts. Audible distance, or received levels (RLs), will depend on the nature of the sound source, ambient noise conditions, and the sensitivity of the receptor to the sound (Richardson et al., 1995). Type and significance of marine mammal reactions to noise are likely to be dependent on a variety of factors including, but not limited to, the behavioral state ( e.g., resting, socializing, etc. ) of the animal at the time it receives the stimulus, frequency of the sound, distance from the source, and the level of the sound relative to ambient conditions (Southall et al., 2007). In general, marine mammal impacts from loud noise can be characterized as auditory and non-auditory.

Auditory impacts consist of injurious ( e.g., ruptured ear drums, permanent threshold shift [PTS]) or non-injurious ( e.g., temporary threshold shift [TTS]) effects. There are no empirical data for onset of PTS in any marine mammal; therefore, PTS-onset must be estimated from TTS-onset measurements and from the rate of TTS growth with increasing exposure levels above the level eliciting TTS-onset. PTS is presumed to be likely if the hearing threshold is reduced by ≥ 40 dB ( i.e., 40 dB of TTS).

Given the distance from the pad area to Ugak Island and the measured sound levels from the Castor 120 (101.4 dB), for the loudest space vehicle used at the KLC, pinniped auditory injury is not anticipated. Further explanation was provided in the proposed rule Federal Register notice (75 FR 80777, December 23, 2010). Regarding TTS, although hearing sensitivity was not apparently affected during the ABR testing, that is not to say that TTS did not occur, as seals were tested approximately 2 hours after launch, not immediately following the launch. However, if TTS did occur, hearing was fully recovered within 2 hours. In conclusion, NMFS has preliminarily determined PTS would not occur in pinnipeds on Ugak Island and TTS, although unlikely, may occur. However, if pinnipeds on Ugak Island experience TTS, full-hearing recovery is expected shortly after exposure.

To comply with their current regulations, the AAC attempted to collect video footage of pinnipeds during launches; however, weather, technical, and accessibility issues prevented video coverage from being obtained. Therefore, no immediate responses of pinnipeds to the AAC's launch noise have been documented. However, as discussed above, VAFB researchers have been investigating the short- and long-term effects of space vehicle launch noise and sonic booms on pinnipeds. As described in NMFS' 2009 EA, the percentage of seals that left the haulout increased as noise level increased up to approximately 100 decibels (dB) A-weighted SEL, after which almost all seals left, although recent data have shown that an increasing percentage of seals may remain on shore. Using time-lapse video photography, VAFB discovered that during four launch events, the seals that reacted but remained on the haulout were all adults. VAFB theorized that adult seals may have habituated to launch stimuli more so than less-experienced younger seals; hence the less-severe reactions. Further information on this research can be found within the proposed rule (75 FR 80777, December 23, 2010).

The behavioral data record for Steller sea lions is small throughout the North Pacific range and typically is focused on reproductive behaviors. In general, studies have shown that responses of pinnipeds on beaches to acoustic disturbance arising from rocket and target missile launches are highly variable. This variability may be due to many factors, including species, age class, and time of year.

The infrequent (approximately nine times per year) and brief (no more than 1 minute as heard from Ugak Island) nature of these sounds that would result from a rocket launch is not expected to alter the population dynamics of Steller sea lions or harbor seals which utilize Ugak Island as a haulout site. If launches occur during the harbor seal pupping period and harbor seals have also chosen to pup on the north beach, it is possible that harbor seal pups could be injured or killed as a result of the adults flushing in response to the rocket noise, or the mother/pup bond could be permanently broken. However, NMFS does not expect harbor seal pup injury and mortality to occur to a great degree, due to previous research studies that are summarized in the proposed rule (75 FR 80778, December 23, 2010).

Finally, the KLC conducts approximately three security overflights per day in the days preceding a launch. Several studies of both harbor seals and Steller sea lions cited in Richardson et al. (2005) suggest that these animals respond significantly less to overflights of both planes and helicopters that occur above 305 m (0.2 mi). NMFS does not anticipate harassment from overflights to occur as they generally remain at least 0.25 miles from a haulout; however, if the pilot or crew notice overt responses from pinnipeds ( e.g., flushing) to aircraft, this response will be noted and reported to NMFS in the flight report. Observations made of any animals displaced by a security overflight are reported to the environmental monitoring team for inclusion in their report of monitoring results.

Solid-fuel rocket boosters will fall into the ocean away from any known or potential haulouts. All sonic booms that reach the earth's surface are expected to occur over open ocean, beyond the OCS. Airborne launch sounds will mostly reflect or refract from the water surface and, except for sounds within a cone of approximately 26 degrees directly below the launch vehicle, will not penetrate into the water column. The sounds that do penetrate will not persist in the water for more than a few seconds. Overall, rocket launch activities from the KLC are not expected to cause any impacts to habitats used by marine mammals, including pinniped haulouts, or to their food sources.

On December 23, 2010 (75 FR 80773), NMFS published a notice of proposed rulemaking on the AAC's request to take marine mammals incidental to rocket launches at KLC and requested comments, information, and suggestions concerning the request. During the 30-day public comment period, NMFS received comments from eight private citizens, the Kodiak Chamber of Commerce, the Kodiak Island Borough Mayor, the City of Kodiak Mayor, and the Commission. Six of the private citizens—four of them residents of Kodiak, Alaska—and all of the city/borough officials wrote in support of the proposed rule. One private citizen expressed general opposition to anything related to the military. The remaining comments and NMFS' responses are detailed below.

Comment 1: The AAC should be required to obtain video footage of the harbor seal reactions to launches from the KLC. Furthermore, NMFS does not provide specific indications of what will be reviewed or potentially modified should the distribution, size, or productivity of either pinniped population be affected from the launches.

Response: As explained in the proposed rule, the AAC will be purchasing and placing one remote live-streaming video system to overlook a harbor seal haulout on the eastern side of Ugak Island. The purpose is to monitor for any behavioral reactions of harbor seals to the launches. The language about reviewing monitoring data and potentially modifying mitigation and monitoring requirements is put in place as an adaptive management measure. Data from aerial surveys and camera footage will be reviewed for unusual behavior, injury, or death. Any modifications to the mitigation or monitoring requirements will be determined on a case-by-case basis.

Comment 2: The Commission recommends that NMFS include in its final rule all of the applicant's proposed mitigation and monitoring measures, including those described in the preamble of the proposed rule.

Response: NMFS has included all of the required mitigation and monitoring measures in the final rule, including those described in the preamble.

Comment 3: The Commission recommends that NMFS require the AAC to use a remote video-camera system to monitor harbor seals on the eastern side of Ugak Island during at least five launches. If the cameras detect any disturbance, then the Commission recommends that the applicant and NMFS consult to determine what monitoring adjustments are needed and, if the authorized harbor seal takes are exceeded due to disturbance on the eastern side of the island, the applicant should consult with NMFS to determine if amendments to the regulations or letters of authorization are needed.

Response: The use of a remote video-camera system to monitor harbor seals on the eastern side of Ugak Island during at least five launches is a required monitoring measure for the AAC under this rulemaking. If any disturbance to the animals' behavior is detected, the regulations require that the AAC consult with NMFS to determine if any mitigation or monitoring modifications are necessary. Furthermore, if the authorized harbor seal takes are exceeded, the regulations require that the AAC consult with NMFS to determine if amendments to the regulations or letters of authorization are needed.

Comment 4: The Commission recommends that NMFS require appropriate monitoring of Steller sea lions before, during, and after launches to determine if the launches are disturbing the sea lions' use of Ugak Island and possibly discouraging more sea lions from hauling out there.

Response: After the first five launches, cameras may be repositioned to monitor Steller sea lions on Ugak Island. Monitoring of Stellers under the previous rule (2006 to 2011) showed one of the following: (1) No sea lions present during a launch; (2) all sea lions present became alert but did not move immediately following a launch; or (3) some sea lions present were flushed into the water temporarily. Attempts will be made by the AAC to capture further sea lion behavioral responses at the time of launch.

Comment 5: The Commission recommends that NMFS advise the applicant of the need to consult with the Fish and Wildlife Service regarding the potential incidental take of sea otters.

Response: The AAC is aware of the Fish and Wildlife Service's jurisdiction over the incidental take of sea otters.

In order to issue an Incidental Take Authorization (ITA) under section 101(a)(5)(A) of the MMPA, NMFS must set forth the permissible methods of taking pursuant to such activity, and other means of effecting the least practicable adverse impact on such species or stock and its habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance, and on the availability of such species or stock for taking for certain subsistence uses.

To minimize impacts on pinnipeds at haulout sites, NMFS is requiring the following mitigation measures: (1) Security overflights associated with the launch will not approach occupied pinniped haulouts on Ugak Island by closer than 0.25 mile (0.4 km), and will maintain a vertical distance of 1,000 ft (305 m) from the haulouts when within 0.5 miles (0.8 km), unless indications of human presence or activity warrant closer inspection of the area to assure that national security interests are protected in accordance with law; (2) the AAC will avoid launches during the harbor seal pupping season (May 15 to June 30), unless constrained by factors including, but not limited to, human safety and national security; and (3) if launch monitoring detects pinniped injury or death, or if long-term trend counts from quarterly aerial surveys indicate that the distribution, size, or productivity of the potentially affected pinniped populations has been affected due to the specified activity, the launch procedures and the monitoring methods will be reviewed, in cooperation with NMFS, and, if necessary, appropriate changes may be made through modifications to a given LOA, prior to conducting the next launch of the same vehicle under that LOA.

NMFS carefully evaluated the applicant's proposed mitigation measures and considered a range of other measures in the context of ensuring that NMFS prescribes the means of effecting the least practicable adverse impact on the affected marine mammal species and stocks and their habitat. Our evaluation of potential measures included consideration of the following factors in relation to one another: (1) The manner and the degree to which the successful implementation of the measure is expected to minimize adverse impacts to marine mammals; (2) the proven or likely efficacy of the specific measure to minimize adverse impacts as planned; and (3) the practicability of the measure for applicant implementation, including consideration of personnel safety, and practicality of implementation. The required mitigation measures take scientific studies (Richardson et al., 2005) of overflight effects on pinnipeds into consideration. By avoiding launches during the harbor seal pupping season, the AAC will avoid all Level A harassment and mortality, which is only anticipated to occur as a result of pups being trampled or separated from their mothers. Lastly, the adaptive nature of the proposed mitigation measures allow for adjustments to be made if launch monitoring or quarterly aerial surveys indicate that impacts to the distribution, size, or productivity of pinniped populations are occurring.

Based on our evaluation of the applicant's proposed measures, as well as other measures considered by NMFS or recommended by the public during the 30-day comment period, NMFS has determined that the aforementioned mitigation measures provide the means of effecting the least practicable adverse impacts on marine mammals species or stocks and their habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance.

In order to issue an ITA for an activity, section 101(a)(5)(A) of the MMPA states that NMFS must set forth “requirements pertaining to the monitoring and reporting of such taking.” The MMPA implementing regulations at 50 CFR 216.104(a)(13) indicate that requests for ITAs must include the suggested means of accomplishing the necessary monitoring and reporting that will result in increased knowledge of the species and of the level of taking or impacts on populations of marine mammals that are expected to be present.

The AAC plans to purchase and place one remote live-streaming video system overlooking one of the harbor seal haulouts on the eastern side of Ugak Island for the first five launches conducted under these regulations to verify the assumption that seals on the eastern side of the island are not affected by launches. Although animals on the northern shore are more likely to be affected by the action, this area is predominantly a rocky reef tidal area where seals haul out opportunistically, either singly or in small numbers on exposed rocks. There is more confidence seals will be visible and able to be monitored on the eastern side of the island. After five launches, AAC and NMFS will reassess the efficiency of the camera system and possibly move it to another location ( e.g., the traditional Steller sea lion haulout).

The selected haulout will be viewed either in real time or via “tape” delay for six days using the following schedule where day length permits. The six-day schedule will be roughly centered on the day of launch, with launch day being day three of the monitoring schedule. The video stream will be viewed by professional biologists for 4 hours each day with monitoring centered on the time of launch on launch day, and on low tide on the other days. Detailed information on when monitoring will occur around a launch is provided in the AAC's application. Data collected from the live stream video will include number of animals observed, by age and sex class when possible, behavior ( e.g., resting), animal response to launches, and re-occupation time if disturbed.

The video system was developed, tested, and first put into service in Alaska, and has proven itself over many years of operation both in Alaska and around the world. The video system is all weather proven and autonomous, drawing energy from a combination of wind and solar generators. It features a camera that includes a lens that can be focused (zoom and pan) on command and provides live-streaming video that can be made available through Internet access to interested researchers in real time.

The AAC will also carry out quarterly aerial surveys to determine long-term trend counts of Steller sea lions and harbor seals within the action area. Surveys will be flown midday and centered around low tide for optimal seal counts. The aircraft will survey from a distance appropriate to count seals or sea lions, but far enough away to minimize harassment. Data collected will include number of seals or sea lions per haulout, by age class when possible, and if any disturbance behavior is noted from aircraft presence.

In addition to visual monitoring, whenever a new class of rocket is flown from the KLC, a real time sound pressure record will be obtained for documentation purposes and correlated with the behavioral response record. Two sound pressure monitors will be used: one will be placed at the established sound pressure recording location known as Narrow Cape and the other as close as practical to the remote video system.

Except with respect to certain activities not pertinent here, the MMPA (16 U.S.C. 1362(18)(A) defines “harassment” as:

As described above, Steller sea lions hauled out on Ugak Island may become alert or flush into the water in response to launch noise. Sound exposure levels from the loudest launch may reach approximately 101.4 dBA at the traditional Steller sea lion haulout. Based on this recorded level and the fact that audible launch noise will be very short in duration, sea lions are not expected to incur PTS, and the chance of TTS is unlikely. No injury or mortality of Stellar sea lions is anticipated, nor is any authorized. Therefore, NMFS authorizes Steller sea lion take, by Level B harassment only, incidental to launches from KLC.

Harbor seals of all age classes hauled out on the northern side of Ugak Island will likely react in a similar manner as Steller sea lions (and may become alert or flush into the water) to launches from KLC. Therefore, harbor seals may be taken by Level B harassment incidental to rocket launch noise. However, during the pupping season (May 15 to June 30), pups may also be injured, killed, or separated from their mother during a flushing event. Therefore, NMFS authorizes Level A harassment and mortality of harbor seal pups, should launches during the harbor seal pupping season be unavoidable.

As discussed above, security overflights associated with a launch will not closely approach or circle any sea lion or seal haulout site. Therefore, incidental take from this activity is not anticipated. Should the pilot or crew on the plane observe pinnipeds reacting to their presence, the plane will increase altitude and note the number of animals reacting to the plane. This data will be included in the AAC's final marine mammal report.

The AAC estimates that up to 45 launches may occur from the KLC over the course of the 5-year period covered by the proposed rulemaking. Annually, the AAC estimates an average of nine launches will occur. Most of these vehicles are expected to be of the Minotaur I through V class, including civil versions of the Castor 120 known as the Athena and Taurus I or smaller target vehicles. The AAC estimates that no more than one launch will occur over a 4-week period, and it is likely the frequency of launches will be less than this estimate.

Based on aerial survey data, the AAC estimates a maximum of ten Steller sea lions could be present during launches occurring during the Steller sea lion season (the maximum number of animals sighted during a survey of this season has been eight). Any sea lions present during the launches will be adult or juvenile males; therefore, no reproductive processes or pupping will be affected by the specified activities. Assuming that all nine launches (the average number of launches predicted by the AAC) occur during the Steller sea lion season, that all nine launches involve the Castor 120 (the loudest vehicle expected to be flown from KLC over the period to be covered by the proposed regulations), and that there is no habituation to rocket motor effects with experience, then up to 90 takes by harassment could occur per year (ten animals/launch × nine launches). However, it is more reasonable to assume that a maximum of four launches per year could occur during the 2-month Steller sea lion season, and that no more than eight Stellers would be present at any given time (the maximum number recorded). Therefore, NMFS authorizes the take, by Level B harassment, of 32 Steller sea lions per year (eight animals × four launches).

The total number of harbor seals present on Ugak Island ranges up to about 1,500, most of which are found on the island's eastern shore where they are sheltered from launch effects by the 1,000-foot tall cliffs that stand between their haulouts and the KLC. Relatively few harbor seals use haulouts on the northern side of the island across from the KLC due to the lack of suitable beaches. No seals were observed on northern haulouts, which consist primarily of isolated rocks, during 19 of 30 marine mammal surveys flown by the AAC from 2006 to 2008. When present, the majority of counts on northern haulouts showed fewer than 25 individuals; however, a one-time high count of about 125 animals on these rocks has been made. Using the conservative and rare high number of 125 as being a representative figure, the AAC estimates that up to 125 individuals might be taken per launch operation. Therefore, NMFS authorizes 1,125 harbor seal (125 seals/launch × nine launches/year) takes during launch operations.

The actual number of pups taken by Level A harassment or mortality is difficult to quantify, as age class was not identified during the AAC's previous monitoring efforts (age class distinction will occur under the current monitoring and reporting requirements). Given that seals do not use the northern haulouts in large numbers (as compared to the protected eastern haulouts), the number of pups on the area of the island exposed to launch noise is likely low. Actual numbers will likely be smaller given the low and variable use of the area by harbor seals.

To better determine the potential number of pups on Ugak Island during launches, NMFS consulted with Ms. Kate Wynne, a marine mammal specialist with the Alaska Sea Grant Marine Advisory Program, who has previously flown aerial surveys within the action area. Her data, from the early 1990s, indicates that pup counts on the northern side of Ugak Island averaged approximately 17. Although this data is not recent, it is the best available. NMFS does not anticipate that all pups on a haulout would be injured or killed during a launch and, in fact, many may not be taken by Level A harassment or mortality. However, in the unlikely event injury or mortality occurs, NMFS authorizes 17 harbor seal pup takes by Level A harassment or mortality, annually, incidental to AAC's activities.

As previously discussed, under AAC's current regulations (valid February 27, 2006 through February 28, 2011) and annual LOAs, AAC has been conducting marine mammal monitoring within the action area before and after launch events to satisfy the monitoring requirements set forth in MMPA authorizations. The objective of monitoring Steller sea lions and Pacific harbor seals is to detect any indications of pinniped disturbance, injury, or mortality resulting from KLC rocket launches at the Ugak Island haulout site. Monitoring requirements included: (1) Conducting fixed-wing aerial surveys at least one day prior to, immediately after, and three days following any launches taking place from June 15 through September 30, weather permitting; (2) installing a remote custom-designed, closed-circuit, weatherproof, time-lapse video camera system at the base of the traditional Steller sea lion haulout before any launch occurring from June 15 through September 30; and (3) making an attempt to place a video camera with zoom lens on the accessible western end of the north-facing shore to record harbor seal behavior on the middle or eastern end of the shore, or on the rocks offshore (recall that the eastern side of Ugak Island—where the majority of seals are—is completely inaccessible to pedestrian or boat traffic due to the high cliffs and violent surf).

The regulations also contained noise monitoring requirements; these data are discussed in the Description of the Specified Activity section above. The AAC complied with the noise monitoring conditions contained within the regulations and annual LOAs. Further information on the AAC's previous activities and monitoring results can be found within the proposed rule (75 FR 80780, December 23, 2010).

NMFS has shifted its focus from direct Steller sea lion to harbor seal monitoring under these regulations. The AAC will monitor harbor seal reactions to rocket launches during the launch itself via a type of camera system currently used by the Alaska Sea Life Center to monitor haulouts and rookeries. The camera will be placed at a harbor seal pupping location on Ugak Island to better assess the likelihood that harbor seal pups may be abandoned, injured, or killed as a direct result of a rocket launch disturbance. The camera system will be installed and operating if the AAC conducts a launch during the harbor seal pupping season. Unlike the previous system, this camera system does not need to be retrieved to acquire data and battery power is not problematic. Therefore, the AAC can place it at a harbor seal haulout during good weather no matter the number of days before a launch and does not have to be concerned with retrieving it. These factors will likely eliminate the previous issues with video monitoring designed to detect pinniped reactions at the time of the launch. In addition, the camera system will have a zoom lens for better viewing quality.

NMFS has defined “negligible impact” in 50 CFR 216.103 as “* * * an impact resulting from the specified activity that cannot be reasonably expected to, and is not reasonably likely to, adversely affect the species or stock through effects on annual rates of recruitment or survival.” In making a negligible impact determination, NMFS considers (and should explicitly address whenever possible) the following: (1) Number of anticipated mortalities; (2) number and nature of anticipated injuries; (3) number, nature, intensity, and duration of Level B harassment; (4) is the nature of the anticipated takes such that we would expect it to actually impact rates of recruitment or survival; (5) context in which the takes occur; and (6) species or stock status.

In the past few years, the AAC has conducted no more than two launches on an annual basis. Regardless, NMFS has analyzed the specified activity to include disturbance events of up to nine launches per year as they anticipate the capability to carry out more efficient mission turn-around time over the duration of the final regulations. Mortalities and injuries are only authorized for harbor seal pups, and these are not expected due to small and variable harbor seal populations using the northern haulout sites, as well as the nature of pups and the early bonds formed between pups and mothers. Level B harassment of Steller sea lions is possible due to rocket launch noise, but is considered unlikely based on projected sound levels and the short duration of the noise; therefore, rates of sea lion recruitment or survival are not expected to be impacted. Rates of harbor seal recruitment or survival are also not expected to be impacted due to the limited number of mortalities or injuries to harbor seal pups (less than one percent of population). Due to the fact that no sonic booms are audible from Ugak Island, NMFS does not anticipate the potential for PTS to occur and TTS is unlikely, but possible. These assumptions are justified from ABR data collected at and around VAFB from similar launch activities. Further, based on aerial survey data, the harbor seal population on this island is increasing. Given that harbor seals are considered a species that is easily disturbed, their resilience to launch effects suggest any impacts from launches are short-term and negligible. The amount of take the AAC has requested, and NMFS authorizes, is considered small (less than one percent of Stellers and less than three percent of harbor seals) relative to the estimated stock populations of 41,197 Steller sea lions in the Western U.S. and 44,453 harbor seals in the Gulf of Alaska.

Mitigation measures to reduce noise from launches once in the air are virtually impossible; however, the noise generated on the launch pad during ignition moves through a deep trench (called a flame trench or flame bucket) that diverts the noise/exhaust toward the northwest (away from Ugak Island). The primary method of minimizing impacts to pinnipeds from launch noise is to minimize the number of launches when possible during sensitive times.

In addition, improved monitoring will better enable the AAC and NMFS to determine if impacts from rocket launches are having short-term and long-term impacts on the present day pinniped populations on Ugak Island. The camera system will be able to detect immediate impacts from launch exposure, including the number of pinnipeds flushing at the haulout site, while quarterly aerial surveys will aid in determining long-term trends of pinniped abundance. NMFS conservatively anticipates a small number of pups may be injured or killed during a launch. However, there is no empirical data to prove or disprove this as no video monitoring of seals during the launch has been successful (the one time a video system was placed near the haulout, no seals were observed). As discussed previously, the population of harbor seals on Ugak Island has increased steadily from several hundred in the 1990s (ENRI 1995-1998) to a peak of about 1,500 today (R&M 2007a, 2007b, 2008, 2009). Therefore, NMFS does not believe there will be any long-term impact on the health of the population if pup mortality occurs from launches. The required monitoring measures contained within this notice are specifically designed to, among other things, determine if pup injury or mortality is occurring ( i.e., from flushing, separation of mothers and pups, etc. ) due to rocket launches from the AAC.

Based on the analysis contained herein of the likely effects of the specified activity on marine mammals and their habitat, and taking into consideration the implementation of the mitigation and monitoring measures, NMFS finds that space vehicle and missile launches at the KLC will result in the incidental take of small numbers of marine mammals, but that the total taking will have a negligible impact on the affected species or stocks.

There are no relevant subsistence uses of marine mammals implicated by this action. Therefore, NMFS has determined that the total taking of affected species or stocks will not have an unmitigable adverse impact on the availability of such species or stocks for taking for subsistence uses.

The Steller sea lion is the only marine mammal species under NMFS' jurisdiction that is listed as endangered under the ESA with confirmed or possible occurrence in the action area. In the 2003 Biological Opinion, NMFS determined that the proposed actions would not result in jeopardy to the affected species or result in adverse modification of critical habitat. In 2005, the AAC, on behalf of the FAA, consulted with NMFS, under Section 7 of the ESA, on the impacts of space vehicle and rocket launches on Steller sea lions. NMFS consulted internally under the ESA on its proposed issuance of the AAC's 2006 MMPA regulations and subsequent LOAs. NMFS also consulted internally on the issuance of the final regulations (effective from March 2011, through February 2016) for this activity under section 101(a)(5)(A) of the MMPA. In a Biological Opinion (BiOp), NMFS Alaska Region concluded that the AAC's activities at the KLC and NMFS' issuance of these regulations are not likely to jeopardize the continued existence of Steller sea lions or destroy or adversely modify any designated critical habitat.

NMFS Alaska Region will also issue BiOps and associated incidental take statements (ITSs) to NMFS' Permits, Conservation, and Recreation Division to exempt the take (under the ESA) that NMFS authorizes in the LOAs under the MMPA. Because of the difference between the statutes, it is possible that ESA analysis of the applicant's action could produce a take estimate that is different than the takes requested by the applicant (and analyzed for authorization by NMFS under the MMPA process), despite the fact that the same proposed action ( i.e., number and type of launches) was being analyzed under each statute. When this occurs, NMFS staff coordinates to ensure that the most conservative (lowest) number of takes is authorized. For the AAC's activities at the KLC, coordination with the NMFS Alaska Region indicates that they will likely allow for the same amount of take of Steller sea lions that was requested by the applicant.

The ITS(s) issued for each LOA will contain implementing terms and conditions to minimize the effect of the marine mammal take authorized through the 2011 LOA (and subsequent LOAs in 2012, 2013, 2014, and 2015). With respect to listed marine mammals, the terms and conditions of the ITSs will be incorporated into the LOAs.

In 1996, the FAA prepared an EA, and subsequently issued a Finding of No Significant Impact (FONSI), for the AAC's proposal to construct and operate a launch site at Narrow Cape on Kodiak Island, Alaska. Since 1998, the AAC has provided monitoring reports related to noise and marine mammal impacts associated with ongoing rocket launches from KLC. After reviewing the new information contained in the monitoring reports, and considering the Commission's comments that impacts to harbor seals should be more comprehensively addressed, NMFS decided that a more current environmental analysis was necessary. In 2005, NMFS prepared an EA and associated FONSI on the Promulgation of Regulations Authorizing Take of Marine Mammals Incidental to Rocket Launches at Kodiak Launch Complex, Alaska, and the Issuance of Subsequent Letters of Authorization. NMFS found that the promulgation of a 5-year rulemaking in 2006 and issuance of subsequent LOAs would not significantly impact the quality of the human environment, and therefore issued a FONSI. Accordingly, preparation of an Environmental Impact Statement or Supplemental Environmental Impact Statement for this action was not necessary. NMFS has determined that because neither the action nor the environmental baseline in the area has changed significantly from that analyzed in previous NEPA documents, further analysis under NEPA is not necessary for issuance of regulations and subsequent LOAs extending into 2016.

The Office of Management and Budget (OMB) has determined that this proposed rule is not significant for purposes of Executive Order 12866.

Good cause exists to waive the 30-day delay in effectiveness for this rule pursuant to 5 U.S.C. 553(d), because delaying the rule's effectiveness is contrary to the public interest and is unnecessary. While there are no launches specifically scheduled for March 2011, the U.S. Air Force has told the AAC to be prepared for a potential launch as early as March. Because these launches may be necessary for national security, it is in the public's interest to have these regulations take effect immediately, before the AAC's current regulations expire on February 28, 2011. The AAC has requested a waiver of the 30-day delay in effectiveness for this rule in order to ensure that the rule goes into effect March 1, 2011, the day after the current regulations expire. A launch delay would lead to increased risk for personnel if there is increased handling time for hazardous materials or ordnance that has to be deactivated or offloaded, depending on the stage of launch preparations at the time of delay. Delaying this initial launch could also delay other scheduled launches for the following months. Additionally, the measures contained in this final rule are substantially similar to the measures contained in the five-year rule that expires on February 28, 2011. Accordingly, delaying the effectiveness of these rules is not necessary to provide time to allow the affected entities to come into compliance with the rules. Moreover, this rule does not impose any requirements or obligations on the public. For these reasons, there is good cause to waive the 30-day delay in effectiveness of this rule.

Pursuant to section 605(b) of the Regulatory Flexibility Act (RFA), the Chief Counsel for Regulation of the Department of Commerce has certified to the Chief Counsel for Advocacy of the Small Business Administration that this final rule will not have a significant economic impact on a substantial number of small entities. A description of this final rule and its purpose are found in the preamble to this rule, and are not repeated here. NMFS received no comments or questions regarding this certification. For a copy of the certification, see ADDRESSES.

Notwithstanding any other provision of law, no person is required to respond to nor shall a person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act (PRA) unless that collection of information displays a currently valid OMB control number. This rule contains a collection-of-information requirement subject to the provisions of the PRA. This collection has been approved previously by OMB under section 3504(b) of the PRA issued under OMB control number 0648-0151, which includes applications for LOAs and reports.

For reasons set forth in the preamble, 50 CFR part 217 is amended as follows: